[Congressional Record Volume 145, Number 66 (Monday, May 10, 1999)]
[Senate]
[Pages S4957-S4978]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

  S. 900, the Financial Services Modernization Act of 1999, as amended 
and passed by the Senate on May 6, 1999, is as follows:

                                 S. 900

       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 ``Financial 
     Services Modernization Act of 1999''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

 TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND 
                          INSURANCE COMPANIES

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act repealed.
Sec. 102. Financial activities.
Sec. 103. Conforming amendments. 
Sec. 104. Operation of State law.

     Subtitle B--Streamlining Supervision of Bank Holding Companies

Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and 
              Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Examination of investment companies.
Sec. 115. Equivalent regulation and supervision.
Sec. 116. Interagency consultation.
Sec. 117. Preserving the integrity of FDIC resources.

                Subtitle C--Activities of National Banks

Sec. 121. Authority of national banks to underwrite municipal revenue 
              bonds.
Sec. 122. Subsidiaries of national banks.
Sec. 123. Agency activities.
Sec. 124. Prohibiting fraudulent representations.
Sec. 125. Insurance underwriting by national banks.

    Subtitle D--National Treatment of Foreign Financial Institutions

Sec. 151. National treatment of foreign financial institutions.
Sec. 152. Representative offices.

                TITLE II--INSURANCE CUSTOMER PROTECTIONS

Sec. 201. Functional regulation of insurance.
Sec. 202. Insurance customer protections.
Sec. 203. Federal and State dispute resolution.

                   TITLE III--REGULATORY IMPROVEMENTS

Sec. 301. Elimination of SAIF and DIF special reserves.
Sec. 302. Expanded small bank access to S corporation treatment.
Sec. 303. Meaningful CRA examinations.
Sec. 304. Financial information privacy protection.
Sec. 305. Cross marketing restriction; limited purpose bank relief; 
              divestiture.
Sec. 306. ``Plain language'' requirement for Federal banking agency 
              rules.
Sec. 307. Retention of ``Federal'' in name of converted Federal savings 
              association.
Sec. 308. Community Reinvestment Act exemption.
Sec. 309. Bank officers and directors as officers and directors of 
              public utilities.
Sec. 310. Control of bankers' banks.
Sec. 311. Multistate licensing and interstate insurance sales 
              activities.
Sec. 312. CRA sunshine requirements.
Sec. 313. Interstate branches and agencies of foreign banks.
Sec. 314. Disclosures to consumers under the Truth in Lending Act.
Sec. 315. Approval for purchases of securities.
Sec. 316. Provision of technical assistance to microenterprises
Sec. 317. Federal reserve audits.
Sec. 318. Study and report on advertising practices of online brokerage 
              services.
Sec. 319. Eligibility of community development financial institution to 
              borrow from the Federal Home Loan Bank system.

         TITLE IV--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Savings association membership.
Sec. 404. Advances to members; collateral.
Sec. 405. Eligibility criteria.
Sec. 406. Management of banks.
Sec. 407. Resolution Funding Corporation.
Sec. 408. GAO study on Federal Home Loan Bank System capital.

         TITLE V--FUNCTIONAL REGULATION OF BROKERS AND DEALERS

Sec. 501. Definition of broker.
Sec. 502. Definition of dealer.
Sec. 503. Definition and treatment of banking products.
Sec. 504. Qualified investor defined.
Sec. 505. Government securities defined.
Sec. 506. Effective date.
Sec. 507. Rule of construction.

          TITLE VI--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 601. Prevention of creation of new S&L holding companies with 
              commercial affiliates.

[[Page S4958]]

Sec. 602. Optional conversion of Federal savings associations.

                       TITLE VII--ATM FEE REFORM

Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is 
              issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.
 TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND 
                          INSURANCE COMPANIES
                        Subtitle A--Affiliations

     SEC. 101. GLASS-STEAGALL ACT REPEALED.

       (a) Section 20 Repealed.--Section 20 of the Banking Act of 
     1933 (12 U.S.C. 377) (commonly referred to as the ``Glass-
     Steagall Act'') is repealed.
       (b) Section 32 Repealed.--Section 32 of the Banking Act of 
     1933 (12 U.S.C. 78) is repealed.

     SEC. 102. FINANCIAL ACTIVITIES.

       (a) In General.--Section 4 of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1843) is amended by adding at the end the 
     following new subsections:
       ``(k) Engaging in Activities That Are Financial in 
     Nature.--
       ``(1) In general.--Notwithstanding subsection (a), a bank 
     holding company may engage in any activity, and may acquire 
     and retain the shares of any company engaged in any activity, 
     that the Board, in coordination with the Secretary of the 
     Treasury, determines (by regulation or order) to be financial 
     in nature or incidental to such financial activities.
       ``(2) Coordination between the board and the secretary of 
     the treasury.--
       ``(A) Proposals raised before the board.--
       ``(i) Consultation.--The Board shall notify the Secretary 
     of the Treasury of, and consult with the Secretary of the 
     Treasury concerning, any request, proposal, or application 
     under this subsection for a determination of whether an 
     activity is financial in nature or incidental to such a 
     financial activity.
       ``(ii) Treasury view.--The Board shall not determine that 
     any activity is financial in nature or incidental to a 
     financial activity under this subsection if the Secretary of 
     the Treasury notifies the Board in writing, not later than 30 
     days after the date of receipt of the notice described in 
     clause (i) (or such longer period as the Board determines to 
     be appropriate in light of the circumstances) that the 
     Secretary of the Treasury believes that the activity is not 
     financial in nature or incidental to a financial activity.
       ``(B) Proposals raised by the treasury.--
       ``(i) Treasury recommendation.--The Secretary of the 
     Treasury may, at any time, recommend in writing that the 
     Board find an activity to be financial in nature or 
     incidental to a financial activity.
       ``(ii) Time period for board action.--Not later than 30 
     days after the date of receipt of a written recommendation 
     from the Secretary of the Treasury under clause (i) (or such 
     longer period as the Secretary of the Treasury and the Board 
     determine to be appropriate in light of the circumstances), 
     the Board shall determine whether to initiate a public 
     rulemaking proposing that the subject recommended activity be 
     found to be financial in nature or incidental to a financial 
     activity under this subsection, and shall notify the 
     Secretary of the Treasury in writing of the determination of 
     the Board and, in the event that the Board determines not to 
     seek public comment on the proposal, the reasons for that 
     determination.
       ``(3) Factors to be considered.--The Board shall determine 
     that an activity is financial in nature or incidental to 
     financial activities, if the Board finds that such activity 
     is consistent with--
       ``(A) the purposes of this Act and the Financial Services 
     Modernization Act of 1999;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which bank holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) fostering--
       ``(i) effective competition with any company seeking to 
     provide financial services in the United States;
       ``(ii) the efficient delivery of information and services 
     that are financial in nature through the use of technological 
     means, including any application necessary to protect the 
     security or efficacy of systems for the transmission of data 
     or financial transactions; and
       ``(iii) the provision to customers of any available or 
     emerging technological means for using financial services.
       ``(4) Activities that are financial in nature.--For 
     purposes of this subsection, the following activities shall 
     be considered to be financial in nature:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding money or securities.
       ``(B) Insuring, guaranteeing, or indemnifying against loss, 
     harm, damage, illness, disability, or death, or providing and 
     issuing annuities, and acting as principal, agent, or broker 
     for purposes of the foregoing, in any State, in full 
     compliance with the laws and regulations of that State that 
     apply to each type of insurance license or authorization in 
     that State.
       ``(C) Providing financial, investment, or economic advisory 
     services, including advising an investment company (as 
     defined in section 3 of the Investment Company Act of 1940).
       ``(D) Issuing or selling instruments representing interests 
     in pools of assets permissible for a bank to hold directly.
       ``(E) Underwriting, dealing in, or making a market in 
     securities.
       ``(F) Engaging in any activity that the Board has 
     determined, by order or regulation that is in effect on the 
     date of enactment of the Financial Services Modernization Act 
     of 1999, to be so closely related to banking or managing or 
     controlling banks as to be a proper incident thereto (subject 
     to the same terms and conditions contained in such order or 
     regulation, unless modified by the Board).
       ``(G) Engaging, in the United States, in any activity 
     that--
       ``(i) a bank holding company may engage in outside of the 
     United States; and
       ``(ii) the Board has determined, under regulations issued 
     pursuant to subsection (c)(13) (as in effect on the day 
     before the date of enactment of the Financial Services 
     Modernization Act of 1999) to be usual in connection with the 
     transaction of banking or other financial operations abroad.
       ``(H) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution or 
     subsidiary of a depository institution that the bank holding 
     company controls), or otherwise, shares, assets, or ownership 
     interests (including debt or equity securities, partnership 
     interests, trust certificates, or other instruments 
     representing ownership) of a company or other entity, whether 
     or not constituting control of such company or entity, 
     engaged in any activity not authorized pursuant to this 
     section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or subsidiary of 
     a depository institution; and
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by--

       ``(I) a securities affiliate or an affiliate thereof; or
       ``(II) an affiliate of an insurance company described in 
     paragraph (I)(ii) that provides investment advice to an 
     insurance company and is registered pursuant to the 
     Investment Advisers Act of 1940, or an affiliate of such 
     investment adviser, as part of a bona fide underwriting or 
     merchant banking activity, including investment activities 
     engaged in for the purpose of appreciation and ultimate 
     resale or disposition of the investment.

       ``(I) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution or 
     subsidiary of a depository institution, that the bank holding 
     company controls), or otherwise, shares, assets, or ownership 
     interests (including debt or equity securities, partnership 
     interests, trust certificates or other instruments 
     representing ownership) of a company or other entity, whether 
     or not constituting control of such company or entity, 
     engaged in any activity not authorized pursuant to this 
     section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or a subsidiary 
     of a depository institution;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by an insurance company that is 
     predominantly engaged in underwriting life, accident and 
     health, or property and casualty insurance (other than 
     credit-related insurance) or providing and issuing annuities; 
     and
       ``(iii) such shares, assets, or ownership interests 
     represent, as determined by the insurance authority of the 
     State of domicile of the insurance company, an investment 
     made in the ordinary course of business of such insurance 
     company in accordance with relevant State law governing such 
     investments.
       ``(J) Activities that the Board determines (by regulation 
     or order) are complementary to financial activities, or any 
     other service that the Board determines (by regulation or 
     order) not to pose a substantial risk to the safety or 
     soundness of depository institutions or the financial system 
     generally.
       ``(5) Actions required.--
       ``(A) In general.--The Board shall, by regulation or order, 
     define, consistent with the purposes of this Act, the 
     activities described in subparagraph (B) as financial in 
     nature, and the extent to which such activities are financial 
     in nature or incidental to activities that are financial in 
     nature.
       ``(B) Activities.--The activities described in this 
     subparagraph are--
       ``(i) lending, exchanging, transferring, investing for 
     others, or safeguarding financial assets other than money or 
     securities;
       ``(ii) providing any device or other instrumentality for 
     transferring money or other financial assets;
       ``(iii) arranging, effecting, or facilitating financial 
     transactions for the account of third parties; and
       ``(iv) activities that are complementary to financial 
     activities, or any other service that the Board determines 
     (by regulation or order) not to pose a substantial risk to 
     the safety or soundness of depository institutions or the 
     financial system generally.
       ``(6) Required notification.--
       ``(A) In general.--A bank holding company that acquires any 
     company or commences any activity pursuant to this subsection 
     shall provide written notice to the Board describing the 
     activity commenced or

[[Page S4959]]

     conducted by the company acquired not later than 30 calendar 
     days after commencing the activity or consummating the 
     acquisition, as applicable.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in subsection (j) with regard 
     to the acquisition of a savings association, a bank holding 
     company may commence any activity, or acquire any company, 
     pursuant to paragraph (4) or any regulation prescribed or 
     order issued under paragraph (5), without prior approval of 
     the Board.
       ``(l) Conditions for Engaging in Expanded Financial 
     Activities.--
       ``(1) In general.--Notwithstanding subsection (k), a bank 
     holding company may not engage in any activity, or directly 
     or indirectly acquire or retain shares of any company engaged 
     in any activity, under subsection (k), other than activities 
     permissible for a bank holding company under subsection 
     (c)(8), unless--
       ``(A) all of the insured depository institution 
     subsidiaries of the bank holding company are well 
     capitalized;
       ``(B) all of the insured depository institution 
     subsidiaries of the bank holding company are well managed; 
     and
       ``(C) the bank holding company has filed with the Board--
       ``(i) a declaration that the company elects to engage in 
     activities or acquire and retain shares of a company which 
     were not permissible for a bank holding company to engage in 
     or acquire before the enactment of the Financial Services 
     Modernization Act of 1999; and
       ``(ii) a certification that the company meets the 
     requirements of subparagraphs (A) and (B).
       ``(2) Foreign banks.--For purposes of paragraph (1), the 
     Board shall apply comparable capital and management standards 
     to a foreign bank that operates a branch or agency or owns or 
     controls a commercial lending company in the United States, 
     giving due regard to the principle of national treatment and 
     equality of competitive opportunity.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) the term `well capitalized' has the same meaning as 
     in section 38 of the Federal Deposit Insurance Act;
       ``(B) the term `well managed' means--
       ``(i) in the case of a depository institution that has been 
     examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency--

       ``(I) the achievement of a composite rating of 1 or 2 under 
     the Uniform Financial Institutions Rating System (or an 
     equivalent rating under an equivalent rating system) in 
     connection with the most recent examination or subsequent 
     review of the depository institution; and
       ``(II) at least a rating of 2 for management, if that 
     rating is given;

       ``(ii) in the case of any depository institution that has 
     not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory; and
       ``(iii) the terms `appropriate Federal banking agency' and 
     `depository institution' have the same meanings as in section 
     3 of the Federal Deposit Insurance Act.
       ``(m) Provisions Applicable to Bank Holding Companies That 
     Fail To Meet Certain Requirements.--
       ``(1) In general.--If the Board finds that--
       ``(A) a bank holding company is engaged, directly or 
     indirectly, in any activity under subsection (k), other than 
     activities that are permissible for a bank holding company 
     under subsection (c)(8); and
       ``(B) such bank holding company is not in compliance with 
     the requirements of subsection (l),

     the Board shall give notice to the bank holding company to 
     that effect, describing the conditions giving rise to the 
     notice.
       ``(2) Agreement to correct conditions required.--Not later 
     than 45 days after the date of receipt by a bank holding 
     company of a notice given under paragraph (1) (or such 
     additional period as the Board may permit), the bank holding 
     company shall execute an agreement with the Board to comply 
     with the requirements applicable to a bank holding company 
     under subsection (l).
       ``(3) Board may impose limitations.--Until the conditions 
     described in a notice to a bank holding company under 
     paragraph (1) are corrected, the Board may impose such 
     limitations on the conduct or activities of that bank holding 
     company or any affiliate of that company as the Board 
     determines to be appropriate under the circumstances and 
     consistent with the purposes of this Act.
       ``(4) Failure to correct.--If the conditions described in a 
     notice to a bank holding company under paragraph (1) are not 
     corrected within 180 days after the date of receipt by the 
     bank holding company of a notice under paragraph (1), the 
     Board may require such bank holding company, under such terms 
     and conditions as may be imposed by the Board and subject to 
     such extension of time as may be granted in the discretion of 
     the Board, either--
       ``(A) to divest control of any subsidiary insured 
     depository institutions; or
       ``(B) to cease to engage in any activity conducted by such 
     bank holding company or its subsidiaries (other than a 
     depository institution or a subsidiary of a depository 
     institution) that is not an activity that is permissible for 
     a bank holding company under subsection (c)(8).
       ``(n) Authority To Retain Commodity Activities and 
     Affiliations.--Notwithstanding subsection (a), a company that 
     is not a bank holding company or a foreign bank (as defined 
     in section 1(b)(7) of the International Banking Act of 1978) 
     and becomes a bank holding company after the date of 
     enactment of the Financial Services Modernization Act of 
     1999, may continue to engage in, or directly or indirectly 
     own or control shares of a company engaged in, activities 
     related to the trading, sale, or investment in commodities 
     and underlying physical properties that were not permissible 
     for bank holding companies to conduct in the United States as 
     of September 30, 1997, if--
       ``(1) the bank holding company, or any subsidiary of the 
     bank holding company, lawfully was engaged, directly or 
     indirectly, in any of such activities as of September 30, 
     1997, in the United States;
       ``(2) the attributed aggregate consolidated assets of the 
     company held by the bank holding company pursuant to this 
     subsection, and not otherwise permitted to be held by a bank 
     holding company, are equal to not more than 5 percent of the 
     total consolidated assets of the bank holding company, except 
     that the Board may increase that percentage by such amounts 
     and under such circumstances as the Board considers 
     appropriate, consistent with the purposes of this Act; and
       ``(3) the bank holding company does not permit--
       ``(A) any company, the shares of which it owns or controls 
     pursuant to this subsection, to offer or market any product 
     or service of an affiliated insured depository institution; 
     or
       ``(B) any affiliated insured depository institution to 
     offer or market any product or service of any company, the 
     shares of which are owned or controlled by such bank holding 
     company pursuant to this subsection.''.
       (b) Financial Activities of Bank Holding Companies 
     Ineligible for Subsection (k) Powers.--
       (1) In general.--Section 4(c)(8) of the Bank Holding 
     Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read 
     as follows:
       ``(8) shares of any company, the activities of which had 
     been determined by the Board by regulation or order under 
     this paragraph as of the day before the date of enactment of 
     the Financial Services Modernization Act of 1999, to be so 
     closely related to banking as to be a proper incident thereto 
     (subject to such terms and conditions contained in such 
     regulation, unless modified by the Board);''.
       (2) Conforming changes to other statutes.--
       (A) Amendment to the bank holding company act amendments of 
     1970.--Section 105 of the Bank Holding Company Act Amendments 
     of 1970 (12 U.S.C. 1850) is amended by striking ``, to engage 
     directly or indirectly in a nonbanking activity pursuant to 
     section 4 of such Act,''.
       (B) Amendment to the bank service company act.--Section 
     4(f) of the Bank Service Company Act (12 U.S.C. 1864(f)) is 
     amended by striking the period at the end and inserting the 
     following: ``as of the day before the date of enactment of 
     the Financial Services Modernization Act of 1999.''.

     SEC. 103. CONFORMING AMENDMENTS.

        Section 10(c)(2)(F)(i) of the Home Owners' Loan Act (12 
     U.S.C. 1467a(c)(2)(F)(i))is amended--
       (1) by inserting ``is permitted for bank holding companies 
     under subsection (c) or (k) of section 4 of the Bank Holding 
     Company Act of 1956, or which'' after ``(i) which''; and
       (2) by striking ``section 4(c)'' and inserting ``subsection 
     (c) or (k) of section 4''.

     SEC. 104. OPERATION OF STATE LAW.

       (a) State Regulation of the Business of Insurance.--The Act 
     entitled ``An Act to express the intent of Congress with 
     reference to the regulation of the business of insurance'' 
     and approved March 9, 1945 (15 U.S.C. 1011 et seq.), commonly 
     referred to as the ``McCarran-Ferguson Act'' remains the law 
     of the United States.
       (b) Mandatory Insurance Licensing Requirements.--No person 
     or entity shall provide insurance in a State as principal or 
     agent unless such person or entity is licensed, as required 
     by the appropriate insurance regulator of such State in 
     accordance with the relevant State insurance laws, subject to 
     subsections (c), (d), and (e).
       (c) Affiliations.--
       (1) In general.--Except as provided in paragraph (2), no 
     State may, by statute, regulation, order, interpretation, or 
     other action, prevent or restrict the affiliations authorized 
     or permitted by this Act and the amendments made by this Act.
       (2) Insurance.--With respect to affiliations between 
     insured depository institutions, or any subsidiary or 
     affiliate thereof, and persons or entities engaged in the 
     business of insurance, paragraph (1) does not prohibit any 
     State from collecting, reviewing, and taking actions on 
     required applications and other documents or reports as may 
     be necessary concerning proposed acquisitions, changes, or 
     continuations of control of any entity engaged in the 
     business of insurance and domiciled in that State, if the 
     State actions do not have the practical effect of 
     discriminating, either intentionally or unintentionally, 
     against an insured depository institution or a subsidiary or 
     affiliate thereof, or against any person or entity based upon 
     affiliation with an insured depository institution.

[[Page S4960]]

       (d) Activities.--
       (1) In general.--Except as provided in paragraph (3), and 
     except with respect to insurance sales, solicitation, and 
     cross marketing activities, which shall be governed by 
     paragraph (2), no State may, by statute, regulation, order, 
     interpretation or other action, prevent or restrict an 
     insured depository institution or subsidiary or affiliate 
     thereof from engaging directly or indirectly, either by 
     itself or in conjunction with a subsidiary, affiliate, or any 
     other entity or person, in any activity authorized or 
     permitted under this Act and the amendments made by this Act.
       (2) Insurance sales.--
       (A) In general.--In accordance with the legal standards for 
     preemption set forth in the decision of the Supreme Court of 
     the United States in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996), no State may, by statute, 
     regulation, order, interpretation, or other action, prevent 
     or significantly interfere with the ability of an insured 
     depository institution, or a subsidiary or affiliate thereof, 
     to engage, directly or indirectly, either by itself or in 
     conjunction with a subsidiary, affiliate, or any other party, 
     in any insurance sales, solicitation, or cross-marketing 
     activity.
       (B) Certain state laws preserved.--Notwithstanding 
     subparagraph (A), a State may impose any of the following 
     restrictions, or restrictions that are substantially the same 
     as but no more burdensome or restrictive than those in each 
     of the following clauses:
       (i) Restrictions prohibiting the rejection of an insurance 
     policy solely because the policy has been issued or 
     underwritten by any person not associated with such insured 
     depository institution, or any subsidiary or affiliate 
     thereof, when such insurance is required in connection with a 
     loan or extension of credit.
       (ii) Restrictions prohibiting a requirement for any debtor, 
     insurer, or insurance agent or broker to pay a separate 
     charge in connection with the handling of insurance that is 
     required in connection with a loan or other extension of 
     credit or the provision of another traditional banking 
     product, unless such charge would be required when the 
     insured depository institution, or any subsidiary or 
     affiliate thereof, is the licensed insurance agent or broker 
     providing the insurance.
       (iii) Restrictions prohibiting the use of any advertisement 
     or other insurance promotional material by an insured 
     depository institution, or any subsidiary or affiliate 
     thereof, that would cause a reasonable person to believe 
     mistakenly that--

       (I) a State or the Federal Government is responsible for 
     the insurance sales activities of, or stands behind the 
     credit of, the institution, affiliate, or subsidiary; or
       (II) a State, or the Federal Government guarantees any 
     returns on insurance products, or is a source of payment on 
     any insurance obligation of or sold by the institution, 
     affiliate, or subsidiary.

       (iv) Restrictions prohibiting the payment or receipt of any 
     commission or brokerage fee or other valuable consideration 
     for services as an insurance agent or broker to or by any 
     person, unless such person holds a valid State license 
     regarding the applicable class of insurance at the time at 
     which the services are performed, except that, in this 
     clause, the term ``services as an insurance agent or broker'' 
     does not include a referral by an unlicensed person of a 
     customer or potential customer to a licensed insurance agent 
     or broker that does not include a discussion of specific 
     insurance policy terms and conditions.
       (v) Restrictions prohibiting any compensation paid to or 
     received by any individual who is not licensed to sell 
     insurance for the referral of a customer that seeks to 
     purchase, or seeks an opinion or advice on, any insurance 
     product to a person that sells or provides opinions or advice 
     on such product, based on the purchase of insurance by the 
     customer.
       (vi) Restrictions prohibiting the release of the insurance 
     information of a customer (defined as information concerning 
     the premiums, terms, and conditions of insurance coverage, 
     including expiration dates and rates, and insurance claims of 
     a customer contained in the records of the insured depository 
     institution, or a subsidiary or affiliate thereof) to any 
     person or entity other than an officer, director, employee, 
     agent, subsidiary, or affiliate of an insured depository 
     institution, for the purpose of soliciting or selling 
     insurance, without the express consent of the customer, other 
     than a provision that prohibits--

       (I) a transfer of insurance information to an unaffiliated 
     insurance company, agent, or broker in connection with 
     transferring insurance in force on existing insureds of the 
     insured depository institution, or subsidiary or affiliate 
     thereof, or in connection with a merger with or acquisition 
     of an unaffiliated insurance company, agent, or broker; or
       (II) the release of information as otherwise authorized by 
     Federal or State law.

