[Congressional Record Volume 145, Number 152 (Tuesday, November 2, 1999)]
[House]
[Pages H11255-H11303]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          CONFERENCE REPORT ON S. 900, GRAMM-LEACH-BLILEY ACT

  Mr. LEACH submitted the following conference report and statement on 
the Senate bill (S. 900) to enhance competition in the financial 
services industry by providing a prudential framework for the 
affiliation of banks, securities firms, insurance companies, and other 
financial service providers, and for other purposes:

                  Conference Report (H. Rept. 106-434)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendments of the House to the bill (S. 
     900), to enhance competition in the financial services 
     industry by providing a prudential framework for the 
     affiliation of banks, securities firms, insurance companies, 
     and other financial service providers, and for other

[[Page H11256]]

     purposes, having met, after full and free conference, have 
     agreed to recommend and do recommend to their respective 
     Houses as follows:
       That the Senate recede from its disagreement to the 
     amendment of the House to the text of the bill and agree to 
     the same with an amendment as follows:
       In lieu of the matter proposed to be inserted by the House 
     amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Gramm-
     Leach-Bliley Act''.
       (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 repeals.
Sec. 102. Activity restrictions applicable to bank holding companies 
              that are not financial holding companies.
Sec. 103. Financial activities.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Cross marketing restriction; limited purpose bank relief; 
              divestiture.
Sec. 108. Use of subordinated debt to protect financial system and 
              deposit funds from ``too big to fail'' institutions.
Sec. 109. Study of financial modernization's effect on the 
              accessibility of small business and farm loans.

     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. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Elimination of application requirement for financial holding 
              companies.
Sec. 117. Preserving the integrity of FDIC resources.
Sec. 118. Repeal of savings bank provisions in the Bank Holding Company 
              Act of 1956.
Sec. 119. Technical amendment.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Subsidiaries of national banks.
Sec. 122. Consideration of merchant banking activities by financial 
              subsidiaries.

               Subtitle D--Preservation of FTC Authority

Sec. 131. Amendment to the Bank Holding Company Act of 1956 to modify 
              notification and post-approval waiting period for section 
              3 transactions.
Sec. 132. Interagency data sharing.
Sec. 133. Clarification of status of subsidiaries and affiliates.

                     Subtitle E--National Treatment

Sec. 141. Foreign banks that are financial holding companies.
Sec. 142. Representative offices.

                 Subtitle F--Direct Activities of Banks

Sec. 151. Authority of national banks to underwrite certain municipal 
              bonds.

                       Subtitle G--Effective Date

Sec. 161. Effective date.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of identified banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.

             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 
              1940.
Sec. 216. Definition of dealer under the Investment Company Act of 
              1940.
Sec. 217. Removal of the exclusion from the definition of investment 
              adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 
              1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 
              1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Statutory disqualification for bank wrongdoing.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.

     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

Sec. 231. Supervision of investment bank holding companies by the 
              Securities and Exchange Commission.

              Subtitle D--Banks and Bank Holding Companies

Sec. 241. Consultation.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. Functional regulation of insurance.
Sec. 302. Insurance underwriting in national banks.
Sec. 303. Title insurance activities of national banks and their 
              affiliates.
Sec. 304. Expedited and equalized dispute resolution for Federal 
              regulators.
Sec. 305. Insurance customer protections.
Sec. 306. Certain State affiliation laws preempted for insurance 
              companies and affiliates.
Sec. 307. Interagency consultation.
Sec. 308. Definition of State.

             Subtitle B--Redomestication of Mutual Insurers

Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.

   Subtitle C--National Association of Registered Agents and Brokers

Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the association and the directors, officers, and 
              employees of the association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.

           Subtitle D--Rental Car Agency Insurance Activities

Sec. 341. Standard of regulation for motor vehicle rentals.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Prevention of creation of new S&L holding companies with 
              commercial affiliates.

                            TITLE V--PRIVACY

        Subtitle A--Disclosure of Nonpublic Personal Information

Sec. 501. Protection of nonpublic personal information.
Sec. 502. Obligations with respect to disclosures of personal 
              information.
Sec. 503. Disclosure of institution privacy policy.
Sec. 504. Rulemaking.
Sec. 505. Enforcement.
Sec. 506. Protection of Fair Credit Reporting Act.
Sec. 507. Relation to State laws.
Sec. 508. Study of information sharing among financial affiliates.
Sec. 509. Definitions.
Sec. 510. Effective date.

         Subtitle B--Fraudulent Access to Financial Information

Sec. 521. Privacy protection for customer information of financial 
              institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.

         TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Savings association membership.
Sec. 604. Advances to members; collateral.
Sec. 605. Eligibility criteria.
Sec. 606. Management of banks.
Sec. 607. Resolution Funding Corporation.
Sec. 608. Capital structure of Federal home loan banks.

                      TITLE VII--OTHER PROVISIONS

                       Subtitle A--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.

                   Subtitle B--Community Reinvestment

Sec. 711. CRA sunshine requirements.
Sec. 712. Small bank regulatory relief.
Sec. 713. Federal Reserve Board study of CRA lending.
Sec. 714. Preserving the Community Reinvestment Act of 1977.
Sec. 715. Responsiveness to community needs for financial services.

               Subtitle C--Other Regulatory Improvements

Sec. 721. Expanded small bank access to S corporation treatment.
Sec. 722. ``Plain language'' requirement for Federal banking agency 
              rules.
Sec. 723. Retention of ``Federal'' in name of converted Federal savings 
              association.

[[Page H11257]]

Sec. 724. Control of bankers' banks.
Sec. 725. Provision of technical assistance to microenterprises.
Sec. 726. Federal Reserve audits.
Sec. 727. Authorization to release reports.
Sec. 728. General Accounting Office study of conflicts of interest.
Sec. 729. Study and report on adapting existing legislative 
              requirements to online banking and lending.
Sec. 730. Clarification of source of strength doctrine.
Sec. 731. Interest rates and other charges at interstate branches.
Sec. 732. Interstate branches and agencies of foreign banks.
Sec. 733. Fair treatment of women by financial advisers.
Sec. 734. Membership of loan guarantee boards.
Sec. 735. Repeal of stock loan limit in Federal Reserve Act.
Sec. 736. Elimination of SAIF and DIF special reserves.
Sec. 737. Bank officers and directors as officers and directors of 
              public utilities.
Sec. 738. Approval for purchases of securities.
Sec. 739. Optional conversion of Federal savings associations.
Sec. 740. Grand jury proceedings.
 TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND 
                          INSURANCE COMPANIES
                        Subtitle A--Affiliations

     SEC. 101. GLASS-STEAGALL ACT REPEALS.

       (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. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING 
                   COMPANIES THAT ARE NOT FINANCIAL HOLDING 
                   COMPANIES.

       (a) 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 the enactment 
     of the Gramm-Leach-Bliley Act, to be so closely related to 
     banking as to be a proper incident thereto (subject to such 
     terms and conditions contained in such regulation or order, 
     unless modified by the Board);''.
       (b) Conforming Changes to Other Statutes.--
       (1) 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,''.
       (2) 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 inserting before the period at the end the 
     following: ``as of the day before the date of the enactment 
     of the Gramm-Leach-Bliley Act''.

     SEC. 103. 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 
     financial 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 accordance with paragraph (2), 
     determines (by regulation or order)--
       ``(A) to be financial in nature or incidental to such 
     financial activity; or
       ``(B) is complementary to a financial activity and does not 
     pose a substantial risk to the safety or soundness of 
     depository institutions or the financial system generally.
       ``(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 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 under the circumstances) that the Secretary of 
     the Treasury believes that the activity is not financial in 
     nature or incidental to a financial activity or is not 
     otherwise permissible under this section.
       ``(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 under the circumstances), the 
     Board shall determine whether to initiate a public rulemaking 
     proposing that the 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, if the Board determines not to seek public comment on 
     the proposal, the reasons for that determination.
       ``(3) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to a financial 
     activity, the Board shall take into account--
       ``(A) the purposes of this Act and the Gramm-Leach-Bliley 
     Act;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which financial holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) whether such activity is necessary or appropriate to 
     allow a financial holding company and the affiliates of a 
     financial holding company to--
       ``(i) compete effectively with any company seeking to 
     provide financial services in the United States;
       ``(ii) efficiently deliver 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) offer customers any available or emerging 
     technological means for using financial services or for the 
     document imaging of data.
       ``(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.
       ``(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 the enactment of the Gramm-Leach-Bliley Act, 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 
     prescribed or interpretations issued pursuant to subsection 
     (c)(13) (as in effect on the day before the date of the 
     enactment of the Gramm-Leach-Bliley Act) 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;
       ``(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 
     subparagraph (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 or investment 
     banking activity, including investment activities engaged in 
     for the purpose of appreciation and ultimate resale or 
     disposition of the investment;
       ``(iii) such shares, assets, or ownership interests are 
     held for a period of time to enable the sale or disposition 
     thereof on a reasonable basis consistent with the financial 
     viability of the activities described in clause (ii); and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     routinely manage or operate such company or entity except as 
     may be necessary or required to obtain a reasonable return on 
     investment upon resale or disposition.
       ``(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

[[Page H11258]]

     and casualty insurance (other than credit-related insurance) 
     or providing and issuing annuities;
       ``(iii) such shares, assets, or ownership interests 
     represent an investment made in the ordinary course of 
     business of such insurance company in accordance with 
     relevant State law governing such investments; and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     routinely manage or operate such company except as may be 
     necessary or required to obtain a reasonable return on 
     investment.
       ``(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 a financial activity.
       ``(B) Activities.--The activities described in this 
     subparagraph are as follows:
       ``(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.
       ``(6) Required notification.--
       ``(A) In general.--A financial 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 conducted by the company 
     acquired not later than 30 calendar days after commencing the 
     activity or consummating the acquisition, as the case may be.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in subsection (j) with regard 
     to the acquisition of a savings association, a financial 
     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.
       ``(7) Merchant banking activities.--
       ``(A) Joint regulations.--The Board and the Secretary of 
     the Treasury may issue such regulations implementing 
     paragraph (4)(H), including limitations on transactions 
     between depository institutions and companies controlled 
     pursuant to such paragraph, as the Board and the Secretary 
     jointly deem appropriate to assure compliance with the 
     purposes and prevent evasions of this Act and the Gramm-
     Leach-Bliley Act and to protect depository institutions.
       ``(B) Sunset of restrictions on merchant banking activities 
     of financial subsidiaries.--The restrictions contained in 
     paragraph (4)(H) on the ownership and control of shares, 
     assets, or ownership interests by or on behalf of a 
     subsidiary of a depository institution shall not apply to a 
     financial subsidiary (as defined in section 5136A of the 
     Revised Statutes of the United States) of a bank, if the 
     Board and the Secretary of the Treasury jointly authorize 
     financial subsidiaries of banks to engage in merchant banking 
     activities pursuant to section 122 of the Gramm-Leach-Bliley 
     Act.
       ``(l) Conditions for Engaging in Expanded Financial 
     Activities.--
       ``(1) In general.--Notwithstanding subsection (k), (n), or 
     (o), 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), (n), 
     or (o), other than activities permissible for any bank 
     holding company under subsection (c)(8), unless--
       ``(A) all of the depository institution subsidiaries of the 
     bank holding company are well capitalized;
       ``(B) all of the 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 be a 
     financial holding company to engage in activities or acquire 
     and retain shares of a company that were not permissible for 
     a bank holding company to engage in or acquire before the 
     enactment of the Gramm-Leach-Bliley Act; and
       ``(ii) a certification that the company meets the 
     requirements of subparagraphs (A) and (B).
       ``(2) CRA requirement.--Notwithstanding subsection (k) or 
     (n) of this section, section 5136A(a) of the Revised Statutes 
     of the United States, or section 46(a) of the Federal Deposit 
     Insurance Act, the appropriate Federal banking agency shall 
     prohibit a financial holding company or any insured 
     depository institution from--
       ``(A) commencing any new activity under subsection (k) or 
     (n) of this section, section 5136A(a) of the Revised Statutes 
     of the United States, or section 46(a) of the Federal Deposit 
     Insurance Act; or
       ``(B) directly or indirectly acquiring control of a company 
     engaged in any activity under subsection (k) or (n) of this 
     section, section 5136A(a) of the Revised Statutes of the 
     United States, or section 46(a) of the Federal Deposit 
     Insurance Act (other than an investment made pursuant to 
     subparagraph (H) or (I) of subsection (k)(4), or section 122 
     of the Gramm-Leach-Bliley Act, or under section 46(a) of the 
     Federal Deposit Insurance Act by reason of such section 122, 
     by an affiliate already engaged in activities under any such 
     provision);
     if any insured depository institution subsidiary of such 
     financial holding company, or the insured depository 
     institution or any of its insured depository institution 
     affiliates, has received in its most recent examination under 
     the Community Reinvestment Act of 1977, a rating of less than 
     `satisfactory record of meeting community credit needs'.
       ``(3) 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.
       ``(m) Provisions Applicable to Financial Holding Companies 
     That Fail To Meet Certain Requirements.--
       ``(1) In general.--If the Board finds that--
       ``(A) a financial holding company is engaged, directly or 
     indirectly, in any activity under subsection (k), (n), or 
     (o), other than activities that are permissible for a bank 
     holding company under subsection (c)(8); and
       ``(B) such financial holding company is not in compliance 
     with the requirements of subsection (l)(1);
     the Board shall give notice to the financial 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 financial holding 
     company of a notice given under paragraph (1) (or such 
     additional period as the Board may permit), the financial 
     holding company shall execute an agreement with the Board to 
     comply with the requirements applicable to a financial 
     holding company under subsection (l)(1).
       ``(3) Board may impose limitations.--Until the conditions 
     described in a notice to a financial holding company under 
     paragraph (1) are corrected, the Board may impose such 
     limitations on the conduct or activities of that financial 
     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 financial holding company under paragraph (1) are 
     not corrected within 180 days after the date of receipt by 
     the financial holding company of a notice under paragraph 
     (1), the Board may require such financial 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 depository 
     institution; or
       ``(B) at the election of the financial holding company 
     instead to cease to engage in any activity conducted by such 
     financial 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).
       ``(5) Consultation.--In taking any action under this 
     subsection, the Board shall consult with all relevant Federal 
     and State regulatory agencies and authorities.
       ``(n) Authority To Retain Limited Nonfinancial Activities 
     and Affiliations.--
       ``(1) In general.--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 financial holding company after 
     the date of the enactment of the Gramm-Leach-Bliley Act may 
     continue to engage in any activity and retain direct or 
     indirect ownership or control of shares of a company engaged 
     in any activity if--
       ``(A) the holding company lawfully was engaged in the 
     activity or held the shares of such company on September 30, 
     1999;
       ``(B) the holding company is predominantly engaged in 
     financial activities as defined in paragraph (2); and
       ``(C) the company engaged in such activity continues to 
     engage only in the same activities that such company 
     conducted on September 30, 1999, and other activities 
     permissible under this Act.
       ``(2) Predominantly financial.--For purposes of this 
     subsection, a company is predominantly engaged in financial 
     activities if the annual gross revenues derived by the 
     holding company and all subsidiaries of the holding 
     company (excluding revenues derived from subsidiary 
     depository institutions), on a consolidated basis, from 
     engaging in activities that are financial in nature or are 
     incidental to a financial activity under subsection (k) 
     represent at least 85 percent of the consolidated annual 
     gross revenues of the company.
       ``(3) No expansion of grandfathered commercial activities 
     through merger or consolidation.--A financial holding company 
     that engages in activities or holds shares pursuant to this 
     subsection, or a subsidiary of such financial holding 
     company, may not acquire, in any merger, consolidation, or 
     other type of business combination, assets of any other 
     company that is engaged in any activity that the Board has 
     not determined to be financial in nature or incidental to a 
     financial activity under subsection (k), except this 
     paragraph shall not apply with respect to a company that owns 
     a broadcasting station licensed under title III of the 
     Communications Act of 1934 and the shares of which are under 
     common control with an insurance company since January 1, 
     1998, unless such company is acquired by, or otherwise 
     becomes an affiliate of, a bank holding company that, at the 
     time such acquisition or affiliation is consummated, is 1 of 
     the 5 largest domestic bank holding companies (as determined 
     on the basis of the consolidated total assets of such 
     companies).
       ``(4) Continuing revenue limitation on grandfathered 
     commercial activities.--Notwithstanding any other provision 
     of this subsection, a financial holding company may continue 
     to engage in activities or hold shares in companies pursuant 
     to this subsection only to the extent that the aggregate 
     annual gross revenues derived from all such activities and 
     all

[[Page H11259]]

     such companies does not exceed 15 percent of the consolidated 
     annual gross revenues of the financial holding company 
     (excluding revenues derived from subsidiary depository 
     institutions).
       ``(5) Cross marketing restrictions applicable to commercial 
     activities.--
       ``(A) In general.--A depository institution controlled by a 
     financial holding company shall not--
       ``(i) offer or market, directly or through any arrangement, 
     any product or service of a company whose activities are 
     conducted or whose shares are owned or controlled by the 
     financial holding company pursuant to this subsection or 
     subparagraph (H) or (I) of subsection (k)(4); or
       ``(ii) permit any of its products or services to be offered 
     or marketed, directly or through any arrangement, by or 
     through any company described in clause (i).
       ``(B) Rule of construction.--Subparagraph (A) shall not be 
     construed as prohibiting an arrangement between a depository 
     institution and a company owned or controlled pursuant to 
     subsection (k)(4)(I) for the marketing of products or 
     services through statement inserts or Internet websites if--
       ``(i) such arrangement does not violate section 106 of the 
     Bank Holding Company Act Amendments of 1970; and
       ``(ii) the Board determines that the arrangement is in the 
     public interest, does not undermine the separation of banking 
     and commerce, and is consistent with the safety and soundness 
     of depository institutions.
       ``(6) Transactions with nonfinancial affiliates.--A 
     depository institution controlled by a financial holding 
     company may not engage in a covered transaction (as defined 
     in section 23A(b)(7) of the Federal Reserve Act) with any 
     affiliate controlled by the company pursuant to this 
     subsection.
       ``(7) Sunset of grandfather.--A financial holding company 
     engaged in any activity, or retaining direct or indirect 
     ownership or control of shares of a company, pursuant to this 
     subsection, shall terminate such activity and divest 
     ownership or control of the shares of such company before the 
     end of the 10-year period beginning on the date of the 
     enactment of the Gramm-Leach-Bliley Act. The Board may, upon 
     application by a financial holding company, extend such 10-
     year period by a period not to exceed an additional 5 years 
     if such extension would not be detrimental to the public 
     interest.
       ``(o) Regulation of Certain Financial Holding Companies.--
     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 financial holding company after the date of enactment of 
     the Gramm-Leach-Bliley Act, 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 holding company, or any subsidiary of the 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 holding company pursuant to this 
     subsection, and not otherwise permitted to be held by a 
     financial 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 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 depository institution; or
       ``(B) any affiliated depository institution to offer or 
     market any product or service of any company, the shares of 
     which are owned or controlled by such holding company 
     pursuant to this subsection.''.
       (b) Community Reinvestment Requirement.--Section 804 of the 
     Community Reinvestment Act of 1977 (12 U.S.C. 2903) is 
     amended by adding at the end the following new subsection:
       ``(c) Financial Holding Company Requirement.--
       ``(1) In general.--An election by a bank holding company to 
     become a financial holding company under section 4 of the 
     Bank Holding Company Act of 1956 shall not be effective if--
       ``(A) the Board finds that, as of the date the declaration 
     of such election and the certification is filed by such 
     holding company under section 4(l)(1)(C) of the Bank Holding 
     Company Act of 1956, not all of the subsidiary insured 
     depository institutions of the bank holding company had 
     achieved a rating of `satisfactory record of meeting 
     community credit needs', or better, at the most recent 
     examination of each such institution; and
       ``(B) the Board notifies the company of such finding before 
     the end of the 30-day period beginning on such date.
       ``(2) Limited exclusions for newly acquired insured 
     depository institutions.--Any insured depository institution 
     acquired by a bank holding company during the 12-month period 
     preceding the date of the submission to the Board of the 
     declaration and certification under section 4(l)(1)(C) of the 
     Bank Holding Company Act of 1956 may be excluded for purposes 
     of paragraph (1) during the 12-month period beginning on the 
     date of such acquisition if--
       ``(A) the bank holding company has submitted an affirmative 
     plan to the appropriate Federal financial supervisory agency 
     to take such action as may be necessary in order for such 
     institution to achieve a rating of `satisfactory record of 
     meeting community credit needs', or better, at the next 
     examination of the institution; and
       ``(B) the plan has been accepted by such agency.
       ``(3) Definitions.--For purposes of this subsection, the 
     following definitions shall apply:
       ``(A) Bank holding company; financial holding company.--The 
     terms `bank holding company' and `financial holding company' 
     have the meanings given those terms in section 2 of the Bank 
     Holding Company Act of 1956.
       ``(B) Board.--The term `Board' means the Board of Governors 
     of the Federal Reserve System.
       ``(C) Insured depository institution.--The term `insured 
     depository institution' has the meaning given the term in 
     section 3(c) of the Federal Deposit Insurance Act.''.
       (c) Technical and Conforming Amendments.--
       (1) Definitions.--Section 2 of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1841) is amended--
       (A) in subsection (n), by inserting `` `depository 
     institution','' after ``the terms''; and
       (B) by adding at the end the following new subsections:
       ``(p) Financial Holding Company.--For purposes of this Act, 
     the term `financial holding company' means a bank holding 
     company that meets the requirements of section 4(l)(1).
       ``(q) Insurance Company.--For purposes of sections 4 and 5, 
     the term `insurance company' includes any person engaged in 
     the business of insurance to the extent of such 
     activities.''.
       (2) Notice procedures.--Section 4(j) of the Bank Holding 
     Company Act of 1956 (12 U.S.C. 1843(j)) is amended--
       (A) in each of subparagraphs (A) and (E) of paragraph (1), 
     by inserting ``or in any complementary activity under 
     subsection (k)(1)(B)'' after ``subsection (c)(8) or (a)(2)''; 
     and
       (B) in paragraph (3)--
       (i) by inserting ``, other than any complementary activity 
     under subsection (k)(1)(B),'' after ``to engage in any 
     activity''; and
       (ii) by inserting ``or a company engaged in any 
     complementary activity under subsection (k)(1)(B)'' after 
     ``insured depository institution''.
       (d) Report.--
       (1) In general.--By the end of the 4-year period beginning 
     on the date of the enactment of this Act, the Board of 
     Governors of the Federal Reserve System and the Secretary of 
     the Treasury shall submit a joint report to the Congress 
     containing a summary of new activities, including 
     grandfathered commercial activities, in which any financial 
     holding company is engaged pursuant to subsection (k)(1) or 
     (n) of section 4 of the Bank Holding Company Act of 1956 (as 
     added by subsection (a)).
       (2) Other contents.--The report submitted to the Congress 
     pursuant to paragraph (1) shall also contain the following:
       (A) A discussion of actions by the Board of Governors of 
     the Federal Reserve System and the Secretary of the Treasury, 
     whether by regulation, order, interpretation, or guideline or 
     by approval or disapproval of an application, with regard to 
     activities of financial holding companies that are incidental 
     to activities that are financial in nature or complementary 
     to such financial activities.
       (B) An analysis and discussion of the risks posed by 
     commercial activities of financial holding companies to the 
     safety and soundness of affiliate depository institutions.
       (C) An analysis and discussion of the effect of mergers and 
     acquisitions under section 4(k) of the Bank Holding Company 
     Act of 1956 on market concentration in the financial services 
     industry.

     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 
     shall engage in the business of insurance in a State as 
     principal or agent unless such person is licensed as required 
     by the appropriate insurance regulator of such State in 
     accordance with the relevant State insurance law, 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 a depository institution, 
     or an affiliate thereof, from being affiliated directly or 
     indirectly or associated with any person, as authorized or 
     permitted by this Act or any other provision of Federal law.
       (2) Insurance.--With respect to affiliations between 
     depository institutions, or any affiliate thereof, and any 
     insurer, paragraph (1) does not prohibit--
       (A) any State from--
       (i) collecting, reviewing, and taking actions (including 
     approval and disapproval) on applications and other documents 
     or reports concerning any proposed acquisition of, or a 
     change or continuation of control of, an insurer domiciled in 
     that State; and
       (ii) exercising authority granted under applicable State 
     law to collect information concerning any proposed 
     acquisition of, or a change or continuation of control of, an 
     insurer engaged in the business of insurance in, and 
     regulated as an insurer by, such State;
     during the 60-day period preceding the effective date of the 
     acquisition or change or continuation of control, so long as 
     the collecting, reviewing, taking actions, or exercising 
     authority by the State does not have the effect of 
     discriminating, intentionally or unintentionally, against a 
     depository institution or an affiliate

[[Page H11260]]

     thereof, or against any other person based upon an 
     association of such person with a depository institution;
       (B) any State from requiring any person that is acquiring 
     control of an insurer domiciled in that State to maintain or 
     restore the capital requirements of that insurer to the level 
     required under the capital regulations of general 
     applicability in that State to avoid the requirement of 
     preparing and filing with the insurance regulatory authority 
     of that State a plan to increase the capital of the insurer, 
     except that any determination by the State insurance 
     regulatory authority with respect to such requirement shall 
     be made not later than 60 days after the date of notification 
     under subparagraph (A); or
       (C) any State from restricting a change in the ownership of 
     stock in an insurer, or a company formed for the purpose of 
     controlling such insurer, after the conversion of the insurer 
     from mutual to stock form so long as such restriction does 
     not have the effect of discriminating, intentionally or 
     unintentionally, against a depository institution or an 
     affiliate thereof, or against any other person based upon an 
     association of such person with a depository institution.
       (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 a 
     depository institution or an affiliate thereof from engaging 
     directly or indirectly, either by itself or in conjunction 
     with an affiliate, or any other 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, 517 U.S. 25 (1996), no State may, by statute, 
     regulation, order, interpretation, or other action, prevent 
     or significantly interfere with the ability of a depository 
     institution, or an affiliate thereof, to engage, directly or 
     indirectly, either by itself or in conjunction with an 
     affiliate or any other person, 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 by a depository institution or an affiliate of a 
     depository institution, solely because the policy has been 
     issued or underwritten by any person who is not associated 
     with such depository institution or affiliate when the 
     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 by an depository institution, or any affiliate of a 
     depository institution, unless such charge would be required 
     when the depository institution or affiliate is the licensed 
     insurance agent or broker providing the insurance.
       (iii) Restrictions prohibiting the use of any advertisement 
     or other insurance promotional material by a depository 
     institution or any affiliate of a depository institution that 
     would cause a reasonable person to believe mistakenly that--

       (I) the Federal Government or a State is responsible for 
     the insurance sales activities of, or stands behind the 
     credit of, the institution or affiliate; 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 or 
     affiliate;

       (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 depository 
     institution or an affiliate thereof) to any person other than 
     an officer, director, employee, agent, or affiliate of a 
     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 
     insurer in connection with transferring insurance in force on 
     existing insureds of the depository institution or an 
     affiliate thereof, or in connection with a merger with or 
     acquisition of an unaffiliated insurer; or
       (II) the release of information as otherwise authorized by 
     State or Federal 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 a depository institution 
     or an affiliate of a depository institution, or a particular 
     insurer, agent, or broker, other than a prohibition that 
     would prevent any such depository institution or affiliate--

       (I) from engaging in any activity described in this clause 
     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 depository institution or an 
     affiliate of the depository institution.