       (vii) Restrictions prohibiting the use of health 
     information obtained from the insurance records of a customer 
     for any purpose, other than for its activities as a licensed 
     agent or broker, without the express consent of the customer.
       (viii) Restrictions prohibiting the extension of credit (or 
     any product or service that is equivalent to an extension of 
     credit), lease or sale of property of any kind, or furnishing 
     of any services or fixing or varying the consideration for 
     any of the foregoing, on the condition or requirement that 
     the customer obtain insurance from the insured depository 
     institution, a subsidiary or affiliate thereof, or a 
     particular insurer, agent, or broker, other than a 
     prohibition that would prevent any insured depository 
     institution, or any subsidiary or affiliate thereof--

       (I) from engaging in any activity that would not violate 
     section 106 of the Bank Holding Company Act Amendments of 
     1970, as interpreted by the Board of Governors of the Federal 
     Reserve System; or
       (II) from informing a customer or prospective customer that 
     insurance is required in order to obtain a loan or credit, 
     that loan or credit approval is contingent upon the 
     procurement by the customer of acceptable insurance, or that 
     insurance is available from the insured depository 
     institution, or any subsidiary or affiliate thereof.

       (ix) Restrictions requiring, when an application by a 
     customer for a loan or other extension of credit from an 
     insured depository institution is pending, and insurance is 
     offered or sold to the customer or is required in connection 
     with the loan or extension of credit by the insured 
     depository institution or any subsidiary or affiliate 
     thereof, that a written disclosure be provided to the 
     customer or prospective customer indicating that his or her 
     choice of an insurance provider will not affect the credit 
     decision or credit terms in any way, except that the insured 
     depository institution may impose reasonable requirements 
     concerning the creditworthiness of the insurance provider and 
     scope of coverage chosen.
       (x) Restrictions, requiring clear and conspicuous 
     disclosure, in writing where practicable, to the customer 
     prior to the sale of any insurance policy that such policy--

       (I) is not a deposit;
       (II) is not insured by the Federal Deposit Insurance 
     Corporation;
       (III) is not guaranteed by the insured depository 
     institution or, if appropriate, its subsidiaries or 
     affiliates or any person soliciting the purchase of or 
     selling insurance on the premises thereof; and
       (IV) where appropriate, involves investment risk, including 
     potential loss of principal.

       (xi) Restrictions requiring that, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or its 
     subsidiaries or affiliates, or any person soliciting the 
     purchase of or selling insurance on the premises thereof, the 
     credit and insurance transactions be completed through 
     separate documents.
       (xii) Restrictions prohibiting, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or its 
     subsidiaries or affiliates, or any person soliciting the 
     purchase of or selling insurance on the premises thereof, 
     inclusion of the expense of insurance premiums in the primary 
     credit transaction without the express written consent of the 
     customer.
       (xiii) Restrictions requiring--

       (I) maintenance of separate and distinct books and records 
     relating to insurance transactions, including all files 
     relating to and reflecting customer complaints; and
       (II) that such insurance books and records be made 
     available to the appropriate State insurance regulator for 
     inspection upon reasonable notice.

       (C) Limitations.--
       (i) OCC deference.--Section 203(e) does not apply with 
     respect to any State statute, regulation, order, 
     interpretation, or other action regarding insurance sales, 
     solicitation, or cross marketing activities described in 
     subparagraph (A) that was issued, adopted, or enacted before 
     September 3, 1998, and that is not described in subparagraph 
     (B).
       (ii) Nondiscrimination.--Subsection (e) does not apply with 
     respect to any State statute, regulation, order, 
     interpretation, or other action regarding insurance sales, 
     solicitation, or cross marketing activities described in 
     subparagraph (A) that was issued, adopted, or enacted before 
     September 3, 1998, and that is not described in subparagraph 
     (B).
       (iii) Construction.--Nothing in this paragraph shall be 
     construed--

       (I) to limit the applicability of the decision of the 
     Supreme Court in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996) with respect to any State 
     statute, regulation, order, interpretation, or other action 
     that is not referred to or described in this paragraph; or
       (II) to create any inference with respect to any State 
     statute, regulation, order, interpretation, or other action 
     that is not referred to in this paragraph.

       (3) Insurance activities other than sales.--State statutes, 
     regulations, interpretations, orders, and other actions shall 
     not be preempted under paragraph (1) to the extent that 
     they--
       (A) relate to, or are issued, adopted, or enacted for the 
     purpose of regulating the business of insurance in accordance 
     with the Act of March 9, 1945 (commonly known as the 
     ``McCarran-Ferguson Act'');
       (B) apply only to persons or entities that are not insured 
     depository institutions, but that are directly engaged in the 
     business of insurance (except that they may apply to 
     depository institutions engaged in providing savings bank 
     life insurance as principal to the extent of regulating such 
     insurance);
       (C) do not relate to or directly or indirectly regulate 
     insurance sales, solicitations, or cross marketing 
     activities; and
       (D) are not prohibited under subsection (e).

[[Page S4961]]

       (4) Financial activities other than insurance.--No State 
     statute, regulation, interpretation, order, or other action 
     shall be preempted under paragraph (1) to the extent that--
       (A) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, insurance sales, solicitations, or cross 
     marketing activities covered under paragraph (2);
       (B) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, the business of insurance activities other than 
     sales, solicitations, or cross marketing activities, covered 
     under paragraph (3);
       (C) it does not relate to securities investigations or 
     enforcement actions referred to in subsection (f); and
       (D) it is not prohibited under subsection (e).
       (e) Nondiscrimination.--Except as provided in any 
     restriction described in subsection (d)(2)(B), no State may, 
     by statute, regulation, order, interpretation, or other 
     action, regulate the activities authorized or permitted under 
     this Act and the amendments made by this Act, or any other 
     provision of Federal law, of an insured depository 
     institution, or subsidiary or affiliate thereof, to the 
     extent that such statute, regulation, order, interpretation, 
     or other action--
       (1) distinguishes by its terms between insured depository 
     institutions, or subsidiaries or affiliates thereof, and 
     other persons or entities engaged in such activities, in a 
     manner that is in any way adverse to any such insured 
     depository institution, or subsidiary or affiliate thereof;
       (2) as interpreted or applied, has or will have an impact 
     on insured depository institutions, or subsidiaries or 
     affiliates thereof, that is substantially more adverse than 
     its impact on other persons or entities providing the same 
     products or services or engaged in the same activities that 
     are not insured depository institutions, or subsidiaries or 
     affiliates thereof, or persons or entities affiliated 
     therewith;
       (3) effectively prevents an insured depository institution, 
     or subsidiary or affiliate thereof, from engaging in 
     activities authorized or permitted by this Act and the 
     amendments made by this Act, or any other provision of 
     Federal law; or
       (4) conflicts with the intent of this Act and the 
     amendments made by this Act generally to permit affiliations 
     that are authorized or permitted by Federal law.
       (f) Limitation.--Subsections (c) and (d) shall not be 
     construed to affect--
       (1) the jurisdiction of the securities commission (or any 
     agency or office performing like functions) of any State, 
     under the laws of that State, to investigate and bring 
     enforcement actions, consistent with section 18(c) of the 
     Securities Act of 1933, with respect to fraud or deceit or 
     unlawful conduct by any person, in connection with securities 
     or securities transactions; or
       (2) State laws, regulations, orders, interpretations, or 
     other actions of general applicability relating to the 
     governance of corporations, partnerships, limited liability 
     companies, or other business associations incorporated or 
     formed under the laws of that State or domiciled in that 
     State, or the applicability of the antitrust laws of any 
     State or any State law that is similar to the antitrust laws 
     if such laws, regulations, interpretations, orders, or other 
     actions are not inconsistent with the purposes of this Act to 
     authorize or permit certain affiliations and to remove 
     barriers to such affiliations.
       (g) Certain State Affiliation Laws Preempted for Insurance 
     Companies and Affiliates.--Except as provided in subsection 
     (c)(2), no State may, by law, regulation, order, 
     interpretation, or otherwise--
       (1) prevent or restrict the ability of any insurer, or any 
     affiliate of an insurer (whether such affiliate is organized 
     as a stock company, mutual holding company, or otherwise), to 
     become a bank holding company, or to acquire control of an 
     insured depository institution, where the practical effect of 
     such State action would be to discriminate, intentionally or 
     unintentionally, against an insurer, or any affiliate of an 
     insurer, based upon its affiliation with an insured 
     depository institution;
       (2) limit the amount of the assets of an insurer that may 
     be invested in the voting securities of an insured depository 
     institution (or any company that controls such institution), 
     except that the laws of the State of domicile of the insurer 
     may limit the amount of such investment to an amount that is 
     not less than 5 percent of the admitted assets of the 
     insurer; or
       (3) prevent, restrict, or have the authority to review, 
     approve, or disapprove a plan of reorganization by which an 
     insurer proposes to reorganize from mutual form to become a 
     stock insurer (whether as a direct or indirect subsidiary of 
     a mutual holding company or otherwise), unless the State is 
     the State of domicile of the insurer, except that the 
     appropriate regulatory authority of the State of domicile of 
     the insurer shall consult with the appropriate regulatory 
     authority in other States in which the insurer conducts 
     business, regarding issues affecting the best interests of 
     policyholders.
       (h) Motor Vehicle Rental Agency Activities.--
       (1) Findings.--Congress finds that--
       (A) in many States, the insurance laws are unclear as to 
     whether personal insurance sales in connection with the 
     short-term rental or leasing of motor vehicles should be 
     licensed by the State as an insurance activity; and
       (B) in those States that have not yet implemented 
     regulations governing the offer or sale of insurance in 
     connection with the short-term lease or rental of a motor 
     vehicle, a presumption should exist that no insurance license 
     is required in connection with such sales.
       (2) Exception for certain insurance products.--Subsection 
     (b) does not apply to any person or entity who offers or 
     provides insurance ancillary to a short-term lease or rental 
     transaction of a motor vehicle in a State that does not, by 
     statute, rule, or regulation, impose any licensing, 
     appointment, personal or corporate qualifications, or 
     education requirements on such persons or entities.
       (3) Construction.--Nothing in this subsection shall be 
     construed to alter the validity or effect of any State law, 
     or the prospective application of any final State statute, 
     rule, or regulation which, by its specific terms, expressly 
     regulates or exempts from regulation any person or entity who 
     offers or provides insurance ancillary to a short-term lease 
     or rental transaction of a motor vehicle.
       (4) Lease period.--For purposes of this subsection, a 
     person shall be considered to be providing insurance 
     ancillary to a short-term lease or rental transaction of a 
     motor vehicle if the lease or rental transaction is for 60 
     days or less, and the insurance is provided for a period of 
     consecutive days not exceeding the length of the lease or 
     rental.
       (5) Effect.--This subsection shall remain in effect during 
     the period beginning on the date of enactment of this Act and 
     ending 5 years after that date of enactment.
       (i) Definitions.--For purposes of this section--
       (1) the term ``antitrust laws'' has the same meaning as in 
     subsection (a) of the first section of the Clayton Act, and 
     includes section 5 of the Federal Trade Commission Act (to 
     the extent that such section 5 relates to unfair methods of 
     competition);
       (2) the term ``insured depository institution'' has the 
     same meaning as in section 3 of the Federal Deposit Insurance 
     Act; and
       (3) the term ``State'' means any State of the United 
     States, the District of Columbia, any territory of the United 
     States, Puerto Rico, Guam, American Samoa, the Trust 
     Territory of the Pacific Islands, the Virgin Islands, and the 
     Northern Mariana Islands.
     Subtitle B--Streamlining Supervision of Bank Holding Companies

     SEC. 111. STREAMLINING BANK HOLDING COMPANY SUPERVISION.

       Section 5(c) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844(c)) is amended to read as follows:
       ``(c) Reports and Examinations.--
       ``(1) Reports.--
       ``(A) In general.--The Board, from time to time, may 
     require a bank holding company and any subsidiary of such 
     company to submit reports under oath to keep the Board 
     informed as to--
       ``(i) the financial condition of the bank holding company 
     or subsidiary, systems for monitoring and controlling 
     financial and operating risks, and transactions with 
     depository institution subsidiaries of the bank holding 
     company; and
       ``(ii) compliance by the company or subsidiary with 
     applicable provisions of this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--For purposes of compliance with this 
     paragraph, the Board shall, to the fullest extent possible, 
     accept--

       ``(I) reports that a bank holding company or any subsidiary 
     of such company has provided or been required to provide to 
     other Federal or State supervisors or to appropriate self-
     regulatory organizations;
       ``(II) information that is otherwise required to be 
     reported publicly; and
       ``(III) externally audited financial statements.

       ``(ii) Reports filed with other agencies.--In the event 
     that the Board requires a report under this subsection from a 
     functionally regulated subsidiary of a bank holding company 
     of a kind that is not required by another Federal or State 
     regulatory authority or an appropriate self-regulatory 
     organization, the Board shall request that the appropriate 
     regulatory authority or self-regulatory organization obtain 
     such report. If the report is not made available to the 
     Board, and the report is necessary to assess a material risk 
     to the bank holding company or any of its depository 
     institution subsidiaries or compliance with this Act, the 
     Board may require such functionally regulated subsidiary to 
     provide such a report to the Board.
       ``(2) Examinations.--
       ``(A) Examination authority for bank holding companies and 
     subsidiaries.--Subject to subparagraph (B), the Board may 
     make examinations of each bank holding company and each 
     subsidiary of such holding company in order--
       ``(i) to inform the Board of the nature of the operations 
     and financial condition of the holding company and such 
     subsidiaries;
       ``(ii) to inform the Board of--

       ``(I) the financial and operational risks within the 
     holding company system that may pose a threat to the safety 
     and soundness of any depository institution subsidiary of 
     such holding company; and
       ``(II) the systems for monitoring and controlling such 
     risks; and

       ``(iii) to monitor compliance with the provisions of this 
     Act and those governing

[[Page S4962]]

     transactions and relationships between any depository 
     institution subsidiary and its affiliates.
       ``(B) Functionally regulated subsidiaries.--Notwithstanding 
     subparagraph (A), the Board may make examinations of a 
     functionally regulated subsidiary of a bank holding company 
     only if--
       ``(i) the Board has reasonable cause to believe that such 
     subsidiary is engaged in activities that pose a material risk 
     to an affiliated depository institution; or
       ``(ii) based on reports and other available information, 
     the Board has reasonable cause to believe that a subsidiary 
     is not in compliance with this Act or with provisions 
     relating to transactions with an affiliated depository 
     institution, and the Board cannot make such determination 
     through examination of the affiliated depository institution 
     or the bank holding company.
       ``(C) Restricted focus of examinations.--The Board shall, 
     to the fullest extent possible, limit the focus and scope of 
     any examination of a bank holding company to--
       ``(i) the bank holding company; and
       ``(ii) any subsidiary of the bank holding company that 
     could have a materially adverse effect on the safety and 
     soundness of any depository institution subsidiary of the 
     holding company due to--

       ``(I) the size, condition, or activities of the subsidiary; 
     or
       ``(II) the nature or size of transactions between the 
     subsidiary and any depository institution that is also a 
     subsidiary of the bank holding company.

       ``(D) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, for the purposes of this 
     paragraph, use the reports of examinations of depository 
     institutions made by the appropriate Federal and State 
     depository institution supervisory authority.
       ``(E) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, forego an examination by the 
     Board under this paragraph and instead review the reports of 
     examination made of--
       ``(i) any registered broker or dealer by or on behalf of 
     the Securities and Exchange Commission;
       ``(ii) any registered investment adviser properly 
     registered by or on behalf of either the Securities and 
     Exchange Commission or any State;
       ``(iii) any licensed insurance company by or on behalf of 
     any State regulatory authority responsible for the 
     supervision of insurance companies; and
       ``(iv) any other subsidiary that the Board finds to be 
     comprehensively supervised by a Federal or State authority.
       ``(3) Capital.--
       ``(A) In general.--The Board may not, by regulation, 
     guideline, order, or otherwise, prescribe or impose any 
     capital or capital adequacy rules, guidelines, standards, or 
     requirements on any subsidiary of a bank holding company 
     that--
       ``(i) is not an insured depository institution; and
       ``(ii) is--

       ``(I) in compliance with the applicable capital 
     requirements of another Federal regulatory authority 
     (including the Securities and Exchange Commission) or State 
     insurance authority; or
       ``(II) properly registered as an investment adviser under 
     the Investment Advisers Act of 1940, or with any State.

       ``(B) Rule of construction.--Subparagraph (A) shall not be 
     construed as preventing the Board from imposing capital or 
     capital adequacy rules, guidelines, standards, or 
     requirements with respect to activities of a registered 
     investment adviser other than with respect to investment 
     advisory activities or activities incidental to investment 
     advisory activities.
       ``(C) Limitations on indirect action.--In developing, 
     establishing, or assessing bank holding company capital or 
     capital adequacy rules, guidelines, standards, or 
     requirements for purposes of this paragraph, the Board may 
     not take into account the activities, operations, or 
     investments of an affiliated investment company registered 
     under the Investment Company Act of 1940, if the investment 
     company is not--
       ``(i) a bank holding company; or
       ``(ii) controlled by a bank holding company by reason of 
     ownership by the bank holding company (including through all 
     of its affiliates) of 25 percent or more of the shares of the 
     investment company, where the shares owned by the bank 
     holding company have a market value equal to more than 
     $1,000,000.
       ``(4) Transfer of board authority to appropriate federal 
     banking agency.--
       ``(A) In general.--In the case of any bank holding company 
     that is not significantly engaged in nonbanking activities, 
     the Board, in consultation with the appropriate Federal 
     banking agency, may designate the appropriate Federal banking 
     agency of the lead insured depository institution subsidiary 
     of such holding company as the appropriate Federal banking 
     agency for the bank holding company.
       ``(B) Authority transferred.--An agency designated by the 
     Board under subparagraph (A) shall have the same authority as 
     the Board under this Act--
       ``(i) to examine and require reports from the bank holding 
     company and any affiliate of such company (other than a 
     depository institution) under this section;
       ``(ii) to approve or disapprove applications or 
     transactions under section 3;
       ``(iii) to take actions and impose penalties under 
     subsections (e) and (f) of this section and under section 8; 
     and
       ``(iv) to take actions regarding the holding company, any 
     affiliate of the holding company (other than a depository 
     institution), or any institution-affiliated party of such 
     company or affiliate under the Federal Deposit Insurance Act 
     and any other statute that the Board may designate.
       ``(C) Agency orders.--Section 9 of this Act and section 105 
     of the Bank Holding Company Act Amendments of 1970 shall 
     apply to orders issued by an agency designated under 
     subparagraph (A) in the same manner as such sections apply to 
     orders issued by the Board.
       ``(5) Functional regulation of securities and insurance 
     activities.--
       ``(A) Securities activities.--Securities activities 
     conducted in a functionally regulated subsidiary of a bank 
     shall be subject to regulation by the Securities and Exchange 
     Commission, and by relevant State securities authorities, as 
     appropriate, subject to section 104 of the Financial Services 
     Modernization Act of 1999, to the same extent as if they were 
     conducted in a nondepository institution subsidiary of a bank 
     holding company.
       ``(B) Insurance activities.--Subject to section 104 of the 
     Financial Services Modernization Act of 1999, insurance 
     agency and brokerage activities and activities as principal 
     conducted in a functionally regulated subsidiary of a bank 
     shall be subject to regulation by a State insurance authority 
     to the same extent as if they were conducted in a 
     nondepository institution subsidiary of a bank holding 
     company.
       ``(6) Definition.--For purposes of this subsection, the 
     term `functionally regulated subsidiary' means any company--
       ``(A) that is not a bank holding company; and
       ``(B) that is--
       ``(i) a broker or dealer that is registered under the 
     Securities Exchange Act of 1934;
       ``(ii) a registered investment adviser, properly registered 
     by or on behalf of either the Securities and Exchange 
     Commission or any State, with respect to the investment 
     advisory activities of such investment adviser and activities 
     incidental to such investment advisory activities;
       ``(iii) an investment company that is registered under the 
     Investment Company Act of 1940;
       ``(iv) an insurance company or insurance agency that is 
     subject to supervision by a State insurance commission, 
     agency, or similar authority; or
       ``(v) an entity that is subject to regulation by the 
     Commodity Futures Trading Commission, with respect to the 
     commodities activities of such entity and activities 
     incidental to such commodities activities.''.

     SEC. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND 
                   SECURITIES AND EXCHANGE COMMISSION.

       Section 5 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844) is amended by adding at the end the following 
     new subsection:
       ``(g) Authority of State Insurance Regulator and the 
     Securities and Exchange Commission.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, any regulation, order, or other action of the Board that 
     requires a bank holding company to provide funds or other 
     assets to an insured depository institution subsidiary shall 
     not be effective nor enforceable, if--
       ``(A) such funds or assets are to be provided by--
       ``(i) a bank holding company that is an insurance company 
     or that is a broker or dealer registered under the Securities 
     Exchange Act of 1934; or
       ``(ii) an affiliate of the insured depository institution 
     that is an insurance company or a broker or dealer registered 
     under the Securities Exchange Act of 1934; and
       ``(B) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker or dealer, as the case may be, determines 
     in a written notice sent to the bank holding company and to 
     the Board that the bank holding company shall not provide 
     such funds or assets because such action would have a 
     material adverse effect on the financial condition of the 
     insurance company or the broker or dealer, as the case may 
     be.
       ``(2) Notice to state insurance authority or sec 
     required.--If the Board requires a bank holding company, or 
     an affiliate of a bank holding company, that is an insurance 
     company or a broker or dealer, as described in paragraph 
     (1)(A), to provide funds or assets to an insured depository 
     institution subsidiary of the bank holding company pursuant 
     to any regulation, order, or other action of the Board 
     referred to in paragraph (1), the Board shall promptly notify 
     the State insurance authority for the insurance company or 
     the Securities and Exchange Commission, as the case may be, 
     of such requirement.
       ``(3) Divestiture in lieu of other action.--If the Board 
     receives a notice described in paragraph (1)(B) from a State 
     insurance authority or the Securities and Exchange Commission 
     with regard to a bank holding company or affiliate referred 
     to in that paragraph, the Board may order the bank holding 
     company to divest the insured depository institution 
     subsidiary not later than 180 days after receiving the 
     notice, or such longer period as the Board determines to be 
     consistent with the safe and sound operation of the insured 
     depository institution.
       ``(4) Conditions before divestiture.--During the period 
     beginning on the date on which an order to divest is issued 
     by the

[[Page S4963]]

     Board under paragraph (3) to a bank holding company and 
     ending on the date on which the divestiture is completed, the 
     Board may impose any conditions or restrictions on ownership 
     or operation by the bank holding company of the insured 
     depository institution, including restricting or prohibiting 
     transactions between the insured depository institution and 
     any affiliate of the institution, as are appropriate under 
     the circumstances.
       ``(5) Rule of construction.--No provision of this 
     subsection may be construed to limit or otherwise affect the 
     regulatory authority, including the scope of the authority, 
     of any Federal agency or department with regard to any entity 
     that is within the jurisdiction of such agency or 
     department.''.

     SEC. 113. ROLE OF THE BOARD OF GOVERNORS OF THE FEDERAL 
                   RESERVE SYSTEM.

       The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et 
     seq.) is amended by inserting after section 10 the following 
     new section:

     ``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, 
                   SUPERVISORY, AND ENFORCEMENT AUTHORITY OF THE 
                   BOARD.

       ``(a) Limitation on Direct Action.--The Board may not 
     prescribe regulations, issue or seek entry of orders, impose 
     restraints, restrictions, guidelines, requirements, 
     safeguards, or standards, or otherwise take any action under 
     or pursuant to any provision of this Act or section 8 of the 
     Federal Deposit Insurance Act against or with respect to a 
     functionally regulated subsidiary of a bank holding company 
     unless--
       ``(1) the action is necessary to prevent or redress an 
     unsafe or unsound practice or breach of fiduciary duty by 
     such subsidiary that poses a material risk to--
       ``(A) the financial safety, soundness, or stability of an 
     affiliated insured depository institution; or
       ``(B) the domestic or international payment system; and
       ``(2) the Board finds that it is not reasonably possible to 
     protect effectively against the material risk at issue 
     through action directed at or against the affiliated insured 
     depository institution or against insured depository 
     institutions generally.
       ``(b) Limitation on Indirect Action.--The Board may not 
     prescribe regulations, issue or seek entry of orders, impose 
     restraints, restrictions, guidelines, requirements, 
     safeguards, or standards, or otherwise take any action under 
     or pursuant to any provision of this Act or section 8 of the 
     Federal Deposit Insurance Act against or with respect to a 
     bank holding company where the purpose or effect of doing so 
     would be to take action indirectly against or with respect to 
     a functionally regulated subsidiary of a bank holding company 
     that may not be taken directly against or with respect to 
     such subsidiary in accordance with subsection (a).
       ``(c) Actions Specifically Authorized.--Notwithstanding 
     subsection (a), the Board may take action under this Act or 
     section 8 of the Federal Deposit Insurance Act to enforce 
     compliance by a functionally regulated subsidiary of a bank 
     holding company with Federal law that the Board has specific 
     jurisdiction to enforce against such subsidiary.
       ``(d) `Functionally Regulated Subsidiary' Defined.--For 
     purposes of this section, the term `functionally regulated 
     subsidiary' has the same meaning as in section 5(c)(6).''.

     SEC. 114. EXAMINATION OF INVESTMENT COMPANIES.

       (a) Exclusive Commission Authority.--Except as provided in 
     subsection (c), a Federal banking agency may not inspect or 
     examine any registered investment company that is not a bank 
     holding company or a savings and loan holding company.
       (b) Examination Results and Other Information.--The 
     Commission shall provide to any Federal banking agency, upon 
     request, the results of any examination, reports, records, or 
     other information with respect to any registered investment 
     company to the extent necessary for the agency to carry out 
     its statutory responsibilities.
       (c) Certain Examinations Authorized.--Nothing in this 
     section shall prevent the Corporation, if the Corporation 
     finds it necessary to determine the condition of an insured 
     depository institution for insurance purposes, from examining 
     an affiliate of any insured depository institution, pursuant 
     to its authority under section 10(b)(4) of the Federal 
     Deposit Insurance Act, as may be necessary to disclose fully 
     the relationship between the insured depository institution 
     and the affiliate, and the effect of such relationship on the 
     insured depository institution.
       (d) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Bank holding company.--The term ``bank holding 
     company'' has the same meaning as in section 2 of the Bank 
     Holding Company Act of 1956.
       (2) Corporation.--The term ``Corporation'' means the 
     Federal Deposit Insurance Corporation.
       (3) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (4) Federal banking agency.--The term ``Federal banking 
     agency'' has the same meaning as in section 3(z) of the 
     Federal Deposit Insurance Act.
       (5) Registered investment company.--The term ``registered 
     investment company'' means an investment company that is 
     registered with the Commission under the Investment Company 
     Act of 1940.
       (6) Savings and loan holding company.--The term ``savings 
     and loan holding company'' has the same meaning as in section 
     10(a)(1)(D) of the Home Owners' Loan Act.

     SEC. 115. EQUIVALENT REGULATION AND SUPERVISION.

       (a) In General.--Notwithstanding any other provision of 
     law, the provisions of--
       (1) section 5(c) of the Bank Holding Company Act of 1956 
     (as amended by this Act) that limit the authority of the 
     Board of Governors of the Federal Reserve System to require 
     reports from, to make examinations of, or to impose capital 
     requirements on holding companies and their functionally 
     regulated subsidiaries or that require deference to other 
     regulators;
       (2) section 5(g) of the Bank Holding Company Act of 1956 
     (as added by this Act) that limit the authority of the Board 
     to require capital from a functionally regulated subsidiary 
     of a holding company to an insured depository institution 
     subsidiary of the holding company and to take certain actions 
     including requiring divestiture of the insured depository 
     institution; and
       (3) section 10A of the Bank Holding Company Act of 1956 (as 
     added by this Act) that limit whatever authority the Board 
     might otherwise have to take direct or indirect action with 
     respect to holding companies and their functionally regulated 
     subsidiaries,

     shall also limit whatever authority that a Federal banking 
     agency (as defined in section 3 of the Federal Deposit 
     Insurance Act) might otherwise have under applicable Federal 
     law to require reports, make examinations, impose capital 
     requirements, or take any other direct or indirect action 
     with respect to any functionally regulated subsidiary of an 
     insured depository institution, subject to the same standards 
     and requirements as are applicable to the Board under those 
     provisions.
       (b) Certain Exemption Authorized.--Nothing in this section 
     shall prevent the Federal Deposit Insurance Corporation, if 
     the Corporation finds it necessary to determine the condition 
     of an insured depository institution for insurance purposes, 
     from examining an affiliate of any insured depository 
     institution, pursuant to its authority under section 10(b)(4) 
     of the Federal Deposit Insurance Act, as may be necessary to 
     disclose fully the relationship between the depository 
     institution and the affiliate, and the effect of such 
     relationship on the depository institution.
       (c) ``Functionally Regulated Subsidiary'' Defined.--For 
     purposes of this section, the term ``functionally regulated 
     subsidiary'' has the same meaning as in section 5(c)(6) of 
     the Bank Holding Company Act of 1956, as amended by this Act.

     SEC. 116. INTERAGENCY CONSULTATION.

       (a) Examination Results and Other Information.--
       (1) Information of the board.--Upon the request of the 
     appropriate insurance regulator of any State, the Board may 
     provide to that regulator any information of the Board 
     regarding the financial condition, risk management policies, 
     and operations of any bank holding company that controls a 
     company that is engaged in insurance activities and is 
     regulated by that State insurance regulator, and regarding 
     any transaction or relationship between such an insurance 
     company and any affiliated depository institution. The Board 
     may provide any other information to the appropriate State 
     insurance regulator that the Board believes is necessary or 
     appropriate to permit the State insurance regulator to 
     administer and enforce applicable State insurance laws.
       (2) Banking agency information.--Upon the request of the 
     appropriate insurance regulator of any State, the appropriate 
     Federal banking agency may provide to that regulator any 
     information of the agency regarding any transaction or 
     relationship between a depository institution supervised by 
     that Federal banking agency and any affiliated company that 
     is engaged in insurance activities regulated by the State 
     insurance regulator. The appropriate Federal banking agency 
     may provide any other information to the appropriate State 
     insurance regulator that the agency believes is necessary or 
     appropriate to permit the State insurance regulator to 
     administer and enforce applicable State insurance laws.
       (3) State insurance regulator information.--Upon the 
     request of the appropriate Federal banking agency, a State 
     insurance regulator may provide any examination or other 
     reports, records, or other information to which the State 
     insurance regulator may have access with respect to a company 
     that--
       (A) is engaged in insurance activities and is regulated by 
     that insurance regulator; and
       (B) is an affiliate of an insured depository institution or 
     a bank holding company.
       (b) Consultation.--Before making any determination relating 
     to the initial affiliation of, or the continuing affiliation 
     of, an insured depository institution or bank holding company 
     with a company engaged in insurance activities, the 
     appropriate Federal banking agency shall consult with the 
     appropriate State insurance regulator of such company and 
     take the views of such insurance regulator into account in 
     making such determination.
       (c) Effect on Other Authority.--Nothing in this section 
     shall limit in any respect the authority of the appropriate 
     Federal banking agency with respect to an insured depository 
     institution or bank holding company or any affiliate thereof 
     under any provision of law.

[[Page S4964]]

       (d) Confidentiality and Privilege.--
       (1) Confidentiality.--The appropriate Federal banking 
     agency may not provide any information or material that is 
     entitled to confidential treatment under applicable Federal 
     banking agency regulations, or other applicable law, to a 
     State insurance regulator, unless such regulator agrees to 
     maintain the information or material in confidence and to 
     take all reasonable steps to oppose any effort to secure 
     disclosure of the information or material by the regulator. 
     The appropriate Federal banking agency shall treat as 
     confidential any information or material obtained from a 
     State insurance regulator that is entitled to confidential 
     treatment under applicable State regulations, or other 
     applicable law, and take all reasonable steps to oppose any 
     effort to secure disclosure of the information or material by 
     the Federal banking agency.
       (2) Privilege.--The provision pursuant to this section of 
     information or material by a Federal banking agency or a 
     State insurance regulator shall not constitute a waiver of, 
     or otherwise affect, any privilege to which the information 
     or material is otherwise subject.
       (e) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Appropriate federal banking agency; insured depository 
     institution.--The terms ``appropriate Federal banking 
     agency'' and ``insured depository institution'' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.
       (2) Board; bank holding company.--The terms ``Board'' and 
     ``bank holding company'' have the same meanings as in section 
     2 of the Bank Holding Company Act of 1956.

     SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.

       Section 11(a)(4)(B) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1821(a)(4)(B)) is amended by striking ``to benefit 
     any shareholder of'' and inserting ``to benefit any 
     shareholder, affiliate (other than an insured depository 
     institution that receives assistance in accordance with the 
     provisions of this Act), or subsidiary of''.
                Subtitle C--Activities of National Banks

     SEC. 121. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE MUNICIPAL 
                   REVENUE BONDS.

       The paragraph designated the Seventh of section 5136 of the 
     Revised Statutes of the United States (12 U.S.C. 24(7)) is 
     amended by adding at the end the following:
       ``The limitations and restrictions contained in this 
     paragraph as to dealing in, underwriting, and purchasing 
     investment securities for the national bank's own account do 
     not apply to obligations (including limited obligation bonds, 
     revenue bonds, and obligations that satisfy the requirements 
     of section 142(b)(1) of the Internal Revenue Code of 1986) 
     issued by or on behalf of any State or political subdivision 
     of a State, including any municipal corporate instrumentality 
     of 1 or more States, or any public agency or authority of any 
     State or political subdivision of a State, if the national 
     banking association is well capitalized (as defined in 
     section 38 of the Federal Deposit Insurance Act).''.

     SEC. 122. SUBSIDIARIES OF NATIONAL BANKS.

       (a) In General.--Chapter one of title LXII of the Revised 
     Statutes of the United States (12 U.S.C. 21 et seq.) is 
     amended--
       (1) by redesignating section 5136A as section 5136C; and
       (2) by inserting after section 5136 (12 U.S.C. 24) the 
     following new section:

     ``SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.

       ``(a) Authorization To Conduct in Operating Subsidiaries 
     Certain Activities That Are Financial in Nature.--
       ``(1) In general.--Subject to paragraph (2), a national 
     bank may control a financial subsidiary, or hold an interest 
     in a financial subsidiary, only if--
       ``(A) the consolidated total assets of the national bank do 
     not exceed $1,000,000,000;
       ``(B) the national bank is not an affiliate of a bank 
     holding company;
       ``(C) the subject activities are not real estate 
     development or real estate investment activities, unless 
     otherwise expressly authorized by law;
       ``(D) the national bank and each insured depository 
     institution affiliate of the national bank is well 
     capitalized and well managed; and
       ``(E) the national bank has received the approval of the 
     Comptroller of the Currency to engage in such activities, 
     which approval shall be based solely upon the factors set 
     forth in subparagraph (D) and factors set forth in subsection 
     (c).
       ``(2) Regulations required.--The Comptroller of the 
     Currency shall, by regulation, prescribe procedures for the 
     enforcement of this section.
       ``(b) Safety and Soundness Fire Walls.--
       ``(1) Capital reduction required.--In determining 
     compliance with applicable capital standards for purposes of 
     subsection (a)(1)(D)--
       ``(A) the aggregate amount of outstanding equity 
     investments by a national bank in a financial subsidiary 
     shall be deducted from the assets and tangible equity of the 
     national bank; and
       ``(B) the assets and liabilities of the financial 
     subsidiary shall not be consolidated with those of the 
     national bank.
       ``(2) Investment limitation.--A national bank may not, 
     without the prior approval of the Comptroller of the 
     Currency, make any equity investment in a financial 
     subsidiary of the bank if that investment would, when made, 
     exceed the amount that the national bank could pay as a 
     dividend without obtaining prior regulatory approval.
       ``(c) Safeguards for the Bank.--A national bank that 
     establishes or maintains a financial subsidiary shall assure 
     that--
       ``(1) the procedures of the national bank for identifying 
     and managing financial and operational risks within the 
     national bank and financial subsidiary adequately protect the 
     national bank from such risks;
       ``(2) the bank has, for the protection of the national 
     bank, reasonable policies and procedures to preserve the 
     separate corporate identity and limited liability of the 
     national bank and the financial subsidiaries of the national 
     bank; and
       ``(3) the national bank is in compliance with this section.
       ``(d) Streamlining Regulation and Supervision and 
     Encouraging Consultation Among Federal and State 
     Regulators.--
       ``(1) In general.--To the extent that a national bank 
     engages in activities that are authorized by subsection (a) 
     through a functionally regulated financial subsidiary, the 
     regulation and supervision of such subsidiary by the 
     Comptroller of the Currency, including its ability to require 
     a contribution of capital or assets to the national bank from 
     that functionally regulated financial subsidiary, shall be 
     limited, as set forth under section 115 of the Financial 
     Services Modernization Act of 1999.
       ``(2) Interagency consultation.--The provisions of section 
     116 of the Financial Services Modernization Act of 1999, 
     relating to interagency consultation, shall apply to the 
     Comptroller of the Currency and the appropriate State 
     regulators of functionally regulated financial subsidiaries 
     of a national bank.
       ``(e) Preservation of Existing Operating Subsidiary 
     Authority.--Notwithstanding any other provision of this 
     section--
       ``(1) a national bank may retain control of a company, or 
     retain an interest in a company, and conduct through such 
     company any activities lawfully conducted therein as of the 
     date of enactment of the Financial Services Modernization Act 
     of 1999; and
       ``(2) a national bank may own shares of or any other 
     interest in any company that is engaged only in activities 
     that are permissible for the national bank to engage in 
     directly, if such activities are engaged in under the same 
     terms and conditions that would govern the conduct if 
     conducted by a national bank directly.
       ``(f) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Financial subsidiary.--The term `financial 
     subsidiary' means a company that--
       ``(A) is a subsidiary of a national bank; and
       ``(B) is engaged as principal in any activity that is 
     permissible for a bank holding company under section 4(k) of 
     the Bank Holding Company Act of 1956 and is not permissible 
     for national banks to engage in directly.
       ``(2) Functionally regulated.--The term `functionally 
     regulated financial subsidiary' means a financial subsidiary 
     that is--
       ``(A) a broker or dealer that is registered under the 
     Securities Exchange Act of 1934;
       ``(B) an investment adviser that is registered under the 
     Investment Advisers Act of 1940, or with any State, with 
     respect to the investment advisory activities of such 
     investment adviser and activities incidental to such 
     investment advisory activities;
       ``(C) an insurance company that is subject to supervision 
     by a State insurance commission, agency, or similar 
     authority; and
       ``(D) an entity that is subject to regulation by the 
     Commodity Futures Trading Commission, with respect to the 
     commodities activities of such entity and activities 
     incidental to such commodities activities.
       ``(3) Subsidiary.--The term `subsidiary' has the same 
     meaning as in section 2 of the Bank Holding Company Act of 
     1956.
       ``(4) Well capitalized.--The term `well capitalized' has 
     the same meaning as in section 38 of the Federal Deposit 
     Insurance Act.
       ``(5) Well managed.--The term `well managed' means--
       ``(A) in the case of a depository institution that has been 
     examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency--
       ``(i) the achievement of a composite rating of 1 or 2 under 
     the Uniform Financial Institutions Rating System (or an 
     equivalent rating under an equivalent rating system) in 
     connection with the most recent examination or subsequent 
     review of the depository institution; and
       ``(ii) at least a rating of 2 for management, if such 
     rating is given; or
       ``(B) in the case of any depository institution that has 
     not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory.
       ``(6) Incorporated definitions.--The terms `appropriate 
     Federal banking agency', `depository institution', and 
     `insured depository institution', have the same meanings as 
     in section 3 of the Federal Deposit Insurance Act.''.
       (b) Limiting the Credit Exposure of a National Bank to a 
     Financial Subsidiary to the Amount of Permissible Credit 
     Exposure to an Affiliate.--Section 23A of the Federal Reserve 
     Act (12 U.S.C. 371c) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d), the following new 
     subsection:
       ``(e) Rules Relating to National Banks With Financial 
     Subsidiaries.--

[[Page S4965]]

       ``(1) Financial subsidiary defined.--For purposes of this 
     section and section 23B, the term `financial subsidiary' has 
     the same meaning as in section 5136A(f) of the Revised 
     Statutes of the United States.
       ``(2) Application to transactions between a financial 
     subsidiary of a national bank and the national bank.--For 
     purposes of applying this section and section 23B to a 
     transaction between a financial subsidiary of a national bank 
     and the national bank (or between such financial subsidiary 
     and any other subsidiary of the national bank that is not a 
     financial subsidiary), and notwithstanding subsection (b)(2) 
     of this section or section 23B(d)(1)--
       ``(A) the financial subsidiary of the national bank--
       ``(i) shall be deemed to be an affiliate of the national 
     bank and of any other subsidiary of the bank that is not a 
     financial subsidiary; and
       ``(ii) shall not be deemed to be a subsidiary of the 
     national bank; and
       ``(B) a purchase of or investment in equity securities 
     issued by the financial subsidiary shall not be deemed to be 
     a covered transaction.
       ``(3) Application to transactions between financial 
     subsidiary and nonbank affiliates.--
       ``(A) In general.--A transaction between a financial 
     subsidiary and an affiliate of the financial subsidiary (that 
     is not a subsidiary of a national bank) shall not be deemed 
     to be a transaction between a subsidiary of a national bank 
     and an affiliate of that bank for purposes of section 23A or 
     section 23B.
       ``(B) Certain affiliates excluded.--For purposes of this 
     paragraph, the term `affiliate' does not include a national 
     bank, or a subsidiary of a national bank that is engaged 
     exclusively in activities permissible for a national bank to 
     engage in directly or agency activities permitted under 
     section 123 of the Financial Services Modernization Act of 
     1999.''.
       (c) Antitying.--Section 106(a) of the Bank Holding Company 
     Act Amendments of 1970 (12 U.S.C. 1971) is amended by adding 
     at the end the following: ``For purposes of this section, a 
     financial subsidiary of a national bank engaging in 
     activities pursuant to section 5136A(a) of the Revised 
     Statutes of the United States shall be deemed to be a 
     subsidiary of a bank holding company, and not a subsidiary of 
     a bank.''.
       (d) Clerical Amendment.--The table of sections for chapter 
     one of title LXII of the Revised Statutes of the United 
     States is amended--
       (1) by redesignating the item relating to section 5136A as 
     relating to section 5136C; and
       (2) by inserting after the item relating to section 5136 
     the following new item:

``5136A. Subsidiaries of national banks.''.

     SEC. 123. AGENCY ACTIVITIES.

       A national bank may control a company, or hold an interest 
     in a company that engages in agency activities that have been 
     determined by the Comptroller of the Currency to be 
     permissible for national banks or to be financial in nature 
     or incidental to such financial activities (as determined 
     pursuant to section 4(k) of the Bank Holding Company Act of 
     1956) if the company engages in such activities solely as 
     agent and not directly or indirectly as principal.

     SEC. 124. PROHIBITING FRAUDULENT REPRESENTATIONS.

       (a) In General.--Chapter 47 of title 18, United States 
     Code, is amended by inserting after section 1007 the 
     following new section:

     ``SEC. 1008. MISREPRESENTATIONS REGARDING FINANCIAL 
                   INSTITUTION LIABILITY FOR OBLIGATIONS OF 
                   AFFILIATES.

       ``(a) Prohibition.--It shall be unlawful for an 
     institution-affiliated party of an insured depository 
     institution or institution-affiliated party of a subsidiary 
     or affiliate of an insured depository institution to 
     fraudulently represent that the institution is or will be 
     liable for any obligation of a subsidiary or other affiliate 
     of the institution.
       ``(b) Penalties.--Whoever violates subsection (a) shall be 
     fined under this title, imprisoned not more than 1 year, or 
     both.
       ``(c) Institution-Affiliated Party Defined.--For purposes 
     of this section, the term `institution-affiliated party' has 
     the same meaning as in section 3 of the Federal Deposit 
     Insurance Act, except that references to an insured 
     depository institution shall be deemed to include references 
     to a subsidiary or affiliate of an insured depository 
     institution.
       ``(d) Other Definitions.--For purposes of this section, the 
     terms `affiliate', `insured depository institution', and 
     `subsidiary' have same meanings as in section 3 of the 
     Federal Deposit Insurance Act.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     47 of title 18, United States Code, is amended by inserting 
     after the item relating to section 1007 the following new 
     item:

``1008. Misrepresentations regarding financial institution liability 
              for obligations of affiliates.''.

     SEC. 125. INSURANCE UNDERWRITING BY NATIONAL BANKS.

       (a) In General.--
       (1) In general.--Except as provided in paragraph (2), a 
     national bank and the subsidiaries of a national bank may 
     only provide insurance in a State as principal in accordance 
     with section 5136A(a) of the Revised Statutes of the United 
     States, as added by this Act.
       (2) Exception.--A national bank and the subsidiaries of a 
     national bank may provide authorized insurance products as 
     principal without regard to section 5136A(a) of the Revised 
     Statutes of the United States, as added by this Act.
       (b) Authorized Insurance Products.--For purposes of this 
     section, a product is an ``authorized insurance product'' 
     if--
       (1) as of January 1, 1999, the Comptroller of the Currency 
     had determined in writing that national banks may provide 
     such product as principal, or national banks were in fact 
     lawfully providing such product as principal;
       (2) no court of relevant jurisdiction had, by final 
     judgment, overturned a determination of the Comptroller of 
     the Currency that national banks may provide such product as 
     principal; and
       (3) the product is not an annuity contract, the income of 
     which is subject to tax treatment under section 72 of the 
     Internal Revenue Code of 1986.
       (c) Definition.--For purposes of this section, the term 
     ``insurance'' means--
       (1) any product regulated as insurance as of January 1, 
     1999, in accordance with the relevant State insurance law, in 
     the State in which the product is provided;
       (2) any product first offered after January 1, 1999, 
     which--
       (A) a State insurance regulator determines shall be 
     regulated as insurance in the State in which the product is 
     provided because the product insures, guarantees, or 
     indemnifies against liability, loss of life, loss of health, 
     or loss through damage to or destruction of property, 
     including surety bonds, life insurance, health insurance, 
     title insurance, and property and casualty insurance (such as 
     private passenger or commercial automobile, homeowners, 
     mortgage, commercial multiperil, general liability, 
     professional liability, workers' compensation, fire and 
     allied lines, farm owners multiperil, aircraft, fidelity, 
     surety, medical malpractice, ocean marine, inland marine, and 
     boiler and machinery insurance); and
       (B) is not a product or service of a bank that is--
       (i) a deposit product;
       (ii) a loan, discount, letter of credit, or other extension 
     of credit;
       (iii) a trust or other fiduciary service;
       (iv) a qualified financial contract (as defined in or 
     determined pursuant to section 11(e)(8)(D)(i) of the Federal 
     Deposit Insurance Act); or
       (v) a financial guaranty, except that this subparagraph 
     shall not apply to a product that includes an insurance 
     component such that if the product is offered or proposed to 
     be offered by the bank as principal--

       (I) it would be treated as a life insurance contract under 
     section 7702 of the Internal Revenue Code of 1986; or
       (II) in the event that the product is not a letter of 
     credit or other similar extension of credit, a qualified 
     financial contract, or a financial guaranty, it would qualify 
     for treatment for losses incurred with respect to such 
     product under section 832(b)(5) of the Internal Revenue Code 
     of 1986, if the bank were subject to tax as an insurance 
     company under section 831 of that Code; and

       (3) any annuity contract, the income on which is subject to 
     tax treatment under section 72 of the Internal Revenue Code 
     of 1986.
    Subtitle D--National Treatment of Foreign Financial Institutions

     SEC. 151. NATIONAL TREATMENT OF FOREIGN FINANCIAL 
                   INSTITUTIONS.