       (ix) Restrictions requiring, when an application by a 
     consumer for a loan or other extension of credit from a 
     depository institution is pending, and insurance is offered 
     or sold to the consumer or is required in connection with the 
     loan or extension of credit by the depository institution or 
     any affiliate thereof, that a written disclosure be provided 
     to the consumer or prospective customer indicating that the 
     customer's choice of an insurance provider will not affect 
     the credit decision or credit terms in any way, except that 
     the depository institution may impose reasonable requirements 
     concerning the creditworthiness of the insurer 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 any depository institution or, 
     if appropriate, an affiliate of any such institution 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 a depository institution, or any affiliate of 
     such institution, 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 a depository institution or an affiliate of 
     such institution, 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 maintenance of separate and 
     distinct books and records relating to insurance 
     transactions, including all files relating to and reflecting 
     consumer complaints, and requiring 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 304(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, 517 U.S. 25 (1996) with respect to any State statute, 
     regulation, order, interpretation, or other action that is 
     not referred to or described in subparagraph (B); or
       (II) to create any inference with respect to any State 
     statute, regulation, order, interpretation, or other action 
     that is not described 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 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'');
       (B) apply only to persons that are not 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);

[[Page H11261]]

       (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).
       (4) Financial activities other than insurance.--No State 
     statute, regulation, order, interpretation, 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--
       (i) does not distinguish by its terms between depository 
     institutions, and affiliates thereof, engaged in the activity 
     at issue and other persons engaged in the same activity in a 
     manner that is in any way adverse with respect to the conduct 
     of the activity by any such depository institution or 
     affiliate engaged in the activity at issue;
       (ii) as interpreted or applied, does not have, and will not 
     have, an impact on depository institutions, or affiliates 
     thereof, engaged in the activity at issue, or any person who 
     has an association with any such depository institution or 
     affiliate, that is substantially more adverse than its impact 
     on other persons engaged in the same activity that are not 
     depository institutions or affiliates thereof, or persons who 
     do not have an association with any such depository 
     institution or affiliate;
       (iii) does not effectively prevent a depository institution 
     or affiliate thereof from engaging in activities authorized 
     or permitted by this Act or any other provision of Federal 
     law; and
       (iv) does not conflict with the intent of this Act 
     generally to permit affiliations that are authorized or 
     permitted by Federal law.
       (e) Nondiscrimination.--Except as provided in any 
     restrictions described in subsection (d)(2)(B), no State may, 
     by statute, regulation, order, interpretation, or other 
     action, regulate the insurance activities authorized or 
     permitted under this Act or any other provision of Federal 
     law of a depository institution, or affiliate thereof, to the 
     extent that such statute, regulation, order, interpretation, 
     or other action--
       (1) distinguishes by its terms between depository 
     institutions, or affiliates thereof, and other persons 
     engaged in such activities, in a manner that is in any way 
     adverse to any such depository institution, or affiliate 
     thereof;
       (2) as interpreted or applied, has or will have an impact 
     on depository institutions, or affiliates thereof, that is 
     substantially more adverse than its impact on other persons 
     providing the same products or services or engaged in the 
     same activities that are not depository institutions, or 
     affiliates thereof, or persons or entities affiliated 
     therewith;
       (3) effectively prevents a depository institution, or 
     affiliate thereof, from engaging in insurance activities 
     authorized or permitted by this Act or any other provision of 
     Federal law; or
       (4) conflicts with the intent of this Act generally to 
     permit affiliations that are authorized or permitted by 
     Federal law between depository institutions, or affiliates 
     thereof, and persons engaged in the business of insurance.
       (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 such State--
       (A) 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
       (B) to require the registration of securities or the 
     licensure or registration of brokers, dealers, or investment 
     advisers (consistent with section 203A of the Investment 
     Advisers Act of 1940), or the associated persons of a broker, 
     dealer, or investment adviser (consistent with such section 
     203A); 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, orders, interpretations, 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) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Affiliate.--The term ``affiliate'' means any company 
     that controls, is controlled by, or is under common control 
     with another company.
       (2) Antitrust laws.--The term ``antitrust laws'' has the 
     meaning given the term 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).
       (3) Depository institution.--The term ``depository 
     institution''--
       (A) has the meaning given the term in section 3 of the 
     Federal Deposit Insurance Act; and
       (B) includes any foreign bank that maintains a branch, 
     agency, or commercial lending company in the United States.
       (4) Insurer.--The term ``insurer'' means any person engaged 
     in the business of insurance.
       (5) State.--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.

     SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

       Section 3(g)(2) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1842(g)(2)) is amended to read as follows:
       ``(2) Regulations.--A bank holding company organized as a 
     mutual holding company shall be regulated on terms, and shall 
     be subject to limitations, comparable to those applicable to 
     any other bank holding company.''.

     SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

       Section 109(e)(4) of the Riegle-Neal Interstate Banking and 
     Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is 
     amended by inserting ``and any branch of a bank controlled by 
     an out-of-State bank holding company (as defined in section 
     2(o)(7) of the Bank Holding Company Act of 1956)'' before the 
     period.

     SEC. 107. 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 in connection with an activity that is financial in 
     nature or incidental to a financial activity; 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 ``, or that 
     is otherwise permissible for a bank controlled by a company 
     described in section 4(f)(1)'' before the period at the end.
       (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 new subclause:

       ``(XI) assets that are derived from, or incidental to, 
     activities in which institutions described in subparagraph 
     (F) or (H) of section 2(c)(2) 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 the 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--

[[Page H11262]]

       ``(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.''.
       (f) Foreign Bank Subsidiaries of Limited Purpose Credit 
     Card Banks.--Section 4(f) of the Bank Holding Company Act of 
     1956 (12 U.S.C. 1843(f)) is amended by adding at the end the 
     following new paragraph:
       ``(14) Foreign bank subsidiaries of limited purpose credit 
     card banks.--
       ``(A) In general.--An institution described in section 
     2(c)(2)(F) may control a foreign bank if--
       ``(i) the investment of the institution in the foreign bank 
     meets the requirements of section 25 or 25A of the Federal 
     Reserve Act and the foreign bank qualifies under such 
     sections;
       ``(ii) the foreign bank does not offer any products or 
     services in the United States; and
       ``(iii) the activities of the foreign bank are permissible 
     under otherwise applicable law.
       ``(B) Other limitations inapplicable.--The limitations 
     contained in any clause of section 2(c)(2)(F) shall not apply 
     to a foreign bank described in subparagraph (A) that is 
     controlled by an institution described in such section.''.

     SEC. 108. USE OF SUBORDINATED DEBT TO PROTECT FINANCIAL 
                   SYSTEM AND DEPOSIT FUNDS FROM ``TOO BIG TO 
                   FAIL'' INSTITUTIONS.

       (a) Study Required.--The Board of Governors of the Federal 
     Reserve System and the Secretary of the Treasury shall 
     conduct a study of--
       (1) the feasibility and appropriateness of establishing a 
     requirement that, with respect to large insured depository 
     institutions and depository institution holding companies the 
     failure of which could have serious adverse effects on 
     economic conditions or financial stability, such institutions 
     and holding companies maintain some portion of their capital 
     in the form of subordinated debt in order to bring market 
     forces and market discipline to bear on the operation of, and 
     the assessment of the viability of, such institutions and 
     companies and reduce the risk to economic conditions, 
     financial stability, and any deposit insurance fund;
       (2) if such requirement is feasible and appropriate, the 
     appropriate amount or percentage of capital that should be 
     subordinated debt consistent with such purposes; and
       (3) the manner in which any such requirement could be 
     incorporated into existing capital standards and other issues 
     relating to the transition to such a requirement.
       (b) Report.--Before the end of the 18-month period 
     beginning on the date of the enactment of this Act, the Board 
     of Governors of the Federal Reserve System and the Secretary 
     of the Treasury shall submit a report to the Congress 
     containing the findings and conclusions of the Board and the 
     Secretary in connection with the study required under 
     subsection (a), together with such legislative and 
     administrative proposals as the Board and the Secretary may 
     determine to be appropriate.
       (c) Definitions.--For purposes of subsection (a), the 
     following definitions shall apply:
       (1) Bank holding company.--The term ``bank holding 
     company'' has the meaning given the term in section 2 of the 
     Bank Holding Company Act of 1956.
       (2) Insured depository institution.--The term ``insured 
     depository institution'' has the meaning given the term in 
     section 3(c) of the Federal Deposit Insurance Act.
       (3) Subordinated debt.--The term ``subordinated debt'' 
     means unsecured debt that--
       (A) has an original weighted average maturity of not less 
     than 5 years;
       (B) is subordinated as to payment of principal and interest 
     to all other indebtedness of the bank, including deposits;
       (C) is not supported by any form of credit enhancement, 
     including a guarantee or standby letter of credit; and
       (D) is not held in whole or in part by any affiliate or 
     institution-affiliated party of the insured depository 
     institution or bank holding company.

     SEC. 109. STUDY OF FINANCIAL MODERNIZATION'S EFFECT ON THE 
                   ACCESSIBILITY OF SMALL BUSINESS AND FARM LOANS.

       (a) Study.--The Secretary of the Treasury, in consultation 
     with the Federal banking agencies (as defined in section 3(z) 
     of the Federal Deposit Insurance Act), shall conduct a study 
     of the extent to which credit is being provided to and for 
     small businesses and farms, as a result of this Act and the 
     amendments made by this Act.
       (b) Report.--Before the end of the 5-year period beginning 
     on the date of the enactment of this Act, the Secretary, in 
     consultation with the Federal banking agencies, shall submit 
     a report to the Congress on the study conducted pursuant to 
     subsection (a) and shall include such recommendations as the 
     Secretary determines to be appropriate for administrative and 
     legislative action.
     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) its financial condition, 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 or any other Federal law 
     that the Board has specific jurisdiction to enforce against 
     such company or subsidiary.
       ``(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) Availability.--A bank holding company or a 
     subsidiary of such company shall provide to the Board, at the 
     request of the Board, a report referred to in clause (i).
       ``(iii) Reports filed with other agencies.--

       ``(I) In general.--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 
     first request that the appropriate regulatory authority or 
     self-regulatory organization obtain such report.
       ``(II) Availability from other subsidiary.--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 or any other Federal law that the 
     Board has specific jurisdiction to enforce against such 
     company or subsidiary or the systems described in paragraph 
     (2)(A)(ii)(II), 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 or any other Federal law that the Board has specific 
     jurisdiction to enforce against such company or subsidiary 
     and those governing 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;
       ``(ii) the Board reasonably determines, after reviewing 
     relevant reports, that examination of the subsidiary is 
     necessary to adequately inform the Board of the systems 
     described in subparagraph (A)(ii)(II); or
       ``(iii) 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 any other Federal law 
     that the Board has specific jurisdiction to enforce against 
     such subsidiary, including 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;

[[Page H11263]]

       ``(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 functionally regulated subsidiary of a 
     bank holding company that--
       ``(i) is not a depository institution; and
       ``(ii) is--

       ``(I) in compliance with the applicable capital 
     requirements of its Federal regulatory authority (including 
     the Securities and Exchange Commission) or State insurance 
     authority;

       ``(II) properly registered as an investment adviser under 
     the Investment Advisers Act of 1940, or with any State; or
       ``(III) is licensed as an insurance agent with the 
     appropriate State insurance authority.

       ``(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--
       ``(i) activities of a registered investment adviser other 
     than with respect to investment advisory activities or 
     activities incidental to investment advisory activities; or
       ``(ii) activities of a licensed insurance agent other than 
     insurance agency activities or activities incidental to 
     insurance agency 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, unless the 
     investment company is--
       ``(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, and the shares owned by the bank holding 
     company have a market value equal to more than $1,000,000.
       ``(4) Functional regulation of securities and insurance 
     activities.--
       ``(A) Securities activities.--Securities activities 
     conducted in a functionally regulated subsidiary of a 
     depository institution 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 Gramm-Leach-Bliley Act, 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 
     Gramm-Leach-Bliley Act, insurance agency and brokerage 
     activities and activities as principal conducted in a 
     functionally regulated subsidiary of a depository institution 
     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.
       ``(5) Definition.--For purposes of this subsection, the 
     term `functionally regulated subsidiary' means any company--
       ``(A) that is not a bank holding company or a depository 
     institution; 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, with respect to insurance 
     activities of the insurance company and activities incidental 
     to such insurance activities, that is subject to supervision 
     by a State insurance regulator; 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.

       (a) Bank Holding Companies.--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 a subsidiary depository institution shall not be 
     effective nor enforceable with respect to an entity described 
     in subparagraph (A) if--
       ``(A) such funds or assets are to be provided by--
       ``(i) a bank holding company that is an insurance company, 
     a broker or dealer registered under the Securities Exchange 
     Act of 1934, an investment company registered under the 
     Investment Company Act of 1940, or an investment adviser 
     registered by or on behalf of either the Securities and 
     Exchange Commission or any State; or
       ``(ii) an affiliate of the depository institution that is 
     an insurance company or a broker or dealer registered under 
     the Securities Exchange Act of 1934, an investment company 
     registered under the Investment Company Act of 1940, or an 
     investment adviser registered by or on behalf of either the 
     Securities and Exchange Commission or any State; and
       ``(B) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker, dealer, investment adviser (solely with 
     respect to investment advisory activities or activities 
     incidental thereto), or investment company, as the case may 
     be, determines in writing sent to the holding company and the 
     Board that the 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, dealer, investment company, or investment 
     adviser, 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, dealer, investment company, or 
     investment adviser described in paragraph (1)(A) to provide 
     funds or assets to a depository institution subsidiary of the 
     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, the Securities and Exchange Commission, or 
     State securities regulator, 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 depository institution not later than 
     180 days after receiving the notice, or such longer period as 
     the Board determines consistent with the safe and sound 
     operation of the depository institution.
       ``(4) Conditions before divestiture.--During the period 
     beginning on the date an order to divest is issued by the 
     Board under paragraph (3) to a bank holding company and 
     ending on the date the divestiture is completed, the Board 
     may impose any conditions or restrictions on the holding 
     company's ownership or operation of the depository 
     institution, including restricting or prohibiting 
     transactions between the 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 as limiting or otherwise 
     affecting, except to the extent specifically provided in this 
     subsection, 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.''.
       (b) Subsidiaries of Depository Institutions.--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. AUTHORITY OF STATE INSURANCE REGULATOR AND 
                   SECURITIES AND EXCHANGE COMMISSION.

       ``(a) In General.--Notwithstanding any other provision of 
     law, the provisions of--
       ``(1) section 5(c) of the Bank Holding Company Act of 1956 
     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 
     that limit the authority of the Board to require a 
     functionally regulated subsidiary of a holding company to 
     provide capital or other funds or assets to a depository 
     institution subsidiary of the holding company and to take 
     certain actions including requiring divestiture of the 
     depository institution; and
       ``(3) section 10A of the Bank Holding Company Act of 1956 
     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 might otherwise have under any statute or regulation 
     to require reports, make examinations, impose capital 
     requirements, or take any other direct or indirect action 
     with respect to any functionally regulated affiliate of a 
     depository institution, subject to the same standards and 
     requirements as are applicable to the Board under those 
     provisions.
       ``(b) Certain Exemption Authorized.--No provision of this 
     section shall be construed as preventing the Corporation, if 
     the Corporation finds it necessary to determine the condition 
     of a depository institution for insurance purposes, from 
     examining an affiliate of any depository institution, 
     pursuant to section 10(b)(4), 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) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Functionally regulated subsidiary.--The term 
     `functionally regulated subsidiary' has the meaning given the 
     term in section 5(c)(5) of the Bank Holding Company Act of 
     1956.
       ``(2) Functionally regulated affiliate.--The term 
     `functionally regulated affiliate' means, with respect to any 
     depository institution, any affiliate of such depository 
     institution that is--
       ``(A) not a depository institution holding company; and
       ``(B) a company described in any clause of section 
     5(c)(5)(B) of the Bank Holding Company Act of 1956.''.

[[Page H11264]]

     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 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 
     depository institution or against 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 that requires the bank holding company 
     to require a functionally regulated subsidiary of the holding 
     company to engage, or to refrain from engaging, in any 
     conduct or activities unless the Board could take such action 
     directly against or with respect to the functionally 
     regulated subsidiary in accordance with subsection (a).
       ``(c) Actions Specifically Authorized.--Notwithstanding 
     subsection (a) or (b), 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 any 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 meaning given the term in section 
     5(c)(5).''.

     SEC. 114. PRUDENTIAL SAFEGUARDS.

       (a) Comptroller of the Currency.--
       (1) In general.--The Comptroller of the Currency may, by 
     regulation or order, impose restrictions or requirements on 
     relationships or transactions between a national bank and a 
     subsidiary of the national bank that the Comptroller finds 
     are--
       (A) consistent with the purposes of this Act, title LXII of 
     the Revised Statutes of the United States, and other Federal 
     law applicable to national banks; and
       (B) appropriate to avoid any significant risk to the safety 
     and soundness of insured depository institutions or any 
     Federal deposit insurance fund or other adverse effects, such 
     as undue concentration of resources, decreased or unfair 
     competition, conflicts of interests, or unsound banking 
     practices.
       (2) Review.--The Comptroller of the Currency shall 
     regularly--
       (A) review all restrictions or requirements established 
     pursuant to paragraph (1) to determine whether there is a 
     continuing need for any such restriction or requirement to 
     carry out the purposes of the Act, including the avoidance of 
     any adverse effect referred to in paragraph (1)(B); and
       (B) modify or eliminate any such restriction or requirement 
     the Comptroller finds is no longer required for such 
     purposes.
       (b) Board of Governors of the Federal Reserve System.--
       (1) In general.--The Board of Governors of the Federal 
     Reserve System may, by regulation or order, impose 
     restrictions or requirements on relationships or 
     transactions--
       (A) between a depository institution subsidiary of a bank 
     holding company and any affiliate of such depository 
     institution (other than a subsidiary of such institution); or
       (B) between a State member bank and a subsidiary of such 
     bank;
     if the Board makes a finding described in paragraph (2) with 
     respect to such restriction or requirement.
       (2) Finding.--The Board of Governors of the Federal Reserve 
     System may exercise authority under paragraph (1) if the 
     Board finds that the exercise of such authority is--
       (A) consistent with the purposes of this Act, the Bank 
     Holding Company Act of 1956, the Federal Reserve Act, and 
     other Federal law applicable to depository institution 
     subsidiaries of bank holding companies or State member banks, 
     as the case may be; and
       (B) appropriate to prevent an evasion of any provision of 
     law referred to in subparagraph (A) or to avoid any 
     significant risk to the safety and soundness of depository 
     institutions or any Federal deposit insurance fund or other 
     adverse effects, such as undue concentration of resources, 
     decreased or unfair competition, conflicts of interests, or 
     unsound banking practices.
       (3) Review.--The Board of Governors of the Federal Reserve 
     System shall regularly--
       (A) review all restrictions or requirements established 
     pursuant to paragraph (1) or (4) to determine whether there 
     is a continuing need for any such restriction or requirement 
     to carry out the purposes of the Act, including the avoidance 
     of any adverse effect referred to in paragraph (2)(B) or 
     (4)(B); and
       (B) modify or eliminate any such restriction or requirement 
     the Board finds is no longer required for such purposes.
       (4) Foreign banks.--The Board may, by regulation or order, 
     impose restrictions or requirements on relationships or 
     transactions between a branch, agency, or commercial lending 
     company of a foreign bank in the United States and any 
     affiliate in the United States of such foreign bank that the 
     Board finds are--
       (A) consistent with the purposes of this Act, the Bank 
     Holding Company Act of 1956, the Federal Reserve Act, and 
     other Federal law applicable to foreign banks and their 
     affiliates in the United States; and
       (B) appropriate to prevent an evasion of any provision of 
     law referred to in subparagraph (A) or to avoid any 
     significant risk to the safety and soundness of depository 
     institutions or any Federal deposit insurance fund or other 
     adverse effects, such as undue concentration of resources, 
     decreased or unfair competition, conflicts of interests, or 
     unsound banking practices.
       (c) Federal Deposit Insurance Corporation.--
       (1) In general.--The Federal Deposit Insurance Corporation 
     may, by regulation or order, impose restrictions or 
     requirements on relationships or transactions between a State 
     nonmember bank (as defined in section 3 of the Federal 
     Deposit Insurance Act) and a subsidiary of the State 
     nonmember bank that the Corporation finds are--
       (A) consistent with the purposes of this Act, the Federal 
     Deposit Insurance Act, or other Federal law applicable to 
     State nonmember banks; and
       (B) appropriate to avoid any significant risk to the safety 
     and soundness of depository institutions or any Federal 
     deposit insurance fund or other adverse effects, such as 
     undue concentration of resources, decreased or unfair 
     competition, conflicts of interests, or unsound banking 
     practices.
       (2) Review.--The Federal Deposit Insurance Corporation 
     shall regularly--
       (A) review all restrictions or requirements established 
     pursuant to paragraph (1) to determine whether there is a 
     continuing need for any such restriction or requirement to 
     carry out the purposes of the Act, including the avoidance of 
     any adverse effect referred to in paragraph (1)(B); and
       (B) modify or eliminate any such restriction or requirement 
     the Corporation finds is no longer required for such 
     purposes.

     SEC. 115. 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 meaning given the term in section 2 of the 
     Bank Holding Company Act of 1956.
       (2) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (3) Corporation.--The term ``Corporation'' means the 
     Federal Deposit Insurance Corporation.
       (4) Federal banking agency.--The term ``Federal banking 
     agency'' has the meaning given the term in section 3(z) of 
     the Federal Deposit Insurance Act.
       (5) Insured depository institution.--The term ``insured 
     depository institution'' has the meaning given the term in 
     section 3(c) of the Federal Deposit Insurance Act.
       (6) 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.
       (7) Savings and loan holding company.--The term ``savings 
     and loan holding company'' has the meaning given the term in 
     section 10(a)(1)(D) of the Home Owners' Loan Act.

     SEC. 116. ELIMINATION OF APPLICATION REQUIREMENT FOR 
                   FINANCIAL HOLDING COMPANIES.

       (a) Prevention of Duplicative Filings.--Section 5(a) of the 
     Bank Holding Company Act of 1956 (12 U.S.C. 1844(a)) is 
     amended by adding at the end the following new sentence: ``A 
     declaration filed in accordance with section 4(l)(1)(C) shall 
     satisfy the requirements of this subsection with regard to 
     the registration of a bank holding company but not any 
     requirement to file an application to acquire a bank pursuant 
     to section 3.''.
       (b) Divestiture Procedures.--Section 5(e)(1) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1844(e)(1)) is 
     amended--
       (1) by striking ``Financial Institutions Supervisory Act of 
     1966, order'' and inserting ``Financial Institutions 
     Supervisory Act of 1966, at the election of the bank holding 
     company--

[[Page H11265]]

       ``(A) order''; and
       (2) by striking ``shareholders of the bank holding company. 
     Such distribution'' and inserting ``shareholders of the bank 
     holding company; or
       ``(B) order the bank holding company, after due notice and 
     opportunity for hearing, and after consultation with the 
     primary supervisor for the bank, which shall be the 
     Comptroller of the Currency in the case of a national bank, 
     and the Federal Deposit Insurance Corporation and the 
     appropriate State supervisor in the case of an insured 
     nonmember bank, to terminate (within 120 days or such longer 
     period as the Board may direct) the ownership or control of 
     any such bank by such company.
     The distribution referred to in subparagraph (A)''.

     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 or affiliate (other than an insured depository 
     institution that receives assistance in accordance with the 
     provisions of this Act) of''.

     SEC. 118. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK 
                   HOLDING COMPANY ACT OF 1956.

       Section 3(f) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1842(f)) is amended to read as follows:
       ``(f) [Repealed].''.

     SEC. 119. TECHNICAL AMENDMENT.

       Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(o)(1)(A)) is amended by striking ``section 
     38(b)'' and inserting ``section 38''.
               Subtitle C--Subsidiaries of National Banks

     SEC. 121. 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 5136B; and
       (2) by inserting after section 5136 (12 U.S.C. 24) the 
     following new section:

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

       ``(a) Authorization To Conduct in 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.
       ``(2) Conditions and requirements.--A national bank may 
     control a financial subsidiary, or hold an interest in a 
     financial subsidiary, only if--
       ``(A) the financial subsidiary engages only in--
       ``(i) activities that are financial in nature or incidental 
     to a financial activity pursuant to subsection (b); and
       ``(ii) activities that are permitted for national banks to 
     engage in directly (subject to the same terms and conditions 
     that govern the conduct of the activities by a national 
     bank);
       ``(B) the activities engaged in by the financial subsidiary 
     as a principal do not include--
       ``(i) insuring, guaranteeing, or indemnifying against loss, 
     harm, damage, illness, disability, or death (except to the 
     extent permitted under section 302 or 303(c) of the Gramm-
     Leach-Bliley Act) or providing or issuing annuities the 
     income of which is subject to tax treatment under section 72 
     of the Internal Revenue Code of 1986;
       ``(ii) real estate development or real estate investment 
     activities, unless otherwise expressly authorized by law; or
       ``(iii) any activity permitted in subparagraph (H) or (I) 
     of section 4(k)(4) of the Bank Holding Company Act of 1956, 
     except activities described in section 4(k)(4)(H) that may be 
     permitted in accordance with section 122 of the Gramm-Leach-
     Bliley Act;
       ``(C) the national bank and each depository institution 
     affiliate of the national bank are well capitalized and well 
     managed;
       ``(D) the aggregate consolidated total assets of all 
     financial subsidiaries of the national bank do not exceed the 
     lesser of--
       ``(i) 45 percent of the consolidated total assets of the 
     parent bank; or
       ``(ii) $50,000,000,000;
       ``(E) except as provided in paragraph (4), the national 
     bank meets any applicable rating or other requirement set 
     forth in paragraph (3); and
       ``(F) the national bank has received the approval of the 
     Comptroller of the Currency for the financial subsidiary to 
     engage in such activities, which approval shall be based 
     solely upon the factors set forth in this section.
       ``(3) Rating or comparable requirement.--
       ``(A) In general.--A national bank meets the requirements 
     of this paragraph if--
       ``(i) the bank is 1 of the 50 largest insured banks and has 
     not fewer than 1 issue of outstanding eligible debt that is 
     currently rated within the 3 highest investment grade rating 
     categories by a nationally recognized statistical rating 
     organization; or
       ``(ii) the bank is 1 of the second 50 largest insured banks 
     and meets the criteria set forth in clause (i) or such other 
     criteria as the Secretary of the Treasury and the Board of 
     Governors of the Federal Reserve System may jointly establish 
     by regulation and determine to be comparable to and 
     consistent with the purposes of the rating required in clause 
     (i).
       ``(B) Consolidated total assets.--For purposes of this 
     paragraph, the size of an insured bank shall be determined on 
     the basis of the consolidated total assets of the bank as of 
     the end of each calendar year.
       ``(4) Financial agency subsidiary.--The requirement in 
     paragraph (2)(E) shall not apply with respect to the 
     ownership or control of a financial subsidiary that engages 
     in activities described in subsection (b)(1) solely as agent 
     and not directly or indirectly as principal.
       ``(5) Regulations required.--Before the end of the 270-day 
     period beginning on the date of the enactment of the Gramm-
     Leach-Bliley Act, the Comptroller of the Currency shall, by 
     regulation, prescribe procedures to implement this section.
       ``(6) Indexed asset limit.--The dollar amount contained in 
     paragraph (2)(D) shall be adjusted according to an indexing 
     mechanism jointly established by regulation by the Secretary 
     of the Treasury and the Board of Governors of the Federal 
     Reserve System.
       ``(7) Coordination with section 4(l)(2) of the bank holding 
     company act of 1956.--Section 4(l)(2) of the Bank Holding 
     Company Act of 1956 applies to a national bank that controls 
     a financial subsidiary in the manner provided in that 
     section.
       ``(b) Activities That Are Financial in Nature.--
       ``(1) Financial activities.--
       ``(A) In general.--An activity shall be financial in nature 
     or incidental to such financial activity only if--
       ``(i) such activity has been defined to be financial in 
     nature or incidental to a financial activity for bank holding 
     companies pursuant to section 4(k)(4) of the Bank Holding 
     Company Act of 1956; or
       ``(ii) the Secretary of the Treasury determines the 
     activity is financial in nature or incidental to a financial 
     activity in accordance with subparagraph (B).
       ``(B) Coordination between the board and the secretary of 
     the treasury.--
       ``(i) Proposals raised before the secretary of the 
     treasury.--

       ``(I) Consultation.--The Secretary of the Treasury shall 
     notify the Board of, and consult with the Board concerning, 
     any request, proposal, or application under this section for 
     a determination of whether an activity is financial in nature 
     or incidental to a financial activity.
       ``(II) Board view.--The Secretary of the Treasury shall not 
     determine that any activity is financial in nature or 
     incidental to a financial activity under this section if the 
     Board notifies the Secretary in writing, not later than 30 
     days after the date of receipt of the notice described in 
     subclause (I) (or such longer period as the Secretary 
     determines to be appropriate under the circumstances) that 
     the Board believes that the activity is not financial in 
     nature or incidental to a financial activity or is not 
     otherwise permissible under this section.

       ``(ii) Proposals raised by the board.--

       ``(I) Board recommendation.--The Board may, at any time, 
     recommend in writing that the Secretary of the Treasury find 
     an activity to be financial in nature or incidental to a 
     financial activity for purposes of this section.
       ``(II) Time period for secretarial action.--Not later than 
     30 days after the date of receipt of a written recommendation 
     from the Board under subclause (I) (or such longer period as 
     the Secretary of the Treasury and the Board determine to be 
     appropriate under the circumstances), the Secretary 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 section, and shall notify the Board in writing of 
     the determination of the Secretary and, in the event that the 
     Secretary determines not to seek public comment on the 
     proposal, the reasons for that determination.