       Section 8(c) of the International Banking Act of 1978 (12 
     U.S.C. 3106(c)) is amended by adding at the end the following 
     new paragraph:
       ``(3) Termination of Grandfathered Rights.--
       ``(A) In general.--If any foreign bank or foreign company 
     files a declaration under section 4() of the Bank Holding 
     Company Act of 1956, any authority conferred by this 
     subsection on any foreign bank or company to engage in any 
     activity that the Board has determined to be permissible for 
     bank holding companies under section 4(k) of that Act shall 
     terminate immediately.
       ``(B) Restrictions and requirements authorized.--If a 
     foreign bank or company that engages, directly or through an 
     affiliate pursuant to paragraph (1), in an activity that the 
     Board determines to be permissible for bank holding companies 
     under section 4(k) of the Bank Holding Company Act of 1956, 
     has not filed a declaration with the Board of its status as a 
     bank holding company under section 4(l) of that Act by the 
     end of the 2-year period beginning on the date of enactment 
     of the Financial Services Modernization Act of 1999, the 
     Board, giving due regard to the principle of national 
     treatment and equality of competitive opportunity, may impose 
     such restrictions and requirements on the conduct of such 
     activities by such foreign bank or company as are comparable 
     to those imposed on a bank holding company organized under 
     the laws of the United States, including a requirement to 
     conduct such activities in compliance with any prudential 
     safeguards established under section 10A of the Bank Holding 
     Company Act of 1956.''.

     SEC. 152. REPRESENTATIVE OFFICES.

       (a) Definition of ``Representative Office''.--Section 
     1(b)(15) of the International Banking Act of 1978 (12 U.S.C. 
     3101(15)) is amended by striking ``State agency, or 
     subsidiary of a foreign bank'' and inserting ``or State 
     agency''.
       (b) Examinations.--Section 10(c) of the International 
     Banking Act of 1978 (12 U.S.C.

[[Page S4966]]

     3107(c)) is amended by adding at the end the following: ``The 
     Board may also make examinations of any affiliate of a 
     foreign bank conducting business in any State, if the Board 
     deems it necessary to determine and enforce compliance with 
     this Act, the Bank Holding Company Act of 1956 (12 U.S.C. 
     1841 et seq.), or other applicable Federal banking law.''.
                TITLE II--INSURANCE CUSTOMER PROTECTIONS

     SEC. 201. FUNCTIONAL REGULATION OF INSURANCE.

       The insurance activity of any person or entity shall be 
     functionally regulated by the States, subject to subsections 
     (c), (d), and (e) of section 104.

     SEC. 202. INSURANCE CUSTOMER PROTECTIONS.

       The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) 
     is amended by adding at the end the following new section:

     ``SEC. 45. INSURANCE CUSTOMER PROTECTIONS.

       ``(a) Regulations Required.--
       ``(1) In general.--The Federal banking agencies shall 
     prescribe and publish in final form, before the end of the 1-
     year period beginning on the date of enactment of the 
     Financial Services Modernization Act of 1999, customer 
     protection regulations (which the agencies jointly determine 
     to be appropriate) that--
       ``(A) apply to retail sales practices, solicitations, 
     advertising, or offers of any insurance product by any 
     insured depository institution or any person that is engaged 
     in such activities at an office of the institution or on 
     behalf of the institution; and
       ``(B) are consistent with the requirements of this Act and 
     provide such additional protections for customers to whom 
     such sales, solicitations, advertising, or offers are 
     directed.
       ``(2) Applicability to subsidiaries.--The regulations 
     prescribed pursuant to paragraph (1) shall extend such 
     protections to any subsidiaries of an insured depository 
     institution as deemed appropriate by the Federal banking 
     agencies, where such extension is determined to be necessary 
     to ensure the customer protections provided by this section.
       ``(3) Consultation and joint regulations.--The Federal 
     banking agencies shall consult with each other and prescribe 
     joint regulations pursuant to paragraph (1), after 
     consultation with the State insurance regulators, as 
     appropriate.
       ``(b) Sales Practices.--The regulations prescribed pursuant 
     to subsection (a) shall include antitying and anticoercion 
     rules applicable to the sale of insurance products that 
     prohibit an insured depository institution from engaging in 
     any practice that would lead a customer to believe an 
     extension of credit, in violation of section 106(b) of the 
     Bank Holding Company Act Amendments of 1970, is conditional 
     upon--
       ``(1) the purchase of an insurance product from the 
     institution or any of its affiliates or subsidiaries; or
       ``(2) an agreement by the customer not to obtain, or a 
     prohibition on the customer from obtaining, an insurance 
     product from an unaffiliated entity.
       ``(c) Disclosures and Advertising.--The regulations 
     prescribed pursuant to subsection (a) shall include the 
     following provisions relating to disclosures and advertising 
     in connection with the initial purchase of an insurance 
     product:
       ``(1) Disclosures.--
       ``(A) In general.--Requirements that the following 
     disclosures be made orally and in writing before the 
     completion of the initial sale and, in the case of clauses 
     (iii) and (iv), at the time of application for an extension 
     of credit:
       ``(i) Uninsured status.--As appropriate, the product is not 
     insured by the Federal Deposit Insurance Corporation, the 
     United States Government, or the insured depository 
     institution.
       ``(ii) Investment risk.--In the case of a variable annuity 
     or insurance product that involves an investment risk, that 
     there is an investment risk associated with the product, 
     including possible loss of value.
       ``(iii) Antitying; anticoercion.--The approval of an 
     extension of credit may not be conditioned on--

       ``(I) the purchase of an insurance product from the 
     institution in which the application for credit is pending or 
     any of its affiliates or subsidiaries; or
       ``(II) an agreement by the customer not to obtain, or a 
     prohibition on the customer from obtaining, an insurance 
     product from an unaffiliated entity.

       ``(iv) Prohibition on enhanced treatment due to other 
     purchases or services.--The processing of an extension of 
     credit or the delivery of any other financial product or 
     service will not be expedited depending upon the purchase by 
     the customer of any additional product or service from an 
     affiliated person or entity of the insured depository 
     institution.
       ``(B) Making disclosure readily understandable.--
     Regulations prescribed under subparagraph (A) shall encourage 
     the use of disclosure that is conspicuous, simple, direct, 
     and readily understandable, such as the following:
       ``(i) `NOT FDIC-INSURED'.
       ``(ii) `NOT GUARANTEED BY THE BANK'.
       ``(iii) `MAY GO DOWN IN VALUE'.
       ``(C) Limitation.--Nothing in this paragraph requires the 
     inclusion of the foregoing disclosures in advertisements of a 
     general nature describing or listing the services or products 
     offered by an institution.
       ``(D) Meaningful disclosures.--Disclosures shall not be 
     considered to be meaningfully provided under this paragraph 
     if the institution or its representative states that 
     disclosures required by this subsection were available to the 
     customer in printed material available for distribution, 
     where such printed material is not provided and such 
     information is not orally disclosed to the customer.
       ``(E) Adjustments for alternative methods of purchase.--In 
     prescribing the requirements under subparagraphs (A) and (F), 
     necessary adjustments shall be made for purchase in person, 
     by telephone, or by electronic media to provide for the most 
     appropriate and complete form of disclosure and 
     acknowledgments.
       ``(F) Customer acknowledgment.--A requirement that an 
     insured depository institution shall require any person 
     selling an insurance product at any office of, or on behalf 
     of, the institution to obtain, at the time at which a 
     customer receives the disclosures required under this 
     paragraph or at the time of the initial purchase by the 
     customer of such product, an acknowledgment by such customer 
     of the receipt of the disclosure required under this 
     paragraph with respect to such product.
       ``(2) Prohibition on misrepresentations.--A prohibition on 
     any practice, or any advertising, at any office of, or on 
     behalf of, the insured depository institution, or any 
     subsidiary, as appropriate, that could mislead any person or 
     otherwise cause a reasonable person to reach an erroneous 
     belief with respect to--
       ``(A) the uninsured nature of any insurance product sold, 
     or offered for sale, by the institution or any subsidiary of 
     the institution; or
       ``(B) in the case of a variable annuity or insurance 
     product that involves an investment risk, the investment risk 
     associated with any such product.
       ``(d) Separation of Banking and Nonbanking Activities.--
       ``(1) Regulations required.--The regulations prescribed 
     pursuant to subsection (a) shall include such provisions as 
     the Federal banking agencies consider appropriate to ensure 
     that the routine acceptance of deposits is kept, to the 
     extent practicable, physically segregated from insurance 
     product activity.
       ``(2) Requirements.--Regulations prescribed pursuant to 
     paragraph (1) shall include the following requirements:
       ``(A) Separate setting.--A clear delineation of the setting 
     in which, and the circumstances under which, transactions 
     involving insurance products should be conducted in a 
     location physically segregated from an area where retail 
     deposits are routinely accepted.
       ``(B) Referrals.--Standards that permit any person 
     accepting deposits from the public in an area where such 
     transactions are routinely conducted in an insured depository 
     institution to refer a customer who seeks to purchase any 
     insurance product to a qualified person who sells such 
     product, only if the person making the referral receives no 
     more than a one-time nominal fee of a fixed dollar amount for 
     each referral that does not depend on whether the referral 
     results in a transaction.
       ``(C) Qualification and licensing requirements.--Standards 
     prohibiting any insured depository institution from 
     permitting any person to sell or offer for sale any insurance 
     product in any part of any office of the institution, or on 
     behalf of the institution, unless such person is 
     appropriately qualified and licensed.
       ``(e) Effect on Other Authority.--
       ``(1) In general.--No provision of this section shall be 
     construed as granting, limiting, or otherwise affecting--
       ``(A) any authority of the Securities and Exchange 
     Commission, any self-regulatory organization, the Municipal 
     Securities Rulemaking Board, or the Secretary of the Treasury 
     under any Federal securities law; or
       ``(B) except as provided in paragraph (2), any authority of 
     any State insurance commission (or any agency or office 
     performing like functions), or of any State securities 
     commission (or any agency or office performing like 
     functions), or other State authority under any State law.
       ``(2) Coordination with state law.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     insurance customer protection regulations prescribed by a 
     Federal banking agency under this section shall not apply to 
     retail sales, solicitations, advertising, or offers of any 
     insurance product by any insured depository institution or to 
     any person who is engaged in such activities at an office of 
     such institution or on behalf of the institution, in a State 
     where the State has in effect statutes, regulations, orders, 
     or interpretations, that are inconsistent with or contrary to 
     the regulations prescribed by the Federal banking agencies.
       ``(B) Preemption.--
       ``(i) In general.--If, with respect to any provision of the 
     regulations prescribed under this section, the Board of 
     Governors of the Federal Reserve System, the Comptroller of 
     the Currency, and the Board of Directors of the Corporation 
     determine jointly that the protection afforded by such 
     provision for customers is greater than the protection 
     provided by a comparable provision of the statutes, 
     regulations, orders, or interpretations referred to in 
     subparagraph (A) of any State, the appropriate State 
     regulatory authority shall be notified of such determination 
     in writing.
       ``(ii) Considerations.--Before making a final determination 
     under clause (i), the Federal agencies referred to in clause 
     (i) shall

[[Page S4967]]

     give appropriate consideration to comments submitted by the 
     appropriate State regulatory authorities relating to the 
     level of protection afforded to consumers under State law.
       ``(iii) Federal preemption and ability of states to 
     override federal preemption.--If the Federal agencies 
     referred to in clause (i) jointly determine that any 
     provision of the regulations prescribed under this section 
     affords greater protections than a comparable State law, 
     rule, regulation, order, or interpretation, those agencies 
     shall send a written preemption notice to the appropriate 
     State regulatory authority to notify the State that the 
     Federal provision will preempt the State provision and will 
     become applicable unless, not later than 3 years after the 
     date of such notice, the State adopts legislation to override 
     such preemption.
       ``(f) Non-Discrimination Against Non-Affiliated Agents.--
     The Federal banking agencies shall ensure that the 
     regulations prescribed pursuant to subsection (a) shall not 
     have the practical effect of discriminating, either 
     intentionally or unintentionally, against any person engaged 
     in insurance sales or solicitations that is not affiliated 
     with an insured depository institution.''.

     SEC. 203. FEDERAL AND STATE DISPUTE RESOLUTION.

       (a) Filing in Court of Appeals.--In the case of a 
     regulatory conflict between a State insurance regulator and a 
     Federal regulator regarding insurance issues, including 
     whether a State law, rule, regulation, order, or 
     interpretation regarding any insurance sales or solicitation 
     activity is properly treated as preempted under Federal law, 
     either regulator may seek expedited judicial review of such 
     determination by the United States Court of Appeals for the 
     circuit in which the State is located or in the United States 
     Court of Appeals for the District of Columbia Circuit by 
     filing a petition for review in such court.
       (b) Expedited Review.--The United States Court of Appeals 
     in which a petition for review if filed in accordance with 
     subsection (a) shall complete all action on such petition, 
     including rendering a judgment, before the end of the 60-day 
     period beginning on the date on which such petition is filed, 
     unless all parties to such proceedings agree to any extension 
     of such period.
       (c) Supreme Court Review.--Any request for certiorari to 
     the Supreme Court of the United States of any judgment of a 
     United States Court of Appeals with respect to a petition for 
     review under this section shall be filed with the Supreme 
     Court of the United States as soon as practicable after such 
     judgment is issued.
       (d) Statute of Limitation.--No action may be filed under 
     this section challenging an order, ruling, determination, or 
     other action of a Federal regulator or State insurance 
     regulator after the later of--
       (1) the end of the 12-month period beginning on the date on 
     which the first public notice is made of such order, ruling, 
     determination or other action in its final form; or
       (2) the end of the 6-month period beginning on the date on 
     which such order, ruling, determination, or other action 
     takes effect.
       (e) Standard of Review.--The court shall decide an action 
     filed under subsection (a) based on its review on the merits 
     of all questions presented under State and Federal law, 
     including the nature of the product or activity and the 
     history and purpose of its regulation under State and Federal 
     law, according equal deference to the Federal regulator and 
     the State insurance regulator.
                   TITLE III--REGULATORY IMPROVEMENTS

     SEC. 301. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.

       (a) SAIF Special Reserve.--Section 11(a)(6) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(6)) is amended by 
     striking subparagraph (L).
       (b) DIF Special Reserve.--Section 2704 of the Deposit 
     Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is 
     amended--
       (1) by striking subsection (b); and
       (2) in subsection (d)--
       (A) by striking paragraph (4);
       (B) in paragraph (6)(C)(i), by striking ``(6) and (7)'' and 
     inserting ``(5), (6), and (7)''; and
       (C) in paragraph (6)(C), by striking clause (ii) and 
     inserting the following:
       ``(ii) by redesignating paragraph (8) as paragraph (5).''.
       (c) Effective Date.--This section and the amendments made 
     by this section shall become effective on the date of 
     enactment of this Act.

     SEC. 302. EXPANDED SMALL BANK ACCESS TO S CORPORATION 
                   TREATMENT.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of--
       (1) possible revisions to the rules governing S 
     corporations, including--
       (A) increasing the permissible number of shareholders in 
     such corporations;
       (B) permitting shares of such corporations to be held in 
     individual retirement accounts;
       (C) clarifying that interest on investments held for 
     safety, soundness, and liquidity purposes should not be 
     considered to be passive income;
       (D) discontinuation of the treatment of stock held by bank 
     directors as a disqualifying personal class of stock for such 
     corporations; and
       (E) improving Federal tax treatment of bad debt and 
     interest deductions; and
       (2) what impact such revisions might have on community 
     banks.
       (b) Report to Congress.--Not later than 6 months after the 
     date of enactment of this Act, the Comptroller General of the 
     United States shall submit a report to the Congress on the 
     results of the study conducted under subsection (a).
       (c) Definition.--For purposes of this section, the term ``S 
     corporation'' has the same meaning as in section 1361(a)(1) 
     of the Internal Revenue Code of 1986.

     SEC. 303. MEANINGFUL CRA EXAMINATIONS.

       (a) Compliance.--Notwithstanding any other provision of 
     law, an insured depository institution rated as 
     ``satisfactory'' or better in its most recent examination 
     under the Community Reinvestment Act of 1977, and in each 
     such examination during the immediately preceding 36-month 
     period shall be deemed to be in compliance with the 
     requirements of that Act until the completion of a subsequent 
     regularly scheduled examination under that Act, unless 
     substantial verifiable information arising since the time of 
     its most recent examination under that Act demonstrating 
     noncompliance is filed with the appropriate Federal banking 
     agency.
       (b) Objections.--
       (1) Agency determination.--The appropriate Federal banking 
     agency shall determine, on a timely basis, whether the 
     information filed by any person under subsection (a) provides 
     sufficient proof that the subject insured depository 
     institution is no longer in compliance with the requirements 
     of the Community Reinvestment Act of 1977, as provided in 
     subsection (a).
       (2) Burden of proof.--A person filing information under 
     subsection (a) shall bear the burden of proving to the 
     satisfaction of the appropriate Federal banking agency, the 
     substantial verifiable nature of that information.
       (c) Definitions.--In this section, the terms ``insured 
     depository institution'' and ``appropriate Federal banking 
     agency'' have the same meanings as in section 3 of the 
     Federal Deposit Insurance Act.

     SEC. 304. FINANCIAL INFORMATION PRIVACY PROTECTION.

       (a) Financial Information Anti-Fraud.--The Consumer Credit 
     Protection Act (15 U.S.C. 1601 et seq.) is amended by adding 
     at the end the following:
          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

     ``SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

       ``(a) Short Title.--This title may be cited as the 
     `Financial Information Anti-Fraud Act of 1999'.
       ``(b) Table of Contents.--The table of contents for this 
     title is as follows:

          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

``Sec. 1001. Short title; table of contents.
``Sec. 1002. Definitions.
``Sec. 1003. Privacy protection for customer information of financial 
              institutions.
``Sec. 1004. Administrative enforcement.
``Sec. 1005. Civil liability.
``Sec. 1006. Criminal penalty.
``Sec. 1007. Relation to State laws.
``Sec. 1008. Agency guidance.

     ``SEC. 1002. DEFINITIONS.

       ``For purposes of this title, the following definitions 
     shall apply:
       ``(1) Customer.--The term `customer' means, with respect to 
     a financial institution, any person (or authorized 
     representative of a person) to whom the financial institution 
     provides a product or service, including that of acting as a 
     fiduciary.
       ``(2) Customer information of a financial institution.--The 
     term `customer information of a financial institution' means 
     any information maintained by a financial institution which 
     is derived from the relationship between the financial 
     institution and a customer of the financial institution and 
     is identified with the customer.
       ``(3) Document.--The term `document' means any information 
     in any form.
       ``(4) Financial institution.--
       ``(A) In general.--The term `financial institution' means 
     any institution engaged in the business of providing 
     financial services to customers who maintain a credit, 
     deposit, trust, or other financial account or relationship 
     with the institution.
       ``(B) Certain financial institutions specifically 
     included.--The term `financial institution' includes any 
     depository institution (as defined in section 19(b)(1)(A) of 
     the Federal Reserve Act), any loan or finance company, any 
     credit card issuer or operator of a credit card system, and 
     any consumer reporting agency that compiles and maintains 
     files on consumers on a nationwide basis (as defined in 
     section 603(p)).
       ``(C) Further definition by regulation.--The Board of 
     Governors of the Federal Reserve System may prescribe 
     regulations further defining the term `financial 
     institution', in accordance with subparagraph (A), for 
     purposes of this title.

     ``SEC. 1003. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF 
                   FINANCIAL INSTITUTIONS.

       ``(a) Prohibition on Obtaining Customer Information by 
     False Pretenses.--It shall be a violation of this title for 
     any person to obtain or attempt to obtain, or cause to be 
     disclosed or attempt to cause to be disclosed to any person, 
     customer information of a financial institution relating to 
     another person--

[[Page S4968]]

       ``(1) by knowingly making a false, fictitious, or 
     fraudulent statement or representation to an officer, 
     employee, or agent of a financial institution with the intent 
     to deceive the officer, employee, or agent into relying on 
     that statement or representation for purposes of releasing 
     the customer information;
       ``(2) by knowingly making a false, fictitious, or 
     fraudulent statement or representation to a customer of a 
     financial institution with the intent to deceive the customer 
     into relying on that statement or representation for purposes 
     of releasing the customer information or authorizing the 
     release of such information; or
       ``(3) by knowingly providing any document to an officer, 
     employee, or agent of a financial institution, knowing that 
     the document is forged, counterfeit, lost, or stolen, was 
     fraudulently obtained, or contains a false, fictitious, or 
     fraudulent statement or representation, if the document is 
     provided with the intent to deceive the officer, employee, or 
     agent into relying on that document for purposes of releasing 
     the customer information.
       ``(b) Prohibition on Solicitation of a Person To Obtain 
     Customer Information From Financial Institution Under False 
     Pretenses.--It shall be a violation of this title to request 
     a person to obtain customer information of a financial 
     institution, knowing or consciously avoiding knowing that the 
     person will obtain, or attempt to obtain, the information 
     from the institution in any manner described in subsection 
     (a).
       ``(c) Nonapplicability to Law Enforcement Agencies.--No 
     provision of this section shall be construed so as to prevent 
     any action by a law enforcement agency, or any officer, 
     employee, or agent of such agency, to obtain customer 
     information of a financial institution in connection with the 
     performance of the official duties of the agency.
       ``(d) Nonapplicability to Financial Institutions in Certain 
     Cases.--No provision of this section shall be construed to 
     prevent any financial institution, or any officer, employee, 
     or agent of a financial institution, from obtaining customer 
     information of such financial institution in the course of--
       ``(1) testing the security procedures or systems of such 
     institution for maintaining the confidentiality of customer 
     information;
       ``(2) investigating allegations of misconduct or negligence 
     on the part of any officer, employee, or agent of the 
     financial institution; or
       ``(3) recovering customer information of the financial 
     institution which was obtained or received by another person 
     in any manner described in subsection (a) or (b).
       ``(e) Nonapplicability to Certain Types of Customer 
     Information of Financial Institutions.--No provision of this 
     section shall be construed to prevent any person from 
     obtaining customer information of a financial institution 
     that otherwise is available as a public record filed pursuant 
     to the securities laws (as defined in section 3(a)(47) of the 
     Securities Exchange Act of 1934).

     ``SEC. 1004. ADMINISTRATIVE ENFORCEMENT.

       ``(a) Enforcement by Federal Trade Commission.--Except as 
     provided in subsection (b), compliance with this title shall 
     be enforced by the Federal Trade Commission in the same 
     manner and with the same power and authority as the 
     Commission has under the Fair Debt Collection Practices Act 
     to enforce compliance with that title.
       ``(b) Enforcement by Other Agencies in Certain Cases.--
       ``(1) In general.--Compliance with this title shall be 
     enforced under--
       ``(A) section 8 of the Federal Deposit Insurance Act, in 
     the case of--
       ``(i) national banks, and Federal branches and Federal 
     agencies of foreign banks, by the Office of the Comptroller 
     of the Currency;
       ``(ii) member banks of the Federal Reserve System (other 
     than national banks), branches and agencies of foreign banks 
     (other than Federal branches, Federal agencies, and insured 
     State branches of foreign banks), commercial lending 
     companies owned or controlled by foreign banks, and 
     organizations operating under section 25 or 25A of the 
     Federal Reserve Act, by the Board;
       ``(iii) banks insured by the Federal Deposit Insurance 
     Corporation (other than members of the Federal Reserve System 
     and national nonmember banks) and insured State branches of 
     foreign banks, by the Board of Directors of the Federal 
     Deposit Insurance Corporation; and
       ``(iv) savings associations the deposits of which are 
     insured by the Federal Deposit Insurance Corporation, by the 
     Director of the Office of Thrift Supervision; and
       ``(B) the Federal Credit Union Act, by the Administrator of 
     the National Credit Union Administration with respect to any 
     Federal credit union.
       ``(2) Violations of this title treated as violations of 
     other laws.--For the purpose of the exercise by any agency 
     referred to in paragraph (1) of its powers under any Act 
     referred to in that paragraph, a violation of this title 
     shall be deemed to be a violation of a requirement imposed 
     under that Act. In addition to its powers under any provision 
     of law specifically referred to in paragraph (1), each of the 
     agencies referred to in that paragraph may exercise, for the 
     purpose of enforcing compliance with this title, any other 
     authority conferred on such agency by law.
       ``(c) State Action for Violations.--
       ``(1) Authority of states.--In addition to such other 
     remedies as are provided under State law, if the chief law 
     enforcement officer of a State, or an official or agency 
     designated by a State, has reason to believe that any person 
     has violated or is violating this title, the State--
       ``(A) may bring an action to enjoin such violation in any 
     appropriate United States district court or in any other 
     court of competent jurisdiction;
       ``(B) may bring an action on behalf of the residents of the 
     State to recover damages of not more than $1,000 for each 
     violation; and
       ``(C) in the case of any successful action under 
     subparagraph (A) or (B), shall be awarded the costs of the 
     action and reasonable attorney fees as determined by the 
     court.
       ``(2) Rights of federal regulators.--
       ``(A) Prior notice.--The State shall serve prior written 
     notice of any action under paragraph (1) upon the Federal 
     Trade Commission and, in the case of an action which involves 
     a financial institution described in section 1004(b)(1), the 
     agency referred to in such section with respect to such 
     institution and provide the Federal Trade Commission and any 
     such agency with a copy of its complaint, except in any case 
     in which such prior notice is not feasible, in which case the 
     State shall serve such notice immediately upon instituting 
     such action.
       ``(B) Right to intervene.--The Federal Trade Commission or 
     an agency described in subsection (b) shall have the right--
       ``(i) to intervene in an action under paragraph (1);
       ``(ii) upon so intervening, to be heard on all matters 
     arising therein;
       ``(iii) to remove the action to the appropriate United 
     States district court; and
       ``(iv) to file petitions for appeal.
       ``(3) Investigatory powers.--For purposes of bringing any 
     action under this subsection, no provision of this subsection 
     shall be construed as preventing the chief law enforcement 
     officer, or an official or agency designated by a State, from 
     exercising the powers conferred on the chief law enforcement 
     officer or such official by the laws of such State to conduct 
     investigations or to administer oaths or affirmations or to 
     compel the attendance of witnesses or the production of 
     documentary and other evidence.
       ``(4) Limitation on state action while federal action 
     pending.--If the Federal Trade Commission or any agency 
     described in subsection (b) has instituted a civil action for 
     a violation of this title, no State may, during the pendency 
     of such action, bring an action under this section against 
     any defendant named in the complaint of the Federal Trade 
     Commission or such agency for any violation of this title 
     that is alleged in that complaint.

     ``SEC. 1005. CIVIL LIABILITY.

       ``Any person, other than a financial institution, who fails 
     to comply with any provision of this title with respect to 
     any financial institution or any customer information of a 
     financial institution shall be liable to such financial 
     institution or the customer to whom such information relates 
     in an amount equal to the sum of the amounts determined under 
     each of the following paragraphs:
       ``(1) Actual damages.--The greater of--
       ``(A) the amount of any actual damage sustained by the 
     financial institution or customer as a result of such 
     failure; or
       ``(B) any amount received by the person who failed to 
     comply with this title, including an amount equal to the 
     value of any nonmonetary consideration, as a result of the 
     action which constitutes such failure.
       ``(2) Additional damages.--Such additional amount as the 
     court may allow.
       ``(3) Attorneys' fees.--In the case of any successful 
     action to enforce any liability under paragraph (1) or (2), 
     the costs of the action, together with reasonable attorneys' 
     fees.

     ``SEC. 1006. CRIMINAL PENALTY.

       ``(a) In General.--Whoever violates, or attempts to 
     violate, section 1003 shall be fined in accordance with title 
     18, United States Code, or imprisoned for not more than 5 
     years, or both.
       ``(b) Enhanced Penalty for Aggravated Cases.--Whoever 
     violates, or attempts to violate, section 1003 while 
     violating another law of the United States or as part of a 
     pattern of any illegal activity involving more than $100,000 
     in a 12-month period shall be fined twice the amount provided 
     in subsection (b)(3) or (c)(3) (as the case may be) of 
     section 3571 of title 18, United States Code, imprisoned for 
     not more than 10 years, or both.

     ``SEC. 1007. RELATION TO STATE LAWS.

       ``(a) In General.--This title shall not be construed as 
     superseding, altering, or affecting the statutes, 
     regulations, orders, or interpretations in effect in any 
     State, except to the extent that such statutes, regulations, 
     orders, or interpretations are inconsistent with the 
     provisions of this title, and then only to the extent of the 
     inconsistency.
       ``(b) Greater Protection Under State Law.--For purposes of 
     this section, a State statute, regulation, order, or 
     interpretation is not inconsistent with the provisions of 
     this title if the protection such statute, regulation, order, 
     or interpretation affords any person is greater than the 
     protection provided under this title.

     ``SEC. 1008. AGENCY GUIDANCE.

       ``In furtherance of the objectives of this title, each 
     Federal banking agency (as defined in section 3(z) of the 
     Federal Deposit Insurance Act) shall issue advisories to 
     depository institutions under the jurisdiction

[[Page S4969]]

     of the agency, in order to assist such depository 
     institutions in deterring and detecting activities proscribed 
     under section 1003.''.
       (b) Report to Congress on Financial Privacy.--Not later 
     than 18 months after the date of enactment of this Act, the 
     Comptroller General of the United States, in consultation 
     with the Federal Trade Commission, the Federal banking 
     agencies, and other appropriate Federal law enforcement 
     agencies, shall submit to the Congress a report on--
       (1) the efficacy and adequacy of the remedies provided in 
     the amendments made by subsection (a) in addressing attempts 
     to obtain financial information by fraudulent means or by 
     false pretenses; and
       (2) any recommendations for additional legislative or 
     regulatory action to address threats to the privacy of 
     financial information created by attempts to obtain 
     information by fraudulent means or false pretenses.
       (c) Reports on Ongoing FTC Study of Consumer Privacy 
     Issues.--With respect to the ongoing multistage study being 
     conducted by the Federal Trade Commission on consumer privacy 
     issues, the Commission shall submit to the Congress an 
     interim report on the findings and conclusions of the 
     Commission, together with such recommendations for 
     legislative and administrative action as the Commission 
     determines to be appropriate, at the conclusion of each stage 
     of such study and a final report at the conclusion of the 
     study.
       (d) Consumer Grievance Process.--The Federal banking 
     agencies (as that term is defined in section 3 of the Federal 
     Deposit Insurance Act) shall jointly establish a consumer 
     complaint mechanism, for receiving and expeditiously 
     addressing consumer complaints alleging a violation of 
     regulations issued under section 45 of the Federal Deposit 
     Insurance Act (as added by section 202 of this Act), which 
     mechanism shall--
       (1) establish a group within each Federal banking agency to 
     receive such complaints; and
       (2) develop procedures for--
       (A) investigating such complaints;
       (B) informing consumers of rights they may have in 
     connection with such complaints; and
       (C) addressing concerns raised by such complaints, as 
     appropriate, including procedures for the recovery of losses, 
     to the extent appropriate.

     SEC. 305. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK 
                   RELIEF; DIVESTITURE.

       (a) Cross Marketing Restriction.--Section 4(f) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1843(f)) is amended by 
     striking paragraph (3).
       (b) Daylight Overdrafts.--Section 4(f) of the Bank Holding 
     Company Act of 1956 (12 U.S.C. 1843(f)) is amended by 
     inserting after paragraph (2) the following new paragraph:
       ``(3) Permissible overdrafts described.--For purposes of 
     paragraph (2)(C), an overdraft is described in this paragraph 
     if--
       ``(A) such overdraft results from an inadvertent computer 
     or accounting error that is beyond the control of both the 
     bank and the affiliate;
       ``(B) such overdraft--
       ``(i) is permitted or incurred on behalf of an affiliate 
     that is monitored by, reports to, and is recognized as a 
     primary dealer by the Federal Reserve Bank of New York; and
       ``(ii) is fully secured, as required by the Board, by 
     bonds, notes, or other obligations that are direct 
     obligations of the United States or on which the principal 
     and interest are fully guaranteed by the United States or by 
     securities and obligations eligible for settlement on the 
     Federal Reserve book entry system; or
       ``(C) such overdraft--
       ``(i) is permitted or incurred by, or on behalf of, an 
     affiliate that is engaged in activities that are so closely 
     related to banking, or managing or controlling banks, as to 
     be a proper incident thereto; and
       ``(ii) does not cause the bank to violate any provision of 
     section 23A or 23B of the Federal Reserve Act, either 
     directly, in the case of a bank that is a member of the 
     Federal Reserve System, or by virtue of section 18(j) of the 
     Federal Deposit Insurance Act, in the case of a bank that is 
     not a member of the Federal Reserve System.''.
       (c) Industrial Loan Companies; Affiliate Overdrafts.--
     Section 2(c)(2)(H) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(c)(2)(H)) is amended by inserting before the 
     period at the end ``, or that is otherwise permissible for a 
     bank controlled by a company described in section 4(f)(1)''.
       (d) Activities Limitations.--Section 4(f)(2) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)) is 
     amended--
       (1) by striking ``Paragraph (1) shall cease to apply to any 
     company described in such paragraph if--'' and inserting 
     ``Subject to paragraph (3), a company described in paragraph 
     (1) shall no longer qualify for the exemption provided under 
     that paragraph if--'';
       (2) in subparagraph (A)--
       (A) in clause (ii)(IX), by striking ``and'' at the end;
       (B) in clause (ii)(X), by inserting ``and'' after the 
     semicolon;
       (C) in clause (ii), by inserting after subclause (X) the 
     following:

       ``(XI) assets that are derived from, or incidental to, 
     activities in which institutions described in section 
     2(c)(2)(F) or section 2(c)(2)(H) are permitted to engage;''; 
     and

       (D) by striking ``or'' at the end; and
       (3) by striking subparagraph (B) and inserting the 
     following:
       ``(B) any bank subsidiary of such company--
       ``(i) accepts demand deposits or deposits that the 
     depositor may withdraw by check or similar means for payment 
     to third parties; and
       ``(ii) engages in the business of making commercial loans 
     (except that, for purposes of this clause, loans made in the 
     ordinary course of a credit card operation shall not be 
     treated as commercial loans); or
       ``(C) after the date of enactment of the Competitive 
     Equality Amendments of 1987, any bank subsidiary of such 
     company permits any overdraft (including any intraday 
     overdraft), or incurs any such overdraft in the account of 
     the bank at a Federal reserve bank, on behalf of an 
     affiliate, other than an overdraft described in paragraph 
     (3).''.
       (e) Divestiture Requirement.--Section 4(f)(4) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended 
     to read as follows:
       ``(4) Divestiture in case of loss of exemption.--If any 
     company described in paragraph (1) fails to qualify for the 
     exemption provided under paragraph (1) by operation of 
     paragraph (2), such exemption shall cease to apply to such 
     company and such company shall divest control of each bank it 
     controls before the end of the 180-day period beginning on 
     the date on which the company receives notice from the Board 
     that the company has failed to continue to qualify for such 
     exemption, unless, before the end of such 180-day period, the 
     company has--
       ``(A) either--
       ``(i) corrected the condition or ceased the activity that 
     caused the company to fail to continue to qualify for the 
     exemption; or
       ``(ii) submitted a plan to the Board for approval to cease 
     the activity or correct the condition in a timely manner 
     (which shall not exceed 1 year); and
       ``(B) implemented procedures that are reasonably adapted to 
     avoid the reoccurrence of such condition or activity.''.

     SEC. 306. ``PLAIN LANGUAGE'' REQUIREMENT FOR FEDERAL BANKING 
                   AGENCY RULES.

       (a) In General.--Each Federal banking agency shall use 
     plain language in all proposed and final rulemakings 
     published by the agency in the Federal Register after January 
     1, 2000.
       (b) Report.--Not later than March 1, 2001, each Federal 
     banking agency shall submit to the Congress a report that 
     describes how the agency has complied with subsection (a).
       (c) Definitions.--For purposes of this section, the terms 
     ``Federal banking agency'' and ``State bank supervisor'' have 
     the same meanings as in section 3 of the Federal Deposit 
     Insurance Act.

     SEC. 307. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED 
                   FEDERAL SAVINGS ASSOCIATION.

       Section 2 of the Act entitled ``An Act to enable national 
     banking associations to increase their capital stock and to 
     change their names or locations'', approved May 1, 1886 (12 
     U.S.C. 30), is amended by adding at the end the following new 
     subsection:
       ``(d) Retention of `Federal' in Name of Converted Federal 
     Savings Association.--
       ``(1) In general.--Notwithstanding subsection (a) or any 
     other provision of law, any depository institution, the 
     charter of which is converted from that of a Federal savings 
     association to a national bank or a State bank after the date 
     of enactment of the Financial Services Modernization Act of 
     1999 may retain the term `Federal' in the name of such 
     institution if such institution remains an insured depository 
     institution.
       ``(2) Definitions.--For purposes of this subsection, the 
     terms `depository institution', `insured depository 
     institution', `national bank', and `State bank' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.''.

     SEC. 308. COMMUNITY REINVESTMENT ACT EXEMPTION.

       (a) In General.--No community financial institution shall 
     be subject to the Community Reinvestment Act of 1977 (12 
     U.S.C. 2901 et seq.).
       (b) Definition of Community Financial Institution.--As used 
     in this section, the term ``community financial institution'' 
     means an insured depository institution (as defined in 
     section 3 of the Federal Deposit Insurance Act), that has 
     aggregate assets of not more than $100,000,000, and that is 
     located in a non-metropolitan area.
       (c) Adjustments.--The dollar amount referred to in 
     subsection (b) shall be adjusted annually after December 31, 
     1999, by the annual percentage increase in the Consumer Price 
     Index for Urban Wage Earners and Clerical Workers published 
     by the Bureau of Labor Statistics.
       (d) Definition.--For purposes of this section, the term 
     ``non-metropolitan area'' means any area, no part of which is 
     within an area designated as a metropolitan statistical area 
     by the Office of Management and Budget.

     SEC. 309. BANK OFFICERS AND DIRECTORS AS OFFICERS AND 
                   DIRECTORS OF PUBLIC UTILITIES.

       Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b)) 
     is amended--
       (1) by striking ``(b) After six'' and inserting the 
     following:
       ``(b) Interlocking Directorates.--
       ``(1) In general.--After 6''; and
       (2) by adding at the end the following:
       ``(2) Applicability.--
       ``(A) In general.--In the circumstances described in 
     subparagraph (B), paragraph (1) shall not apply to a person 
     that holds or proposes to hold the positions of--

[[Page S4970]]

       ``(i) officer or director of a public utility; and
       ``(ii) officer or director of a bank, trust company, 
     banking association, or firm authorized by law to underwrite 
     or participate in the marketing of securities of a public 
     utility.
       ``(B) Circumstances.--The circumstances described in this 
     subparagraph are that--
       ``(i) a person described in subparagraph (A) does not 
     participate in any deliberations or decisions of the public 
     utility regarding the selection of a bank, trust company, 
     banking association, or firm to underwrite or participate in 
     the marketing of securities of the public utility, if the 
     person serves as an officer or director of a bank, trust 
     company, banking association, or firm that is under 
     consideration in the deliberation process;
       ``(ii) the bank, trust company, banking association, or 
     firm of which the person is an officer or director does not 
     engage in the underwriting of, or participate in the 
     marketing of, securities of the public utility of which the 
     person holds the position of officer or director;
       ``(iii) the public utility for which the person serves or 
     proposes to serve as an officer or director selects 
     underwriters by competitive procedures; or
       ``(iv) the issuance of securities the public utility for 
     which the person serves or proposes to serve as an officer or 
     director has been approved by all Federal and State 
     regulatory agencies having jurisdiction over the issuance.''.

     SEC. 310. CONTROL OF BANKERS' BANKS.

       Section 2(a)(5)(E)(i) of the Bank Holding Company Act of 
     1956 (12 U.S.C. 1841(a)(5)(E)(i)) is amended by inserting 
     ``one or more'' before ``thrift institutions''.

     SEC. 311. MULTISTATE LICENSING AND INTERSTATE INSURANCE SALES 
                   ACTIVITIES.

       (a) Findings.--Congress finds that--
       (1) the States regulate the business of insurance, 
     including the licensing of insurance agents and brokers;
       (2) the current State insurance licensing system requires 
     insurance agents and brokers to obtain licenses on a line-by-
     line, class-by-class, producer-by-producer, State-by-State 
     basis;
       (3) in the commercial and industrial insurance arena, this 
     State-based system usually requires a single agent or broker 
     to hold scores of licenses if that agent or broker intends to 
     sell or broker insurance on a nationwide basis;
       (4) because of the duplicative licensing requirements both 
     within States and from State to State, a single insurance 
     agent or broker must satisfy literally hundreds of 
     administrative filing requirements to become fully licensed 
     to engage in the sale of a full range of insurance products 
     on a nationwide basis;
       (5) these administrative requirements appear to be 
     essentially unrelated to any requisite standards of 
     professionalism;
       (6) many States impose certain requirements on insurance 
     agents and brokers that pose an undue, discriminatory burden 
     on nonresident agents, including some States that ban 
     solicitation of insurance clients by nonresident agents and 
     brokers;
       (7) many States impose anticompetitive post-licensure 
     requirements on nonresident agents and brokers, including 
     countersignature laws that require an agent or broker 
     servicing the needs of an out-of-State client to have any 
     insurance policy that is sold ``countersigned'' by a resident 
     agent;
       (8) in some cases, such countersignature laws also require 
     a nonresident agent or broker to pay at least half of any 
     commission earned in a State in which the agent or broker is 
     not a resident to a resident agent or broker; and
       (9) such duplicative and onerous filing requirements and 
     anticompetitive burdens inhibit interstate commerce, 
     constitute unjustifiable trade barriers, greatly undermine 
     the competition that this Act seeks to foster.
       (b) Sense of Congress.--It is the sense of the Congress 
     that--
       (1) by the end of the 36-month period beginning on the date 
     of enactment of this Act, the States should--
       (A) implement uniform insurance agent and broker licensing 
     application and qualification requirements that result in a 
     fully reciprocal licensing system; and
       (B) eliminate any pre- or post-licensure requirements that 
     have the practical effect of discriminating, directly or 
     indirectly, against nonresident insurance agents or brokers;
       (2) if such actions are not taken, Congress should take 
     steps to directly rectify the problems identified in 
     subsection (a); and
       (3) any entity established by the Congress to so rectify 
     the problems should be under the supervision and oversight of 
     the National Association of Insurance Commissioners.

     SEC. 312. CRA SUNSHINE REQUIREMENTS.

       (a) Disclosure and Reporting.--The Federal Deposit 
     Insurance Act (12 U.S.C. 1811 et seq.), is amended by adding 
     at the end thereof the following new section:

     ``SEC. 46. CRA SUNSHINE REQUIREMENTS.

       ``(a) Public Disclosure of Agreements.--Any agreement 
     entered into by an insured depository institution or 
     affiliate with a nongovernmental entity or person made 
     pursuant to or in connection with the Community Reinvestment 
     Act involving funds or other resources of such insured 
     depository institution or affiliate shall be in its entirety 
     fully disclosed, and the full text thereof made available to 
     the appropriate Federal banking agency with supervisory 
     responsibility over the insured depository institution and to 
     the public and shall obligate each party to comply with the 
     provisions of this section.
       ``(b) Annual Report of Activity.--Each party to the 
     agreement shall report, as applicable, to the appropriate 
     Federal banking agency with supervisory responsibility over 
     the insured depository institution, no less frequently than 
     once each year, such information as the Federal banking 
     agency may by rule require relating to the following actions 
     taken by the party pursuant to an agreement described in 
     subsection (a) during the previous 12-month period--
       ``(1) payments, fees or loans made to any party to the 
     agreement or received from any party to the agreement and the 
     terms and conditions of the same; and
       ``(2) aggregate data on loans, investments and services 
     provided by each party in its community or communities 
     pursuant to the agreement; and
       ``(3) such other pertinent matters as determined by rule by 
     the appropriate Federal banking agency with supervisory 
     responsibility over the insured depository institution.

     The Federal banking agency shall ensure that the regulations 
     implementing this section do not impose an undue burden on 
     the parties and that proprietary and confidential information 
     is protected.
       ``(c) Existing Agreements.--The requirements of subsection 
     (b) (1), (2), and (3) shall be deemed to be fulfilled with 
     respect to any agreement made prior to May 5, 1999.
       ``(d) Secondary Agreements.--Any agreement made on or after 
     May 5, 1999 pursuant to an agreement described in subsection 
     (a) also is subject to the requirements of subsections (a) 
     and (b).
       ``(e) Definitions.--
       ``(1) Agreement.--As used in this section, the term 
     `agreement' refers to any written contract, written 
     arrangement, or other written understanding with a value in 
     excess of $10,000 annually, or a group of substantively 
     related contracts with an aggregate value of $10,000 
     annually, made pursuant to or in connection with the 
     Community Reinvestment Act of 1977, at least one party to 
     which is an insured depository institution or affiliate 
     thereof, or entity owned or controlled by an insured 
     depository institution or affiliate, whether organized on a 
     profit or not-for-profit basis. The term `agreement' shall 
     not include any specific contract or commitment for a loan or 
     extension of credit to individuals, businesses, farms, or 
     other entities, where the purpose of the loan or extension of 
     credit does not include any re-lending of the borrowed funds 
     to other parties.
       ``(2) Appropriate federal banking agency and insured 
     depository institution.--As used in this section, the terms 
     `appropriate Federal banking agency' and `insured depository 
     institution' have the same meanings as defined in section 3 
     of this Act.
       ``(d) Violations.--Any violation of the provisions of this 
     section shall be considered a violation of this Act. If the 
     party to the agreement that is not an insured depository 
     institution or affiliate fails to comply with this section, 
     the agreement shall not be enforceable after being given 
     notice and a reasonable period of time to perform or comply.
       ``(e) Limitation.--Nothing in this section is intended to 
     provide any authority upon any appropriate Federal banking 
     agency to enforce the provisions of the agreements that are 
     subject to the requirements of subsection (a).
       ``(f) Regulations.--Each appropriate Federal banking agency 
     shall prescribe regulations requiring procedures reasonably 
     designed to assure and monitor compliance with the 
     requirements of this section.''.

     SEC. 313. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.

       Section 5 of the International Banking Act of 1978, as 
     amended (12 U.S.C. 3103), is amended by striking subsection 
     (a)(7) and substituting the following:

     ``(7) ADDITIONAL AUTHORITY FOR INTERSTATE BRANCHES AND 
                   AGENCIES OF FOREIGN BANKS; UPGRADES OF CERTAIN 
                   FOREIGN BANK AGENCIES AND BRANCHES

       ``Notwithstanding paragraphs (1) and (2), a foreign bank 
     may--
       ``(A) with the approval of the Board and the Comptroller of 
     the Currency, establish and operate a Federal branch or 
     Federal agency or, with the approval of the Board and the 
     appropriate State bank supervisor, a State branch or State 
     agency in any State outside the foreign bank's home State 
     if--
       ``(i) the establishment and operation of such branch or 
     agency is permitted by the State in which the branch or 
     agency is to be established; and
       ``(ii) in the case of a Federal or State branch, the branch 
     receives only such deposits as would be permitted for a 
     corporation organized under section 25A of the Federal 
     Reserve Act (12 U.S.C. 611 et seq.); or
       ``(B) with the approval of the Board and the relevant 
     licensing authority (the Comptroller in the case of a Federal 
     branch or the appropriate State supervisor in the case of a 
     State branch), upgrade an agency, or a branch of the type 
     referred to in subsection (a)(7)(A)(ii), located in a State 
     outside the foreign bank's home State, into a Federal or 
     State branch if the establishment and operation of such 
     branch is permitted by such State and--

[[Page S4971]]

       ``(i) such agency or branch was in operation in such State 
     on the day before September 29, 1994, or
       ``(ii) such agency or branch has been in operation in such 
     State for a period of time that meets the State's minimum age 
     requirement permitted under section 1831u(a)(5) of title 12, 
     United States Code.''.