       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to a financial 
     activity, the Secretary shall take into account--
       ``(A) the purposes of this Act and the Gramm-Leach-Bliley 
     Act;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which banks compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) whether such activity is necessary or appropriate to 
     allow a bank and the subsidiaries of a bank to--
       ``(i) compete effectively with any company seeking to 
     provide financial services in the United States;
       ``(ii) efficiently deliver 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) offer customers any available or emerging 
     technological means for using financial services or for the 
     document imaging of data.
       ``(3) Authorization of new financial activities.--The 
     Secretary of the Treasury shall, by regulation or order and 
     in accordance with paragraph (1)(B), define, consistent with 
     the purposes of this Act and the Gramm-Leach-Bliley Act, the 
     following activities as, and the extent to which such 
     activities are, financial in nature or incidental to a 
     financial activity:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding financial assets other than money or 
     securities.
       ``(B) Providing any device or other instrumentality for 
     transferring money or other financial assets.
       ``(C) Arranging, effecting, or facilitating financial 
     transactions for the account of third parties.
       ``(c) Capital Deduction.--
       ``(1) Capital deduction required.--In determining 
     compliance with applicable capital standards--
       ``(A) the aggregate amount of the outstanding equity 
     investment, including retained earnings, of a national bank 
     in all financial subsidiaries shall be deducted from the 
     assets and tangible equity of the national bank; and
       ``(B) the assets and liabilities of the financial 
     subsidiaries shall not be consolidated with those of the 
     national bank.

[[Page H11266]]

       ``(2) Financial statement disclosure of capital 
     deduction.--Any published financial statement of a national 
     bank that controls a financial subsidiary shall, in addition 
     to providing information prepared in accordance with 
     generally accepted accounting principles, separately present 
     financial information for the bank in the manner provided in 
     paragraph (1).
       ``(d) 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 the financial subsidiary adequately protect 
     the national bank from such risks;
       ``(2) the national bank has, for the protection of the 
     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.
       ``(e) Provisions Applicable to National Banks That Fail To 
     Continue To Meet Certain Requirements.--
       ``(1) In general.--If a national bank or insured depository 
     institution affiliate does not continue to meet the 
     requirements of subsection (a)(2)(C) or subsection (d), the 
     Comptroller of the Currency shall promptly give notice to the 
     national bank to that effect describing the conditions giving 
     rise to the notice.
       ``(2) Agreement to correct conditions.--Not later than 45 
     days after the date of receipt by a national bank of a notice 
     given under paragraph (1) (or such additional period as the 
     Comptroller of the Currency may permit), the national bank 
     shall execute an agreement with the Comptroller of the 
     Currency and any relevant insured depository institution 
     affiliate shall execute an agreement with its appropriate 
     Federal banking agency to comply with the requirements of 
     subsection (a)(2)(C) and subsection (d).
       ``(3) Imposition of conditions.--Until the conditions 
     described in a notice under paragraph (1) are corrected--
       ``(A) the Comptroller of the Currency may impose such 
     limitations on the conduct or activities of the national bank 
     or any subsidiary of the national bank as the Comptroller of 
     the Currency determines to be appropriate under the 
     circumstances and consistent with the purposes of this 
     section; and
       ``(B) the appropriate Federal banking agency may impose 
     such limitations on the conduct or activities of any relevant 
     insured depository institution affiliate or any subsidiary of 
     the institution as such agency determines to be appropriate 
     under the circumstances and consistent with the purposes of 
     this section.
       ``(4) Failure to correct.--If the conditions described in a 
     notice to a national bank under paragraph (1) are not 
     corrected within 180 days after the date of receipt by the 
     national bank of the notice, the Comptroller of the Currency 
     may require the national bank, under such terms and 
     conditions as may be imposed by the Comptroller and subject 
     to such extension of time as may be granted in the discretion 
     of the Comptroller, to divest control of any financial 
     subsidiary.
       ``(5) Consultation.--In taking any action under this 
     subsection, the Comptroller shall consult with all relevant 
     Federal and State regulatory agencies and authorities.
       ``(f) Failure To Maintain Public Rating or Meet Applicable 
     Criteria.--
       ``(1) In general.--A national bank that does not continue 
     to meet any applicable rating or other requirement of 
     subsection (a)(2)(E) after acquiring or establishing a 
     financial subsidiary shall not, directly or through a 
     subsidiary, purchase or acquire any additional equity capital 
     of any financial subsidiary until the bank meets such 
     requirements.
       ``(2) Equity capital.--For purposes of this subsection, the 
     term `equity capital' includes, in addition to any equity 
     instrument, any debt instrument issued by a financial 
     subsidiary, if the instrument qualifies as capital of the 
     subsidiary under any Federal or State law, regulation, or 
     interpretation applicable to the subsidiary.
       ``(g) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Affiliate, company, control, and subsidiary.--The 
     terms `affiliate', `company', `control', and `subsidiary' 
     have the meanings given those terms in section 2 of the Bank 
     Holding Company Act of 1956.
       ``(2) Appropriate federal banking agency, depository 
     institution, insured bank, and insured depository 
     institution.--The terms `appropriate Federal banking agency', 
     `depository institution', `insured bank', and `insured 
     depository institution' have the meanings given those terms 
     in section 3 of the Federal Deposit Insurance Act.
       ``(3) Financial subsidiary.--The term `financial 
     subsidiary' means any company that is controlled by 1 or more 
     insured depository institutions other than a subsidiary 
     that--
       ``(A) engages solely in activities that national banks are 
     permitted to engage in directly and are conducted subject to 
     the same terms and conditions that govern the conduct of such 
     activities by national banks; or
       ``(B) a national bank is specifically authorized by the 
     express terms of a Federal statute (other than this section), 
     and not by implication or interpretation, to control, such as 
     by section 25 or 25A of the Federal Reserve Act or the Bank 
     Service Company Act.
       ``(4) Eligible debt.--The term `eligible debt' means 
     unsecured long-term debt that--
       ``(A) is not supported by any form of credit enhancement, 
     including a guarantee or standby letter of credit; and
       ``(B) is not held in whole or in any significant part by 
     any affiliate, officer, director, principal shareholder, or 
     employee of the bank or any other person acting on behalf of 
     or with funds from the bank or an affiliate of the bank.
       ``(5) Well capitalized.--The term `well capitalized' has 
     the meaning given the term in section 38 of the Federal 
     Deposit Insurance Act.
       ``(6) 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.''.
       (b) Sections 23A and 23B of the Federal Reserve Act.--
       (1) Limiting the exposure of a bank to a financial 
     subsidiary to the amount of permissible exposure to an 
     affiliate.--Section 23A of the Federal Reserve Act (12 U.S.C. 
     371c) is amended--
       (A) by redesignating subsection (e) as subsection (f); and
       (B) by inserting after subsection (d), the following new 
     subsection:
       ``(e) Rules Relating to Banks with Financial 
     Subsidiaries.--
       ``(1) Financial subsidiary defined.--For purposes of this 
     section and section 23B, the term `financial subsidiary' 
     means any company that is a subsidiary of a bank that would 
     be a financial subsidiary of a national bank under section 
     5136A of the Revised Statutes of the United States.
       ``(2) Financial subsidiary treated as an affiliate.--For 
     purposes of applying this section and section 23B, and 
     notwithstanding subsection (b)(2) of this section or section 
     23B(d)(1), a financial subsidiary of a bank--
       ``(A) shall be deemed to be an affiliate of the bank; and
       ``(B) shall not be deemed to be a subsidiary of the bank.
       ``(3) Exceptions for transactions with financial 
     subsidiaries.--
       ``(A) Exception from limit on covered transactions with any 
     individual financial subsidiary.--Notwithstanding paragraph 
     (2), the restriction contained in subsection (a)(1)(A) shall 
     not apply with respect to covered transactions between a bank 
     and any individual financial subsidiary of the bank.
       ``(B) Exception for earnings retained by financial 
     subsidiaries.--Notwithstanding paragraph (2) or subsection 
     (b)(7), a bank's investment in a financial subsidiary of the 
     bank shall not include retained earnings of the financial 
     subsidiary.
       ``(4) Anti-evasion provision.--For purposes of this section 
     and section 23B--
       ``(A) any purchase of, or investment in, the securities of 
     a financial subsidiary of a bank by an affiliate of the bank 
     shall be considered to be a purchase of or investment in such 
     securities by the bank; and
       ``(B) any extension of credit by an affiliate of a bank to 
     a financial subsidiary of the bank shall be considered to be 
     an extension of credit by the bank to the financial 
     subsidiary if the Board determines that such treatment is 
     necessary or appropriate to prevent evasions of this Act and 
     the Gramm-Leach-Bliley Act.''.
       (2) Rebuttable presumption of control of portfolio 
     company.--Section 23A(b) of the Federal Reserve Act (12 
     U.S.C. 371c(b)) is amended by adding at the end the following 
     new paragraph--
       ``(11) Rebuttable presumption of control of portfolio 
     companies.--In addition to paragraph (3), a company or 
     shareholder shall be presumed to control any other company if 
     the company or shareholder, directly or indirectly, or acting 
     through 1 or more other persons, owns or controls 15 percent 
     or more of the equity capital of the other company pursuant 
     to subparagraph (H) or (I) of section 4(k)(4) of the Bank 
     Holding Company Act of 1956 or rules adopted under section 
     122 of the Gramm-Leach-Bliley Act, if any, unless the company 
     or shareholder provides information acceptable to the Board 
     to rebut this presumption of control.''.
       (3) Rulemaking required concerning derivative transactions 
     and intraday credit.--Section 23A(f) of the Federal Reserve 
     Act (12 U.S.C. 371c(f)) (as so redesignated by paragraph 
     (1)(A) of this subsection) is amended by inserting at the end 
     the following new paragraph:
       ``(3) Rulemaking required concerning derivative 
     transactions and intraday credit.--
       ``(A) In general.--Not later than 18 months after the date 
     of the enactment of the Gramm-Leach-Bliley Act, the Board 
     shall adopt final rules under this section to address as 
     covered transactions credit exposure arising out of 
     derivative transactions between member banks and their 
     affiliates and intraday extensions of credit by member banks 
     to their affiliates.
       ``(B) Effective date.--The effective date of any final rule 
     adopted by the Board pursuant to subparagraph (A) shall be 
     delayed for such period as the Board deems necessary or 
     appropriate to permit banks to conform their activities to 
     the requirements of the final rule without undue hardship.''.
       (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) Safety and Soundness Firewalls for State Banks With 
     Financial Subsidiaries.--

[[Page H11267]]

       (1) Federal deposit insurance act.--The Federal Deposit 
     Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
     inserting after section 45 (as added by section 112(b) of 
     this title) the following new section:

     ``SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO 
                   FINANCIAL SUBSIDIARIES OF BANKS.

       ``(a) In General.--An insured State bank may control or 
     hold an interest in a subsidiary that engages in activities 
     as principal that would only be permissible for a national 
     bank to conduct through a financial subsidiary if--
       ``(1) the State bank and each insured depository 
     institution affiliate of the State bank are well capitalized 
     (after the capital deduction required by paragraph (2));
       ``(2) the State bank complies with the capital deduction 
     and financial statement disclosure requirements in section 
     5136A(c) of the Revised Statutes of the United States;
       ``(3) the State bank complies with the financial and 
     operational safeguards required by section 5136A(d) of the 
     Revised Statutes of the United States; and
       ``(4) the State bank complies with the amendments to 
     sections 23A and 23B of the Federal Reserve Act made by 
     section 121(b) of the Gramm-Leach-Bliley Act.
       ``(b) Preservation of Existing Subsidiaries.--
     Notwithstanding subsection (a), an insured State bank may 
     retain control of a subsidiary, or retain an interest in a 
     subsidiary, that the State bank lawfully controlled or 
     acquired before the date of the enactment of the Gramm-Leach-
     Bliley Act, and conduct through such subsidiary any 
     activities lawfully conducted in such subsidiary as of such 
     date.
       ``(c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Subsidiary.--The term `subsidiary' means any company 
     that is a subsidiary (as defined in section 3(w)(4)) of 1 or 
     more insured banks.
       ``(2) Financial subsidiary.--The term `financial 
     subsidiary' has the meaning given the term in section 
     5136A(g) of the Revised Statutes of the United States.
       ``(d) Preservation of Authority.--
       ``(1) Federal deposit insurance act.--No provision of this 
     section shall be construed as superseding the authority of 
     the Federal Deposit Insurance Corporation to review 
     subsidiary activities under section 24.
       ``(2) Federal reserve act.--No provision of this section 
     shall be construed as affecting the applicability of the 20th 
     undesignated paragraph of section 9 of the Federal Reserve 
     Act.''.
       (2) Federal Reserve Act.--The 20th undesignated paragraph 
     of section 9 of the Federal Reserve Act (12 U.S.C. 335) is 
     amended by adding at the end the following: ``This paragraph 
     shall not apply to any interest held by a State member bank 
     in accordance with section 5136A of the Revised Statutes of 
     the United States and subject to the same conditions and 
     limitations provided in such section.''.
       (e) 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 
     section 5136B; and
       (2) by inserting after the item relating to section 5136 
     the following new item:

``5136A. Financial subsidiaries of national banks.''.

     SEC. 122. CONSIDERATION OF MERCHANT BANKING ACTIVITIES BY 
                   FINANCIAL SUBSIDIARIES.

       After the end of the 5-year period beginning on the date of 
     the enactment of the Gramm-Leach-Bliley Act, the Board of 
     Governors of the Federal Reserve System and the Secretary of 
     the Treasury may, if appropriate, after considering--
       (1) the experience with the effects of financial 
     modernization under this Act and merchant banking activities 
     of financial holding companies;
       (2) the potential effects on depository institutions and 
     the financial system of allowing merchant banking activities 
     in financial subsidiaries; and
       (3) other relevant facts;

     jointly adopt rules that permit financial subsidiaries to 
     engage in merchant banking activities described in section 
     4(k)(4)(H) of the Bank Holding Company Act of 1956, under 
     such terms and conditions as the Board of Governors of the 
     Federal Reserve System and the Secretary of the Treasury 
     jointly determine to be appropriate.
               Subtitle D--Preservation of FTC Authority

     SEC. 131. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 
                   TO MODIFY NOTIFICATION AND POST-APPROVAL 
                   WAITING PERIOD FOR SECTION 3 TRANSACTIONS.

       Section 11(b)(1) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1849(b)(1)) is amended by inserting ``and, if the 
     transaction also involves an acquisition under section 4, the 
     Board shall also notify the Federal Trade Commission of such 
     approval'' before the period at the end of the first 
     sentence.

     SEC. 132. INTERAGENCY DATA SHARING.

       (a) In General.--To the extent not prohibited by other law, 
     the Comptroller of the Currency, the Director of the Office 
     of Thrift Supervision, the Federal Deposit Insurance 
     Corporation, and the Board of Governors of the Federal 
     Reserve System shall make available to the Attorney General 
     and the Federal Trade Commission any data in the possession 
     of any such banking agency that the antitrust agency deems 
     necessary for antitrust review of any transaction requiring 
     notice to any such antitrust agency or the approval of such 
     agency under section 3 or 4 of the Bank Holding Company Act 
     of 1956, section 18(c) of the Federal Deposit Insurance Act, 
     the National Bank Consolidation and Merger Act, section 10 of 
     the Home Owners' Loan Act, or the antitrust laws.
       (b) Confidentiality Requirements.--
       (1) In general.--Any information or material obtained by 
     any agency pursuant to subsection (a) shall be treated as 
     confidential.
       (2) Procedures for disclosure.--If any information or 
     material obtained by any agency pursuant to subsection (a) is 
     proposed to be disclosed to a third party, written notice of 
     such disclosure shall first be provided to the agency from 
     which such information or material was obtained and an 
     opportunity shall be given to such agency to oppose or limit 
     the proposed disclosure.
       (3) Other privileges not waived by disclosure under this 
     section.--The provision by any Federal agency of any 
     information or material pursuant to subsection (a) to another 
     agency shall not constitute a waiver, or otherwise affect, 
     any privilege any agency or person may claim with respect to 
     such information under Federal or State law.
       (4) Exception.--No provision of this section shall be 
     construed as preventing or limiting access to any information 
     by any duly authorized committee of the Congress or the 
     Comptroller General of the United States.
       (c) Banking Agency Information Sharing.--The provisions of 
     subsection (b) shall apply to--
       (1) any information or material obtained by any Federal 
     banking agency (as defined in section 3(z) of the Federal 
     Deposit Insurance Act) from any other Federal banking agency; 
     and
       (2) any report of examination or other confidential 
     supervisory information obtained by any State agency or 
     authority, or any other person, from a Federal banking 
     agency.

     SEC. 133. CLARIFICATION OF STATUS OF SUBSIDIARIES AND 
                   AFFILIATES.

       (a) Clarification of Federal Trade Commission 
     Jurisdiction.--Any person that directly or indirectly 
     controls, is controlled directly or indirectly by, or is 
     directly or indirectly under common control with, any bank or 
     savings association (as such terms are defined in section 3 
     of the Federal Deposit Insurance Act) and is not itself a 
     bank or savings association shall not be deemed to be a bank 
     or savings association for purposes of any provisions applied 
     by the Federal Trade Commission under the Federal Trade 
     Commission Act.
       (b) Savings Provision.--No provision of this section shall 
     be construed as restricting the authority of any Federal 
     banking agency (as defined in section 3 of the Federal 
     Deposit Insurance Act) under any Federal banking law, 
     including section 8 of the Federal Deposit Insurance Act.
       (c) Hart-Scott-Rodino Amendments.--
       (1) Banks.--Section 7A(c)(7) of the Clayton Act (15 U.S.C. 
     18a(c)(7)) is amended by inserting before the semicolon at 
     the end the following: ``, except that a portion of a 
     transaction is not exempt under this paragraph if such 
     portion of the transaction (A) is subject to section 4(k) of 
     the Bank Holding Company Act of 1956; and (B) does not 
     require agency approval under section 3 of the Bank Holding 
     Company Act of 1956''.
       (2) Bank holding companies.--Section 7A(c)(8) of the 
     Clayton Act (15 U.S.C. 18a(c)(8)) is amended by inserting 
     before the semicolon at the end the following: ``, except 
     that a portion of a transaction is not exempt under this 
     paragraph if such portion of the transaction (A) is subject 
     to section 4(k) of the Bank Holding Company Act of 1956; and 
     (B) does not require agency approval under section 4 of the 
     Bank Holding Company Act of 1956''.
                     Subtitle E--National Treatment

     SEC. 141. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.

       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(l)(1)(C) 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 financial holding companies under section 4(k) of such 
     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 has determined to be permissible for financial 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 financial holding company under such section by 
     the end of the 2-year period beginning on the date of the 
     enactment of the Gramm-Leach-Bliley Act, 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 financial 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 114 of the Gramm-Leach-
     Bliley Act.''.

     SEC. 142. REPRESENTATIVE OFFICES.

       (a) Definition.--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. 3107(c)) is amended by adding 
     at the end the following new sentence: ``The Board may also 
     make examinations of any affiliate of a foreign bank 
     conducting business in any State if the Board

[[Page H11268]]

     deems it necessary to determine and enforce compliance with 
     this Act, the Bank Holding Company Act of 1956, or other 
     applicable Federal banking law.''.
                 Subtitle F--Direct Activities of Banks

     SEC. 151. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN 
                   MUNICIPAL 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 new sentence: ``In 
     addition to the provisions in this paragraph for dealing in, 
     underwriting, or purchasing securities, the limitations and 
     restrictions contained in this paragraph as to dealing in, 
     underwriting, and purchasing investment securities for the 
     national bank's own account shall 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 bank is 
     well capitalized (as defined in section 38 of the Federal 
     Deposit Insurance Act).''.
                       Subtitle G--Effective Date

     SEC. 161. EFFECTIVE DATE.

       This title (other than section 104) and the amendments made 
     by this title shall take effect 120 days after the date of 
     the enactment of this Act.
                    TITLE II--FUNCTIONAL REGULATION
                    Subtitle A--Brokers and Dealers

     SEC. 201. DEFINITION OF BROKER.

       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 one or more of the following activities under the 
     conditions described:
       ``(i) Third party brokerage arrangements.--The bank enters 
     into a contractual or other written 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 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 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 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 types of investment vehicles 
     available from the bank and the broker or dealer under the 
     arrangement;
       ``(VI) bank employees do not 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 as permitted under clause (ii) or (viii) 
     of this subparagraph; 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--

       ``(I) is chiefly compensated for such transactions, 
     consistent with fiduciary principles and standards, on the 
     basis of an administration or annual fee (payable on a 
     monthly, quarterly, or other basis), a percentage of assets 
     under management, or a flat or capped per order processing 
     fee equal to not more than the cost incurred by the bank in 
     connection with executing securities transactions for trustee 
     and fiduciary customers, or any combination of such fees; and
       ``(II) 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, 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.

       ``(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 affiliates (as defined in section 2 of the 
     Bank Holding Company Act of 1956), 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 Gramm-
     Leach-Bliley Act; 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 
     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--

       ``(I) 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;
       ``(II) at any time after the date that is 1 year after the 
     date of the enactment of the Gramm-Leach-Bliley Act, is not 
     affiliated with a broker or dealer that has been registered 
     for more than 1 year in accordance with this Act, and engages 
     in dealing, market making, or underwriting activities, other 
     than with respect to exempted securities; and
       ``(III) if the bank is not affiliated with a broker or 
     dealer, does not effect any primary offering described in 
     subclause (I) the aggregate amount of which exceeds 25 
     percent of the capital of the bank, except that the 
     limitation of this subclause shall not apply with respect to 
     any sale of government securities or municipal securities.

       ``(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;
       ``(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

[[Page H11269]]

     under applicable law, if the bank maintains records 
     separately identifying the securities and the customer; or
       ``(ee) serves as a custodian or provider of other related 
     administrative services to any individual retirement account, 
     pension, retirement, profit sharing, bonus, thrift savings, 
     incentive, or other similar benefit plan.

       ``(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) of this 
     title 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) Identified banking products.--The bank effects 
     transactions in identified banking products as defined in 
     section 206 of the Gramm-Leach-Bliley Act.
       ``(x) Municipal securities.--The bank effects transactions 
     in municipal securities.
       ``(xi) De minimis exception.--The bank effects, other than 
     in transactions referred to in clauses (i) through (x), 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 rules, regulations, or orders as the 
     Commission may prescribe or issue.
       ``(D) Fiduciary capacity.--For purposes of subparagraph 
     (B)(ii), 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 under a uniform gift to 
     minor act, or as an investment adviser if the bank receives a 
     fee for its investment advice;
       ``(ii) in any capacity in which the bank possesses 
     investment discretion on behalf of another; or
       ``(iii) in any other similar capacity.
       ``(E) 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 
     Gramm-Leach-Bliley Act, subject to section 15(e); and
       ``(ii) is subject to such restrictions and requirements as 
     the Commission considers appropriate.''.

     SEC. 202. 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 as a trustee or 
     fiduciary.

       ``(iii) Asset-backed transactions.--The bank engages in the 
     issuance or sale to qualified investors, through a grantor 
     trust or other separate entity, of securities backed by or 
     representing an interest in notes, drafts, acceptances, 
     loans, leases, receivables, other obligations (other than 
     securities of which the bank is not the issuer), or pools of 
     any such obligations predominantly originated by--

       ``(I) the bank;
       ``(II) an affiliate of any such bank other than a broker or 
     dealer; or
       ``(III) a syndicate of banks of which the bank is a member, 
     if the obligations or pool of obligations consists of 
     mortgage obligations or consumer-related receivables.

       ``(iv) Identified banking products.--The bank buys or sells 
     identified banking products, as defined in section 206 of the 
     Gramm-Leach-Bliley Act.''.

     SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES 
                   OFFERINGS.

       Section 15A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78o-3) is amended by inserting after subsection (i) 
     the following new subsection:
       ``(j) Registration for Sales of Private Securities 
     Offerings.--A registered securities association shall create 
     a limited qualification category for any associated person of 
     a member who 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 and 
     the rules and regulations thereunder, and shall deem 
     qualified in such limited qualification category, without 
     testing, any bank employee who, in the six month period 
     preceding the date of the enactment of the Gramm-Leach-Bliley 
     Act, engaged in effecting such sales.''.

     SEC. 204. INFORMATION SHARING.

       Section 18 of the Federal Deposit Insurance Act is amended 
     by adding at the end the following new subsection:
       ``(t) Recordkeeping Requirements.--
       ``(1) Requirements.--Each appropriate Federal banking 
     agency, after consultation with and consideration of the 
     views of the Commission, shall establish recordkeeping 
     requirements for banks relying on exceptions contained in 
     paragraphs (4) and (5) of section 3(a) of the Securities 
     Exchange Act of 1934. Such recordkeeping requirements shall 
     be sufficient to demonstrate compliance with the terms of 
     such exceptions and be designed to facilitate compliance with 
     such exceptions.
       ``(2) Availability to commission; confidentiality.--Each 
     appropriate Federal banking agency shall make any information 
     required under paragraph (1) available to the Commission upon 
     request. Notwithstanding any other provision of law, the 
     Commission shall not be compelled to disclose any such 
     information. Nothing in this paragraph shall authorize the 
     Commission to withhold information from Congress, or prevent 
     the Commission from complying with a request for information 
     from any other Federal department or agency or any self-
     regulatory organization requesting the information for 
     purposes within the scope of its jurisdiction, or complying 
     with an order of a court of the United States in an action 
     brought by the United States or the Commission. For purposes 
     of section 552 of title 5, United States Code, this paragraph 
     shall be considered a statute described in subsection 
     (b)(3)(B) of such section 552.
       ``(3) Definitions.--As used in this subsection the term 
     `Commission' means the Securities and Exchange Commission.''.

     SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.

       Section 15 of the Securities Exchange Act of 1934 (15 
     U.S.C. 78o) is amended by adding at the end the following new 
     subsection:
       ``(i) Rulemaking To Extend Requirements to New Hybrid 
     Products.--
       ``(1) Consultation.--Prior to commencing a rulemaking under 
     this subsection, the Commission shall consult with and seek 
     the concurrence of the Board concerning the imposition of 
     broker or dealer registration requirements with respect any 
     new hybrid product. In developing and promulgating rules 
     under this subsection, the Commission shall consider the 
     views of the Board, including views with respect to the 
     nature of the new hybrid product; the history, purpose, 
     extent, and appropriateness of the regulation of the new 
     product under the Federal banking laws; and the impact of the 
     proposed rule on the banking industry.
       ``(2) Limitation.--The Commission shall not--
       ``(A) require a bank to register as a broker or dealer 
     under this section because the bank engages in any 
     transaction in, or buys or sells, a new hybrid product; or
       ``(B) bring an action against a bank for a failure to 
     comply with a requirement described in subparagraph (A),
     unless the Commission has imposed such requirement by rule or 
     regulation issued in accordance with this section.
       ``(3) Criteria for rulemaking.--The Commission shall not 
     impose a requirement under paragraph (2) of this subsection 
     with respect to any new hybrid product unless the Commission 
     determines that--
       ``(A) the new hybrid product is a security; and
       ``(B) imposing such requirement is necessary and 
     appropriate in the public interest and for the protection of 
     investors.
       ``(4) Considerations.--In making a determination under 
     paragraph (3), the Commission shall consider--
       ``(A) the nature of the new hybrid product; and
       ``(B) the history, purpose, extent, and appropriateness of 
     the regulation of the new hybrid product under the Federal 
     securities laws and under the Federal banking laws.
       ``(5) Objection to commission regulation.--
       ``(A) Filing of petition for review.--The Board may obtain 
     review of any final regulation described in paragraph (2) in 
     the United States Court of Appeals for the District of 
     Columbia Circuit by filing in such court, not later than 60 
     days after the date of publication of the final regulation, a 
     written petition requesting that the regulation be set aside. 
     Any proceeding to challenge any such rule shall be expedited 
     by the Court of Appeals.
       ``(B) Transmittal of petition and record.--A copy of a 
     petition described in subparagraph (A) shall be transmitted 
     as soon as

[[Page H11270]]

     possible by the Clerk of the Court to an officer or employee 
     of the Commission designated for that purpose. Upon receipt 
     of the petition, the Commission shall file with the court the 
     regulation under review and any documents referred to 
     therein, and any other relevant materials prescribed by the 
     court.
       ``(C) Exclusive jurisdiction.--On the date of the filing of 
     the petition under subparagraph (A), the court has 
     jurisdiction, which becomes exclusive on the filing of the 
     materials set forth in subparagraph (B), to affirm and 
     enforce or to set aside the regulation at issue.
       ``(D) Standard of review.--The court shall determine to 
     affirm and enforce or set aside a regulation of the 
     Commission under this subsection, based on the determination 
     of the court as to whether--
       ``(i) the subject product is a new hybrid product, as 
     defined in this subsection;
       ``(ii) the subject product is a security; and
       ``(iii) imposing a requirement to register as a broker or 
     dealer for banks engaging in transactions in such product is 
     appropriate in light of the history, purpose, and extent of 
     regulation under the Federal securities laws and under the 
     Federal banking laws, giving deference neither to the views 
     of the Commission nor the Board.
       ``(E) Judicial stay.--The filing of a petition by the Board 
     pursuant to subparagraph (A) shall operate as a judicial 
     stay, until the date on which the determination of the court 
     is final (including any appeal of such determination).
       ``(F) Other authority to challenge.--Any aggrieved party 
     may seek judicial review of the Commission's rulemaking under 
     this subsection pursuant to section 25 of this title.
       ``(6) Definitions.--For purposes of this subsection:
       ``(A) New hybrid product.--The term `new hybrid product' 
     means a product that--
       ``(i) was not subjected to regulation by the Commission as 
     a security prior to the date of the enactment of the Gramm-
     Leach-Bliley Act;
       ``(ii) is not an identified banking product as such term is 
     defined in section 206 of such Act; and
       ``(iii) is not an equity swap within the meaning of section 
     206(a)(6) of such Act.
       ``(B) Board.--The term `Board' means the Board of Governors 
     of the Federal Reserve System.''.

     SEC. 206. DEFINITION OF IDENTIFIED BANKING PRODUCT.

       (a) Definition of Identified Banking Product.--For purposes 
     of paragraphs (4) and (5) of section 3(a) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78c(a) (4), (5)), the term 
     ``identified 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 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; or
       (6) any swap agreement, including credit and equity swaps, 
     except that an equity swap that is sold directly to any 
     person other than a qualified investor (as defined in section 
     3(a)(54) of the Securities Act of 1934) shall not be treated 
     as an identified banking product.
       (b) Definition of Swap Agreement.--For purposes of 
     subsection (a)(6), the term ``swap agreement'' means any 
     individually negotiated contract, agreement, warrant, note, 
     or option that is based, in whole or in part, on the value 
     of, any interest in, or any quantitative measure or the 
     occurrence of any event relating to, one or more commodities, 
     securities, currencies, interest or other rates, indices, or 
     other assets, but does not include any other identified 
     banking product, as defined in paragraphs (1) through (5) of 
     subsection (a).
       (c) Classification Limited.--Classification of a particular 
     product as an identified banking product pursuant to this 
     section shall not be construed as finding or implying that 
     such product 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) Incorporated Definitions.--For purposes of this 
     section, the terms ``bank'' and ``qualified investor'' have 
     the same meanings as given in section 3(a) of the Securities 
     Exchange Act of 1934, as amended by this Act.

     SEC. 207. ADDITIONAL DEFINITIONS.

       Section 3(a) of the Securities Exchange Act of 1934 is 
     amended by adding at the end the following new paragraph:
       ``(54) Qualified investor.--
       ``(A) Definition.--Except as provided in subparagraph (B), 
     for purposes of this title, 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) of this 
     subsection), 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 United States Small Business Administration under section 
     301 (c) or (d) 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 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 
     $25,000,000 in investments;
       ``(xii) any natural person who owns and invests on a 
     discretionary basis, not less than $25,000,000 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) Altered thresholds for asset-back securities and loan 
     participations.--For purposes sections 3(a)(5)(C)(iii) of 
     this title and section 206(a)(5) of the Gramm-Leach-Bliley 
     Act, the term `qualified investor' has the meaning given such 
     term by subparagraph (A) of this paragraph except that 
     clauses (xi) and (xii) shall be applied by substituting 
     `$10,000,000' for `$25,000,000'.
       ``(C) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person, 
     taking into consideration such factors as the financial 
     sophistication of the person, net worth, and knowledge and 
     experience in financial matters.''.

     SEC. 208. 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 sections 15, 15C, and 17A as applied 
     to a bank, a qualified Canadian government obligation as 
     defined in section 5136 of the Revised Statutes of the United 
     States.''.

     SEC. 209. EFFECTIVE DATE.

       This subtitle shall take effect at the end of the 18-month 
     period beginning on the date of the enactment of this Act.

     SEC. 210. RULE OF CONSTRUCTION.

       Nothing in this Act shall supersede, affect, or otherwise 
     limit the scope and applicability of the Commodity Exchange 
     Act (7 U.S.C. 1 et seq.).
             Subtitle B--Bank Investment Company Activities

     SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED 
                   BANK.

       (a) Management Companies.--Section 17(f) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
       (1) by redesignating paragraphs (1), (2), and (3) as 
     subparagraphs (A), (B), and (C), respectively;
       (2) by striking ``(f) Every registered'' and inserting the 
     following:
       ``(f) Custody of Securities.--
       ``(1) Every registered'';
       (3) by redesignating the second, third, fourth, and fifth 
     sentences of such subsection as paragraphs (2) through (5), 
     respectively, and indenting the left margin of such 
     paragraphs appropriately; and
       (4) by adding at the end the following new paragraph:
       ``(6) The Commission may, after consultation with and 
     taking into consideration the views of the Federal banking 
     agencies (as defined in section 3 of the Federal Deposit 
     Insurance Act), adopt rules and regulations, and issue 
     orders, consistent with the protection of investors, 
     prescribing the conditions under which a bank, or an 
     affiliated person of a bank, either of which is an affiliated 
     person, promoter, organizer, or sponsor of, or principal 
     underwriter for, a registered management company may serve as 
     custodian of that registered management company.''.
       (b) Unit Investment Trusts.--Section 26 of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-26) is amended--
       (1) by redesignating subsections (b) through (e) as 
     subsections (c) through (f), respectively; and
       (2) by inserting after subsection (a) the following new 
     subsection:
       ``(b) The Commission may, after consultation with and 
     taking into consideration the views of the Federal banking 
     agencies (as defined in section 3 of the Federal Deposit 
     Insurance Act), adopt rules and regulations, and issue 
     orders, consistent with the protection of investors, 
     prescribing the conditions under which a bank, or an 
     affiliated person of a bank, either of which is an affiliated 
     person of a principal underwriter for, or depositor of, a 
     registered unit investment trust, may serve as trustee or 
     custodian under subsection (a)(1).''.

[[Page H11271]]

     SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

       Section 17(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-17(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``; or''; and
       (3) by adding at the end the following new paragraph:
       ``(4) to loan money or other property to such registered 
     company, or to any company controlled by such registered 
     company, in contravention of such rules, regulations, or 
     orders as the Commission may, after consultation with and 
     taking into consideration the views of the Federal banking 
     agencies (as defined in section 3 of the Federal Deposit 
     Insurance Act), prescribe or issue consistent with the 
     protection of investors.''.

     SEC. 213. INDEPENDENT DIRECTORS.

       (a) In General.--Section 2(a)(19)(A) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
       (1) by striking clause (v) and inserting the following new 
     clause:
       ``(v) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has executed any portfolio transactions 
     for, engaged in any principal transactions with, or 
     distributed shares for--

       ``(I) the investment company;
       ``(II) any other investment company having the same 
     investment adviser as such investment company or holding 
     itself out to investors as a related company for purposes of 
     investment or investor services; or
       ``(III) any account over which the investment company's 
     investment adviser has brokerage placement discretion,'';

       (2) by redesignating clause (vi) as clause (vii); and
       (3) by inserting after clause (v) the following new clause:
       ``(vi) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has loaned money or other property to--

       ``(I) the investment company;
       ``(II) any other investment company having the same 
     investment adviser as such investment company or holding 
     itself out to investors as a related company for purposes of 
     investment or investor services; or
       ``(III) any account for which the investment company's 
     investment adviser has borrowing authority,''.

       (b) Conforming Amendment.--Section 2(a)(19)(B) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is 
     amended--
       (1) by striking clause (v) and inserting the following new 
     clause:
       ``(v) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has executed any portfolio transactions 
     for, engaged in any principal transactions with, or 
     distributed shares for--

       ``(I) any investment company for which the investment 
     adviser or principal underwriter serves as such;
       ``(II) any investment company holding itself out to 
     investors, for purposes of investment or investor services, 
     as a company related to any investment company for which the 
     investment adviser or principal underwriter serves as such; 
     or
       ``(III) any account over which the investment adviser has 
     brokerage placement discretion,'';

       (2) by redesignating clause (vi) as clause (vii); and
       (3) by inserting after clause (v) the following new clause:
       ``(vi) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has loaned money or other property to--

       ``(I) any investment company for which the investment 
     adviser or principal underwriter serves as such;
       ``(II) any investment company holding itself out to 
     investors, for purposes of investment or investor services, 
     as a company related to any investment company for which the 
     investment adviser or principal underwriter serves as such; 
     or
       ``(III) any account for which the investment adviser has 
     borrowing authority,''.

       (c) Affiliation of Directors.--Section 10(c) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-10(c)) is 
     amended by striking ``bank, except'' and inserting ``bank 
     (together with its affiliates and subsidiaries) or any one 
     bank holding company (together with its affiliates and 
     subsidiaries) (as such terms are defined in section 2 of the 
     Bank Holding Company Act of 1956), except''.

     SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

       Section 35(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-34(a)) is amended to read as follows:
       ``(a) Misrepresentation of Guarantees.--
       ``(1) In general.--It shall be unlawful for any person, 
     issuing or selling any security of which a registered 
     investment company is the issuer, to represent or imply in 
     any manner whatsoever that such security or company--
       ``(A) has been guaranteed, sponsored, recommended, or 
     approved by the United States, or any agency, instrumentality 
     or officer of the United States;
       ``(B) has been insured by the Federal Deposit Insurance 
     Corporation; or
       ``(C) is guaranteed by or is otherwise an obligation of any 
     bank or insured depository institution.
       ``(2) Disclosures.--Any person issuing or selling the 
     securities of a registered investment company that is advised 
     by, or sold through, a bank shall prominently disclose that 
     an investment in the company is not insured by the Federal 
     Deposit Insurance Corporation or any other government 
     agency. The Commission may, after consultation with and 
     taking into consideration the views of the Federal banking 
     agencies (as defined in section 3 of the Federal Deposit 
     Insurance Act), adopt rules and regulations, and issue 
     orders, consistent with the protection of investors, 
     prescribing the manner in which the disclosure under this 
     paragraph shall be provided.
       ``(3) Definitions.--The terms `insured depository 
     institution' and `appropriate Federal banking agency' have 
     the same meanings as given in section 3 of the Federal 
     Deposit Insurance Act.''.

     SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY 
                   ACT OF 1940.

       Section 2(a)(6) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-2(a)(6)) is amended to read as follows:
       ``(6) The term `broker' has the same meaning as given in 
     section 3 of the Securities Exchange Act of 1934, except that 
     such term does not include any person solely by reason of the 
     fact that such person is an underwriter for one or more 
     investment companies.''.

     SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY 
                   ACT OF 1940.

       Section 2(a)(11) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-2(a)(11)) is amended to read as follows:
       ``(11) The term `dealer' has the same meaning as given in 
     the Securities Exchange Act of 1934, but does not include an 
     insurance company or investment company.''.

     SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF 
                   INVESTMENT ADVISER FOR BANKS THAT ADVISE 
                   INVESTMENT COMPANIES.

       (a) Investment Adviser.--Section 202(a)(11)(A) of the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) 
     is amended by striking ``investment company'' and inserting 
     ``investment company, except that the term `investment 
     adviser' includes any bank or bank holding company to the 
     extent that such bank or bank holding company serves or acts 
     as an investment adviser to a registered investment company, 
     but if, in the case of a bank, such services or actions are 
     performed through a separately identifiable department or 
     division, the department or division, and not the bank 
     itself, shall be deemed to be the investment adviser''.
       (b) Separately Identifiable Department or Division.--
     Section 202(a) of the Investment Advisers Act of 1940 (15 
     U.S.C. 80b-2(a)) is amended by adding at the end the 
     following:
       ``(26) The term `separately identifiable department or 
     division' of a bank means a unit--
       ``(A) that is under the direct supervision of an officer or 
     officers designated by the board of directors of the bank as 
     responsible for the day-to-day conduct of the bank's 
     investment adviser activities for one or more investment 
     companies, including the supervision of all bank employees 
     engaged in the performance of such activities; and
       ``(B) for which all of the records relating to its 
     investment adviser activities are separately maintained in or 
     extractable from such unit's own facilities or the facilities 
     of the bank, and such records are so maintained or otherwise 
     accessible as to permit independent examination and 
     enforcement by the Commission of this Act or the Investment 
     Company Act of 1940 and rules and regulations promulgated 
     under this Act or the Investment Company Act of 1940.''.

     SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS 
                   ACT OF 1940.

       Section 202(a)(3) of the Investment Advisers Act of 1940 
     (15 U.S.C. 80b-2(a)(3)) is amended to read as follows:
       ``(3) The term `broker' has the same meaning as given in 
     section 3 of the Securities Exchange Act of 1934.''.

     SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS 
                   ACT OF 1940.

       Section 202(a)(7) of the Investment Advisers Act of 1940 
     (15 U.S.C. 80b-2(a)(7)) is amended to read as follows:
       ``(7) The term `dealer' has the same meaning as given in 
     section 3 of the Securities Exchange Act of 1934, but does 
     not include an insurance company or investment company.''.

     SEC. 220. INTERAGENCY CONSULTATION.

       The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
     seq.) is amended by inserting after section 210 the following 
     new section:

     ``SEC. 210A. CONSULTATION.

       ``(a) Examination Results and Other Information.--
       ``(1) The appropriate Federal banking agency shall provide 
     the Commission upon request the results of any examination, 
     reports, records, or other information to which such agency 
     may have access--
       ``(A) with respect to the investment advisory activities of 
     any--
       ``(i) bank holding company;
       ``(ii) bank; or
       ``(iii) separately identifiable department or division of a 
     bank,
     that is registered under section 203 of this title; and
       ``(B) in the case of a bank holding company or bank that 
     has a subsidiary or a separately identifiable department or 
     division registered under that section, with respect to the 
     investment advisory activities of such bank or bank holding 
     company.

[[Page H11272]]

       ``(2) The Commission shall provide to the appropriate 
     Federal banking agency upon request the results of any 
     examination, reports, records, or other information with 
     respect to the investment advisory activities of any bank 
     holding company, bank, or separately identifiable department 
     or division of a bank, which is registered under section 203 
     of this title.
       ``(3) Notwithstanding any other provision of law, the 
     Commission and the appropriate Federal banking agencies shall 
     not be compelled to disclose any information provided under 
     paragraph (1) or (2). Nothing in this paragraph shall 
     authorize the Commission or such agencies to withhold 
     information from Congress, or prevent the Commission or such 
     agencies from complying with a request for information from 
     any other Federal department or agency or any self-regulatory 
     organization requesting the information for purposes within 
     the scope of its jurisdiction, or complying with an order of 
     a court of the United States in an action brought by the 
     United States, the Commission, or such agencies. For purposes 
     of section 552 of title 5, United States Code, this paragraph 
     shall be considered a statute described in subsection 
     (b)(3)(B) of such section 552.
       ``(b) Effect on Other Authority.--Nothing in this section 
     shall limit in any respect the authority of the appropriate 
     Federal banking agency with respect to such bank holding 
     company (or affiliates or subsidiaries thereof), bank, or 
     subsidiary, department, or division or a bank under any other 
     provision of law.
       ``(c) Definition.--For purposes of this section, the term 
     `appropriate Federal banking agency' shall have the same 
     meaning as given in section 3 of the Federal Deposit 
     Insurance Act.''.

     SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

       (a) Securities Act of 1933.--Section 3(a)(2) of the 
     Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended by 
     striking ``or any interest or participation in any common 
     trust fund or similar fund maintained by a bank exclusively 
     for the collective investment and reinvestment of assets 
     contributed thereto by such bank in its capacity as trustee, 
     executor, administrator, or guardian'' and inserting ``or any 
     interest or participation in any common trust fund or similar 
     fund that is excluded from the definition of the term 
     `investment company' under section 3(c)(3) of the Investment 
     Company Act of 1940''.
       (b) Securities Exchange Act of 1934.--Section 
     3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(12)(A)(iii)) is amended to read as follows:
       ``(iii) any interest or participation in any common trust 
     fund or similar fund that is excluded from the definition of 
     the term `investment company' under section 3(c)(3) of the 
     Investment Company Act of 1940;''.
       (c) Investment Company Act of 1940.--Section 3(c)(3) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is 
     amended by inserting before the period the following: ``, 
     if--
       ``(A) such fund is employed by the bank solely as an aid to 
     the administration of trusts, estates, or other accounts 
     created and maintained for a fiduciary purpose;
       ``(B) except in connection with the ordinary advertising of 
     the bank's fiduciary services, interests in such fund are 
     not--
       ``(i) advertised; or
       ``(ii) offered for sale to the general public; and
       ``(C) fees and expenses charged by such fund are not in 
     contravention of fiduciary principles established under 
     applicable Federal or State law''.

     SEC. 222. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.

       Section 9(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-9(a)) is amended in paragraphs (1) and (2) by 
     striking ``securities dealer, transfer agent,'' and inserting 
     ``securities dealer, bank, transfer agent,''.

     SEC. 223. CONFORMING CHANGE IN DEFINITION.

       Section 2(a)(5) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-2(a)(5)) is amended by striking ``(A) a banking 
     institution organized under the laws of the United States'' 
     and inserting ``(A) a depository institution (as defined in 
     section 3 of the Federal Deposit Insurance Act) or a branch 
     or agency of a foreign bank (as such terms are defined in 
     section 1(b) of the International Banking Act of 1978)''.

     SEC. 224. CONFORMING AMENDMENT.

       Section 202 of the Investment Advisers Act of 1940 (15 
     U.S.C. 80b-2) is amended by adding at the end the following 
     new subsection:
       ``(c) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking and is 
     required to consider or determine whether an action is 
     necessary or appropriate in the public interest, the 
     Commission shall also consider, in addition to the protection 
     of investors, whether the action will promote efficiency, 
     competition, and capital formation.''.

     SEC. 225. EFFECTIVE DATE.

       This subtitle shall take effect 18 months after the date of 
     the enactment of this Act.
     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

     SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY 
                   THE SECURITIES AND EXCHANGE COMMISSION.

       (a) Amendment.--Section 17 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78q) is amended--
       (1) by redesignating subsection (i) as subsection (k); and
       (2) by inserting after subsection (h) the following new 
     subsections:
       ``(i) Investment Bank Holding Companies.--
       ``(1) Elective supervision of an investment bank holding 
     company not having a bank or savings association affiliate.--
       ``(A) In general.--An investment bank holding company that 
     is not--
       ``(i) an affiliate of an insured bank (other than an 
     institution described in subparagraph (D), (F), or (G) of 
     section 2(c)(2), or held under section 4(f), of the Bank 
     Holding Company Act of 1956), or a savings association;
       ``(ii) a foreign bank, foreign company, or company that is 
     described in section 8(a) of the International Banking Act of 
     1978; or
       ``(iii) a foreign bank that controls, directly or 
     indirectly, a corporation chartered under section 25A of the 
     Federal Reserve Act,
     may elect to become supervised by filing with the Commission 
     a notice of intention to become supervised, pursuant to 
     subparagraph (B) of this paragraph. Any investment bank 
     holding company filing such a notice shall be supervised in 
     accordance with this section and comply with the rules 
     promulgated by the Commission applicable to supervised 
     investment bank holding companies.
       ``(B) Notification of status as a supervised investment 
     bank holding company.--An investment bank holding company 
     that elects under subparagraph (A) to become supervised by 
     the Commission shall file with the Commission a written 
     notice of intention to become supervised by the Commission in 
     such form and containing such information and documents 
     concerning such investment bank holding company as the 
     Commission, by rule, may prescribe as necessary or 
     appropriate in furtherance of the purposes of this section. 
     Unless the Commission finds that such supervision is not 
     necessary or appropriate in furtherance of the purposes of 
     this section, such supervision shall become effective 45 days 
     after the date of receipt of such written notice by the 
     Commission or within such shorter time period as the 
     Commission, by rule or order, may determine.
       ``(2) Election not to be supervised by the commission as an 
     investment bank holding company.--
       ``(A) Voluntary withdrawal.--A supervised investment bank 
     holding company that is supervised pursuant to paragraph (1) 
     may, upon such terms and conditions as the Commission deems 
     necessary or appropriate, elect not to be supervised by the 
     Commission by filing a written notice of withdrawal from 
     Commission supervision. Such notice shall not become 
     effective until 1 year after receipt by the Commission, or 
     such shorter or longer period as the Commission deems 
     necessary or appropriate to ensure effective supervision of 
     the material risks to the supervised investment bank holding 
     company and to the affiliated broker or dealer, or to prevent 
     evasion of the purposes of this section.
       ``(B) Discontinuation of commission supervision.--If the 
     Commission finds that any supervised investment bank holding 
     company that is supervised pursuant to paragraph (1) is no 
     longer in existence or has ceased to be an investment bank 
     holding company, or if the Commission finds that continued 
     supervision of such a supervised investment bank holding 
     company is not consistent with the purposes of this section, 
     the Commission may discontinue the supervision pursuant to a 
     rule or order, if any, promulgated by the Commission under 
     this section.
       ``(3) Supervision of investment bank holding companies.--
       ``(A) Recordkeeping and reporting.--
       ``(i) In general.--Every supervised investment bank holding 
     company and each affiliate thereof shall make and keep for 
     prescribed periods such records, furnish copies thereof, and 
     make such reports, as the Commission may require by rule, in 
     order to keep the Commission informed as to--

       ``(I) the company's or affiliate's activities, financial 
     condition, policies, systems for monitoring and controlling 
     financial and operational risks, and transactions and 
     relationships between any broker or dealer affiliate of the 
     supervised investment bank holding company; and
       ``(II) the extent to which the company or affiliate has 
     complied with the provisions of this Act and regulations 
     prescribed and orders issued under this Act.

       ``(ii) Form and contents.--Such records and reports shall 
     be prepared in such form and according to such specifications 
     (including certification by an independent public 
     accountant), as the Commission may require and shall be 
     provided promptly at any time upon request by the Commission. 
     Such records and reports may include--

       ``(I) a balance sheet and income statement;
       ``(II) an assessment of the consolidated capital of the 
     supervised investment bank holding company;
       ``(III) an independent auditor's report attesting to the 
     supervised investment bank holding company's compliance with 
     its internal risk management and internal control objectives; 
     and
       ``(IV) reports concerning the extent to which the company 
     or affiliate has complied with the provisions of this title 
     and any regulations prescribed and orders issued under this 
     title.

       ``(B) Use of existing reports.--
       ``(i) In general.--The Commission shall, to the fullest 
     extent possible, accept reports in fulfillment of the 
     requirements under this paragraph that the supervised 
     investment bank holding company or its affiliates have been 
     required to provide to another appropriate regulatory agency 
     or self-regulatory organization.
       ``(ii) Availability.--A supervised investment bank holding 
     company or an affiliate of such company shall provide to the 
     Commission, at the request of the Commission, any report 
     referred to in clause (i).
       ``(C) Examination authority.--
       ``(i) Focus of examination authority.--The Commission may 
     make examinations of any supervised investment bank holding 
     company and any affiliate of such company in order to--

       ``(I) inform the Commission regarding--

[[Page H11273]]

       ``(aa) the nature of the operations and financial condition 
     of the supervised investment bank holding company and its 
     affiliates;
       ``(bb) the financial and operational risks within the 
     supervised investment bank holding company that may affect 
     any broker or dealer controlled by such supervised investment 
     bank holding company; and
       ``(cc) the systems of the supervised investment bank 
     holding company and its affiliates for monitoring and 
     controlling those risks; and

       ``(II) monitor compliance with the provisions of this 
     subsection, provisions governing transactions and 
     relationships between any broker or dealer affiliated with 
     the supervised investment bank holding company and any of the 
     company's other affiliates, and applicable provisions of 
     subchapter II of chapter 53, title 31, United States Code 
     (commonly referred to as the `Bank Secrecy Act') and 
     regulations thereunder.

       ``(ii) Restricted focus of examinations.--The Commission 
     shall limit the focus and scope of any examination of a 
     supervised investment bank holding company to--

       ``(I) the company; and
       ``(II) any affiliate of the company that, because of its 
     size, condition, or activities, the nature or size of the 
     transactions between such affiliate and any affiliated broker 
     or dealer, or the centralization of functions within the 
     holding company system, could, in the discretion of the 
     Commission, have a materially adverse effect on the 
     operational or financial condition of the broker or dealer.

       ``(iii) Deference to other examinations.--For purposes of 
     this subparagraph, the Commission shall, to the fullest 
     extent possible, use the reports of examination of an 
     institution described in subparagraph (D), (F), or (G) of 
     section 2(c)(2), or held under section 4(f), of the Bank 
     Holding Company Act of 1956 made by the appropriate 
     regulatory agency, or of a licensed insurance company made by 
     the appropriate State insurance regulator.
       ``(4) Functional regulation of banking and insurance 
     activities of supervised investment bank holding companies.--
     The Commission shall defer to--
       ``(A) the appropriate regulatory agency with regard to all 
     interpretations of, and the enforcement of, applicable 
     banking laws relating to the activities, conduct, ownership, 
     and operations of banks, and institutions described in 
     subparagraph (D), (F), and (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956; 
     and
       ``(B) the appropriate State insurance regulators with 
     regard to all interpretations of, and the enforcement of, 
     applicable State insurance laws relating to the activities, 
     conduct, and operations of insurance companies and insurance 
     agents.
       ``(5) Definitions.--For purposes of this subsection:
       ``(A) The term `investment bank holding company' means--
       ``(i) any person other than a natural person that owns or 
     controls one or more brokers or dealers; and
       ``(ii) the associated persons of the investment bank 
     holding company.
       ``(B) The term `supervised investment bank holding company' 
     means any investment bank holding company that is supervised 
     by the Commission pursuant to this subsection.
       ``(C) The terms `affiliate', `bank', `bank holding 
     company', `company', `control', and `savings association' 
     have the same meanings as given in section 2 of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841).
       ``(D) The term `insured bank' has the same meaning as given 
     in section 3 of the Federal Deposit Insurance Act.
       ``(E) The term `foreign bank' has the same meaning as given 
     in section 1(b)(7) of the International Banking Act of 1978.
       ``(F) The terms `person associated with an investment bank 
     holding company' and `associated person of an investment bank 
     holding company' mean any person directly or indirectly 
     controlling, controlled by, or under common control with, an 
     investment bank holding company.
       ``(j) Authority To Limit Disclosure of Information.--
     Notwithstanding any other provision of law, the Commission 
     shall not be compelled to disclose any information required 
     to be reported under subsection (h) or (i) or any information 
     supplied to the Commission by any domestic or foreign 
     regulatory agency that relates to the financial or 
     operational condition of any associated person of a broker or 
     dealer, investment bank holding company, or any affiliate of 
     an investment bank holding company. Nothing in this 
     subsection shall authorize the Commission to withhold 
     information from Congress, or prevent the Commission from 
     complying with a request for information from any other 
     Federal department or agency or any self-regulatory 
     organization requesting the information for purposes within 
     the scope of its jurisdiction, or complying with an order of 
     a court of the United States in an action brought by the 
     United States or the Commission. For purposes of section 552 
     of title 5, United States Code, this subsection shall be 
     considered a statute described in subsection (b)(3)(B) of 
     such section 552. In prescribing regulations to carry out the 
     requirements of this subsection, the Commission shall 
     designate information described in or obtained pursuant to 
     subparagraphs (A), (B), and (C) of subsection (i)(5) as 
     confidential information for purposes of section 24(b)(2) of 
     this title.''.
       (b) Conforming Amendments.--
       (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
     following new subparagraph:
       ``(H) When used with respect to an institution described in 
     subparagraph (D), (F), or (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956--
       ``(i) the Comptroller of the Currency, in the case of a 
     national bank or a bank in the District of Columbia examined 
     by the Comptroller of the Currency;
       ``(ii) the Board of Governors of the Federal Reserve 
     System, in the case of a State member bank of the Federal 
     Reserve System or any corporation chartered under section 25A 
     of the Federal Reserve Act;
       ``(iii) the Federal Deposit Insurance Corporation, in the 
     case of any other bank the deposits of which are insured in 
     accordance with the Federal Deposit Insurance Act; or
       ``(iv) the Commission in the case of all other such 
     institutions.''.
       (2) Section 1112(e) of the Right to Financial Privacy Act 
     of 1978 (12 U.S.C. 3412(e)) is amended--
       (A) by striking ``this title'' and inserting ``law''; and
       (B) by inserting ``, examination reports'' after 
     ``financial records''.
              Subtitle D--Banks and Bank Holding Companies

     SEC. 241. CONSULTATION.