     SEC. 314. DISCLOSURES TO CONSUMERS UNDER THE TRUTH IN LENDING 
                   ACT.

       (a) Disclosure of Late Payment Deadlines and Penalties.--
     Section 127(b) of the Truth in Lending Act (15 U.S.C. 
     1637(b)) is amended by adding at the end the following:
       ``(12) If a charge is to be imposed due to the failure of 
     the obligor to make payment on or before a required payment 
     due date, the date that payment is due or, if different, the 
     date on which a late payment fee will be charged, shall be 
     stated prominently in a conspicuous location on the billing 
     statement, together with the amount of the charge to be 
     imposed if payment is made after such date.''.
       (b) Disclosures Related to ``Teaser Rates''.--Section 
     127(c) (15 U.S.C. 1637(c)) is amended by inserting after 
     paragraph (5) (as so redesignated by section 4 of this Act) 
     the following:
       ``(6) Additional notice concerning `teaser rates'.--
       ``(A) In general.--An application or solicitation for a 
     credit card for which a disclosure is required under this 
     subsection shall contain the disclosure contained in 
     subparagraph (B) or (C), as appropriate, if the application 
     or solicitation offers, for an introductory period of less 
     than 1 year, an annual percentage rate of interest that--
       ``(i) is less than the annual percentage rate of interest 
     that will apply after the end of the introductory period; or
       ``(ii) in the case of an annual percentage rate that varies 
     in accordance with an index, is less than the current annual 
     percentage rate under the index that will apply after the end 
     of such period.
       ``(B) Fixed annual percentage rate.--If the annual 
     percentage rate that will apply after the end of the 
     introductory period will be a fixed rate, the application or 
     solicitation shall include the following disclosure: `The 
     annual percentage rate of interest applicable during the 
     introductory period is not the annual percentage rate that 
     will apply after the end of the introductory period. The 
     permanent annual percentage rate will apply after [insert 
     applicable date] and will be [insert applicable percentage 
     rate].'.
       ``(C) Variable annual percentage rate.--If the annual 
     percentage rate that will apply after the end of the 
     introductory period will vary in accordance with an index, 
     the application or solicitation shall include the following 
     disclosure: `The annual percentage rate of interest 
     applicable during the introductory period is not the annual 
     percentage rate that will apply after the end of the 
     introductory period. The permanent annual percentage rate 
     will be determined by an index, and will apply after [insert 
     applicable date]. If the index that will apply after such 
     date were applied to your account today, the annual 
     percentage rate would be [insert applicable percentage 
     rate].'.
       ``(D) Conditions for introductory rates.--If the annual 
     percentage rate of interest that will apply during the 
     introductory period described in subparagraph (A) is 
     revocable or otherwise conditioned upon any action by the 
     obligor, including any failure by the obligor to pay the 
     minimum payment amount or finance charge or to make any 
     payment by the stated monthly payment due date, the 
     application or solicitation shall include disclosure of--
       ``(i) the conditions that the obligor must meet to retain 
     the annual percentage rate of interest during the 
     introductory period; and
       ``(ii) the annual percentage rate of interest that will 
     apply as a result of the failure of the obligor to meet such 
     conditions.
       ``(E) Form of disclosure.--The disclosures required under 
     this paragraph shall be made in a clear and conspicuous 
     manner, in a prominent fashion.''.

     SEC. 315. APPROVAL FOR PURCHASES OF SECURITIES.

       Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C. 
     371c-1) is amended to read as follows:
       ``Subparagraph (B) of paragraph (1) shall not apply if the 
     purchase or acquisition of such securities has been approved, 
     before such securities are initially offered for sale to the 
     public, by a majority of the directors of the bank based on a 
     determination that the purchase is a sound investment for the 
     bank irrespective of the fact that an affiliate of the bank 
     is a principal underwriter of the securities.''.

     SEC. 316. PROVISION OF TECHNICAL ASSISTANCE TO 
                   MICROENTERPRISES.

       (a) In General.--Title I of the Riegle Community 
     Development and Regulatory Improvement Act of 1994 (12 U.S.C. 
     4701 et seq.) is amended by adding at the end the following:
    ``Subtitle C--Microenterprise Technical Assistance and Capacity 
                            Building Program

     ``SEC. 171. SHORT TITLE.

       ``This subtitle may be cited as the `Program for Investment 
     in Microentrepreneurs Act of 1999', also referred to as the 
     `PRIME Act'.

     ``SEC. 172. DEFINITIONS.

       ``For purposes of this subtitle--
       ``(1) the term `Administrator' has the same meaning as in 
     section 103;
       ``(2) the term `capacity building services' means services 
     provided to an organization that is, or is in the process of 
     becoming a microenterprise development organization or 
     program, for the purpose of enhancing its ability to provide 
     training and services to disadvantaged entrepreneurs;
       ``(3) the term `collaborative' means 2 or more nonprofit 
     entities that agree to act jointly as a qualified 
     organization under this subtitle;
       ``(4) the term `disadvantaged entrepreneur' means a 
     microentrepreneur that is--
       ``(A) a low-income person;
       ``(B) a very low-income person; or
       ``(C) an entrepreneur that lacks adequate access to capital 
     or other resources essential for business success, or is 
     economically disadvantaged, as determined by the 
     Administrator;
       ``(5) the term `Fund' has the same meaning as in section 
     103;
       ``(6) the term `Indian tribe' has the same meaning as in 
     section 103;
       ``(7) the term `intermediary' means a private, nonprofit 
     entity that seeks to serve microenterprise development 
     organizations and programs as authorized under section 175;
       ``(8) the term `low-income person' has the same meaning as 
     in section 103;
       ``(9) the term `microentrepreneur' means the owner or 
     developer of a microenterprise;
       ``(10) the term `microenterprise' means a sole 
     proprietorship, partnership, or corporation that--
       ``(A) has fewer than 5 employees; and
       ``(B) generally lacks access to conventional loans, equity, 
     or other banking services;
       ``(11) the term `microenterprise development organization 
     or program' means a nonprofit entity, or a program 
     administered by such an entity, including community 
     development corporations or other nonprofit development 
     organizations and social service organizations, that provides 
     services to disadvantaged entrepreneurs or prospective 
     entrepreneurs;
       ``(12) the term `training and technical assistance' means 
     services and support provided to disadvantaged entrepreneurs 
     or prospective entrepreneurs, such as assistance for the 
     purpose of enhancing business planning, marketing, 
     management, financial management skills, and assistance for 
     the purpose of accessing financial services; and
       ``(13) the term `very low-income person' means having an 
     income, adjusted for family size, of not more than 150 
     percent of the poverty line (as defined in section 673(2) of 
     the Community Services Block Grant Act (42 U.S.C. 9902(2), 
     including any revision required by that section).

     ``SEC. 173. ESTABLISHMENT OF PROGRAM.

       ``The Administrator shall establish a microenterprise 
     technical assistance and capacity building grant program to 
     provide assistance from the Fund in the form of grants to 
     qualified organizations in accordance with this subtitle.

     ``SEC. 174. USES OF ASSISTANCE.

       ``A qualified organization shall use grants made under this 
     subtitle--
       ``(1) to provide training and technical assistance to 
     disadvantaged entrepreneurs;
       ``(2) to provide training and capacity building services to 
     microenterprise development organizations and programs and 
     groups of such organizations to assist such organizations and 
     programs in developing microenterprise training and services;
       ``(3) to aid in researching and developing the best 
     practices in the field of microenterprise and technical 
     assistance programs for disadvantaged entrepreneurs; and
       ``(4) for such other activities as the Administrator 
     determines are consistent with the purposes of this subtitle.

     ``SEC. 175. QUALIFIED ORGANIZATIONS.

       ``For purposes of eligibility for assistance under this 
     subtitle, a qualified organization shall be--
       ``(1) a nonprofit microenterprise development organization 
     or program (or a group or collaborative thereof) that has a 
     demonstrated record of delivering microenterprise services to 
     disadvantaged entrepreneurs;
       ``(2) an intermediary;
       ``(3) a microenterprise development organization or program 
     that is accountable to a local community, working in 
     conjunction with a State or local government or Indian tribe; 
     or
       ``(4) an Indian tribe acting on its own, if the Indian 
     tribe can certify that no private organization or program 
     referred to in this paragraph exists within its jurisdiction.

     ``SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.

       ``(a) Allocation of Assistance.--
       ``(1) In general.--The Administrator shall allocate 
     assistance from the Fund under this subtitle to ensure that--
       ``(A) activities described in section 174(1) are funded 
     using not less than 75 percent of amounts made available for 
     such assistance; and
       ``(B) activities described in section 174(2) are funded 
     using not less than 15 percent of amounts made available for 
     such assistance.
       ``(2) Limit on individual assistance.--No single 
     organization or entity may receive more than 10 percent of 
     the total funds appropriated under this subtitle in a single 
     fiscal year.
       ``(b) Targeted Assistance.--The Administrator shall ensure 
     that not less than 50 percent of the grants made under this 
     subtitle are used to benefit very low-income persons, 
     including those residing on Indian reservations.
       ``(c) Subgrants Authorized.--
       ``(1) In general.--A qualified organization receiving 
     assistance under this subtitle may

[[Page S4972]]

     provide grants using that assistance to qualified small and 
     emerging microenterprise organizations and programs, subject 
     to such rules and regulations as the Administrator determines 
     to be appropriate.
       ``(2) Limit on administrative expenses.--Not more than 7.5 
     percent of assistance received by a qualified organization 
     under this subtitle may be used for administrative expenses 
     in connection with the making of subgrants under paragraph 
     (1).
       ``(d) Diversity.--In making grants under this subtitle, the 
     Administrator shall ensure that grant recipients include both 
     large and small microenterprise organizations, serving urban, 
     rural, and Indian tribal communities and racially and 
     ethnically diverse populations.

     ``SEC. 177. MATCHING REQUIREMENTS.

       ``(a) In General.--Financial assistance under this subtitle 
     shall be matched with funds from sources other than the 
     Federal Government on the basis of not less than 50 percent 
     of each dollar provided by the Fund.
       ``(b) Sources of Matching Funds.--Fees, grants, gifts, 
     funds from loan sources, and in-kind resources of a grant 
     recipient from public or private sources may be used to 
     comply with the matching requirement in subsection (a).
       ``(c) Exception.--
       ``(1) In general.--In the case of an applicant for 
     assistance under this subtitle with severe constraints on 
     available sources of matching funds, the Administrator may 
     reduce or eliminate the matching requirements of subsection 
     (a).
       ``(2) Limitation.--Not more than 10 percent of the total 
     funds made available from the Fund in any fiscal year to 
     carry out this subtitle may be excepted from the matching 
     requirements of subsection (a), as authorized by paragraph 
     (1) of this subsection.

     ``SEC. 178. APPLICATIONS FOR ASSISTANCE.

       ``An application for assistance under this subtitle shall 
     be submitted in such form and in accordance with such 
     procedures as the Fund shall establish.

     ``SEC. 179. RECORDKEEPING.

       ``The requirements of section 115 shall apply to a 
     qualified organization receiving assistance from the Fund 
     under this subtitle as if it were a community development 
     financial institution receiving assistance from the Fund 
     under subtitle A.

     ``SEC. 180. AUTHORIZATION.

       ``In addition to funds otherwise authorized to be 
     appropriated to the Fund to carry out this title, there are 
     authorized to be appropriated to the Fund to carry out this 
     subtitle--
       ``(1) $15,000,000 for fiscal year 2000;
       ``(2) $15,000,000 for fiscal year 2001;
       ``(3) $15,000,000 for fiscal year 2002; and
       ``(4) $15,000,000 for fiscal year 2003.

     ``SEC. 181. IMPLEMENTATION.

       ``The Administrator shall, by regulation, establish such 
     requirements as may be necessary to carry out this 
     subtitle.''.
       (b) Administrative Expenses.--Section 121(a)(2)(A) of the 
     Riegle Community Development and Regulatory Improvement Act 
     of 1994 (12 U.S.C. 4718(a)(2)(A)) is amended--
       (1) by striking ``$5,550,000'' and inserting 
     ``$6,100,000''; and
       (2) in the first sentence, by inserting before the period 
     ``, including costs and expenses associated with carrying out 
     subtitle C''.
       (c) Conforming Amendments.--Section 104(d) of the Riegle 
     Community Development and Regulatory Improvement Act of 1994 
     (12 U.S.C. 4703(d)) is amended--
       (1) in paragraph (2)--
       (A) by striking ``15'' and inserting ``17'';
       (B) in subparagraph (G)--
       (i) by striking ``9'' and inserting ``11'';
       (ii) by redesignating clauses (iv) and (v) as clauses (v) 
     and (vi), respectively; and
       (iii) by inserting after clause (iii) the following:
       ``(iv) 2 individuals who have expertise in microenterprises 
     and microenterprise development;''; and
       (2) in paragraph (4), in the first sentence, by inserting 
     before the period ``and subtitle C''.

     SEC. 317. FEDERAL RESERVE AUDITS.

       (a) In General.--The Federal Reserve Act (12 U.S.C. 221 et 
     seq.) is amended by inserting after section 11A the 
     following:

     ``SEC. 11B. ANNUAL INDEPENDENT AUDITS OF FEDERAL RESERVE 
                   BANKS.

       ``(a) Audit Required.--Each Federal reserve bank shall 
     annually obtain an audit of the financial statements of each 
     Federal reserve bank (which shall have been prepared in 
     accordance with generally accepted accounting principles) 
     using generally accepted auditing standards from an 
     independent auditor that meets the requirements of subsection 
     (b).
       ``(b) Auditor's Qualifications.--The independent auditor 
     referred to in subsection (a) shall--
       ``(1) be a certified public accountant who is independent 
     of the Federal Reserve System; and
       ``(2) meet any other qualifications that the Board may 
     establish.
       ``(c) Certification Required.--In each audit required under 
     subsection (a), the auditor shall certify to the Federal 
     reserve bank and to the Board that the auditor--
       ``(1) is a certified public accountant and is independent 
     of the Federal Reserve System; and
       ``(2) conducted the audit using generally accepted auditing 
     standards.
       ``(d) Certification by Federal Reserve Bank.--Not later 
     than 30 days after the completion of each audit required 
     under subsection (a), the Federal reserve bank shall provide 
     to the Comptroller General of the United States--
       ``(1) a certification that--
       ``(A) the Federal reserve bank has obtained the audit 
     required under subsection (a);
       ``(B) the Federal reserve bank has received the 
     certifications of the auditor required under subsection (c); 
     and
       ``(C) the audit fully complies with subsection (a).
       ``(e) Detection of Illegal Acts.--
       ``(1) Audit procedures.--Each audit required by this 
     section shall include procedures designed to provide 
     reasonable assurance of detecting illegal acts that would 
     have a direct and material effect on the determination of 
     financial statement amounts.
       ``(2) Reporting possible illegalities.--If, in the course 
     of conducting an audit required by this section, the 
     independent auditor detects or otherwise becomes aware of 
     information indicating that an illegal act (whether or not 
     perceived to have an effect on the financial statements of 
     the Federal reserve bank) has or may have occurred, the 
     auditor--
       ``(A) shall determine whether it is likely that the illegal 
     act has occurred; and
       ``(B) shall, if the auditor determines that the illegal act 
     is likely to have occurred--
       ``(i) determine and consider the possible effect of the 
     illegal act on the financial statements of the Federal 
     reserve bank; and
       ``(ii) as soon as practicable, inform the Board that the 
     illegal act is likely to have occurred.
       ``(3) Report to congress.--The independent auditor under 
     this section shall, as soon as practicable, directly report 
     its conclusions to the Committee on Governmental Affairs of 
     the Senate and the Committee on Government Reform of the 
     House of Representatives with regard to any possible illegal 
     act that has been detected or has otherwise come to the 
     attention of the auditor during the course of the audit 
     required by this section, if, after determining that the 
     Board is adequately informed with respect to such possible 
     illegal act, the auditor concludes that--
       ``(A) the possible illegal act has a direct and material 
     effect on the financial statements of the Federal reserve 
     bank;
       ``(B) the Board has not taken timely and appropriate 
     remedial actions with respect to the possible illegal act; 
     and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard report of the 
     auditor when made, or warrant resignation from the audit 
     engagement.
       ``(4) Resignation of auditor.--If an independent auditor 
     resigns from its engagement to audit a Federal reserve bank 
     under paragraph (3), the auditor shall furnish to the 
     Committee on Governmental Affairs of the Senate and the 
     Committee on Government Reform of the House of 
     Representatives, not later than 1 business day after such 
     resignation, a copy of the report of the auditor (or 
     documentation of any oral report given).
       ``(f) Recordkeeping.--To facilitate compliance with this 
     section, each Federal reserve bank shall--
       ``(1) ensure that the books, records, and accounts of the 
     Federal reserve bank are maintained and kept in sufficient 
     detail to accurately and fairly reflect the transactions and 
     dispositions of the assets of the bank;
       ``(2) devise and maintain a system of internal controls 
     sufficient to provide reasonable assurance that transactions 
     are recorded as necessary to permit preparation of financial 
     statements in conformity with generally accepted accounting 
     principles and to maintain accountability for assets;
       ``(3) ensure that access to assets of the Federal reserve 
     bank is permitted only in accordance with the general or 
     specific authorization of the Board; and
       ``(4) ensure that--
       ``(A) the recorded accountability for assets is compared 
     with the existing assets at reasonable intervals; and
       ``(B) appropriate action is taken with respect to any 
     differences.
       ``(g) Reports to Board, Congress.--Not later than April 30 
     of each year, each Federal reserve bank shall submit a copy 
     of each audit conducted under this section to the Board, and 
     to the Committee on Governmental Affairs of the Senate and 
     the Committee on Government Reform of the House of 
     Representatives.

     ``SEC. 11C. INDEPENDENT AUDITS OF FEDERAL RESERVE SYSTEM AND 
                   FEDERAL RESERVE BOARD.

       ``(a) Audit of Reserve System.--The Board shall annually 
     obtain an audit of the consolidated financial statements of 
     the Federal Reserve System (which shall have been prepared in 
     accordance with generally accepted accounting principles) 
     from an independent auditor, using generally accepted 
     auditing standards, based on reports of audits of Federal 
     reserve banks submitted to the Board under section 11B(g) and 
     the audit of the Board under subsection (b) of this section.
       ``(b) Audit of Board.--
       ``(1) In general.--The Board shall annually obtain an audit 
     of the financial statements of the Board (which shall have 
     been prepared in accordance with generally accepted 
     accounting principles) from an independent auditor, using 
     generally accepted auditing standards.
       ``(2) Priced services audit.--

[[Page S4973]]

       ``(A) In general.--As part of each audit of the Board 
     required by this subsection, the auditor shall--
       ``(i) audit the calculation of the private sector 
     adjustment factor established by the Board pursuant to 
     section 11A(c)(3) for the year that is the subject of the 
     audit; and
       ``(ii) audit the pro forma balance sheet and income 
     statement for the services described in section 11A(b), 
     including the determination of revenue, expenses, and income 
     before income taxes for each service listed in that section 
     (in accordance with the criteria specified in section 
     11A(c)(3)).
       ``(B) Report to the board.--The auditor shall report the 
     results of the audit under subparagraph (A)(ii) to the Board 
     in written form.
       ``(3) Limitation.--The evaluations and audits required by 
     this subsection shall not include deliberations, decisions, 
     or actions on monetary policy matters, including discount 
     authority under section 13, reserves of national banks, 
     securities credit, interest on deposits, and open market 
     operations.
       ``(c) Auditor's Qualifications.--An independent auditor 
     referred to in this section shall--
       ``(1) be a certified public accountant and be independent 
     of the Federal Reserve System; and
       ``(2) meet any other qualifications that the Board may 
     establish.
       ``(d) Certification Required.--In each audit required under 
     this section, the auditor shall certify to the Board that the 
     auditor--
       ``(1) is a certified public accountant and is independent 
     of the Federal Reserve System; and
       ``(2) conducted the audit using generally accepted auditing 
     standards.
       ``(e) Detection of Illegal Acts.--
       ``(1) Audit procedures.--Each audit required by this 
     section shall include procedures designed to provide 
     reasonable assurance of detecting illegal acts that would 
     have a direct and material affect on the determination of 
     financial statement amounts.
       ``(2) Reporting possible illegalities.--If, in the course 
     of conducting an audit of the Federal Reserve System or the 
     Board as required by this section, the independent auditor 
     detects or otherwise becomes aware of information indicating 
     that an illegal act (whether or not perceived to have an 
     effect on the financial statements of the Federal reserve 
     bank) has or may have occurred, the auditor--
       ``(A) shall determine whether it is likely that the illegal 
     act has occurred; and
       ``(B) shall, if the auditor determines that the illegal act 
     is likely to have occurred--
       ``(i) determine and consider the possible effect of the 
     illegal act on the financial statements of the Federal 
     Reserve System or the Board, as applicable; and
       ``(ii) as soon as practicable, inform the Board that the 
     illegal act is likely to have occurred.
       ``(3) Report to congress.--An independent auditor under 
     this section shall directly report, as soon as practicable, 
     its conclusions to the Committee on Governmental Affairs of 
     the Senate and the Committee on Government Reform of the 
     House of Representatives, with regard to any possible illegal 
     act that has been detected or has otherwise come to the 
     attention of the auditor during the course of an audit of the 
     Federal Reserve System or the Board required by this section, 
     if, after determining that the Board is adequately informed 
     with respect to such possible illegal act, the auditor 
     concludes that--
       ``(A) the possible illegal act has a direct and material 
     effect on the financial statements of the Federal Reserve 
     System or the Board, as applicable;
       ``(B) the Board has not taken timely and appropriate 
     remedial actions with respect to the possible illegal act; 
     and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard report of the 
     auditor when made, or warrant resignation from the audits 
     engagement.
       ``(4) Resignation of auditor.--If an independent auditor 
     resigns from its engagement to audit the Federal Reserve 
     System or the Board under paragraph (3), the auditor shall 
     furnish to the Committee on Governmental Affairs of the 
     Senate and the Committee on Government Reform of the House of 
     Representatives, not later than 1 business day after such 
     resignation, a copy of the report of the auditor (or 
     documentation of any oral report given).
       ``(f) Recordkeeping.--To facilitate compliance with this 
     section, the Board shall--
       ``(1) ensure that the books, records, and accounts of the 
     Board are maintained and kept in sufficient detail to 
     accurately and fairly reflect the transactions and 
     dispositions of assets;
       ``(2) devise and maintain a system of internal controls 
     sufficient to provide reasonable assurance that transactions 
     are recorded as necessary to permit preparation of financial 
     statements in conformity with generally accepted accounting 
     principles and to maintain accountability for assets;
       ``(3) ensure that access to assets of the Board is 
     permitted only in accordance with general or specific 
     authorization of the Board; and
       ``(4) ensure that--
       ``(A) the recorded accountability for assets is compared 
     with the existing assets at reasonable intervals; and
       ``(B) appropriate action is taken with respect to any 
     differences.
       ``(g) Reports to Congress.--Not later than May 31 of each 
     year, the Board shall make available all audits and reports 
     required by this section to the Committee on Governmental 
     Affairs of the Senate and the Committee on Government Reform 
     of the House of Representatives.''.
       (b) Federal Reserve Requirements.--
       (1) Clarification of fee schedule requirements.--
       (A) In general.--Section 11A(b) of the Federal Reserve Act 
     (12 U.S.C. 248a(b)) is amended--
       (i) by redesignating paragraphs (7) and (8) as paragraphs 
     (8) and (9), respectively; and
       (ii) by inserting after paragraph (6) the following:
       ``(7) transportation of paper checks in the clearing 
     process;''.
       (B) Publication of revised schedule.--Not later than 60 
     days after the date of enactment of this Act, the Board of 
     Governors of the Federal Reserve System shall publish a 
     revision of the schedule of fees required under section 11A 
     of the Federal Reserve Act that reflects the changes made in 
     the schedule in accordance with the amendments made by 
     subparagraph (A) of this paragraph.
       (2) Clarification of applicable pricing criteria.--Section 
     11A(c) of the Federal Reserve Act (12 U.S.C. 248a(c)) is 
     amended by striking paragraph (3) and inserting the 
     following:
       ``(3)(A) In each fiscal year, fees shall be established for 
     each service provided by the Federal reserve banks on the 
     basis of all direct and indirect costs actually incurred 
     (excluding the effect of any pension cost credit) in 
     providing each of the services, including interest on items 
     credited prior to actual collection, overhead, and an 
     allocation of imputed costs, which takes into account the 
     taxes that would have been paid and the return on capital 
     that would have been provided had the services been provided 
     by a private business firm.
       ``(B) The pricing principles referred to in subparagraph 
     (A) shall be carried out with due regard to competitive 
     factors and the provision of an adequate level of such 
     services nationwide.
       ``(C)(i) Not later than 1 year after the date of enactment 
     of the Financial Services Modernization Act of 1999, and not 
     less frequently than once every 3 years thereafter, the Board 
     shall conduct a comprehensive review of the methodology used 
     to calculate the private sector adjustment factor pursuant to 
     section 11A(c)(3), including a public notice and comment 
     period.
       ``(ii) In conducting the review under clause (i), the Board 
     shall publish in the Federal Register all elements of the 
     methodology in use by the Board in the calculation of the 
     private sector adjustment factor pursuant to section 
     11A(c)(3) provide notice and solicit public comment on the 
     methodology, requesting commentators to identify areas of the 
     methodology that are outdated, inappropriate, unnecessary, or 
     that contribute to an inaccurate result in the calculation of 
     the private sector adjustment factor.
       ``(iii) The Board shall--
       ``(I) publish in the Federal Register a summary of the 
     comments received under this subparagraph, identifying 
     significant issues raised; and
       ``(II) provide comment on such issues and make changes to 
     the methodology to the extent that the Board considers to be 
     appropriate.
       ``(iv) Not later than 30 days after the completion of each 
     review under clause (i), the Board shall submit to Congress a 
     report which shall include--
       ``(I) a summary of any significant issues raised by public 
     comments received by the Board under this subparagraph and 
     the relative merits of such issues; and
       ``(II) an analysis of whether the Board is able to address 
     the concerns raised, or whether such concerns should be 
     addressed by legislation.''.