       (a) In General.--The Securities and Exchange Commission 
     shall consult and coordinate comments with the appropriate 
     Federal banking agency before taking any action or rendering 
     any opinion with respect to the manner in which any insured 
     depository institution or depository institution holding 
     company reports loan loss reserves in its financial 
     statement, including the amount of any such loan loss 
     reserve.
       (b) Definitions.--For purposes of subsection (a), the terms 
     ``insured depository institution'', ``depository institution 
     holding company'', and ``appropriate Federal banking agency'' 
     have the same meaning as given in section 3 of the Federal 
     Deposit Insurance Act.
                          TITLE III--INSURANCE
               Subtitle A--State Regulation of Insurance

     SEC. 301. FUNCTIONAL REGULATION OF INSURANCE.

       The insurance activities of any person (including a 
     national bank exercising its power to act as agent under the 
     eleventh undesignated paragraph of section 13 of the Federal 
     Reserve Act) shall be functionally regulated by the States, 
     subject to section 104.

     SEC. 302. INSURANCE UNDERWRITING IN NATIONAL BANKS.

       (a) In General.--Except as provided in section 303, a 
     national bank and the subsidiaries of a national bank may not 
     provide insurance in a State as principal except that this 
     prohibition shall not apply to authorized products.
       (b) Authorized Products.--For the purposes of this section, 
     a product is authorized 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 title insurance, or 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, but not limited to, 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 (B) 
     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; or

       (3) any annuity contract, the income on which is subject to 
     tax treatment under section 72 of the Internal Revenue Code 
     of 1986.

[[Page H11274]]

       (d) Rule of Construction.--For purposes of this section, 
     providing insurance (including reinsurance) outside the 
     United States that insures, guarantees, or indemnifies 
     insurance products provided in a State, or that indemnifies 
     an insurance company with regard to insurance products 
     provided in a State, shall be considered to be providing 
     insurance as principal in that State.

     SEC. 303. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND 
                   THEIR AFFILIATES.

       (a) General Prohibition.--No national bank may engage in 
     any activity involving the underwriting or sale of title 
     insurance.
       (b) Nondiscrimination Parity Exception.--
       (1) In general.--Notwithstanding any other provision of law 
     (including section 104 of this Act), in the case of any State 
     in which banks organized under the laws of such State are 
     authorized to sell title insurance as agent, a national bank 
     may sell title insurance as agent in such State, but only in 
     the same manner, to the same extent, and under the same 
     restrictions as such State banks are authorized to sell title 
     insurance as agent in such State.
       (2) Coordination with ``wildcard'' provision.--A State law 
     which authorizes State banks to engage in any activities in 
     such State in which a national bank may engage shall not be 
     treated as a statute which authorizes State banks to sell 
     title insurance as agent, for purposes of paragraph (1).
       (c) Grandfathering With Consistent Regulation.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3) and notwithstanding subsections (a) and (b), a national 
     bank, and a subsidiary of a national bank, may conduct title 
     insurance activities which such national bank or subsidiary 
     was actively and lawfully conducting before the date of the 
     enactment of this Act.
       (2) Insurance affiliate.--In the case of a national bank 
     which has an affiliate which provides insurance as principal 
     and is not a subsidiary of the bank, the national bank and 
     any subsidiary of the national bank may not engage in the 
     underwriting of title insurance pursuant to paragraph (1).
       (3) Insurance subsidiary.--In the case of a national bank 
     which has a subsidiary which provides insurance as principal 
     and has no affiliate other than a subsidiary which provides 
     insurance as principal, the national bank may not directly 
     engage in any activity involving the underwriting of title 
     insurance.
       (d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes 
     of this section, the terms ``affiliate'' and ``subsidiary'' 
     have the same meanings as in section 2 of the Bank Holding 
     Company Act of 1956.
       (e) Rule of Construction.--No provision of this Act or any 
     other Federal law shall be construed as superseding or 
     affecting a State law which was in effect before the date of 
     the enactment of this Act and which prohibits title insurance 
     from being offered, provided, or sold in such State, or from 
     being underwritten with respect to real property in such 
     State, by any person whatsoever.

     SEC. 304. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR 
                   FEDERAL REGULATORS.

       (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, 
     the Federal or State 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 is 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 proceeding 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 petition 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 a petition 
     filed under this section 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, without unequal deference.

     SEC. 305. INSURANCE CUSTOMER PROTECTIONS.

       The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) 
     is amended by inserting after section 46, as added by section 
     121(d) of this Act, the following new section:

     ``SEC. 47. 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 the enactment of the 
     Gramm-Leach-Bliley Act, 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 
     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 subsidiary of a depository institution, as 
     deemed appropriate by the regulators referred to in paragraph 
     (3), where such extension is determined to be necessary to 
     ensure the consumer 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 a 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
       ``(2) an agreement by the consumer not to obtain, or a 
     prohibition on the consumer 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 clause 
     (iii), 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 depository institution.
       ``(ii) Investment risk.--In the case of a variable annuity 
     or other insurance product which involves an investment risk, 
     that there is an investment risk associated with the product, 
     including possible loss of value.
       ``(iii) Coercion.--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 affiliate of the institution; or
       ``(II) an agreement by the consumer not to obtain, or a 
     prohibition on the consumer from obtaining, an insurance 
     product from an unaffiliated entity.

       ``(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'.
       ``(iv) `NOT INSURED BY ANY GOVERNMENT AGENCY'.
       ``(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) Consumer acknowledgment.--A requirement that a 
     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 a consumer receives the 
     disclosures required under this paragraph or at the time of 
     the initial purchase by the consumer of such product, an 
     acknowledgment by such consumer of the receipt of the 
     disclosure required under this subsection 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 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;
       ``(B) in the case of a variable annuity or insurance 
     product that involves an investment risk, the investment risk 
     associated with any such product; or
       ``(C) in the case of an institution or subsidiary at which 
     insurance products are sold or offered for sale, the fact 
     that--

[[Page H11275]]

       ``(i) the approval of an extension of credit to a customer 
     by the institution or subsidiary may not be conditioned on 
     the purchase of an insurance product by such customer from 
     the institution or subsidiary; and
       ``(ii) the customer is free to purchase the insurance 
     product from another source.
       ``(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 a 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 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) Domestic Violence Discrimination Prohibition.--
       ``(1) In general.--In the case of an applicant for, or an 
     insured under, any insurance product described in paragraph 
     (2), the status of the applicant or insured as a victim of 
     domestic violence, or as a provider of services to victims of 
     domestic violence, shall not be considered as a criterion in 
     any decision with regard to insurance underwriting, pricing, 
     renewal, or scope of coverage of insurance policies, or 
     payment of insurance claims, except as required or expressly 
     permitted under State law.
       ``(2) Scope of application.--The prohibition contained in 
     paragraph (1) shall apply to any life or health insurance 
     product which is sold or offered for sale, as principal, 
     agent, or broker, by any depository institution or any person 
     who is engaged in such activities at an office of the 
     institution or on behalf of the institution.
       ``(3) Domestic violence defined.--For purposes of this 
     subsection, the term `domestic violence' means the occurrence 
     of one or more of the following acts by a current or former 
     family member, household member, intimate partner, or 
     caretaker:
       ``(A) Attempting to cause or causing or threatening another 
     person physical harm, severe emotional distress, 
     psychological trauma, rape, or sexual assault.
       ``(B) Engaging in a course of conduct or repeatedly 
     committing acts toward another person, including following 
     the person without proper authority, under circumstances that 
     place the person in reasonable fear of bodily injury or 
     physical harm.
       ``(C) Subjecting another person to false imprisonment.
       ``(D) Attempting to cause or cause damage to property so as 
     to intimidate or attempt to control the behavior of another 
     person.
       ``(f) Consumer Grievance Process.--The Federal banking 
     agencies shall jointly establish a consumer complaint 
     mechanism, for receiving and expeditiously addressing 
     consumer complaints alleging a violation of regulations 
     issued under the section, which shall--
       ``(1) establish a group within each regulatory agency to 
     receive such complaints;
       ``(2) develop procedures for investigating such complaints;
       ``(3) develop procedures for informing consumers of rights 
     they may have in connection with such complaints; and
       ``(4) develop procedures for addressing concerns raised by 
     such complaints, as appropriate, including procedures for the 
     recovery of losses to the extent appropriate.
       ``(g) 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 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 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.
       ``(h) Non-Discrimination Against Non-Affiliated Agents.--
     The Federal banking agencies shall ensure that the 
     regulations prescribed pursuant to subsection (a) shall not 
     have the effect of discriminating, either intentionally or 
     unintentionally, against any person engaged in insurance 
     sales or solicitations that is not affiliated with a 
     depository institution.''.

     SEC. 306. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR 
                   INSURANCE COMPANIES AND AFFILIATES.

       Except as provided in section 104(c)(2), no State may, by 
     law, regulation, order, interpretation, or otherwise--
       (1) prevent or significantly interfere with 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 financial holding company 
     or to acquire control of a depository institution;
       (2) limit the amount of an insurer's assets that may be 
     invested in the voting securities of a depository institution 
     (or any company which controls such institution), except that 
     the laws of an insurer's State of domicile may limit the 
     amount of such investment to an amount that is not less than 
     5 percent of the insurer's admitted assets; or
       (3) prevent, significantly interfere with, 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 such State is the State of domicile of the 
     insurer.

     SEC. 307. INTERAGENCY CONSULTATION.

       (a) Purpose.--It is the intention of the Congress that the 
     Board of Governors of the Federal Reserve System, as the 
     umbrella supervisor for financial holding companies, and the 
     State insurance regulators, as the functional regulators of 
     companies engaged in insurance activities, coordinate efforts 
     to supervise companies that control both a depository 
     institution and a company engaged in insurance activities 
     regulated under State law. In particular, Congress believes 
     that the Board and the State insurance regulators should 
     share, on a confidential basis, information relevant to the 
     supervision of companies that control both a depository 
     institution and a company engaged in insurance activities, 
     including information regarding the financial health of the 
     consolidated organization and information regarding 
     transactions and relationships between insurance companies 
     and affiliated depository institutions. The appropriate 
     Federal banking agencies for depository institutions should 
     also share, on a confidential basis, information with the 
     relevant State insurance regulators regarding transactions 
     and relationships between depository institutions and 
     affiliated companies engaged in insurance activities. The 
     purpose of this section is to encourage this coordination and 
     confidential sharing of information, and to thereby improve 
     both the efficiency and the quality of the supervision of 
     financial holding companies and their affiliated depository 
     institutions and companies engaged in insurance activities.
       (b) 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 any information of the Board regarding the financial 
     condition, risk management policies, and operations of any 
     financial holding company that controls a company that is 
     engaged in insurance activities and is regulated by such 
     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 any information of the 
     agency regarding any transaction or relationship between a 
     depository institution supervised

[[Page H11276]]

     by such Federal banking agency and any affiliated company 
     that is engaged in insurance activities regulated by such 
     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 Board or the appropriate Federal banking 
     agency, a State insurance regulator may provide any 
     examination or other reports, records, or other information 
     to which such insurance regulator may have access with 
     respect to a company which--
       (A) is engaged in insurance activities and regulated by 
     such insurance regulator; and
       (B) is an affiliate of a depository institution or 
     financial holding company.
       (c) Consultation.--Before making any determination relating 
     to the initial affiliation of, or the continuing affiliation 
     of, a depository institution or financial 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.
       (d) Effect on Other Authority.--Nothing in this section 
     shall limit in any respect the authority of the appropriate 
     Federal banking agency with respect to a depository 
     institution or bank holding company or any affiliate thereof 
     under any provision of law.
       (e) Confidentiality and Privilege.--
       (1) Confidentiality.--The appropriate Federal banking 
     agency shall 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 State 
     insurance regulator shall not constitute a waiver of, or 
     otherwise affect, any privilege to which the information or 
     material is otherwise subject.
       (f) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Appropriate federal banking agency; depository 
     institution.--The terms ``appropriate Federal banking 
     agency'' and ``depository institution'' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.
       (2) Board and financial holding company.--The terms 
     ``Board'' and ``financial holding company'' have the same 
     meanings as in section 2 of the Bank Holding Company Act of 
     1956.

     SEC. 308. DEFINITION OF STATE.

       For purposes of this subtitle, 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--Redomestication of Mutual Insurers

     SEC. 311. GENERAL APPLICATION.

       This subtitle shall only apply to a mutual insurance 
     company in a State which has not enacted a law which 
     expressly establishes reasonable terms and conditions for a 
     mutual insurance company domiciled in such State to 
     reorganize into a mutual holding company.

     SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.

       (a) Redomestication.--A mutual insurer organized under the 
     laws of any State may transfer its domicile to a transferee 
     domicile as a step in a reorganization in which, pursuant to 
     the laws of the transferee domicile and consistent with the 
     standards in subsection (f), the mutual insurer becomes a 
     stock insurer that is a direct or indirect subsidiary of a 
     mutual holding company.
       (b) Resulting Domicile.--Upon complying with the applicable 
     law of the transferee domicile governing transfers of 
     domicile and completion of a transfer pursuant to this 
     section, the mutual insurer shall cease to be a domestic 
     insurer in the transferor domicile and, as a continuation of 
     its corporate existence, shall be a domestic insurer of the 
     transferee domicile.
       (c) Licenses Preserved.--The certificate of authority, 
     agents' appointments and licenses, rates, approvals and other 
     items that a licensed State allows and that are in existence 
     immediately prior to the date that a redomesticating insurer 
     transfers its domicile pursuant to this subtitle shall 
     continue in full force and effect upon transfer, if the 
     insurer remains duly qualified to transact the business of 
     insurance in such licensed State.
       (d) Effectiveness of Outstanding Policies and Contracts.--
       (1) In general.--All outstanding insurance policies and 
     annuities contracts of a redomesticating insurer shall remain 
     in full force and effect and need not be endorsed as to the 
     new domicile of the insurer, unless so ordered by the State 
     insurance regulator of a licensed State, and then only in the 
     case of outstanding policies and contracts whose owners 
     reside in such licensed State.
       (2) Forms.--
       (A) Applicable State law may require a redomesticating 
     insurer to file new policy forms with the State insurance 
     regulator of a licensed State on or before the effective date 
     of the transfer.
       (B) Notwithstanding subparagraph (A), a redomesticating 
     insurer may use existing policy forms with appropriate 
     endorsements to reflect the new domicile of the 
     redomesticating insurer until the new policy forms are 
     approved for use by the State insurance regulator of such 
     licensed State.
       (e) Notice.--A redomesticating insurer shall give notice of 
     the proposed transfer to the State insurance regulator of 
     each licensed State and shall file promptly any resulting 
     amendments to corporate documents required to be filed by a 
     foreign licensed mutual insurer with the insurance regulator 
     of each such licensed State.
       (f) Procedural Requirements.--No mutual insurer may 
     redomesticate to another State and reorganize into a mutual 
     holding company pursuant to this section unless the State 
     insurance regulator of the transferee domicile determines 
     that the plan of reorganization of the insurer includes the 
     following requirements:
       (1) Approval by board of directors and policyholders.--The 
     reorganization is approved by at least a majority of the 
     board of directors of the mutual insurer and at least a 
     majority of the policyholders who vote after notice, 
     disclosure of the reorganization and the effects of the 
     transaction on policyholder contractual rights, and 
     reasonable opportunity to vote, in accordance with such 
     notice, disclosure, and voting procedures as are approved 
     by the State insurance regulator of the transferee 
     domicile.
       (2) Continued voting control by policyholders; review of 
     public stock offering.--After the consummation of a 
     reorganization, the policyholders of the reorganized insurer 
     shall have the same voting rights with respect to the mutual 
     holding company as they had before the reorganization with 
     respect to the mutual insurer. With respect to an initial 
     public offering of stock, the offering shall be conducted in 
     compliance with applicable securities laws and in a manner 
     approved by the State insurance regulator of the transferee 
     domicile.
       (3) Award of stock or grant of options to officers and 
     directors.--During the applicable period provided for under 
     the State law of the transferee domicile following completion 
     of an initial public offering, or for a period of six months 
     if no such applicable period is provided, neither a stock 
     holding company nor the converted insurer shall award any 
     stock options or stock grants to persons who are elected 
     officers or directors of the mutual holding company, the 
     stock holding company, or the converted insurer, except with 
     respect to any such awards or options to which a person is 
     entitled as a policyholder and as approved by the State 
     insurance regulator of the transferee domicile.
       (4) Policyholder rights.--Upon reorganization into a mutual 
     holding company, the contractual rights of the policyholders 
     are preserved.
       (5) Fair and equitable treatment of policyholders.--The 
     reorganization is approved as fair and equitable to the 
     policyholders by the insurance regulator of the transferee 
     domicile.

     SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.

       (a) In General.--Unless otherwise permitted by this 
     subtitle, State laws of any transferor domicile that conflict 
     with the purposes and intent of this subtitle are preempted, 
     including but not limited to--
       (1) any law that has the purpose or effect of impeding the 
     activities of, taking any action against, or applying any 
     provision of law or regulation to, any insurer or an 
     affiliate of such insurer because that insurer or any 
     affiliate plans to redomesticate, or has redomesticated, 
     pursuant to this subtitle;
       (2) any law that has the purpose or effect of impeding the 
     activities of, taking action against, or applying any 
     provision of law or regulation to, any insured or any 
     insurance licensee or other intermediary because such person 
     has procured insurance from or placed insurance with any 
     insurer or affiliate of such insurer that plans to 
     redomesticate, or has redomesticated, pursuant to this 
     subtitle, but only to the extent that such law would treat 
     such insured licensee or other intermediary differently than 
     if the person procured insurance from, or placed insurance 
     with, an insured licensee or other intermediary which had not 
     redomesticated; and
       (3) any law that has the purpose or effect of terminating, 
     because of the redomestication of a mutual insurer pursuant 
     to this subtitle, any certificate of authority, agent 
     appointment or license, rate approval, or other approval, of 
     any State insurance regulator or other State authority in 
     existence immediately prior to the redomestication in any 
     State other than the transferee domicile.
       (b) Differential Treatment Prohibited.--No State law, 
     regulation, interpretation, or functional equivalent thereof, 
     of a State other than a transferee domicile may treat a 
     redomesticating or redomesticated insurer or any affiliate 
     thereof any differently than an insurer operating in that 
     State that is not a redomesticating or redomesticated 
     insurer.
       (c) Laws Prohibiting Operations.--If any licensed State 
     fails to issue, delays the issuance of, or seeks to revoke an 
     original or renewal certificate of authority of a 
     redomesticated insurer promptly following redomestication, 
     except on grounds and in a manner consistent with its past 
     practices regarding the issuance of certificates of authority 
     to foreign insurers that are not redomesticating, then the 
     redomesticating insurer shall be exempt from any State law of 
     the licensed State to the extent that such State law or the 
     operation of such State law would

[[Page H11277]]

     make unlawful, or regulate, directly or indirectly, the 
     operation of the redomesticated insurer, except that such 
     licensed State may require the redomesticated insurer to--
       (1) comply with the unfair claim settlement practices law 
     of the licensed State;
       (2) pay, on a nondiscriminatory basis, applicable premium 
     and other taxes which are levied on licensed insurers or 
     policyholders under the laws of the licensed State;
       (3) register with and designate the State insurance 
     regulator as its agent solely for the purpose of receiving 
     service of legal documents or process;
       (4) submit to an examination by the State insurance 
     regulator in any licensed State in which the redomesticated 
     insurer is doing business to determine the insurer's 
     financial condition, if--
       (A) the State insurance regulator of the transferee 
     domicile has not begun an examination of the redomesticated 
     insurer and has not scheduled such an examination to begin 
     before the end of the 1-year period beginning on the date of 
     the redomestication; and
       (B) any such examination is coordinated to avoid 
     unjustified duplication and repetition;
       (5) comply with a lawful order issued in--
       (A) a delinquency proceeding commenced by the State 
     insurance regulator of any licensed State if there has been a 
     judicial finding of financial impairment under paragraph (7); 
     or
       (B) a voluntary dissolution proceeding;
       (6) comply with any State law regarding deceptive, false, 
     or fraudulent acts or practices, except that if the licensed 
     State seeks an injunction regarding the conduct described in 
     this paragraph, such injunction must be obtained from a court 
     of competent jurisdiction as provided in section 314(a);
       (7) comply with an injunction issued by a court of 
     competent jurisdiction, upon a petition by the State 
     insurance regulator alleging that the redomesticating insurer 
     is in hazardous financial condition or is financially 
     impaired;
       (8) participate in any insurance insolvency guaranty 
     association on the same basis as any other insurer licensed 
     in the licensed State; and
       (9) require a person acting, or offering to act, as an 
     insurance licensee for a redomesticated insurer in the 
     licensed State to obtain a license from that State, except 
     that such State may not impose any qualification or 
     requirement that discriminates against a nonresident 
     insurance licensee.

     SEC. 314. OTHER PROVISIONS.

       (a) Judicial Review.--The appropriate United States 
     district court shall have exclusive jurisdiction over 
     litigation arising under this section involving any 
     redomesticating or redomesticated insurer.
       (b) Severability.--If any provision of this section, or the 
     application thereof to any person or circumstances, is held 
     invalid, the remainder of the section, and the application of 
     such provision to other persons or circumstances, shall not 
     be affected thereby.

     SEC. 315. DEFINITIONS.

       For purposes of this subtitle, the following definitions 
     shall apply:
       (1) Court of competent jurisdiction.--The term ``court of 
     competent jurisdiction'' means a court authorized pursuant to 
     section 314(a) to adjudicate litigation arising under this 
     subtitle.
       (2) Domicile.--The term ``domicile'' means the State in 
     which an insurer is incorporated, chartered, or organized.
       (3) Insurance licensee.--The term ``insurance licensee'' 
     means any person holding a license under State law to act as 
     insurance agent, subagent, broker, or consultant.
       (4) Institution.--The term ``institution'' means a 
     corporation, joint stock company, limited liability company, 
     limited liability partnership, association, trust, 
     partnership, or any similar entity.
       (5) Licensed state.--The term ``licensed State'' means any 
     State, 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 in which the redomesticating insurer 
     has a certificate of authority in effect immediately prior to 
     the redomestication.
       (6) Mutual insurer.--The term ``mutual insurer'' means a 
     mutual insurer organized under the laws of any State.
       (7) Person.--The term ``person'' means an individual, 
     institution, government or governmental agency, State or 
     political subdivision of a State, public corporation, board, 
     association, estate, trustee, or fiduciary, or other similar 
     entity.
       (8) Policyholder.--The term ``policyholder'' means the 
     owner of a policy issued by a mutual insurer, except that, 
     with respect to voting rights, the term means a member of a 
     mutual insurer or mutual holding company granted the right to 
     vote, as determined under applicable State law.
       (9) Redomesticated insurer.--The term ``redomesticated 
     insurer'' means a mutual insurer that has redomesticated 
     pursuant to this subtitle.
       (10) Redomesticating insurer.--The term ``redomesticating 
     insurer'' means a mutual insurer that is redomesticating 
     pursuant to this subtitle.
       (11) Redomestication or transfer.--The term 
     ``redomestication'' or ``transfer'' means the transfer of the 
     domicile of a mutual insurer from one State to another State 
     pursuant to this subtitle.
       (12) State insurance regulator.--The term ``State insurance 
     regulator'' means the principal insurance regulatory 
     authority of a State, 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.
       (13) State law.--The term ``State law'' means the statutes 
     of any State, 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 and any regulation, order, or 
     requirement prescribed pursuant to any such statute.
       (14) Transferee domicile.--The term ``transferee domicile'' 
     means the State to which a mutual insurer is redomesticating 
     pursuant to this subtitle.
       (15) Transferor domicile.--The term ``transferor domicile'' 
     means the State from which a mutual insurer is 
     redomesticating pursuant to this subtitle.

     SEC. 316. EFFECTIVE DATE.

       This subtitle shall take effect on the date of the 
     enactment of this Act.
   Subtitle C--National Association of Registered Agents and Brokers

     SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.

        (a) In General.--The provisions of this subtitle shall 
     take effect unless, not later than 3 years after the date of 
     the enactment of this Act, at least a majority of the 
     States--
       (1) have enacted uniform laws and regulations governing the 
     licensure of individuals and entities authorized to sell and 
     solicit the purchase of insurance within the State; or
       (2) have enacted reciprocity laws and regulations governing 
     the licensure of nonresident individuals and entities 
     authorized to sell and solicit insurance within those States.
       (b) Uniformity Required.--States shall be deemed to have 
     established the uniformity necessary to satisfy subsection 
     (a)(1) if the States--
       (1) establish uniform criteria regarding the integrity, 
     personal qualifications, education, training, and experience 
     of licensed insurance producers, including the qualification 
     and training of sales personnel in ascertaining the 
     appropriateness of a particular insurance product for a 
     prospective customer;
       (2) establish uniform continuing education requirements for 
     licensed insurance producers;
       (3) establish uniform ethics course requirements for 
     licensed insurance producers in conjunction with the 
     continuing education requirements under paragraph (2);
       (4) establish uniform criteria to ensure that an insurance 
     product, including any annuity contract, sold to a consumer 
     is suitable and appropriate for the consumer based on 
     financial information disclosed by the consumer; and
       (5) do not impose any requirement upon any insurance 
     producer to be licensed or otherwise qualified to do business 
     as a nonresident that has the effect of limiting or 
     conditioning that producer's activities because of its 
     residence or place of operations, except that counter-
     signature requirements imposed on nonresident producers shall 
     not be deemed to have the effect of limiting or conditioning 
     a producer's activities because of its residence or place of 
     operations under this section.
       (c) Reciprocity Required.--States shall be deemed to have 
     established the reciprocity required to satisfy subsection 
     (a)(2) if the following conditions are met:
       (1) Administrative licensing procedures.--At least a 
     majority of the States permit a producer that has a resident 
     license for selling or soliciting the purchase of insurance 
     in its home State to receive a license to sell or solicit the 
     purchase of insurance in such majority of States as a 
     nonresident to the same extent that such producer is 
     permitted to sell or solicit the purchase of insurance in its 
     State, if the producer's home State also awards such licenses 
     on such a reciprocal basis, without satisfying any additional 
     requirements other than submitting--
       (A) a request for licensure;
       (B) the application for licensure that the producer 
     submitted to its home State;
       (C) proof that the producer is licensed and in good 
     standing in its home State; and
       (D) the payment of any requisite fee to the appropriate 
     authority.
       (2) Continuing education requirements.--A majority of the 
     States accept an insurance producer's satisfaction of its 
     home State's continuing education requirements for licensed 
     insurance producers to satisfy the States' own continuing 
     education requirements if the producer's home State also 
     recognizes the satisfaction of continuing education 
     requirements on such a reciprocal basis.
       (3) No limiting nonresident requirements.--A majority of 
     the States do not impose any requirement upon any insurance 
     producer to be licensed or otherwise qualified to do business 
     as a nonresident that has the effect of limiting or 
     conditioning that producer's activities because of its 
     residence or place of operations, except that 
     countersignature requirements imposed on nonresident 
     producers shall not be deemed to have the effect of limiting 
     or conditioning a producer's activities because of its 
     residence or place of operations under this section.
       (4) Reciprocal reciprocity.--Each of the States that 
     satisfies paragraphs (1), (2), and (3) grants reciprocity to 
     residents of all of the other States that satisfy such 
     paragraphs.
       (d) Determination.--
       (1) NAIC determination.--At the end of the 3-year period 
     beginning on the date of the enactment of this Act, the 
     National Association of Insurance Commissioners (hereafter in 
     this subtitle referred to as the ''NAIC'') shall determine, 
     in consultation with the insurance commissioners or chief 
     insurance regulatory officials of the States, whether the 
     uniformity or reciprocity required by subsections (b) and (c) 
     has been achieved.
       (2) Judicial review.--The appropriate United States 
     district court shall have exclusive jurisdiction over any 
     challenge to the NAIC's determination under this section and 
     such court shall apply the standards set forth in section 706 
     of

[[Page H11278]]

     title 5, United States Code, when reviewing any such 
     challenge.
       (e) Continued Application.--If, at any time, the uniformity 
     or reciprocity required by subsections (b) and (c) no longer 
     exists, the provisions of this subtitle shall take effect 2 
     years after the date on which such uniformity or reciprocity 
     ceases to exist, unless the uniformity or reciprocity 
     required by those provisions is satisfied before the 
     expiration of that 2-year period.
       (f) Savings Provision.--No provision of this section shall 
     be construed as requiring that any law, regulation, 
     provision, or action of any State which purports to regulate 
     insurance producers, including any such law, regulation, 
     provision, or action which purports to regulate unfair trade 
     practices or establish consumer protections, including 
     countersignature laws, be altered or amended in order to 
     satisfy the uniformity or reciprocity required by subsections 
     (b) and (c), unless any such law, regulation, provision, or 
     action is inconsistent with a specific requirement of any 
     such subsection and then only to the extent of such 
     inconsistency.
       (g) Uniform Licensing.--Nothing in this section shall be 
     construed to require any State to adopt new or additional 
     licensing requirements to achieve the uniformity necessary to 
     satisfy subsection (a)(1).

     SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND 
                   BROKERS.

       (a) Establishment.--There is established the National 
     Association of Registered Agents and Brokers (hereafter in 
     this subtitle referred to as the ``Association'').
       (b) Status.--The Association shall--
       (1) be a nonprofit corporation;
       (2) have succession until dissolved by an Act of Congress;
       (3) not be an agent or instrumentality of the United States 
     Government; and
       (4) except as otherwise provided in this Act, be subject 
     to, and have all the powers conferred upon a nonprofit 
     corporation by the District of Columbia Nonprofit 
     Corporation Act (D.C. Code, sec. 29y-1001 et seq.).

     SEC. 323. PURPOSE.

       The purpose of the Association shall be to provide a 
     mechanism through which uniform licensing, appointment, 
     continuing education, and other insurance producer sales 
     qualification requirements and conditions can be adopted and 
     applied on a multistate basis, while preserving the right of 
     States to license, supervise, and discipline insurance 
     producers and to prescribe and enforce laws and regulations 
     with regard to insurance-related consumer protection and 
     unfair trade practices.

     SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

       The Association shall be subject to the supervision and 
     oversight of the NAIC.

     SEC. 325. MEMBERSHIP.

       (a) Eligibility.--
       (1) In general.--Any State-licensed insurance producer 
     shall be eligible to become a member in the Association.
       (2) Ineligibility for suspension or revocation of 
     license.--Notwithstanding paragraph (1), a State-licensed 
     insurance producer shall not be eligible to become a member 
     if a State insurance regulator has suspended or revoked such 
     producer's license in that State during the 3-year period 
     preceding the date on which such producer applies for 
     membership.
       (3) Resumption of eligibility.--Paragraph (2) shall cease 
     to apply to any insurance producer if--
       (A) the State insurance regulator renews the license of 
     such producer in the State in which the license was suspended 
     or revoked; or
       (B) the suspension or revocation is subsequently 
     overturned.
       (b) Authority To Establish Membership Criteria.--The 
     Association shall have the authority to establish membership 
     criteria that--
       (1) bear a reasonable relationship to the purposes for 
     which the Association was established; and
       (2) do not unfairly limit the access of smaller agencies to 
     the Association membership.
       (c) Establishment of Classes and Categories.--
       (1) Classes of membership.--The Association may establish 
     separate classes of membership, with separate criteria, if 
     the Association reasonably determines that performance of 
     different duties requires different levels of education, 
     training, or experience.
       (2) Categories.--The Association may establish separate 
     categories of membership for individuals and for other 
     persons. The establishment of any such categories of 
     membership shall be based either on the types of licensing 
     categories that exist under State laws or on the aggregate 
     amount of business handled by an insurance producer. No 
     special categories of membership, and no distinct membership 
     criteria, shall be established for members which are 
     depository institutions or for their employees, agents, or 
     affiliates.
       (d) Membership Criteria.--
       (1) In general.--The Association may establish criteria for 
     membership which shall include standards for integrity, 
     personal qualifications, education, training, and experience.
       (2) Minimum standard.--In establishing criteria under 
     paragraph (1), the Association shall consider the highest 
     levels of insurance producer qualifications established under 
     the licensing laws of the States.
       (e) Effect of Membership.--Membership in the Association 
     shall entitle the member to licensure in each State for which 
     the member pays the requisite fees, including licensing fees 
     and, where applicable, bonding requirements, set by such 
     State.
       (f) Annual Renewal.--Membership in the Association shall be 
     renewed on an annual basis.
       (g) Continuing Education.--The Association shall establish, 
     as a condition of membership, continuing education 
     requirements which shall be comparable to or greater than the 
     continuing education requirements under the licensing laws of 
     a majority of the States.
       (h) Suspension and Revocation.--The Association may--
       (1) inspect and examine the records and offices of the 
     members of the Association to determine compliance with the 
     criteria for membership established by the Association; and
       (2) suspend or revoke the membership of an insurance 
     producer if--
       (A) the producer fails to meet the applicable membership 
     criteria of the Association; or
       (B) the producer has been subject to disciplinary action 
     pursuant to a final adjudicatory proceeding under the 
     jurisdiction of a State insurance regulator, and the 
     Association concludes that retention of membership in the 
     Association would not be in the public interest.
       (i) Office of Consumer Complaints.--
       (1) In general.--The Association shall establish an office 
     of consumer complaints that shall--
       (A) receive and investigate complaints from both consumers 
     and State insurance regulators related to members of the 
     Association; and
       (B) recommend to the Association any disciplinary actions 
     that the office considers appropriate, to the extent that any 
     such recommendation is not inconsistent with State law.
       (2) Records and referrals.--The office of consumer 
     complaints of the Association shall--
       (A) maintain records of all complaints received in 
     accordance with paragraph (1) and make such records available 
     to the NAIC and to each State insurance regulator for the 
     State of residence of the consumer who filed the complaint; 
     and
       (B) refer, when appropriate, any such complaint to any 
     appropriate State insurance regulator.
       (3) Telephone and other access.--The office of consumer 
     complaints shall maintain a toll-free telephone number for 
     the purpose of this subsection and, as practicable, other 
     alternative means of communication with consumers, such as an 
     Internet home page.

     SEC. 326. BOARD OF DIRECTORS.

       (a) Establishment.--There is established the board of 
     directors of the Association (hereafter in this subtitle 
     referred to as the ``Board'') for the purpose of governing 
     and supervising the activities of the Association and the 
     members of the Association.
       (b) Powers.--The Board shall have such powers and authority 
     as may be specified in the bylaws of the Association.
       (c) Composition.--
       (1) Members.--The Board shall be composed of 7 members 
     appointed by the NAIC.
       (2) Requirement.--At least 4 of the members of the Board 
     shall each have significant experience with the regulation of 
     commercial lines of insurance in at least 1 of the 20 States 
     in which the greatest total dollar amount of commercial-lines 
     insurance is placed in the United States.
       (3) Initial board membership.--
       (A) In general.--If, by the end of the 2-year period 
     beginning on the date of the enactment of this Act, the NAIC 
     has not appointed the initial 7 members of the Board of the 
     Association, the initial Board shall consist of the 7 State 
     insurance regulators of the 7 States with the greatest total 
     dollar amount of commercial-lines insurance in place as of 
     the end of such period.
       (B) Alternate composition.--If any of the State insurance 
     regulators described in subparagraph (A) declines to serve on 
     the Board, the State insurance regulator with the next 
     greatest total dollar amount of commercial-lines insurance in 
     place, as determined by the NAIC as of the end of such 
     period, shall serve as a member of the Board.
       (C) Inoperability.--If fewer than 7 State insurance 
     regulators accept appointment to the Board, the Association 
     shall be established without NAIC oversight pursuant to 
     section 332.
       (d) Terms.--The term of each director shall, after the 
     initial appointment of the members of the Board, be for 3 
     years, with one-third of the directors to be appointed each 
     year.
       (e) Board Vacancies.--A vacancy on the Board shall be 
     filled in the same manner as the original appointment of the 
     initial Board for the remainder of the term of the vacating 
     member.
       (f) Meetings.--The Board shall meet at the call of the 
     chairperson, or as otherwise provided by the bylaws of the 
     Association.

     SEC. 327. OFFICERS.

       (a) In General.--
       (1) Positions.--The officers of the Association shall 
     consist of a chairperson and a vice chairperson of the Board, 
     a president, secretary, and treasurer of the Association, and 
     such other officers and assistant officers as may be deemed 
     necessary.
       (2) Manner of selection.--Each officer of the Board and the 
     Association shall be elected or appointed at such time and in 
     such manner and for such terms not exceeding 3 years as may 
     be prescribed in the bylaws of the Association.
       (b) Criteria for Chairperson.--Only individuals who are 
     members of the NAIC shall be eligible to serve as the 
     chairperson of the board of directors.

     SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.

       (a) Adoption and Amendment of Bylaws.--
       (1) Copy required to be filed with the naic.--The board of 
     directors of the Association shall file with the NAIC a copy 
     of the proposed bylaws or any proposed amendment to the 
     bylaws, accompanied by a concise general statement of the 
     basis and purpose of such proposal.
       (2) Effective date.--Except as provided in paragraph (3), 
     any proposed bylaw or proposed amendment shall take effect--
       (A) 30 days after the date of the filing of a copy with the 
     NAIC;
       (B) upon such later date as the Association may designate; 
     or
       (C) upon such earlier date as the NAIC may determine.

[[Page H11279]]

       (3) Disapproval by the naic.--Notwithstanding paragraph 
     (2), a proposed bylaw or amendment shall not take effect if, 
     after public notice and opportunity to participate in a 
     public hearing--
       (A) the NAIC disapproves such proposal as being contrary to 
     the public interest or contrary to the purposes of this 
     subtitle and provides notice to the Association setting forth 
     the reasons for such disapproval; or
       (B) the NAIC finds that such proposal involves a matter of 
     such significant public interest that public comment should 
     be obtained, in which case it may, after notifying the 
     Association in writing of such finding, require that the 
     procedures set forth in subsection (b) be followed with 
     respect to such proposal, in the same manner as if such 
     proposed bylaw change were a proposed rule change within the 
     meaning of such subsection.
       (b) Adoption and Amendment of Rules.--
       (1) Filing proposed regulations with the naic.--
       (A) In general.--The board of directors of the Association 
     shall file with the NAIC a copy of any proposed rule or any 
     proposed amendment to a rule of the Association which shall 
     be accompanied by a concise general statement of the basis 
     and purpose of such proposal.
       (B) Other rules and amendments ineffective.--No proposed 
     rule or amendment shall take effect unless approved by the 
     NAIC or otherwise permitted in accordance with this 
     paragraph.
       (2) Initial consideration by the naic.--Not later than 35 
     days after the date of publication of notice of filing of a 
     proposal, or before the end of such longer period not to 
     exceed 90 days as the NAIC may designate after such date, if 
     the NAIC finds such longer period to be appropriate and sets 
     forth its reasons for so finding, or as to which the 
     Association consents, the NAIC shall--
       (A) by order approve such proposed rule or amendment; or
       (B) institute proceedings to determine whether such 
     proposed rule or amendment should be modified or disapproved.
       (3) NAIC proceedings.--
       (A) In general.--Proceedings instituted by the NAIC with 
     respect to a proposed rule or amendment pursuant to paragraph 
     (2) shall--
       (i) include notice of the grounds for disapproval under 
     consideration;
       (ii) provide opportunity for hearing; and
       (iii) be concluded not later than 180 days after the date 
     of the Association's filing of such proposed rule or 
     amendment.
       (B) Disposition of proposal.--At the conclusion of any 
     proceeding under subparagraph (A), the NAIC shall, by order, 
     approve or disapprove the proposed rule or amendment.
       (C) Extension of time for consideration.--The NAIC may 
     extend the time for concluding any proceeding under 
     subparagraph (A) for--
       (i) not more than 60 days if the NAIC finds good cause for 
     such extension and sets forth its reasons for so finding; or
       (ii) such longer period as to which the Association 
     consents.
       (4) Standards for review.--
       (A) Grounds for approval.--The NAIC shall approve a 
     proposed rule or amendment if the NAIC finds that the rule or 
     amendment is in the public interest and is consistent with 
     the purposes of this Act.
       (B) Approval before end of notice period.--The NAIC shall 
     not approve any proposed rule before the end of the 30-day 
     period beginning on the date on which the Association files 
     proposed rules or amendments in accordance with paragraph 
     (1), unless the NAIC finds good cause for so doing and sets 
     forth the reasons for so finding.
       (5) Alternate procedure.--
       (A) In general.--Notwithstanding any provision of this 
     subsection other than subparagraph (B), a proposed rule or 
     amendment relating to the administration or organization of 
     the Association shall take effect--
       (i) upon the date of filing with the NAIC, if such proposed 
     rule or amendment is designated by the Association as 
     relating solely to matters which the NAIC, consistent with 
     the public interest and the purposes of this subsection, 
     determines by rule do not require the procedures set forth in 
     this paragraph; or
       (ii) upon such date as the NAIC shall for good cause 
     determine.
       (B) Abrogation by the naic.--
       (i) In general.--At any time within 60 days after the date 
     of filing of any proposed rule or amendment under 
     subparagraph (A)(i) or clause (ii) of this subparagraph, the 
     NAIC may repeal such rule or amendment and require that the 
     rule or amendment be refiled and reviewed in accordance with 
     this paragraph, if the NAIC finds that such action is 
     necessary or appropriate in the public interest, for the 
     protection of insurance producers or policyholders, or 
     otherwise in furtherance of the purposes of this subtitle.
       (ii) Effect of reconsideration by the naic.--Any action of 
     the NAIC pursuant to clause (i) shall--

       (I) not affect the validity or force of a rule change 
     during the period such rule or amendment was in effect; and
       (II) not be considered to be a final action.

       (c) Action Required by the NAIC.--The NAIC may, in 
     accordance with such rules as the NAIC determines to be 
     necessary or appropriate to the public interest or to carry 
     out the purposes of this subtitle, require the Association to 
     adopt, amend, or repeal any bylaw, rule, or amendment of the 
     Association, whenever adopted.
       (d) Disciplinary Action by the Association.--
       (1) Specification of charges.--In any proceeding to 
     determine whether membership shall be denied, suspended, 
     revoked, or not renewed (hereafter in this section referred 
     to as a ``disciplinary action''), the Association shall bring 
     specific charges, notify such member of such charges, give 
     the member an opportunity to defend against the charges, and 
     keep a record.
       (2) Supporting statement.--A determination to take 
     disciplinary action shall be supported by a statement setting 
     forth--
       (A) any act or practice in which such member has been found 
     to have been engaged;
       (B) the specific provision of this subtitle, the rules or 
     regulations under this subtitle, or the rules of the 
     Association which any such act or practice is deemed to 
     violate; and
       (C) the sanction imposed and the reason for such sanction.
       (e) NAIC Review of Disciplinary Action.--
       (1) Notice to the naic.--If the Association orders any 
     disciplinary action, the Association shall promptly notify 
     the NAIC of such action.
       (2) Review by the naic.--Any disciplinary action taken by 
     the Association shall be subject to review by the NAIC--
       (A) on the NAIC's own motion; or
       (B) upon application by any person aggrieved by such action 
     if such application is filed with the NAIC not more than 30 
     days after the later of--
       (i) the date the notice was filed with the NAIC pursuant to 
     paragraph (1); or
       (ii) the date the notice of the disciplinary action was 
     received by such aggrieved person.
       (f) Effect of Review.--The filing of an application to the 
     NAIC for review of a disciplinary action, or the institution 
     of review by the NAIC on the NAIC's own motion, shall not 
     operate as a stay of disciplinary action unless the NAIC 
     otherwise orders.
       (g) Scope of Review.--
       (1) In general.--In any proceeding to review such action, 
     after notice and the opportunity for hearing, the NAIC 
     shall--
       (A) determine whether the action should be taken;
       (B) affirm, modify, or rescind the disciplinary sanction; 
     or
       (C) remand to the Association for further proceedings.
       (2) Dismissal of review.--The NAIC may dismiss a proceeding 
     to review disciplinary action if the NAIC finds that--
       (A) the specific grounds on which the action is based exist 
     in fact;
       (B) the action is in accordance with applicable rules and 
     regulations; and
       (C) such rules and regulations are, and were, applied in a 
     manner consistent with the purposes of this subtitle.

     SEC. 329. ASSESSMENTS.

       (a) Insurance Producers Subject to Assessment.--The 
     Association may establish such application and membership 
     fees as the Association finds necessary to cover the costs of 
     its operations, including fees made reimbursable to the NAIC 
     under subsection (b), except that, in setting such fees, the 
     Association may not discriminate against smaller insurance 
     producers.
       (b) NAIC Assessments.--The NAIC may assess the Association 
     for any costs that the NAIC incurs under this subtitle.

     SEC. 330. FUNCTIONS OF THE NAIC.

       (a) Administrative Procedure.--Determinations of the NAIC, 
     for purposes of making rules pursuant to section 328, shall 
     be made after appropriate notice and opportunity for a 
     hearing and for submission of views of interested persons.
       (b) Examinations and Reports.--
       (1) Examinations.--The NAIC may make such examinations and 
     inspections of the Association and require the Association to 
     furnish to the NAIC such reports and records or copies 
     thereof as the NAIC may consider necessary or appropriate in 
     the public interest or to effectuate the purposes of this 
     subtitle.
       (2) Report by association.--As soon as practicable after 
     the close of each fiscal year, the Association shall submit 
     to the NAIC a written report regarding the conduct of its 
     business, and the exercise of the other rights and powers 
     granted by this subtitle, during such fiscal year. Such 
     report shall include financial statements setting forth the 
     financial position of the Association at the end of such 
     fiscal year and the results of its operations (including the 
     source and application of its funds) for such fiscal year. 
     The NAIC shall transmit such report to the President and the 
     Congress with such comment thereon as the NAIC determines to 
     be appropriate.

     SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS, 
                   OFFICERS, AND EMPLOYEES OF THE ASSOCIATION.

       (a) In General.--The Association shall not be deemed to be 
     an insurer or insurance producer within the meaning of any 
     State law, rule, regulation, or order regulating or taxing 
     insurers, insurance producers, or other entities engaged in 
     the business of insurance, including provisions imposing 
     premium taxes, regulating insurer solvency or financial 
     condition, establishing guaranty funds and levying 
     assessments, or requiring claims settlement practices.
       (b) Liability of the Association, Its Directors, Officers, 
     and Employees.--Neither the Association nor any of its 
     directors, officers, or employees shall have any liability to 
     any person for any action taken or omitted in good faith 
     under or in connection with any matter subject to this 
     subtitle.

     SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

       (a) In General.--The Association shall be established 
     without NAIC oversight and the provisions set forth in 
     section 324, subsections (a), (b), (c), and (e) of section 
     328, and sections 329(b) and 330 of this subtitle shall cease 
     to be effective if, at the end of the 2-year period beginning 
     on the date on which the provisions of this subtitle take 
     effect pursuant to section 321--
       (1) at least a majority of the States representing at least 
     50 percent of the total United

[[Page H11280]]

     States commercial-lines insurance premiums have not satisfied 
     the uniformity or reciprocity requirements of subsections 
     (a), (b), and (c) of section 321; and
       (2) the NAIC has not approved the Association's bylaws as 
     required by section 328 or is unable to operate or supervise 
     the Association, or the Association is not conducting its 
     activities as required under this Act.
       (b) Board Appointments.--If the repeals required by 
     subsection (a) are implemented, the following shall apply:
       (1) General appointment power.--The President, with the 
     advice and consent of the Senate, shall appoint the members 
     of the Association's Board established under section 326 from 
     lists of candidates recommended to the President by the NAIC.
       (2) Procedures for obtaining naic appointment 
     recommendations.--
       (A) Initial determination and recommendations.--After the 
     date on which the provisions of subsection (a) take effect, 
     the NAIC shall, not later than 60 days thereafter, provide a 
     list of recommended candidates to the President. If the NAIC 
     fails to provide a list by that date, or if any list that is 
     provided does not include at least 14 recommended candidates 
     or comply with the requirements of section 326(c), the 
     President shall, with the advice and consent of the Senate, 
     make the requisite appointments without considering the views 
     of the NAIC.
       (B) Subsequent appointments.--After the initial 
     appointments, the NAIC shall provide a list of at least six 
     recommended candidates for the Board to the President by 
     January 15 of each subsequent year. If the NAIC fails to 
     provide a list by that date, or if any list that is provided 
     does not include at least six recommended candidates or 
     comply with the requirements of section 326(c), the 
     President, with the advice and consent of the Senate, shall 
     make the requisite appointments without considering the views 
     of the NAIC.
       (C) Presidential oversight.--
       (i) Removal.--If the President determines that the 
     Association is not acting in the interests of the public, the 
     President may remove the entire existing Board for the 
     remainder of the term to which the members of the Board were 
     appointed and appoint, with the advice and consent of the 
     Senate, new members to fill the vacancies on the Board for 
     the remainder of such terms.
       (ii) Suspension of rules or actions.--The President, or a 
     person designated by the President for such purpose, may 
     suspend the effectiveness of any rule, or prohibit any 
     action, of the Association which the President or the 
     designee determines is contrary to the public interest.
       (c) Annual Report.--As soon as practicable after the close 
     of each fiscal year, the Association shall submit to the 
     President and to the Congress a written report relative to 
     the conduct of its business, and the exercise of the other 
     rights and powers granted by this subtitle, during such 
     fiscal year. Such report shall include financial statements 
     setting forth the financial position of the Association at 
     the end of such fiscal year and the results of its operations 
     (including the source and application of its funds) for such 
     fiscal year.

     SEC. 333. RELATIONSHIP TO STATE LAW.

       (a) Preemption of State Laws.--State laws, regulations, 
     provisions, or other actions purporting to regulate insurance 
     producers shall be preempted as provided in subsection (b).
       (b) Prohibited Actions.--No State shall--
       (1) impede the activities of, take any action against, or 
     apply any provision of law or regulation to, any insurance 
     producer because that insurance producer or any affiliate 
     plans to become, has applied to become, or is a member of the 
     Association;
       (2) impose any requirement upon a member of the Association 
     that it pay different fees to be licensed or otherwise 
     qualified to do business in that State, including bonding 
     requirements, based on its residency;
       (3) impose any licensing, appointment, integrity, personal 
     or corporate qualifications, education, training, experience, 
     residency, or continuing education requirement upon a member 
     of the Association that is different from the criteria for 
     membership in the Association or renewal of such membership, 
     except that counter-signature requirements imposed on 
     nonresident producers shall not be deemed to have the effect 
     of limiting or conditioning a producer's activities because 
     of its residence or place of operations under this section; 
     or
       (4) implement the procedures of such State's system of 
     licensing or renewing the licenses of insurance producers in 
     a manner different from the authority of the Association 
     under section 325.
       (c) Savings Provision.--Except as provided in subsections 
     (a) and (b), no provision of this section shall be construed 
     as altering or affecting the continuing effectiveness of any 
     law, regulation, provision, or other action of any State 
     which purports to regulate insurance producers, including any 
     such law, regulation, provision, or action which purports to 
     regulate unfair trade practices or establish consumer 
     protections, including countersignature laws.

     SEC. 334. COORDINATION WITH OTHER REGULATORS.

       (a) Coordination With State Insurance Regulators.--The 
     Association shall have the authority to--
       (1) issue uniform insurance producer applications and 
     renewal applications that may be used to apply for the 
     issuance or removal of State licenses, while preserving the 
     ability of each State to impose such conditions on the 
     issuance or renewal of a license as are consistent with 
     section 333;
       (2) establish a central clearinghouse through which members 
     of the Association may apply for the issuance or renewal of 
     licenses in multiple States; and
       (3) establish or utilize a national database for the 
     collection of regulatory information concerning the 
     activities of insurance producers.
       (b) Coordination With the National Association of 
     Securities Dealers.--The Association shall coordinate with 
     the National Association of Securities Dealers in order to 
     ease any administrative burdens that fall on persons that are 
     members of both associations, consistent with the purposes of 
     this subtitle and the Federal securities laws.

     SEC. 335. JUDICIAL REVIEW.

       (a) Jurisdiction.--The appropriate United States district 
     court shall have exclusive jurisdiction over litigation 
     involving the Association, including disputes between the 
     Association and its members that arise under this subtitle. 
     Suits brought in State court involving the Association shall 
     be deemed to have arisen under Federal law and therefore be 
     subject to jurisdiction in the appropriate United States 
     district court.
       (b) Exhaustion of Remedies.--An aggrieved person shall be 
     required to exhaust all available administrative remedies 
     before the Association and the NAIC before it may seek 
     judicial review of an Association decision.
       (c) Standards of Review.--The standards set forth in 
     section 553 of title 5, United States Code, shall be applied 
     whenever a rule or bylaw of the Association is under judicial 
     review, and the standards set forth in section 554 of title 
     5, United States Code, shall be applied whenever a 
     disciplinary action of the Association is judicially 
     reviewed.

     SEC. 336. DEFINITIONS.

       For purposes of this subtitle, the following definitions 
     shall apply:
       (1) Home state.--The term ``home State'' means the State in 
     which the insurance producer maintains its principal place of 
     residence and is licensed to act as an insurance producer.
       (2) Insurance.--The term ``insurance'' means any product, 
     other than title insurance, defined or regulated as insurance 
     by the appropriate State insurance regulatory authority.
       (3) Insurance producer.--The term ``insurance producer'' 
     means any insurance agent or broker, surplus lines broker, 
     insurance consultant, limited insurance representative, and 
     any other person that solicits, negotiates, effects, 
     procures, delivers, renews, continues or binds policies of 
     insurance or offers advice, counsel, opinions or services 
     related to insurance.
       (4) State.--The term ``State'' includes any State, 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.
       (5) State law.--The term ``State law'' includes all laws, 
     decisions, rules, regulations, or other State action having 
     the effect of law, of any State. A law of the United States 
     applicable only to the District of Columbia shall be treated 
     as a State law rather than a law of the United States.
           Subtitle D--Rental Car Agency Insurance Activities

     SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.

       (a) Protection Against Retroactive Application of 
     Regulatory and Legal Action.--Except as provided in 
     subsection (b), during the 3-year period beginning on the 
     date of the enactment of this Act, it shall be a presumption 
     that no State law imposes any licensing, appointment, or 
     education requirements on any person who solicits the 
     purchase of or sells insurance connected with, and 
     incidental to, the lease or rental of a motor vehicle.
       (b) Preeminence of State Insurance Law.--No provision of 
     this section shall be construed as altering the validity, 
     interpretation, construction, or effect of--
       (1) any State statute;
       (2) the prospective application of any court judgment 
     interpreting or applying any State statute; or
       (3) the prospective application of any final State 
     regulation, order, bulletin, or other statutorily authorized 
     interpretation or action,
     which, by its specific terms, expressly regulates or exempts 
     from regulation any person who solicits the purchase of or 
     sells insurance connected with, and incidental to, the short-
     term lease or rental of a motor vehicle.
       (c) Scope of Application.--This section shall apply with 
     respect to--
       (1) the lease or rental of a motor vehicle for a total 
     period of 90 consecutive days or less; and
       (2) insurance which is provided in connection with, and 
     incidentally to, such lease or rental for a period of 
     consecutive days not exceeding the lease or rental period.
       (d) Motor Vehicle Defined.--For purposes of this section, 
     the term ``motor vehicle'' has the same meaning as in section 
     13102 of title 49, United States Code.
          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

     SEC. 401. 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--

[[Page H11281]]

       ``(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.
       ``(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 (12 U.S.C. 1467a(o)(5)(E)) is amended by 
     striking ``, except subparagraph (B)'' and inserting ``or 
     (c)(9)(A)(ii)''.
       (c) Rule of Construction for Certain Applications.--
       (1) In general.--In the case of a company that--
       (A) submits an application with the Director of the Office 
     of Thrift Supervision before the date of the enactment of 
     this Act to convert a State-chartered trust company 
     controlled by such company on May 4, 1999, to a savings 
     association; and
       (B) controlled a subsidiary on May 4, 1999, that had 
     submitted an application to the Director on September 2, 
     1998;
     the company (including any subsidiary controlled by such 
     company as of such date of enactment) shall be treated as 
     having filed such conversion application with the Director 
     before May 4, 1999, for purposes of section 10(c)(9)(C) of 
     the Home Owners' Loan Act (as added by subsection (a)).
       (2) Definitions.--For purposes of paragraph (1), the terms 
     ``company'', ``control'', ``savings association'', and 
     ``subsidiary'' have the meanings given those terms in section 
     10 of the Home Owners' Loan Act.
                            TITLE V--PRIVACY
        Subtitle A--Disclosure of Nonpublic Personal Information

     SEC. 501. PROTECTION OF NONPUBLIC PERSONAL INFORMATION.