     SEC. 318. STUDY AND REPORT ON ADVERTISING PRACTICES OF ONLINE 
                   BROKERAGE SERVICES.

       (a) Study.--The Securities and Exchange Commission 
     (hereafter in this section referred to as the 
     ``Commission''), in consultation with the National 
     Association of Securities Dealers and other interested 
     parties, shall conduct a study of--
       (1) the nature and content of advertising by online 
     brokerage services in all media, including television, on the 
     Internet, radio, and in print;
       (2) if such advertising influences investors and potential 
     investors to make investment decisions, and if such 
     advertising improperly influences those investors and 
     potential investors to make inappropriate investment 
     decisions;
       (3) whether such advertising properly discloses the risks 
     associated with trading and investing in the capital markets; 
     and
       (4) whether--
       (A) there are appropriate regulatory mechanisms in place to 
     prevent any improper or deceptive advertising; and
       (B) the Commission has or needs additional resources or 
     authority to actively participate in such regulation.
       (b) Report.--Not later than 180 days after the date of 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the results of the study conducted under 
     subsection (a), together with any recommendations for changes 
     that it considers necessary to protect investors and 
     potential investors from improper or deceptive advertising.

[[Page S4974]]

     SEC. 319. ELIGIBILITY OF COMMUNITY DEVELOPMENT FINANCIAL 
                   INSTITUTION TO BORROW FROM THE FEDERAL HOME 
                   LOAN BANK SYSTEM.

       Section 10b of the Federal Home Loan Bank Act (12 U.S.C. 
     1430b) is amended--
       (1) in subsection (a) by striking the second sentence and 
     inserting the following two sentences: ``Such mortgagees must 
     be (i) chartered institutions having succession and (ii) 
     subject to the inspection and supervision of some 
     governmental agency or a community development financial 
     institution (other than an insured depository institution or 
     a subsidiary thereof) that, at the time the advance is made, 
     is certified under the Community Development Banking and 
     Financial Institutions Act of 1994. The principal activity of 
     such mortgagees in the mortgage field must consist of lending 
     their own funds and any advances may be subject to the same 
     collateralization requirements as applied to other nonmember 
     borrowers.'';
       (2) in the last sentence of subsection (a) by replacing the 
     word ``such'' with ``the same'' and by replacing the phrase 
     ``shall be determined by the board'' with the phrase ``are 
     comparable extensions of credit to members''; and
       (3) in subsection (b) by inserting in the first sentence 
     between the words ``agency'' and ``for'' the following 
     phrase: ``or a certified community development financial 
     institution''.
         TITLE IV--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

     SEC. 401. SHORT TITLE.

       This title may be cited as the ``Federal Home Loan Bank 
     System Modernization Act of 1999''.

     SEC. 402. DEFINITIONS.

       Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 
     1422) is amended--
       (1) in paragraph (1), by striking ``term `Board' means'' 
     and inserting ``terms `Finance Board' and `Board' mean'';
       (2) by striking paragraph (3) and inserting the following:
       ``(3) State.--The term `State', in addition to the States 
     of the United States, includes the District of Columbia, 
     Guam, Puerto Rico, the United States Virgin Islands, American 
     Samoa, and the Commonwealth of the Northern Mariana 
     Islands.''; and
       (3) by adding at the end the following new paragraph:
       ``(13) Community financial institution.--
       ``(A) In general.--The term `community financial 
     institution' means a member--
       ``(i) the deposits of which are insured under the Federal 
     Deposit Insurance Act; and
       ``(ii) that has, as of the date of the transaction at 
     issue, less than $500,000,000 in average total assets, based 
     on an average of total assets over the 3 years preceding that 
     date.
       ``(B) Adjustments.--The $500,000,000 limit referred to in 
     subparagraph (A)(ii) shall be adjusted annually by the 
     Finance Board, based on the annual percentage increase, if 
     any, in the Consumer Price Index for all urban consumers, as 
     published by the Department of Labor.''.

     SEC. 403. SAVINGS ASSOCIATION MEMBERSHIP.

       (a) Federal Home Loan Bank Membership.--Section 5(f) of the 
     Home Owners' Loan Act (12 U.S.C. 1464(f)) is amended to read 
     as follows:
       ``(f) Federal Home Loan Bank Membership.--On and after June 
     1, 2000, a Federal savings association may become a member of 
     the Federal Home Loan Bank System, and shall qualify for such 
     membership in the manner provided by the Federal Home Loan 
     Bank Act.''.
       (b) Withdrawal.--Section 6(e) of the Federal Home Loan Bank 
     Act (12 U.S.C. 1426(e)) is amended by striking ``Any member 
     other than a Federal savings and loan association may 
     withdraw'' and inserting ``Any member may withdraw if, on the 
     date of withdrawal there is in effect a certification by the 
     Finance Board that the withdrawal will not cause the Federal 
     Home Loan Bank System to fail to meet its obligation under 
     section 21B(f)(2)(C) to contribute to the debt service for 
     the obligations issued by the Resolution Funding 
     Corporation''.

     SEC. 404. ADVANCES TO MEMBERS; COLLATERAL.

       (a) In General.--Section 10(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1430(a)) is amended--
       (1) by redesignating paragraphs (1) through (4) as 
     subparagraphs (A) through (D), respectively, and indenting 
     appropriately;
       (2) by striking ``(a) Each'' and inserting the following:
       ``(a) In General.--
       ``(1) All advances.--Each'';
       (3) by striking the second sentence and inserting the 
     following:
       ``(2) Purposes of advances.--A long-term advance may only 
     be made for the purposes of--
       ``(A) providing funds to any member for residential housing 
     finance; and
       ``(B) providing funds to any community financial 
     institution for small businesses, small farms, and small 
     agri-businesses.'';
       (4) by striking ``A Bank'' and inserting the following:
       ``(3) Collateral.--A Bank'';
       (5) in paragraph (3) (as so designated by paragraph (4) of 
     this subsection)--
       (A) in subparagraph (C) (as so redesignated by paragraph 
     (1) of this subsection) by striking ``Deposits'' and 
     inserting ``Cash or deposits'';
       (B) in subparagraph (D) (as so redesignated by paragraph 
     (1) of this subsection), by striking the second sentence; and
       (C) by inserting after subparagraph (D) (as so redesignated 
     by paragraph (1) of this subsection) the following new 
     subparagraph:
       ``(E) Secured loans for small business, agriculture, or 
     securities representing a whole interest in such secured 
     loans, in the case of any community financial institution.'';
       (6) in paragraph (5)--
       (A) in the second sentence, by striking ``and the Board'';
       (B) in the third sentence, by striking ``Board'' and 
     inserting ``Federal Home Loan Bank''; and
       (C) by striking ``(5) Paragraphs (1) through (4)'' and 
     inserting the following:
       ``(4) Additional bank authority.--Subparagraphs (A) through 
     (E) of paragraph (3)''; and
       (7) by adding at the end the following:
       ``(5) Review of certain collateral standards.--The Board 
     may review the collateral standards applicable to each 
     Federal Home Loan Bank for the classes of collateral 
     described in subparagraphs (D) and (E) of paragraph (3), and 
     may, if necessary for safety and soundness purposes, require 
     an increase in the collateral standards for any or all of 
     those classes of collateral.
       ``(6) Definitions.--For purposes of this subsection, the 
     terms `small business', `agriculture', `small farm', and 
     `small agri-business' shall have the meanings given those 
     terms by rule or regulation of the Finance Board.''.
       (b) Clerical Amendment.--The section heading for section 10 
     of the Federal Home Loan Bank Act (12 U.S.C. 1430) is amended 
     to read as follows:

     ``SEC. 10. ADVANCES TO MEMBERS.''.

     SEC. 405. ELIGIBILITY CRITERIA.

       Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 
     1424(a)) is amended--
       (1) in paragraph (2)(A), by inserting, ``(other than a 
     community financial institution)'' after ``institution'';
       (2) in the matter immediately following paragraph (2)(C)--
       (A) by striking ``An insured'' and inserting the following:
       ``(3) Certain institutions.--An insured''; and
       (B) by striking ``preceding sentence'' and inserting 
     ``paragraph (2)''; and
       (3) by adding at the end the following new paragraph:
       ``(4) Limited exemption for community financial 
     institutions.--A community financial institution that 
     otherwise meets the requirements of paragraph (2) may become 
     a member without regard to the percentage of its total assets 
     that is represented by residential mortgage loans, as 
     described in subparagraph (A) of paragraph (2).''.

     SEC. 406. MANAGEMENT OF BANKS.

       (a) Board of Directors.--Section 7(d) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1427(d)) is amended--
       (1) by striking ``(d) The term'' and inserting the 
     following:
       ``(d) Terms of Office.--The term''; and
       (2) by striking ``shall be two years''.
       (b) Compensation.--Section 7(i) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) is amended by striking ``subject 
     to the approval of the board''.
       (c) Repeal of Sections 22A and 27.--The Federal Home Loan 
     Bank Act (12 U.S.C. 1421 et seq.) is amended by striking 
     sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
       (d) Section 12.--Section 12 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1432) is amended--
       (1) in subsection (a)--
       (A) by striking ``, but, except'' and all that follows 
     through ``ten years'';
       (B) by striking ``subject to the approval of the Board'' 
     each place that term appears;
       (C) by striking ``and, by its Board of directors,'' and all 
     that follows through ``agent of such bank,'' and inserting 
     ``and, by the board of directors of the Bank, to prescribe, 
     amend, and repeal by-laws governing the manner in which its 
     affairs may be administered, consistent with applicable laws 
     and regulations, as administered by the Finance Board. No 
     officer, employee, attorney, or agent of a Federal Home Loan 
     Bank''; and
       (D) by striking ``Board of directors'' each place that term 
     appears and inserting ``board of directors''; and
       (2) in subsection (b), by striking ``loans banks'' and 
     inserting ``loan banks''.
       (e) Powers and Duties of Federal Housing Finance Board.--
       (1) Issuance of notices of violations.--Section 2B(a) of 
     the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) To issue and serve a notice of charges upon a Federal 
     Home Loan Bank or upon any executive officer or director of a 
     Federal Home Loan Bank if, in the determination of the 
     Finance Board, the Bank, executive officer, or director is 
     engaging or has engaged in, or the Finance Board has 
     reasonable cause to believe that the Bank, executive officer, 
     or director is about to engage in, any conduct that violates 
     any provision of this Act or any law, order, rule, or 
     regulation or any condition imposed in writing by the Finance 
     Board in connection with the granting of any application or 
     other request by the Bank, or any written agreement entered 
     into by the Bank with the agency, in accordance with the 
     procedures provided in section 1371(c) of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992. Such 
     authority includes the same authority to take affirmative 
     action to correct conditions resulting from violations or 
     practices

[[Page S4975]]

     or to limit activities of a Bank or any executive officer or 
     director of a Bank as appropriate Federal banking agencies 
     have to take with respect to insured depository institutions 
     under paragraphs (6) and (7) of section 8(b) of the Federal 
     Deposit Insurance Act, and to have all other powers, rights, 
     and duties to enforce this Act with respect to the Federal 
     Home Loan Banks and their executive officers and directors as 
     the Office of Federal Housing Enterprise Oversight has to 
     enforce the Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992, the Federal National Mortgage 
     Association Charter Act, or the Federal Home Loan Mortgage 
     Corporation Act with respect to the Federal housing 
     enterprises under the Federal Housing Enterprises Financial 
     Safety and Soundness Act of 1992.
       ``(6) To sue and be sued, by and through its own 
     attorneys.''.
       (2) Technical amendment.--Section 111 of Public Law 93-495 
     (12 U.S.C. 250) is amended by inserting ``Federal Housing 
     Finance Board,'' after ``Director of the Office of Thrift 
     Supervision,''.
       (f) Eligibility To Secure Advances.--
       (1) Section 9.--Section 9 of the Federal Home Loan Bank Act 
     (12 U.S.C. 1429) is amended--
       (A) in the second sentence, by striking ``with the approval 
     of the Board''; and
       (B) in the third sentence, by striking ``, subject to the 
     approval of the Board,''.
       (2) Section 10.--Section 10 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1430) is amended--
       (A) in subsection (c)--
       (i) in the first sentence, by striking ``Board'' and 
     inserting ``Federal Home Loan Bank''; and
       (ii) in the second sentence, by striking ``held by'' and 
     all that follows before the period; and
       (B) in subsection (d)--
       (i) in the first sentence, by striking ``and the approval 
     of the Board''; and
       (ii) by striking ``Subject to the approval of the Board, 
     any'' and inserting ``Any''.
       (g) Section 16.--Section 16(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1436(a)) is amended--
       (1) in the third sentence--
       (A) by striking ``net earnings'' and inserting ``previously 
     retained earnings or current net earnings''; and
       (B) by striking ``, and then only with the approval of the 
     Federal Housing Finance Board''; and
       (2) by striking the fourth sentence.
       (h) Section 18.--Section 18(b) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1438(b)) is amended by striking paragraph 
     (4).

     SEC. 407. RESOLUTION FUNDING CORPORATION.

       (a) In General.--Section 21B(f)(2)(C) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read 
     as follows:
       ``(C) Payments by federal home loan banks.--
       ``(i) In general.--To the extent that the amounts available 
     pursuant to subparagraphs (A) and (B) are insufficient to 
     cover the amount of interest payments, each Federal Home Loan 
     Bank shall pay to the Funding Corporation in each calendar 
     year, 20.75 percent of the net earnings of that Bank (after 
     deducting expenses relating to section 10(j) and operating 
     expenses).
       ``(ii) Annual determination.--The Board annually shall 
     determine the extent to which the value of the aggregate 
     amounts paid by the Federal Home Loan Banks exceeds or falls 
     short of the value of an annuity of $300,000,000 per year 
     that commences on the issuance date and ends on the final 
     scheduled maturity date of the obligations, and shall select 
     appropriate present value factors for making such 
     determinations.
       ``(iii) Payment term alterations.--The Board shall extend 
     or shorten the term of the payment obligations of a Federal 
     Home Loan Bank under this subparagraph as necessary to ensure 
     that the value of all payments made by the Banks is 
     equivalent to the value of an annuity referred to in clause 
     (ii).
       ``(iv) Term beyond maturity.--If the Board extends the term 
     of payment obligations beyond the final scheduled maturity 
     date for the obligations, each Federal Home Loan Bank shall 
     continue to pay 20.75 percent of its net earnings (after 
     deducting expenses relating to section 10(j) and operating 
     expenses) to the Treasury of the United States until the 
     value of all such payments by the Federal Home Loan Banks is 
     equivalent to the value of an annuity referred to in clause 
     (ii). In the final year in which the Federal Home Loan Banks 
     are required to make any payment to the Treasury under this 
     subparagraph, if the dollar amount represented by 20.75 
     percent of the net earnings of the Federal Home Loan Banks 
     exceeds the remaining obligation of the Banks to the 
     Treasury, the Finance Board shall reduce the percentage pro 
     rata to a level sufficient to pay the remaining 
     obligation.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on June 1, 2000. Payments made by a 
     Federal Home Loan Bank before that effective date shall be 
     counted toward the total obligation of that Bank under 
     section 21B(f)(2)(C) of the Federal Home Loan Bank Act, as 
     amended by this section.

     SEC. 408. GAO STUDY ON FEDERAL HOME LOAN BANK SYSTEM CAPITAL.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of--
       (1) possible revisions to the capital structure of the 
     Federal Home Loan Bank System, including the need for--
       (A) more permanent capital;
       (B) a statutory leverage ratio; and
       (C) a risk-based capital structure; and
       (2) what impact such revisions might have on the operations 
     of the Federal Home Loan Bank System, including the 
     obligation of the Federal Home Loan Bank System under section 
     21B(f)(2)(C) of the Federal Home Loan Bank Act.
       (b) Report to Congress.--Not later than 1 year after the 
     date of enactment of this Act, the Comptroller General of the 
     United States shall submit a report to the Congress on the 
     results of the study conducted under subsection (a).
         TITLE V--FUNCTIONAL REGULATION OF BROKERS AND DEALERS

     SEC. 501. DEFINITION OF BROKER.

       (a) It is the intention of this Act subject to carefully 
     defined exceptions which do not undermine the dominant 
     principle of functional regulation to ensure that securities 
     transactions effected by a bank are regulated by securities 
     regulators, notwithstanding any other provision of this Act.
       (b) Section 3(a)(4) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)(4)) is amended to read as follows:
       ``(4) Broker.--
       ``(A) In general.--The term `broker' means any person 
     engaged in the business of effecting transactions in 
     securities for the account of others.
       ``(B) Exception for certain bank activities.--A bank shall 
     not be considered to be a broker because the bank engages in 
     any of the following activities under the conditions 
     described:
       ``(i) Third party brokerage arrangements.--The bank enters 
     into a contractual or other arrangement with a broker or 
     dealer registered under this title under which the broker or 
     dealer offers brokerage services on or off the premises of 
     the bank, if--

       ``(I) such broker or dealer is clearly identified as the 
     person performing the brokerage services;
       ``(II) the broker or dealer performs brokerage services in 
     an area of the bank that is clearly marked and, to the extent 
     practicable, physically separate from the routine deposit-
     taking activities of the bank;
       ``(III) any materials used by the bank to advertise or 
     promote generally the availability of brokerage services 
     under the contractual or other arrangement clearly indicate 
     that the brokerage services are being provided by the broker 
     or dealer and not by the bank;
       ``(IV) any materials used by the bank to advertise or 
     promote generally the availability of brokerage services 
     under the contractual or other arrangement are in compliance 
     with the Federal securities laws before distribution;
       ``(V) bank employees (other than associated persons of a 
     broker or dealer who are qualified pursuant to the rules of a 
     self-regulatory organization) perform only clerical or 
     ministerial functions in connection with brokerage 
     transactions including scheduling appointments with the 
     associated persons of a broker or dealer, except that bank 
     employees may forward customer funds or securities and may 
     describe in general terms the range of investment vehicles 
     available from the bank and the broker or dealer under the 
     contractual or other arrangement;
       ``(VI) bank employees do not directly receive incentive 
     compensation for any brokerage transaction, unless such 
     employees are associated persons of a broker or dealer and 
     are qualified pursuant to the rules of a self-regulatory 
     organization, except that the bank employees may receive 
     compensation for the referral of any customer if the 
     compensation is a nominal one-time cash fee of a fixed dollar 
     amount and the payment of the fee is not contingent on 
     whether the referral results in a transaction;
       ``(VII) such services are provided by the broker or dealer 
     on a basis in which all customers that receive any services 
     are fully disclosed to the broker or dealer;
       ``(VIII) the bank does not carry a securities account of 
     the customer, except in a customary custodian or trustee 
     capacity; and
       ``(IX) the bank, broker, or dealer informs each customer 
     that the brokerage services are provided by the broker or 
     dealer and not by the bank, and that the securities are not 
     deposits or other obligations of the bank, are not guaranteed 
     by the bank, and are not insured by the Federal Deposit 
     Insurance Corporation.

       ``(ii) Trust activities.--The bank effects transactions in 
     a trustee capacity, or effects transactions in a fiduciary 
     capacity in its trust department or other department that is 
     regularly examined by bank examiners for compliance with 
     fiduciary principles and standards, and does not publicly 
     solicit brokerage business, other than by advertising that it 
     effects transactions in securities in conjunction with 
     advertising its other trust activities.
       ``(iii) Permissible securities transactions.--The bank 
     effects transactions in--

       ``(I) commercial paper, bankers acceptances, or commercial 
     bills;
       ``(II) exempted securities;
       ``(III) qualified Canadian Government obligations, as 
     defined in section 5136 of the Revised Statutes of the United 
     States, in conformity with section 15C of this title and the 
     rules and regulations thereunder, or obligations of the North 
     American Development Bank; or
       ``(IV) any standardized, credit enhanced debt security 
     issued by a foreign government pursuant to the March 1989 
     plan of then Secretary of the Treasury Brady, used by such

[[Page S4976]]

     foreign government to retire outstanding commercial bank 
     loans.

       ``(iv) Certain stock purchase plans.--

       ``(I) Employee benefit plans.--The bank effects 
     transactions, as part of its transfer agency activities, in 
     the securities of an issuer as part of any pension, 
     retirement, profit-sharing, bonus, thrift, savings, 
     incentive, or other similar benefit plan for the employees of 
     that issuer or its subsidiaries, if the bank does not solicit 
     transactions or provide investment advice with respect to the 
     purchase or sale of securities in connection with the plan.
       ``(II) Dividend reinvestment plans.--The bank effects 
     transactions, as part of its transfer agency activities, in 
     the securities of an issuer as part of that issuer's dividend 
     reinvestment plan, if--

       ``(aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan; and
       ``(bb) the bank does not net shareholders' buy and sell 
     orders, other than for programs for odd-lot holders or plans 
     registered with the Commission.

       ``(III) Issuer plans.--The bank effects transactions, as 
     part of its transfer agency activities, in the securities of 
     an issuer as part of a plan or program for the purchase or 
     sale of that issuer's shares, if--

       ``(aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan or program; and
       ``(bb) the bank does not net shareholders' buy and sell 
     orders, other than for programs for odd-lot holders or plans 
     registered with the Commission.

       ``(IV) Permissible delivery of materials.--The exception to 
     being considered a broker for a bank engaged in activities 
     described in subclauses (I), (II), and (III) will not be 
     affected by delivery of written or electronic plan materials 
     by a bank to employees of the issuer, shareholders of the 
     issuer, or members of affinity groups of the issuer, so long 
     as such materials are--

       ``(aa) comparable in scope or nature to that permitted by 
     the Commission as of the date of the enactment of the 
     Financial Services Modernization Act of 1999; or
       ``(bb) otherwise permitted by the Commission.
       ``(v) Sweep accounts.--The bank effects transactions as 
     part of a program for the investment or reinvestment of bank 
     deposit funds into any no-load, open-end management 
     investment company registered under the Investment Company 
     Act of 1940 that holds itself out as a money market fund.
       ``(vi) Affiliate transactions.--The bank effects 
     transactions for the account of any affiliate of the bank (as 
     defined in section 2 of the Bank Holding Company Act of 1956) 
     other than--

       ``(I) a registered broker or dealer; or
       ``(II) an affiliate that is engaged in merchant banking, as 
     described in section 4(k)(4)(H) of the Bank Holding Company 
     Act of 1956.