       (a) Privacy Obligation Policy.--It is the policy of the 
     Congress that each financial institution has an affirmative 
     and continuing obligation to respect the privacy of its 
     customers and to protect the security and confidentiality of 
     those customers' nonpublic personal information.
       (b) Financial Institutions Safeguards.--In furtherance of 
     the policy in subsection (a), each agency or authority 
     described in section 505(a) shall establish appropriate 
     standards for the financial institutions subject to their 
     jurisdiction relating to administrative, technical, and 
     physical safeguards--
       (1) to insure the security and confidentiality of customer 
     records and information;
       (2) to protect against any anticipated threats or hazards 
     to the security or integrity of such records; and
       (3) to protect against unauthorized access to or use of 
     such records or information which could result in substantial 
     harm or inconvenience to any customer.

     SEC. 502. OBLIGATIONS WITH RESPECT TO DISCLOSURES OF PERSONAL 
                   INFORMATION.

       (a) Notice Requirements.--Except as otherwise provided in 
     this subtitle, a financial institution may not, directly or 
     through any affiliate, disclose to a nonaffiliated third 
     party any nonpublic personal information, unless such 
     financial institution provides or has provided to the 
     consumer a notice that complies with section 503.
       (b) Opt Out.--
       (1) In general.--A financial institution may not disclose 
     nonpublic personal information to a nonaffiliated third party 
     unless--
       (A) such financial institution clearly and conspicuously 
     discloses to the consumer, in writing or in electronic form 
     or other form permitted by the regulations prescribed under 
     section 504, that such information may be disclosed to such 
     third party;
       (B) the consumer is given the opportunity, before the time 
     that such information is initially disclosed, to direct that 
     such information not be disclosed to such third party; and
       (C) the consumer is given an explanation of how the 
     consumer can exercise that nondisclosure option.
       (2) Exception.--This subsection shall not prevent a 
     financial institution from providing nonpublic personal 
     information to a nonaffiliated third party to perform 
     services for or functions on behalf of the financial 
     institution, including marketing of the financial 
     institution's own products or services, or financial products 
     or services offered pursuant to joint agreements between two 
     or more financial institutions that comply with the 
     requirements imposed by the regulations prescribed under 
     section 504, if the financial institution fully discloses the 
     providing of such information and enters into a contractual 
     agreement with the third party that requires the third party 
     to maintain the confidentiality of such information.
       (c) Limits on Reuse of Information.--Except as otherwise 
     provided in this subtitle, a nonaffiliated third party that 
     receives from a financial institution nonpublic personal 
     information under this section shall not, directly or through 
     an affiliate of such receiving third party, disclose such 
     information to any other person that is a nonaffiliated third 
     party of both the financial institution and such receiving 
     third party, unless such disclosure would be lawful if made 
     directly to such other person by the financial institution.
       (d) Limitations on the Sharing of Account Number 
     Information for Marketing Purposes.--A financial institution 
     shall not disclose, other than to a consumer reporting 
     agency, an account number or similar form of access number or 
     access code for a credit card account, deposit account, or 
     transaction account of a consumer to any nonaffiliated third 
     party for use in telemarketing, direct mail marketing, or 
     other marketing through electronic mail to the consumer.
       (e) General Exceptions.--Subsections (a) and (b) shall not 
     prohibit the disclosure of nonpublic personal information--
       (1) as necessary to effect, administer, or enforce a 
     transaction requested or authorized by the consumer, or in 
     connection with--
       (A) servicing or processing a financial product or service 
     requested or authorized by the consumer;
       (B) maintaining or servicing the consumer's account with 
     the financial institution, or with another entity as part of 
     a private label credit card program or other extension of 
     credit on behalf of such entity; or
       (C) a proposed or actual securitization, secondary market 
     sale (including sales of servicing rights), or similar 
     transaction related to a transaction of the consumer;
       (2) with the consent or at the direction of the consumer;
       (3)(A) to protect the confidentiality or security of the 
     financial institution's records pertaining to the consumer, 
     the service or product, or the transaction therein; (B) to 
     protect against or prevent actual or potential fraud, 
     unauthorized transactions, claims, or other liability; (C) 
     for required institutional risk control, or for resolving 
     customer disputes or inquiries; (D) to persons holding a 
     legal or beneficial interest relating to the consumer; or (E) 
     to persons acting in a fiduciary or representative capacity 
     on behalf of the consumer;
       (4) to provide information to insurance rate advisory 
     organizations, guaranty funds or agencies, applicable rating 
     agencies of the financial institution, persons assessing the 
     institution's compliance with industry standards, and the 
     institution's attorneys, accountants, and auditors;
       (5) to the extent specifically permitted or required under 
     other provisions of law and in accordance with the Right to 
     Financial Privacy Act of 1978, to law enforcement agencies 
     (including a Federal functional regulator, the Secretary of 
     the Treasury with respect to subchapter II of chapter 53 of 
     title 31, United States Code, and chapter 2 of title I of 
     Public Law 91-508 (12 U.S.C. 1951-1959), a State insurance 
     authority, or the Federal Trade Commission), self-regulatory 
     organizations, or for an investigation on a matter related to 
     public safety;
       (6)(A) to a consumer reporting agency in accordance with 
     the Fair Credit Reporting Act, or (B) from a consumer report 
     reported by a consumer reporting agency;
       (7) in connection with a proposed or actual sale, merger, 
     transfer, or exchange of all or a portion of a business or 
     operating unit if the disclosure of nonpublic personal 
     information concerns solely consumers of such business or 
     unit; or

[[Page H11282]]

       (8) to comply with Federal, State, or local laws, rules, 
     and other applicable legal requirements; to comply with a 
     properly authorized civil, criminal, or regulatory 
     investigation or subpoena or summons by Federal, State, or 
     local authorities; or to respond to judicial process or 
     government regulatory authorities having jurisdiction over 
     the financial institution for examination, compliance, or 
     other purposes as authorized by law.

     SEC. 503. DISCLOSURE OF INSTITUTION PRIVACY POLICY.

       (a) Disclosure Required.--At the time of establishing a 
     customer relationship with a consumer and not less than 
     annually during the continuation of such relationship, a 
     financial institution shall provide a clear and conspicuous 
     disclosure to such consumer, in writing or in electronic form 
     or other form permitted by the regulations prescribed under 
     section 504, of such financial institution's policies and 
     practices with respect to--
       (1) disclosing nonpublic personal information to affiliates 
     and nonaffiliated third parties, consistent with section 502, 
     including the categories of information that may be 
     disclosed;
       (2) disclosing nonpublic personal information of persons 
     who have ceased to be customers of the financial institution; 
     and
       (3) protecting the nonpublic personal information of 
     consumers.
     Such disclosures shall be made in accordance with the 
     regulations prescribed under section 504.
       (b) Information To Be Included.--The disclosure required by 
     subsection (a) shall include--
       (1) the policies and practices of the institution with 
     respect to disclosing nonpublic personal information to 
     nonaffiliated third parties, other than agents of the 
     institution, consistent with section 502 of this subtitle, 
     and including--
       (A) the categories of persons to whom the information is or 
     may be disclosed, other than the persons to whom the 
     information may be provided pursuant to section 502(e); and
       (B) the policies and practices of the institution with 
     respect to disclosing of nonpublic personal information of 
     persons who have ceased to be customers of the financial 
     institution;
       (2) the categories of nonpublic personal information that 
     are collected by the financial institution;
       (3) the policies that the institution maintains to protect 
     the confidentiality and security of nonpublic personal 
     information in accordance with section 501; and
       (4) the disclosures required, if any, under section 
     603(d)(2)(A)(iii) of the Fair Credit Reporting Act.

     SEC. 504. RULEMAKING.

       (a) Regulatory Authority.--
       (1) Rulemaking.--The Federal banking agencies, the National 
     Credit Union Administration, the Secretary of the Treasury, 
     the Securities and Exchange Commission, and the Federal Trade 
     Commission shall each prescribe, after consultation as 
     appropriate with representatives of State insurance 
     authorities designated by the National Association of 
     Insurance Commissioners, such regulations as may be necessary 
     to carry out the purposes of this subtitle with respect to 
     the financial institutions subject to their jurisdiction 
     under section 505.
       (2) Coordination, consistency, and comparability.--Each of 
     the agencies and authorities required under paragraph (1) to 
     prescribe regulations shall consult and coordinate with the 
     other such agencies and authorities for the purposes of 
     assuring, to the extent possible, that the regulations 
     prescribed by each such agency and authority are consistent 
     and comparable with the regulations prescribed by the other 
     such agencies and authorities.
       (3) Procedures and deadline.--Such regulations shall be 
     prescribed in accordance with applicable requirements of 
     title 5, United States Code, and shall be issued in final 
     form not later than 6 months after the date of the enactment 
     of this Act.
       (b) Authority To Grant Exceptions.--The regulations 
     prescribed under subsection (a) may include such additional 
     exceptions to subsections (a) through (d) of section 502 as 
     are deemed consistent with the purposes of this subtitle.

     SEC. 505. ENFORCEMENT.

       (a) In General.--This subtitle and the regulations 
     prescribed thereunder shall be enforced by the Federal 
     functional regulators, the State insurance authorities, and 
     the Federal Trade Commission with respect to financial 
     institutions and other persons subject to their jurisdiction 
     under applicable law, as follows:
       (1) Under section 8 of the Federal Deposit Insurance Act, 
     in the case of--
       (A) national banks, Federal branches and Federal agencies 
     of foreign banks, and any subsidiaries of such entities 
     (except brokers, dealers, persons providing insurance, 
     investment companies, and investment advisers), by the Office 
     of the Comptroller of the Currency;
       (B) 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, organizations 
     operating under section 25 or 25A of the Federal Reserve Act, 
     and bank holding companies and their nonbank subsidiaries or 
     affiliates (except brokers, dealers, persons providing 
     insurance, investment companies, and investment advisers), by 
     the Board of Governors of the Federal Reserve System;
       (C) banks insured by the Federal Deposit Insurance 
     Corporation (other than members of the Federal Reserve 
     System), insured State branches of foreign banks, and any 
     subsidiaries of such entities (except brokers, dealers, 
     persons providing insurance, investment companies, and 
     investment advisers), by the Board of Directors of the 
     Federal Deposit Insurance Corporation; and
       (D) savings associations the deposits of which are insured 
     by the Federal Deposit Insurance Corporation, and any 
     subsidiaries of such savings associations (except brokers, 
     dealers, persons providing insurance, investment companies, 
     and investment advisers), by the Director of the Office of 
     Thrift Supervision.
       (2) Under the Federal Credit Union Act, by the Board of the 
     National Credit Union Administration with respect to any 
     federally insured credit union, and any subsidiaries of such 
     an entity.
       (3) Under the Securities Exchange Act of 1934, by the 
     Securities and Exchange Commission with respect to any broker 
     or dealer.
       (4) Under the Investment Company Act of 1940, by the 
     Securities and Exchange Commission with respect to investment 
     companies.
       (5) Under the Investment Advisers Act of 1940, by the 
     Securities and Exchange Commission with respect to investment 
     advisers registered with the Commission under such Act.
       (6) Under State insurance law, in the case of any person 
     engaged in providing insurance, by the applicable State 
     insurance authority of the State in which the person is 
     domiciled, subject to section 104 of this Act.
       (7) Under the Federal Trade Commission Act, by the Federal 
     Trade Commission for any other financial institution or other 
     person that is not subject to the jurisdiction of any agency 
     or authority under paragraphs (1) through (6) of this 
     subsection.
       (b) Enforcement of Section 501.--
       (1) In general.--Except as provided in paragraph (2), the 
     agencies and authorities described in subsection (a) shall 
     implement the standards prescribed under section 501(b) in 
     the same manner, to the extent practicable, as standards 
     prescribed pursuant to section 39(a) of the Federal Deposit 
     Insurance Act are implemented pursuant to such section.
       (2) Exception.--The agencies and authorities described in 
     paragraphs (3), (4), (5), (6), and (7) of subsection (a) 
     shall implement the standards prescribed under section 501(b) 
     by rule with respect to the financial institutions and other 
     persons subject to their respective jurisdictions under 
     subsection (a).
       (c) Absence of State Action.--If a State insurance 
     authority fails to adopt regulations to carry out this 
     subtitle, such State shall not be eligible to override, 
     pursuant to section 47(g)(2)(B)(iii) of the Federal Deposit 
     Insurance Act, the insurance customer protection regulations 
     prescribed by a Federal banking agency under section 47(a) of 
     such Act.
       (d) Definitions.--The terms used in subsection (a)(1) that 
     are not defined in this subtitle or otherwise defined in 
     section 3(s) of the Federal Deposit Insurance Act shall 
     have the same meaning as given in section 1(b) of the 
     International Banking Act of 1978.

     SEC. 506. PROTECTION OF FAIR CREDIT REPORTING ACT.

       (a) Amendment.--Section 621 of the Fair Credit Reporting 
     Act (15 U.S.C. 1681s) is amended--
       (1) in subsection (d), by striking everything following the 
     end of the second sentence; and
       (2) by striking subsection (e) and inserting the following:
       ``(e) Regulatory Authority.--
       ``(1) The Federal banking agencies referred to in 
     paragraphs (1) and (2) of subsection (b) shall jointly 
     prescribe such regulations as necessary to carry out the 
     purposes of this Act with respect to any persons identified 
     under paragraphs (1) and (2) of subsection (b), and the Board 
     of Governors of the Federal Reserve System shall have 
     authority to prescribe regulations consistent with such joint 
     regulations with respect to bank holding companies and 
     affiliates (other than depository institutions and consumer 
     reporting agencies) of such holding companies.
       ``(2) The Board of the National Credit Union Administration 
     shall prescribe such regulations as necessary to carry out 
     the purposes of this Act with respect to any persons 
     identified under paragraph (3) of subsection (b).''.
       (b) Conforming Amendment.--Section 621(a) of the Fair 
     Credit Reporting Act (15 U.S.C. 1681s(a)) is amended by 
     striking paragraph (4).
       (c) Relation to Other Provisions.--Except for the 
     amendments made by subsections (a) and (b), nothing in this 
     title shall be construed to modify, limit, or supersede the 
     operation of the Fair Credit Reporting Act, and no inference 
     shall be drawn on the basis of the provisions of this title 
     regarding whether information is transaction or experience 
     information under section 603 of such Act.

     SEC. 507. RELATION TO STATE LAWS.

       (a) In General.--This subtitle and the amendments made by 
     this subtitle shall not be construed as superseding, 
     altering, or affecting any statute, regulation, order, or 
     interpretation in effect in any State, except to the extent 
     that such statute, regulation, order, or interpretation is 
     inconsistent with the provisions of this subtitle, 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 subtitle if the protection such statute, regulation, 
     order, or interpretation affords any person is greater than 
     the protection provided under this subtitle and the 
     amendments made by this subtitle, as determined by the 
     Federal Trade Commission, after consultation with the agency 
     or authority with jurisdiction under section 505(a) of either 
     the person that initiated the complaint or that is the 
     subject of the complaint, on its own motion or upon the 
     petition of any interested party.

[[Page H11283]]

     SEC. 508. STUDY OF INFORMATION SHARING AMONG FINANCIAL 
                   AFFILIATES.

       (a) In General.--The Secretary of the Treasury, in 
     conjunction with the Federal functional regulators and the 
     Federal Trade Commission, shall conduct a study of 
     information sharing practices among financial institutions 
     and their affiliates. Such study shall include--
       (1) the purposes for the sharing of confidential customer 
     information with affiliates or with nonaffiliated third 
     parties;
       (2) the extent and adequacy of security protections for 
     such information;
       (3) the potential risks for customer privacy of such 
     sharing of information;
       (4) the potential benefits for financial institutions and 
     affiliates of such sharing of information;
       (5) the potential benefits for customers of such sharing of 
     information;
       (6) the adequacy of existing laws to protect customer 
     privacy;
       (7) the adequacy of financial institution privacy policy 
     and privacy rights disclosure under existing law;
       (8) the feasibility of different approaches, including opt-
     out and opt-in, to permit customers to direct that 
     confidential information not be shared with affiliates and 
     nonaffiliated third parties; and
       (9) the feasibility of restricting sharing of information 
     for specific uses or of permitting customers to direct the 
     uses for which information may be shared.
       (b) Consultation.--The Secretary shall consult with 
     representatives of State insurance authorities designated by 
     the National Association of Insurance Commissioners, and also 
     with financial services industry, consumer organizations and 
     privacy groups, and other representatives of the general 
     public, in formulating and conducting the study required by 
     subsection (a).
       (c) Report.--On or before January 1, 2002, the Secretary 
     shall submit a report to the Congress containing the findings 
     and conclusions of the study required under subsection (a), 
     together with such recommendations for legislative or 
     administrative action as may be appropriate.

     SEC. 509. DEFINITIONS.

       As used in this subtitle:
       (1) Federal banking agency.--The term ``Federal banking 
     agency'' has the same meaning as given in section 3 of the 
     Federal Deposit Insurance Act.
       (2) Federal functional regulator.--The term ``Federal 
     functional regulator'' means--
       (A) the Board of Governors of the Federal Reserve System;
       (B) the Office of the Comptroller of the Currency;
       (C) the Board of Directors of the Federal Deposit Insurance 
     Corporation;
       (D) the Director of the Office of Thrift Supervision;
       (E) the National Credit Union Administration Board; and
       (F) the Securities and Exchange Commission.
       (3) Financial institution.--
       (A) In general.--The term ``financial institution'' means 
     any institution the business of which is engaging in 
     financial activities as described in section 4(k) of the Bank 
     Holding Company Act of 1956.
       (B) Persons subject to cftc regulation.--Notwithstanding 
     subparagraph (A), the term ``financial institution'' does not 
     include any person or entity with respect to any financial 
     activity that is subject to the jurisdiction of the Commodity 
     Futures Trading Commission under the Commodity Exchange Act.
       (C) Farm credit institutions.--Notwithstanding subparagraph 
     (A), the term ``financial institution'' does not include the 
     Federal Agricultural Mortgage Corporation or any entity 
     chartered and operating under the Farm Credit Act of 1971.
       (D) Other secondary market institutions.--Notwithstanding 
     subparagraph (A), the term ``financial institution'' does not 
     include institutions chartered by Congress specifically to 
     engage in transactions described in section 502(e)(1)(C), as 
     long as such institutions do not sell or transfer nonpublic 
     personal information to a nonaffiliated third party.
       (4) Nonpublic personal information.--
       (A) The term ``nonpublic personal information'' means 
     personally identifiable financial information--
       (i) provided by a consumer to a financial institution;
       (ii) resulting from any transaction with the consumer or 
     any service performed for the consumer; or
       (iii) otherwise obtained by the financial institution.
       (B) Such term does not include publicly available 
     information, as such term is defined by the regulations 
     prescribed under section 504.
       (C) Notwithstanding subparagraph (B), such term--
       (i) shall include any list, description, or other grouping 
     of consumers (and publicly available information pertaining 
     to them) that is derived using any nonpublic personal 
     information other than publicly available information; but
       (ii) shall not include any list, description, or other 
     grouping of consumers (and publicly available information 
     pertaining to them) that is derived without using any 
     nonpublic personal information.
       (5) Nonaffiliated third party.--The term ``nonaffiliated 
     third party'' means any entity that is not an affiliate of, 
     or related by common ownership or affiliated by corporate 
     control with, the financial institution, but does not include 
     a joint employee of such institution.
       (6) Affiliate.--The term ``affiliate'' means any company 
     that controls, is controlled by, or is under common control 
     with another company.
       (7) Necessary to effect, administer, or enforce.--The term 
     ``as necessary to effect, administer, or enforce the 
     transaction'' means--
       (A) the disclosure is required, or is a usual, appropriate, 
     or acceptable method, to carry out the transaction or the 
     product or service business of which the transaction is a 
     part, and record or service or maintain the consumer's 
     account in the ordinary course of providing the financial 
     service or financial product, or to administer or service 
     benefits or claims relating to the transaction or the product 
     or service business of which it is a part, and includes--
       (i) providing the consumer or the consumer's agent or 
     broker with a confirmation, statement, or other record of the 
     transaction, or information on the status or value of the 
     financial service or financial product; and
       (ii) the accrual or recognition of incentives or bonuses 
     associated with the transaction that are provided by the 
     financial institution or any other party;
       (B) the disclosure is required, or is one of the lawful or 
     appropriate methods, to enforce the rights of the financial 
     institution or of other persons engaged in carrying out the 
     financial transaction, or providing the product or service;
       (C) the disclosure is required, or is a usual, appropriate, 
     or acceptable method, for insurance underwriting at the 
     consumer's request or for reinsurance purposes, or for any of 
     the following purposes as they relate to a consumer's 
     insurance: account administration, reporting, investigating, 
     or preventing fraud or material misrepresentation, processing 
     premium payments, processing insurance claims, administering 
     insurance benefits (including utilization review activities), 
     participating in research projects, or as otherwise required 
     or specifically permitted by Federal or State law; or
       (D) the disclosure is required, or is a usual, appropriate 
     or acceptable method, in connection with--
       (i) the authorization, settlement, billing, processing, 
     clearing, transferring, reconciling, or collection of amounts 
     charged, debited, or otherwise paid using a debit, credit or 
     other payment card, check, or account number, or by other 
     payment means;
       (ii) the transfer of receivables, accounts or interests 
     therein; or
       (iii) the audit of debit, credit or other payment 
     information.
       (8) State insurance authority.--The term ``State insurance 
     authority'' means, in the case of any person engaged in 
     providing insurance, the State insurance authority of the 
     State in which the person is domiciled.
       (9) Consumer.--The term ``consumer'' means an individual 
     who obtains, from a financial institution, financial products 
     or services which are to be used primarily for personal, 
     family, or household purposes, and also means the legal 
     representative of such an individual.
       (10) Joint agreement.--The term ``joint agreement'' means a 
     formal written contract pursuant to which two or more 
     financial institutions jointly offer, endorse, or sponsor a 
     financial product or service, and as may be further defined 
     in the regulations prescribed under section 504.
       (11) Customer relationship.--The term ``time of 
     establishing a customer relationship'' shall be defined by 
     the regulations prescribed under section 504, and shall, in 
     the case of a financial institution engaged in extending 
     credit directly to consumers to finance purchases of goods or 
     services, mean the time of establishing the credit 
     relationship with the consumer.

     SEC. 510. EFFECTIVE DATE.

       This subtitle shall take effect 6 months after the date on 
     which rules are required to be prescribed under section 
     504(a)(3), except--
       (1) to the extent that a later date is specified in the 
     rules prescribed under section 504; and
       (2) that sections 504 and 506 shall be effective upon 
     enactment.
         Subtitle B--Fraudulent Access to Financial Information

     SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF 
                   FINANCIAL INSTITUTIONS.

       (a) Prohibition on Obtaining Customer Information by False 
     Pretenses.--It shall be a violation of this subtitle 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--
       (1) by making a false, fictitious, or fraudulent statement 
     or representation to an officer, employee, or agent of a 
     financial institution;
       (2) by making a false, fictitious, or fraudulent statement 
     or representation to a customer of a financial institution; 
     or
       (3) by 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.
       (b) Prohibition on Solicitation of a Person To Obtain 
     Customer Information From Financial Institution Under False 
     Pretenses.--It shall be a violation of this subtitle to 
     request a person to obtain customer information of a 
     financial institution, 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 so as 
     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--

[[Page H11284]]

       (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 Insurance Institutions for 
     Investigation of Insurance Fraud.--No provision of this 
     section shall be construed so as to prevent any insurance 
     institution, or any officer, employee, or agency of an 
     insurance institution, from obtaining information as part of 
     an insurance investigation into criminal activity, fraud, 
     material misrepresentation, or material nondisclosure that is 
     authorized for such institution under State law, regulation, 
     interpretation, or order.
       (f) Nonapplicability to Certain Types of Customer 
     Information of Financial Institutions.--No provision of this 
     section shall be construed so as 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).
       (g) Nonapplicability to Collection of Child Support 
     Judgments.--No provision of this section shall be construed 
     to prevent any State-licensed private investigator, or any 
     officer, employee, or agent of such private investigator, 
     from obtaining customer information of a financial 
     institution, to the extent reasonably necessary to collect 
     child support from a person adjudged to have been delinquent 
     in his or her obligations by a Federal or State court, and to 
     the extent that such action by a State-licensed private 
     investigator is not unlawful under any other Federal or State 
     law or regulation, and has been authorized by an order or 
     judgment of a court of competent jurisdiction.

     SEC. 522. ADMINISTRATIVE ENFORCEMENT.

       (a) Enforcement by Federal Trade Commission.--Except as 
     provided in subsection (b), compliance with this subtitle 
     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 such Act.
       (b) Enforcement by Other Agencies in Certain Cases.--
       (1) In general.--Compliance with this subtitle 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 subtitle 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 subtitle 
     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 subtitle, any other 
     authority conferred on such agency by law.

     SEC. 523. CRIMINAL PENALTY.

       (a) In General.--Whoever knowingly and intentionally 
     violates, or knowingly and intentionally attempts to violate, 
     section 521 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 521 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. 524. RELATION TO STATE LAWS.

       (a) In General.--This subtitle 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 subtitle, 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 subtitle if the protection such statute, regulation, 
     order, or interpretation affords any person is greater than 
     the protection provided under this subtitle as determined by 
     the Federal Trade Commission, after consultation with the 
     agency or authority with jurisdiction under section 522 of 
     either the person that initiated the complaint or that is the 
     subject of the complaint, on its own motion or upon the 
     petition of any interested party.

     SEC. 525. AGENCY GUIDANCE.

       In furtherance of the objectives of this subtitle, each 
     Federal banking agency (as defined in section 3(z) of the 
     Federal Deposit Insurance Act), the National Credit Union 
     Administration, and the Securities and Exchange Commission or 
     self-regulatory organizations, as appropriate, shall review 
     regulations and guidelines applicable to financial 
     institutions under their respective jurisdictions and shall 
     prescribe such revisions to such regulations and guidelines 
     as may be necessary to ensure that such financial 
     institutions have policies, procedures, and controls in place 
     to prevent the unauthorized disclosure of customer financial 
     information and to deter and detect activities proscribed 
     under section 521.

     SEC. 526. REPORTS.

       (a) Report to the Congress.--Before the end of the 18-month 
     period beginning on the date of the enactment of this Act, 
     the Comptroller General, in consultation with the Federal 
     Trade Commission, Federal banking agencies, the National 
     Credit Union Administration, the Securities and Exchange 
     Commission, appropriate Federal law enforcement agencies, and 
     appropriate State insurance regulators, shall submit to the 
     Congress a report on the following:
       (1) The efficacy and adequacy of the remedies provided in 
     this subtitle in addressing attempts to obtain financial 
     information by fraudulent means or by false pretenses.
       (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.
       (b) Annual Report by Administering Agencies.--The Federal 
     Trade Commission and the Attorney General shall submit to 
     Congress an annual report on number and disposition of all 
     enforcement actions taken pursuant to this subtitle.

     SEC. 527. DEFINITIONS.

       For purposes of this subtitle, 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 or for 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 broker or dealer, any investment adviser or 
     investment company, any insurance company, 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) of the Consumer Credit 
     Protection Act).
       (C) Securities institutions.--For purposes of subparagraph 
     (B)--
       (i) the terms ``broker'' and ``dealer'' have the same 
     meanings as given in section 3 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78c);
       (ii) the term ``investment adviser'' has the same meaning 
     as given in section 202(a)(11) of the Investment Advisers Act 
     of 1940 (15 U.S.C. 80b-2(a)); and
       (iii) the term ``investment company'' has the same meaning 
     as given in section 3 of the Investment Company Act of 1940 
     (15 U.S.C. 80a-3).
       (D) Certain persons and entities specifically excluded.--
     The term ``financial institution'' does not include any 
     person or entity with respect to any financial activity that 
     is subject to the jurisdiction of the Commodity Futures 
     Trading Commission under the Commodity Exchange Act and does 
     not include the Federal Agricultural Mortgage Corporation or 
     any entity chartered and operating under the Farm Credit Act 
     of 1971.
       (E) Further definition by regulation.--The Federal Trade 
     Commission, after consultation with Federal banking agencies 
     and the Securities and Exchange Commission, may prescribe 
     regulations clarifying or describing the types of 
     institutions which shall be treated as financial institutions 
     for purposes of this subtitle.
         TITLE VI--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

     SEC. 601. SHORT TITLE.