       ``(vii) Private securities offerings.--The bank effects 
     sales as part of a primary offering of securities not 
     involving a public offering, pursuant to section 3(b), 4(2), 
     or 4(6) of the Securities Act of 1933, or the rules and 
     regulations issued thereunder.
       ``(viii) Safekeeping and custody activities.--

       ``(I) In general.--The bank, as part of customary banking 
     activities--

       ``(aa) provides safekeeping or custody services with 
     respect to securities, including the exercise of warrants and 
     other rights on behalf of customers;
       ``(bb) facilitates the transfer of funds or securities, as 
     a custodian or a clearing agency, in connection with the 
     clearance and settlement of its customers' transactions in 
     securities;
       ``(cc) effects securities lending or borrowing transactions 
     with or on behalf of customers as part of services provided 
     to customers pursuant to division (aa) or (bb) or invests 
     cash collateral pledged in connection with such transactions; 
     or
       ``(dd) holds securities pledged by a customer to another 
     person or securities subject to purchase or resale agreements 
     involving a customer, or facilitates the pledging or transfer 
     of such securities by book entry or as otherwise provided 
     under applicable law.

       ``(II) Exception for carrying broker activities.--The 
     exception to being considered a broker for a bank engaged in 
     activities described in subclause (I) shall not apply if the 
     bank, in connection with such activities, acts in the United 
     States as a carrying broker (as such term, and different 
     formulations thereof, are used in section 15(c)(3) and the 
     rules and regulations thereunder) for any broker or dealer, 
     unless such carrying broker activities are engaged in with 
     respect to government securities (as defined in paragraph 
     (42) of this subsection).

       ``(ix) Banking products.--The bank effects transactions in 
     traditional banking products, as defined in section 503(a) of 
     the Financial Services Modernization Act of 1999.
       ``(x) De minimis exception.--The bank effects, other than 
     in transactions referred to in clauses (i) through (ix), not 
     more than 500 transactions in securities in any calendar 
     year, and such transactions are not effected by an employee 
     of the bank who is also an employee of a broker or dealer.
       ``(C) Execution by broker or dealer.--The exception to 
     being considered a broker for a bank engaged in activities 
     described in clauses (ii), (iv), and (viii) of subparagraph 
     (B) shall not apply if the activities described in such 
     provisions result in the trade in the United States of any 
     security that is a publicly traded security in the United 
     States, unless--
       ``(i) the bank directs such trade to a registered broker or 
     dealer for execution;
       ``(ii) the trade is a cross trade or other substantially 
     similar trade of a security that--

       ``(I) is made by the bank or between the bank and an 
     affiliated fiduciary; and
       ``(II) is not in contravention of fiduciary principles 
     established under applicable Federal or State law; or

       ``(iii) the trade is conducted in some other manner 
     permitted under such rules, regulations, or orders as the 
     Commission may prescribe or issue.
       ``(D) No effect of bank exemptions on other commission 
     authority.--The exception to being considered a broker for a 
     bank engaged in activities described in subparagraphs (B) and 
     (C) shall not affect the authority of the Commission under 
     any other provision of this title or any other securities 
     law.
       ``(E) Fiduciary capacity.--For purposes of subparagraph 
     (B)(ii) of this paragraph and paragraph (5)(C), the term 
     `fiduciary capacity' means--
       ``(i) in the capacity as trustee, executor, administrator, 
     registrar of stocks and bonds, transfer agent, guardian, 
     assignee, receiver, or custodian, either under a uniform gift 
     to minor act or for an individual retirement account, or as 
     an investment adviser if the bank receives a fee for its 
     investment advice or services, or as a service provider to 
     any pension, retirement, profit sharing, bonus, thrift, 
     savings, incentive, or other similar benefit plan;
       ``(ii) in any capacity in which the bank possesses 
     investment discretion on behalf of another; or
       ``(iii) in any other similar capacity.
       ``(F) Exception for entities subject to section 15(e).--The 
     term `broker' does not include a bank that--
       ``(i) was, on the day before the date of enactment of the 
     Financial Services Modernization Act of 1999, subject to 
     section 15(e); and
       ``(ii) is subject to such restrictions and requirements as 
     the Commission considers appropriate.''.

     SEC. 502. DEFINITION OF DEALER.

       Section 3(a)(5) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(5)) is amended to read as follows:
       ``(5) Dealer.--
       ``(A) In general.--The term `dealer' means any person 
     engaged in the business of buying and selling securities for 
     such person's own account through a broker or otherwise.
       ``(B) Exception for person not engaged in the business of 
     dealing.--The term `dealer' does not include a person that 
     buys or sells securities for such person's own account, 
     either individually or in a fiduciary capacity, but not as a 
     part of a regular business.
       ``(C) Exception for certain bank activities.--A bank shall 
     not be considered to be a dealer because the bank engages in 
     any of the following activities under the conditions 
     described:
       ``(i) Permissible securities transactions.--The bank buys 
     or sells--

       ``(I) commercial paper, bankers acceptances, or commercial 
     bills;
       ``(II) exempted securities;
       ``(III) qualified Canadian government obligations as 
     defined in section 5136 of the Revised Statutes of the United 
     States, in conformity with section 15C of this title and the 
     rules and regulations thereunder, or obligations of the North 
     American Development Bank; or
       ``(IV) any standardized, credit enhanced debt security 
     issued by a foreign government pursuant to the March 1989 
     plan of then Secretary of the Treasury Brady, used by such 
     foreign government to retire outstanding commercial bank 
     loans.

       ``(ii) Investment, trustee, and fiduciary transactions.--
     The bank buys or sells securities for investment purposes--

       ``(I) for the bank; or
       ``(II) for accounts for which the bank acts in a trustee 
     capacity or fiduciary capacity.

       ``(iii) Asset-backed transactions.--The bank engages in the 
     issuance or sale to qualified investors, through a grantor 
     trust or otherwise, of securities backed by or representing 
     an interest in notes, drafts, acceptances, loans, leases, 
     receivables, other obligations, or pools of any such 
     obligations predominantly originated by the bank, or a 
     syndicate of banks of which the bank is a member, or an 
     affiliate of any such bank other than a broker or dealer.
       ``(iv) Banking products.--The bank buys or sells 
     traditional banking products, as defined in section 503(a) of 
     the Financial Services Modernization Act of 1999.''.

     SEC. 503. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

       (a) Definition of Traditional Banking Product.--For 
     purposes of this title and paragraphs (4) and (5) of section 
     3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(4), (5)), as amended by this title, the term 
     ``traditional banking product'' means--
       (1) a deposit account, savings account, certificate of 
     deposit, or other deposit instrument issued by a bank;
       (2) a banker's acceptance;
       (3) a letter of credit issued or loan made by a bank;
       (4) a debit account at a bank arising from a credit card or 
     similar arrangement;
       (5) a participation in a loan which the bank or an 
     affiliate of the bank (other than a

[[Page S4977]]

     broker or dealer) funds, participates in, or owns that is 
     sold--
       (A) to qualified investors; or
       (B) to other persons that--
       (i) have the opportunity to review and assess any material 
     information, including information regarding the borrower's 
     creditworthiness; and
       (ii) based on such factors as financial sophistication, net 
     worth, and knowledge and experience in financial matters, 
     have the capability to evaluate the information available, as 
     determined under generally applicable banking standards or 
     guidelines; and
       (6) any swap agreement (as defined in section 
     11(e)(8)(D)(vi) of the Federal Deposit Insurance Act), 
     including credit swaps and equity swaps, unless the 
     appropriate Federal banking agency determines that credit 
     swaps and equity swaps shall not be included in the 
     definition of such term.
       (b) Transactions Involving Hybrid Products.--
       (1) Commission authority.--The Commission may, with the 
     concurrence of the Board, determine, by regulation published 
     in the Federal Register, that a bank that effects 
     transactions in, or buys or sells, a new product should be 
     subject to the registration requirements of this section.
       (2) Limitation.--The Commission may not impose the 
     registration requirements of this section on any bank that 
     effects transactions in, or buys or sells, a product under 
     this subsection unless the Commission, with the concurrence 
     of the Board, determines in the regulations described in 
     paragraph (1) that--
       (A) the subject product is a new product;
       (B) the subject product is a security; and
       (C) imposing the registration requirements of this section 
     is necessary or appropriate in the public interest and for 
     the protection of investors.
       (c) Classification Limited.--Classification of a particular 
     product or instrument as a traditional banking product 
     pursuant to this section shall not be construed as finding or 
     implying that such product or instrument is or is not a 
     security for any purpose under the securities laws, or is or 
     is not an account, agreement, contract, or transaction for 
     any purpose under the Commodity Exchange Act.
       (d) No Limitation on Other Authority To Challenge.--Nothing 
     in this section shall affect the right or authority of the 
     Board, any appropriate Federal banking agency, or any 
     interested party under any other provision of law to object 
     to or seek judicial review as to whether a product or 
     instrument is or is not appropriately classified as a 
     traditional banking product under subsection (a).
       (e) Other Definitions.--For purposes of this section--
       (1) the term ``appropriate Federal banking agency'' has the 
     same meaning as in section 3 of the Federal Deposit Insurance 
     Act;
       (2) the term ``bank'' has the same meaning as in section 
     3(a)(6) of the Securities Exchange Act of 1934;
       (3) the term ``Board'' means the Board of Governors of the 
     Federal Reserve System;
       (4) the term ``Commission'' means the Securities and 
     Exchange Commission;
       (5) the term ``government securities'' has the same meaning 
     as in section 3(a)(42) of the Securities Exchange Act of 
     1934, and, for purposes of this subsection, commercial paper, 
     bankers acceptances, and commercial bills shall be treated in 
     the same manner as government securities;
       (6) the term ``new product'' means a product or instrument 
     offered or provided by a bank that--
       (i) was not subject to regulation by the Commission as a 
     security under the Federal securities laws before the date of 
     enactment of this Act; and
       (ii) is not a traditional banking product; and
       (7) the term ``qualified investor'' has the same meaning as 
     in section 3(a)(54) of the Securities Exchange Act of 1934, 
     as added by this title.

     SEC. 504. QUALIFIED INVESTOR DEFINED.

       Section 3(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)) is amended by adding at the end the following 
     new paragraphs:
       ``(54) Qualified investor.--
       ``(A) Definition.--The term `qualified investor' means--
       ``(i) any investment company registered with the Commission 
     under section 8 of the Investment Company Act of 1940;
       ``(ii) any issuer eligible for an exclusion from the 
     definition of `investment company' pursuant to section 
     3(c)(7) of the Investment Company Act of 1940;
       ``(iii) any bank (as defined in paragraph (6)), savings 
     association (as defined in section 3(b) of the Federal 
     Deposit Insurance Act), broker, dealer, insurance company (as 
     defined in section 2(a)(13) of the Securities Act of 1933), 
     or business development company (as defined in section 
     2(a)(48) of the Investment Company Act of 1940);
       ``(iv) any small business investment company licensed by 
     the Small Business Administration under subsection (c) or (d) 
     of section 301 of the Small Business Investment Act of 1958;
       ``(v) any State sponsored employee benefit plan, or any 
     other employee benefit plan, within the meaning of the 
     Employee Retirement Income Security Act of 1974, other than 
     an individual retirement account, if the investment decisions 
     are made by a plan fiduciary, as defined in section 3(21) of 
     that Act, which is either a bank, savings and loan 
     association, insurance company, or registered investment 
     adviser;
       ``(vi) any trust whose purchases of securities are directed 
     by a person described in clauses (i) through (v) of this 
     subparagraph;
       ``(vii) any market intermediary that is exempt under 
     section 3(c)(2) of the Investment Company Act of 1940;
       ``(viii) any associated person of a broker or dealer, other 
     than a natural person;
       ``(ix) any foreign bank (as defined in section 1(b)(7) of 
     the International Banking Act of 1978);
       ``(x) the government of any foreign country;
       ``(xi) any corporation, company, or partnership that owns 
     and invests on a discretionary basis, not less than 
     $10,000,000 in investments;
       ``(xii) any natural person who owns and invests on a 
     discretionary basis, not less than $10,000,000 in 
     investments;
       ``(xiii) any government or political subdivision, agency, 
     or instrumentality of a government who owns and invests on a 
     discretionary basis, not less than $50,000,000 in 
     investments; or
       ``(xiv) any multinational or supranational entity or any 
     agency or instrumentality thereof.
       ``(B) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person not 
     described in subparagraph (A), taking into consideration such 
     factors as the financial sophistication of the person, net 
     worth, and knowledge and experience in financial matters.''.

     SEC. 505. GOVERNMENT SECURITIES DEFINED.

       Section 3(a)(42) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(42)) is amended--
       (1) by striking ``or'' at the end of subparagraph (C);
       (2) by striking the period at the end of subparagraph (D) 
     and inserting ``; or''; and
       (3) by adding at the end the following new subparagraph:
       ``(E) for purposes of section 15C, as applied to a bank, a 
     qualified Canadian Government obligation, as defined in 
     section 5136 of the Revised Statutes of the United States.''.

     SEC. 506. EFFECTIVE DATE.

       This title shall become effective at the end of the 1-year 
     period beginning on the date of enactment of this Act.

     SEC. 507. RULE OF CONSTRUCTION.

       Nothing in this title shall supersede, affect, or otherwise 
     limit the scope and applicability of the Commodity Exchange 
     Act (7 U.S.C. 1 et seq.).
          TITLE VI--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

     SEC. 601. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES 
                   WITH COMMERCIAL AFFILIATES.

       (a) In General.--Section 10(c) of the Home Owners' Loan Act 
     (12 U.S.C. 1467a(c)) is amended by adding at the end the 
     following new paragraph:
       ``(9) Prevention of new affiliations between s&l holding 
     companies and commercial firms.--
       ``(A) In general.--Notwithstanding paragraph (3), no 
     company may directly or indirectly, including through any 
     merger, consolidation, or other type of business combination, 
     acquire control of a savings association after May 4, 1999, 
     unless the company is engaged, directly or indirectly 
     (including through a subsidiary other than a savings 
     association), only in activities that are permitted--
       ``(i) under paragraph (1)(C) or (2) of this subsection; or
       ``(ii) for financial holding companies under section 4(k) 
     of the Bank Holding Company Act of 1956.
       ``(B) Prevention of new commercial affiliations.--
     Notwithstanding paragraph (3), no savings and loan holding 
     company may engage directly or indirectly (including through 
     a subsidiary other than a savings association) in any 
     activity other than as described in clauses (i) and (ii) of 
     subparagraph (A).
       ``(C) Preservation of authority of existing unitary s&l 
     holding companies.--Subparagraphs (A) and (B) do not apply 
     with respect to any company that was a savings and loan 
     holding company on May 4, 1999, or that becomes a savings and 
     loan holding company pursuant to an application pending 
     before the Office on or before that date, and that--
       ``(i) meets and continues to meet the requirements of 
     paragraph (3); and
       ``(ii) continues to control not fewer than 1 savings 
     association that it controlled on May 4, 1999, or that it 
     acquired pursuant to an application pending before the Office 
     on or before that date, or the successor to such savings 
     association.
       ``(D) Corporate reorganizations permitted.--This paragraph 
     does not prevent a transaction that--
       ``(i) involves solely a company under common control with a 
     savings and loan holding company from acquiring, directly or 
     indirectly, control of the savings and loan holding company 
     or any savings association that is already a subsidiary of 
     the savings and loan holding company; or
       ``(ii) involves solely a merger, consolidation, or other 
     type of business combination as a result of which a company 
     under common control with the savings and loan holding 
     company acquires, directly or indirectly, control of the 
     savings and loan holding company or any savings association 
     that is already a subsidiary of the savings and loan holding 
     company.

[[Page S4978]]

       ``(E) Authority to prevent evasions.--The Director may 
     issue interpretations, regulations, or orders that the 
     Director determines necessary to administer and carry out the 
     purpose and prevent evasions of this paragraph, including a 
     determination that, notwithstanding the form of a 
     transaction, the transaction would in substance result in a 
     company acquiring control of a savings association.
       ``(F) Preservation of authority for family trusts.--
     Subparagraphs (A) and (B) do not apply with respect to any 
     trust that becomes a savings and loan holding company with 
     respect to a savings association, if--
       ``(i) not less than 85 percent of the beneficial ownership 
     interests in the trust are continuously owned, directly or 
     indirectly, by or for the benefit of members of the same 
     family, or their spouses, who are lineal descendants of 
     common ancestors who controlled, directly or indirectly, such 
     savings association on May 4, 1999, or a subsequent date, 
     pursuant to an application pending before the Office on or 
     before May 4, 1999; and
       ``(ii) at the time at which such trust becomes a savings 
     and loan holding company, such ancestors or lineal 
     descendants, or spouses of such descendants, have directly or 
     indirectly controlled the savings association continuously 
     since May 4, 1999, or a subsequent date, pursuant to an 
     application pending before the Office on or before May 4, 
     1999.''.
       (b) Conforming Amendment.--Section 10(o)(5)(E) of the Home 
     Owners' Loan Act (15 U.S.C. 1467a(o)(5)(E)) is amended by 
     striking ``, except subparagraph (B)'' and inserting ``or 
     (c)(9)(A)(ii)''.

     SEC. 602. OPTIONAL CONVERSION OF FEDERAL SAVINGS 
                   ASSOCIATIONS.

       Section 5(i) of the Home Owners' Loan Act (12 U.S.C. 
     1464(i)) is amended by adding at the end the following new 
     paragraph:
       ``(5) Conversion to national bank.--Notwithstanding any 
     other provision of law, any Federal savings association 
     chartered and in operation prior to the date of enactment of 
     the Financial Services Modernization Act of 1999, with 
     branches in one or more States, may convert, at its option, 
     with the approval of the Comptroller of the Currency, into 
     one or more National banks, each of which may encompass one 
     or more of the branches of the Federal savings association in 
     one or more States; but only if the resulting National bank 
     or banks will meet any and all financial, management, and 
     capital requirements applicable to National banks.''.
                       TITLE VII--ATM FEE REFORM

     SEC. 701. SHORT TITLE.

       This title may be cited as the ``ATM Fee Reform Act of 
     1999''.

     SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY 
                   HOST ATM.

       Section 904(d) of the Electronic Fund Transfer Act (15 
     U.S.C. 1693b(d)) is amended by adding at the end the 
     following:
       ``(3) Fee disclosures at automated teller, machines.--
       ``(A) In general.--The regulations prescribed under 
     paragraph (1) shall require any automated teller machine 
     operator who imposes a fee on any consumer for providing host 
     transfer services to such consumer to provide notice in 
     accordance with subparagraph (B) to the consumer (at the time 
     the service is provided) of--
       ``(i) the fact that a fee is imposed by such operator for 
     providing the service; and
       ``(ii) the amount of any such fee.
       ``(B) Notice requirements.--
       ``(i) On the machine.--The notice required under clause (i) 
     of subparagraph (A) with respect to any fee described in such 
     subparagraph shall be posted in a prominent and conspicuous 
     location on or at the automated teller machine at which the 
     electronic fund transfer is initiated by the consumer; and
       ``(ii) On the screen.--The notice required under clauses 
     (i) and (ii) of subparagraph (A) with respect to any fee 
     described in such subparagraph shall appear on the screen of 
     the automated teller machine, or on a paper notice issued 
     from such machine, after the transaction is initiated and 
     before the consumer is irrevocably committed to completing 
     the transaction.
       ``(C) Prohibition on fees not properly disclosed and 
     explicitly assumed by consumer.--No fee may be imposed by any 
     automated teller machine operator in connection with any 
     electronic fund transfer initiated by a consumer for which a 
     notice is required under subparagraph (A), unless--
       ``(i) the consumer receives such notice in accordance with 
     subparagraph (B); and
       ``(ii) the consumer elects to continue in the manner 
     necessary to effect the transaction after receiving such 
     notice.
       ``(D) Definitions.--For purposes of this paragraph, the 
     following definitions shall apply:
       ``(i) Electronic fund transfer.--The term `electronic fund 
     transfer' includes a transaction which involves a balance 
     inquiry initiated by a consumer in the same manner as an 
     electronic fund transfer, whether or not the consumer 
     initiates a transfer of funds in the course of the 
     transaction.
       ``(ii) Automated teller machine operator.--The term 
     `automated teller machine operator' means any person who--

       ``(I) operates an automated teller machine at which 
     consumers initiate electronic fund transfers; and
       ``(II) is not the financial institution which holds the 
     account of such consumer from which the transfer is made.

       ``(iii) Host transfer services.--The term `host transfer 
     services' means any electronic fund transfer made by an 
     automated teller machine operator in connection with a 
     transaction initiated by a consumer at an automated teller 
     machine operated by such operator.''.

     SEC. 703. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM 
                   CARD IS ISSUED.

       Section 905(a) of the Electronic Fund Transfer Act (15 
     U.S.C. 1693c(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (8);
       (2) by striking the period at the end of paragraph (9) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (9) the following:
       ``(10) a notice to the consumer that a fee may be imposed 
     by--
       ``(A) an automated teller machine operator (as defined in 
     section 904(d)(3)(D)(ii)) if the consumer initiates a 
     transfer from an automated teller machine which is not 
     operated by the person issuing the card or other means of 
     access; and
       ``(B) any national, regional, or local network utilized to 
     effect the transaction.''.

     SEC. 704. FEASIBILITY STUDY.

       (a) In General.--The Comptroller General of the United 
     States shall conduct a study of the feasibility of requiring, 
     in connection with any electronic and transfer initiated by a 
     consumer through the use of an automated teller machine--
       (1) a notice to be provided to the consumer before the 
     consumer is irrevocably committed to completing the 
     transaction, which clearly states the amount of any fee which 
     will be imposed upon the consummation of the transaction by--
       (A) any automated teller machine operator (as defined in 
     section 904(d)(2)(D)(ii) of the Electronic Fund Transfer Act) 
     involved in the transaction;
       (B) the financial institution holding the account of the 
     consumer;
       (C) any national, regional, or local network utilized to 
     effect the transaction; and
       (D) any other party involved in the transfer; and
       (2) the consumer to elect to consummate the transaction 
     after receiving the notice described in paragraph (1).
       (b) Factors To Be Considered.--In conducting the study 
     required under subsection (a) with regard to the notice 
     requirement described in such subsection, the Comptroller 
     General shall consider the following factors:
       (1) The availability of appropriate technology.
       (2) Implementation and operating costs.
       (3) The competitive impact any such notice requirement 
     would have on various sizes and types of institutions, if 
     implemented.
       (4) The period of time which would be reasonable for 
     implementing any such notice requirement.
       (5) The extent to which consumers would benefit from any 
     such notice requirement.
       (6) Any other factor the Comptroller General determines to 
     be appropriate in analyzing the feasibility of imposing any 
     such notice requirement.
       (c) Report to Congress.--Before the end of the 6-month 
     period beginning on the date of the enactment of this Act, 
     the Comptroller General shall submit a report to the Congress 
     containing--
       (1) the findings and conclusions of the Comptroller General 
     in connection with the study required under subsection (a); 
     and
       (2) the recommendation of the Comptroller General with 
     regard to the question of whether a notice requirement 
     described in subsection (a) should be implemented and, if so, 
     how such requirement should be implemented.

     SEC. 705. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.

       Section 910 of the Electronic Fund Transfer Act (15 U.S.C. 
     1693h) is amended by adding at the end the following new 
     subsection:
       ``(d) Exception for Damaged Notices.--If the notice 
     required to be posted pursuant to section 904(d)(3)(B)(i) by 
     an automated teller machine operator has been posted by such 
     operator in compliance with such section and the notice is 
     subsequently removed, damaged, or altered by any person other 
     than the operator of the automated teller machine, the 
     operator shall have no liability under this section for 
     failure to comply with section 904(d)(3)(B)(i).''.

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