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

     SEC. 602. 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

[[Page H11285]]

     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. 603. SAVINGS ASSOCIATION 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.--After the end of 
     the 6-month period beginning on the date of the enactment of 
     the Federal Home Loan Bank System Modernization Act of 1999, 
     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.''.

     SEC. 604. 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 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.''.

       (c) Qualified Thrift Lender Status.--Section 10 of the 
     Federal Home Loan Bank Act (12 U.S.C. 1430) is amended by 
     striking the 1st of the 2 subsections designated as 
     subsection (e).
       (d) Federal Home Loan Bank Access.--Section 10(m)(3)(B) of 
     the Home Owners' Loan Act (12 U.S.C. 1467a(m)(3)(B)) is 
     amended--
       (1) in clause (i), by striking subclause (III) and 
     redesignating subclause (IV) as subclause (III); and
       (2) by striking clause (ii) and inserting the following:
       ``(ii) Additional restrictions effective after 3 years.--
     Beginning 3 years after the date on which a savings 
     association should have become a qualified thrift lender, or 
     the date on which the savings association ceases to be a 
     qualified thrift lender, as applicable, the savings 
     association shall not retain any investment (including an 
     investment in any subsidiary) or engage, directly or 
     indirectly, in any activity, unless that investment or 
     activity--

       ``(I) would be permissible for the savings association if 
     it were a national bank; and
       ``(II) is permissible for the savings association as a 
     savings association.''.

     SEC. 605. 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. 606. MANAGEMENT OF BANKS.

       (a) Board of Directors.--Section 7 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(d)) is amended--
       (1) in subsection (a), by striking ``and bona fide 
     residents of the district in which such bank is located'' and 
     inserting ``, and each of whom shall be either a bona fide 
     resident of the district in which such bank is located or an 
     officer or director of a member of such bank located in that 
     district'';
       (2) in subsection (d), by striking the 1st sentence and 
     inserting the following: ``The term of each director, whether 
     elected or appointed, shall be 3 years. The board of 
     directors of each Federal home loan bank and the Finance 
     Board shall adjust the terms of members first elected or 
     appointed after the date of the enactment of the Federal Home 
     Loan Bank System Modernization Act of 1999 to ensure that the 
     terms of the members of the board of directors are staggered 
     with approximately \1/3\ of the terms expiring each year.''; 
     and
       (3) by striking subsection (g) and inserting the following:
       ``(g) Chairperson and Vice Chairperson.--
       ``(1) Election.--The Chairperson and Vice Chairperson of 
     the board of directors of each Federal home loan bank shall 
     be elected by a majority of all the directors of such bank 
     from among the directors of the bank.
       ``(2) Terms.--The term of office of the Chairperson and the 
     Vice Chairperson of the board of directors of a Federal home 
     loan bank shall be 2 years.
       ``(3) Acting chairperson.--In the event of a vacancy in the 
     position of Chairperson of the board of directors or during 
     the absence or disability of the Chairperson, the Vice 
     Chairperson shall act as Chairperson.
       ``(4) Procedures.--The board of directors of each Federal 
     home loan bank shall establish procedures, in the bylaws of 
     such board, for designating an acting chairperson for any 
     period during which the Chairperson and the Vice Chairperson 
     are not available to carry out the requirements of that 
     position for any reason and removing any person from any such 
     position for good cause.''.
       (b) Compensation.--Section 7(i) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) is amended--
       (1) by striking ``(i) Each bank may pay its directors'' and 
     inserting ``(i) Directors' Compensation.--
       ``(1) In general.--Subject to paragraph (2), each bank may 
     pay its directors''; and
       (2) by adding at the end the following new paragraph:
       ``(2) Limitation.--
       ``(A) In general.--The annual salary of each of the 
     following members of the board of directors of a Federal home 
     loan bank may not exceed the amount specified:

The annual compensation may not exceed--
  Chairperson..............................................$25,000 ....

  Vice Chairperson.........................................$20,000 ....

  All other members........................................$15,000.....

       ``(B) Adjustment.--Beginning January 1, 2001, each dollar 
     amount referred to in the table in subparagraph (A) 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.
       ``(C) Expenses.--Subparagraph (A) shall not be construed as 
     prohibiting the reimbursement of expenses incurred by members 
     of the board of directors of any Federal home loan bank in 
     connection with service on the board of directors.''.
       (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'' 
     the first 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'' where such term 
     appears in the penultimate sentence 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

[[Page H11286]]

     (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 an unsafe or unsound 
     practice in conducting the business of the bank, or 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 subsection (c) 
     or (f) of section 1371 of the Federal Housing Enterprises 
     Financial Safety and Soundness Act of 1992. Such authority 
     includes the same authority to issue an order requiring a 
     party to take affirmative action to correct conditions 
     resulting from violations or practices 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 
     subtitle C (other than section 1371) of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992.
       ``(6) To address any insufficiencies in capital levels 
     resulting from the application of section 5(f) of the Home 
     Owners' Loan Act.
       ``(7) To act in its own name and through its own 
     attorneys--
       ``(A) in enforcing any provision of this Act or any 
     regulation promulgated under this Act; or
       ``(B) in any action, suit, or proceeding to which the 
     Finance Board is a party that involves the Board's regulation 
     or supervision of any Federal home loan bank.''.
       (2) Technical amendment.--Section 111 of Public Law 93-495 
     (12 U.S.C. 250) is amended by striking ``Federal Home Loan 
     Bank Board,'' and inserting ``Director of the Office of 
     Thrift Supervision, the Federal Housing Finance Board,''.
       (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) by striking the second sentence; 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. 607. 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, 20.0 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, in consultation with the Secretary of the 
     Treasury.
       ``(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 20.0 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 20.0 
     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 January 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. 608. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

       Section 6 of the Federal Home Loan Bank Act (12 U.S.C. 
     1426) is amended to read as follows:

     ``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

       ``(a) Regulations.--
       ``(1) Capital standards.--Not later than 1 year after the 
     date of the enactment of the Federal Home Loan Bank System 
     Modernization Act of 1999, the Finance Board shall issue 
     regulations prescribing uniform capital standards applicable 
     to each Federal home loan bank, which shall require each such 
     bank to meet--
       ``(A) the leverage requirement specified in paragraph (2); 
     and
       ``(B) the risk-based capital requirements, in accordance 
     with paragraph (3).
       ``(2) Leverage requirement.--
       ``(A) In general.--The leverage requirement shall require 
     each Federal home loan bank to maintain a minimum amount of 
     total capital based on the total assets of the bank and shall 
     be 5 percent.
       ``(B) Treatment of stock and retained earnings.--In 
     determining compliance with the minimum leverage ratio 
     established under subparagraph (A), the paid-in value of the 
     outstanding Class B stock and the amount of retained earnings 
     shall be multiplied by 1.5, and such higher amounts shall be 
     deemed to be capital for purposes of meeting the 5 percent 
     minimum leverage ratio, except that a Federal home loan 
     bank's total capital (determined without taking into account 
     any such multiplier) shall not be less than 4 percent of the 
     total assets of the bank.
       ``(3) Risk-based capital standards.--
       ``(A) In general.--Each Federal home loan bank shall 
     maintain permanent capital in an amount that is sufficient, 
     as determined in accordance with the regulations of the 
     Finance Board, to meet--
       ``(i) the credit risk to which the Federal home loan bank 
     is subject; and
       ``(ii) the market risk, including interest rate risk, to 
     which the Federal home loan bank is subject, based on a 
     stress test established by the Finance Board that rigorously 
     tests for changes in market variables, including changes in 
     interest rates, rate volatility, and changes in the shape of 
     the yield curve.
       ``(B) Consideration of other risk-based standards.--In 
     establishing the risk-based standard under subparagraph 
     (A)(ii), the Finance Board shall take due consideration of 
     any risk-based capital test established pursuant to section 
     1361 of the Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992 (12 U.S.C. 4611) for the enterprises 
     (as defined in that Act), with such modifications as the 
     Finance Board determines to be appropriate to reflect 
     differences in operations between the Federal home loan banks 
     and those enterprises.
       ``(4) Other regulatory requirements.--The regulations 
     issued by the Finance Board under paragraph (1) shall--
       ``(A) permit each Federal home loan bank to issue, with 
     such rights, terms, and preferences, not inconsistent with 
     this Act and the regulations issued hereunder, as the board 
     of directors of that bank may approve, any 1 or more of--
       ``(i) Class A stock, which shall be redeemable in cash and 
     at par 6 months following submission by a member of a written 
     notice of its intent to redeem such shares; and
       ``(ii) Class B stock, which shall be redeemable in cash and 
     at par 5 years following submission by a member of a written 
     notice of its intent to redeem such shares;
       ``(B) provide that the stock of a Federal home loan bank 
     may be issued to and held by only members of the bank, and 
     that a bank may not issue any stock other than as provided in 
     this section;
       ``(C) prescribe the manner in which stock of a Federal home 
     loan bank may be sold, transferred, redeemed, or repurchased; 
     and
       ``(D) provide the manner of disposition of outstanding 
     stock held by, and the liquidation of any claims of the 
     Federal home loan bank against, an institution that ceases to 
     be a member of the bank, through merger or otherwise, or that 
     provides notice of intention to withdraw from membership in 
     the bank.
       ``(5) Definitions of capital.--For purposes of determining 
     compliance with the capital standards established under this 
     subsection--
       ``(A) permanent capital of a Federal home loan bank shall 
     include--
       ``(i) the amounts paid for the Class B stock; and
       ``(ii) the retained earnings of the bank (as determined in 
     accordance with generally accepted accounting principles); 
     and
       ``(B) total capital of a Federal home loan bank shall 
     include--
       ``(i) permanent capital;
       ``(ii) the amounts paid for the Class A stock;
       ``(iii) consistent with generally accepted accounting 
     principles, and subject to the regulation of the Finance 
     Board, a general allowance

[[Page H11287]]

     for losses, which may not include any reserves or allowances 
     made or held against specific assets; and
       ``(iv) any other amounts from sources available to absorb 
     losses incurred by the bank that the Finance Board determines 
     by regulation to be appropriate to include in determining 
     total capital.
       ``(6) Transition period.--Notwithstanding any other 
     provision of this Act, the requirements relating to purchase 
     and retention of capital stock of a Federal home loan bank by 
     any member thereof in effect on the day before the date of 
     the enactment of the Federal Home Loan Bank System 
     Modernization Act of 1999, shall continue in effect with 
     respect to each Federal home loan bank until the regulations 
     required by this subsection have taken effect and the capital 
     structure plan required by subsection (b) has been approved 
     by the Finance Board and implemented by such bank.
       ``(b) Capital Structure Plan.--
       ``(1) Approval of plans.--Not later than 270 days after the 
     date of publication by the Finance Board of final regulations 
     in accordance with subsection (a), the board of directors of 
     each Federal home loan bank shall submit for Finance Board 
     approval a plan establishing and implementing a capital 
     structure for such bank that--
       ``(A) the board of directors determines is best suited for 
     the condition and operation of the bank and the interests of 
     the members of the bank;
       ``(B) meets the requirements of subsection (c); and
       ``(C) meets the minimum capital standards and requirements 
     established under subsection (a) and other regulations 
     prescribed by the Finance Board.
       ``(2) Approval of modifications.--The board of directors of 
     a Federal home loan bank shall submit to the Finance Board 
     for approval any modifications that the bank proposes to make 
     to an approved capital structure plan.
       ``(c) Contents of Plan.--The capital structure plan of each 
     Federal home loan bank shall contain provisions addressing 
     each of the following:
       ``(1) Minimum investment.--
       ``(A) In general.--Each capital structure plan of a Federal 
     home loan bank shall require each member of the bank to 
     maintain a minimum investment in the stock of the bank, the 
     amount of which shall be determined in a manner to be 
     prescribed by the board of directors of each bank and to be 
     included as part of the plan.
       ``(B) Investment alternatives.--
       ``(i) In general.--In establishing the minimum investment 
     required for each member under subparagraph (A), a Federal 
     home loan bank may, in its discretion, include any 1 or more 
     of the requirements referred to in clause (ii), or any other 
     provisions approved by the Finance Board.
       ``(ii) Authorized requirements.--A requirement is referred 
     to in this clause if it is a requirement for--

       ``(I) a stock purchase based on a percentage of the total 
     assets of a member; or
       ``(II) a stock purchase based on a percentage of the 
     outstanding advances from the bank to the member.

       ``(C) Minimum amount.--Each capital structure plan of a 
     Federal home loan bank shall require that the minimum stock 
     investment established for members shall be set at a level 
     that is sufficient for the bank to meet the minimum capital 
     requirements established by the Finance Board under 
     subsection (a).
       ``(D) Adjustments to minimum required investment.--The 
     capital structure plan of each Federal home loan bank shall 
     impose a continuing obligation on the board of directors of 
     the bank to review and adjust the minimum investment required 
     of each member of that bank, as necessary to ensure that the 
     bank remains in compliance with applicable minimum capital 
     levels established by the Finance Board, and shall require 
     each member to comply promptly with any adjustments to the 
     required minimum investment.
       ``(2) Transition rule.--
       ``(A) In general.--The capital structure plan of each 
     Federal home loan bank shall specify the date on which it 
     shall take effect, and may provide for a transition period of 
     not longer than 3 years to allow the bank to come into 
     compliance with the capital requirements prescribed under 
     subsection (a), and to allow any institution that was a 
     member of the bank on the date of the enactment of the 
     Federal Home Loan Bank System Modernization Act of 1999, to 
     come into compliance with the minimum investment required 
     pursuant to the plan.
       ``(B) Interim purchase requirements.--The capital structure 
     plan of a Federal home loan bank may allow any member 
     referred to in subparagraph (A) that would be required by the 
     terms of the capital structure plan to increase its 
     investment in the stock of the bank to do so in periodic 
     installments during the transition period.
       ``(3) Disposition of shares.--The capital structure plan of 
     a Federal home loan bank shall provide for the manner of 
     disposition of any stock held by a member of that bank that 
     terminates its membership or that provides notice of its 
     intention to withdraw from membership in that bank.
       ``(4) Classes of stock.--
       ``(A) In general.--The capital structure plan of a Federal 
     home loan bank shall afford each member of that bank the 
     option of maintaining its required investment in the bank 
     through the purchase of any combination of classes of stock 
     authorized by the board of directors of the bank and approved 
     by the Finance Board in accordance with its regulations.
       ``(B) Rights requirement.--A Federal home loan bank shall 
     include in its capital structure plan provisions establishing 
     terms, rights, and preferences, including minimum investment, 
     dividends, voting, and liquidation preferences of each class 
     of stock issued by the bank, consistent with Finance Board 
     regulations and market requirements.
       ``(C) Reduced minimum investment.--The capital structure 
     plan of a Federal home loan bank may provide for a reduced 
     minimum stock investment for any member of that bank that 
     elects to purchase Class B in a manner that is consistent 
     with meeting the minimum capital requirements of the bank, as 
     established by the Finance Board.
       ``(D) Liquidation of claims.--The capital structure plan of 
     a Federal home loan bank shall provide for the liquidation in 
     an orderly manner, as determined by the bank, of any claim of 
     that bank against a member, including claims for any 
     applicable prepayment fees or penalties resulting from 
     prepayment of advances prior to stated maturity.
       ``(5) Limited transferability of stock.--The capital 
     structure plan of a Federal home loan bank shall--
       ``(A) provide that any stock issued by that bank shall be 
     available only to and held only by members of that bank and 
     tradable only between that bank and its members; and
       ``(B) establish standards, criteria, and requirements for 
     the issuance, purchase, transfer, retirement, and redemption 
     of stock issued by that bank.
       ``(6) Bank review of plan.--Before filing a capital 
     structure plan with the Finance Board, each Federal home loan 
     bank shall conduct a review of the plan by--
       ``(A) an independent certified public accountant, to 
     ensure, to the extent possible, that implementation of the 
     plan would not result in any write-down of the redeemable 
     bank stock investment of its members; and
       ``(B) at least one major credit rating agency, to 
     determine, to the extent possible, whether implementation of 
     the plan would have any material effect on the credit ratings 
     of the bank.
       ``(d) Termination of Membership.--
       ``(1) Voluntary withdrawal.--Any member may withdraw from a 
     Federal home loan bank if the member provides written notice 
     to the bank of its intent to do so and 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. The 
     applicable stock redemption notice periods shall commence 
     upon receipt of the notice by the bank. Upon the expiration 
     of the applicable notice period for each class of redeemable 
     stock, the member may surrender such stock to the bank, and 
     shall be entitled to receive in cash the par value of the 
     stock. During the applicable notice periods, the member shall 
     be entitled to dividends and other membership rights 
     commensurate with continuing stock ownership.
       ``(2) Involuntary withdrawal.--
       ``(A) In general.--The board of directors of a Federal home 
     loan bank may terminate the membership of any institution if, 
     subject to Finance Board regulations, it determines that--
       ``(i) the member has failed to comply with a provision of 
     this Act or any regulation prescribed under this Act; or
       ``(ii) the member has been determined to be insolvent, or 
     otherwise subject to the appointment of a conservator, 
     receiver, or other legal custodian, by a Federal or State 
     authority with regulatory and supervisory responsibility for 
     the member.
       ``(B) Stock disposition.--An institution, the membership of 
     which is terminated in accordance with subparagraph (A)--
       ``(i) shall surrender redeemable stock to the Federal home 
     loan bank, and shall receive in cash the par value of the 
     stock, upon the expiration of the applicable notice period 
     under subsection (a)(4)(A);
       ``(ii) shall receive any dividends declared on its 
     redeemable stock, during the applicable notice period under 
     subsection (a)(4)(A); and
       ``(iii) shall not be entitled to any other rights or 
     privileges accorded to members after the date of the 
     termination.
       ``(C) Commencement of notice period.--With respect to an 
     institution, the membership of which is terminated in 
     accordance with subparagraph (A), the applicable notice 
     period under subsection (a)(4) for each class of redeemable 
     stock shall commence on the earlier of--
       ``(i) the date of such termination; or
       ``(ii) the date on which the member has provided notice of 
     its intent to redeem such stock.
       ``(3) Liquidation of indebtedness.--Upon the termination of 
     the membership of an institution for any reason, the 
     outstanding indebtedness of the member to the bank shall be 
     liquidated in an orderly manner, as determined by the bank 
     and, upon the extinguishment of all such indebtedness, the 
     bank shall return to the member all collateral pledged to 
     secure the indebtedness.
       ``(e) Redemption of Excess Stock.--
       ``(1) In general.--A Federal home loan bank, in its sole 
     discretion, may redeem or repurchase, as appropriate, any 
     shares of Class A or Class B stock issued by the bank and 
     held by a member that are in excess of the minimum stock 
     investment required of that member.
       ``(2) Excess stock.--Shares of stock held by a member shall 
     not be deemed to be `excess stock' for purposes of this 
     subsection by virtue of a member's submission of a notice of 
     intent to withdraw from membership or termination of its 
     membership in any other manner.
       ``(3) Priority.--A Federal home loan bank may not redeem 
     any excess Class B stock prior to the end of the 5-year 
     notice period, unless the member has no Class A stock 
     outstanding that could be redeemed as excess.

[[Page H11288]]

       ``(f) Impairment of Capital.--If the Finance Board or the 
     board of directors of a Federal home loan bank determines 
     that the bank has incurred or is likely to incur losses that 
     result in or are expected to result in charges against the 
     capital of the bank, the bank shall not redeem or repurchase 
     any stock of the bank without the prior approval of the 
     Finance Board while such charges are continuing or are 
     expected to continue. In no case may a bank redeem or 
     repurchase any applicable capital stock if, following the 
     redemption, the bank would fail to satisfy any minimum 
     capital requirement.
       ``(g) Rejoining After Divestiture of All Shares.--
       ``(1) In general.--Except as provided in paragraph (2), and 
     notwithstanding any other provision of this Act, an 
     institution that divests all shares of stock in a Federal 
     home loan bank may not, after such divestiture, acquire 
     shares of any Federal home loan bank before the end of the 5-
     year period beginning on the date of the completion of such 
     divestiture, unless the divestiture is a consequence of a 
     transfer of membership on an uninterrupted basis between 
     banks.
       ``(2) Exception for withdrawals from membership before 
     1998.--Any institution that withdrew from membership in any 
     Federal home loan bank before December 31, 1997, may acquire 
     shares of a Federal home loan bank at any time after that 
     date, subject to the approval of the Finance Board and the 
     requirements of this Act.
       ``(h) Treatment of Retained Earnings.--
       ``(1) In general.--The holders of the Class B stock of a 
     Federal home loan bank shall own the retained earnings, 
     surplus, undivided profits, and equity reserves, if any, of 
     the bank.
       ``(2) Exception.--Except as specifically provided in this 
     section or through the declaration of a dividend or a capital 
     distribution by a Federal home loan bank, or in the event of 
     liquidation of the bank, a member shall have no right to 
     withdraw or otherwise receive distribution of any portion of 
     the retained earnings of the bank.
       ``(3) Limitation.--A Federal home loan bank may not make 
     any distribution of its retained earnings unless, following 
     such distribution, the bank would continue to meet all 
     applicable capital requirements.''.
                      TITLE VII--OTHER PROVISIONS
                       Subtitle A--ATM Fee Reform

     SEC. 701. SHORT TITLE.

       This subtitle 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 new paragraph:
       ``(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.
       ``(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, except that during the period beginning on 
     the date of the enactment of the Gramm-Leach-Bliley Act and 
     ending on December 31, 2004, this clause shall not apply to 
     any automated teller machine that lacks the technical 
     capability to disclose the notice on the screen or to issue a 
     paper notice 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) 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 that holds the 
     account of such consumer from which the transfer is made.

       ``(ii) Electronic fund transfer.--The term `electronic fund 
     transfer' includes a transaction that 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.
       ``(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 new 
     paragraph:
       ``(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)(i)) if the consumer initiates a transfer 
     from an automated teller machine that 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 fund 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 that 
     will be imposed upon the consummation of the transaction by--
       (A) any automated teller machine operator (as defined in 
     section 904(d)(3)(D)(i) 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 that 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 the 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, 
     the manner in which 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).''.
                   Subtitle B--Community Reinvestment

     SEC. 711. CRA SUNSHINE REQUIREMENTS.

       The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) 
     is amended by inserting after section 47, as added by section 
     305 of this Act, the following new section:

     ``SEC. 48. CRA SUNSHINE REQUIREMENTS.

       ``(a) Public Disclosure of Agreements.--Any agreement (as 
     defined in subsection (e)) entered into after the date of the 
     enactment of the Gramm-Leach-Bliley Act by an insured 
     depository institution or affiliate with a nongovernmental 
     entity or person made pursuant to or in connection with the 
     Community Reinvestment Act of 1977 involving funds or other 
     resources of such insured depository institution or 
     affiliate--
       ``(1) 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 by each 
     party to the agreement; and
       ``(2) shall obligate each party to comply with this 
     section.
       ``(b) Annual Report of Activity by Insured Depository 
     Institution.--Each insured depository institution or 
     affiliate that is a party to an agreement described in 
     subsection (a) shall report to the appropriate Federal 
     banking agency with supervisory responsibility over the 
     insured depository institution, not 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 the agreement during the preceding 12-
     month period:
       ``(1) Payments, fees, or loans made to any party to the 
     agreement or received from any

[[Page H11289]]

     party to the agreement and the terms and conditions of the 
     same.
       ``(2) Aggregate data on loans, investments, and services 
     provided by each party in its community or communities 
     pursuant to the agreement.
       ``(3) Such other pertinent matters as determined by 
     regulation by the appropriate Federal banking agency with 
     supervisory responsibility over the insured depository 
     institution.
       ``(c) Annual Report of Activity by Nongovernmental 
     Entities.--
       ``(1) In general.--Each nongovernmental entity or person 
     that is not an affiliate of an insured depository institution 
     and that is a party to an agreement described in subsection 
     (a) shall report to the appropriate Federal banking agency 
     with supervisory responsibility over the insured depository 
     institution that is a party to such agreement, not less 
     frequently than once each year, an accounting of the use of 
     funds received pursuant to each such agreement during the 
     preceding 12-month period.
       ``(2) Submission to insured depository institution.--A 
     nongovernmental entity or person referred to in paragraph (1) 
     may comply with the reporting requirement in such paragraph 
     by transmitting the report to the insured depository 
     institution that is a party to the agreement, and such 
     insured depository institution shall promptly transmit such 
     report to the appropriate Federal banking agency with 
     supervisory authority over the insured depository 
     institution.
       ``(3) Information to be included.--The accounting referred 
     to in paragraph (1) shall include a detailed, itemized list 
     of the uses to which such funds have been made, including 
     compensation, administrative expenses, travel, entertainment, 
     consulting and professional fees paid, and such other 
     categories, as determined by regulation by the appropriate 
     Federal banking agency with supervisory responsibility over 
     the insured depository institution.
       ``(d) Applicability.--Subsections (b) and (c) shall not 
     apply with respect to any agreement entered into before the 
     end of the 6-month period beginning on the date of the 
     enactment of the Gramm-Leach-Bliley Act.
       ``(e) Definitions.--
       ``(1) Agreement.--For purposes of this section, the term 
     `agreement'--
       ``(A) means--
       ``(i) any written contract, written arrangement, or other 
     written understanding that provides for cash payments, 
     grants, or other consideration with a value in excess of 
     $10,000, or for loans the aggregate amount of principal of 
     which exceeds $50,000, annually (or the sum of all such 
     agreements during a 12-month period with an aggregate value 
     of cash payments, grants, or other consideration in excess of 
     $10,000, or with an aggregate amount of loan principal in 
     excess of $50,000); or
       ``(ii) a group of substantively related contracts with an 
     aggregate value of cash payments, grants, or other 
     consideration in excess of $10,000, or with an aggregate 
     amount of loan principal in excess of $50,000, annually;
     made pursuant to, or in connection with, the fulfillment of 
     the Community Reinvestment Act of 1977, at least 1 party to 
     which is an insured depository institution or affiliate 
     thereof, whether organized on a profit or not-for-profit 
     basis; and
       ``(B) does not include--
       ``(i) any individual mortgage loan;
       ``(ii) any specific contract or commitment for a loan or 
     extension of credit to individuals, businesses, farms, or 
     other entities, if the funds are loaned at rates not 
     substantially below market rates and if the purpose of the 
     loan or extension of credit does not include any re-lending 
     of the borrowed funds to other parties; or
       ``(iii) any agreement entered into by an insured depository 
     institution or affiliate with a nongovernmental entity or 
     person who has not commented on, testified about, or 
     discussed with the institution, or otherwise contacted the 
     institution, concerning the Community Reinvestment Act of 
     1977.
       ``(2) Fulfillment of cra.--For purposes of subparagraph 
     (A), the term `fulfillment' means a list of factors that the 
     appropriate Federal banking agency determines have a material 
     impact on the agency's decision--
       ``(A) to approve or disapprove an application for a deposit 
     facility (as defined in section 803 of the Community 
     Reinvestment Act of 1977); or
       ``(B) to assign a rating to an insured depository 
     institution under section 807 of the Community Reinvestment 
     Act of 1977.
       ``(f) Violations.--
       ``(1) Violations by persons other than insured depository 
     institutions or their affiliates.--
       ``(A) Material failure to comply.--If the party to an 
     agreement described in subsection (a) that is not an insured 
     depository institution or affiliate willfully fails to comply 
     with this section in a material way, as determined by the 
     appropriate Federal banking agency, the agreement shall be 
     unenforceable after the offending party has been given notice 
     and a reasonable period of time to perform or comply.
       ``(B) Diversion of funds or resources.--If funds or 
     resources received under an agreement described in subsection 
     (a) have been diverted contrary to the purposes of the 
     agreement for personal financial gain, the appropriate 
     Federal banking agency with supervisory responsibility over 
     the insured depository institution may impose either or both 
     of the following penalties:
       ``(i) Disgorgement by the offending individual of funds 
     received under the agreement.
       ``(ii) Prohibition of the offending individual from being a 
     party to any agreement described in subsection (a) for a 
     period of not to exceed 10 years.
       ``(2) Designation of successor nongovernmental party.--If 
     an agreement described in subsection (a) is found to be 
     unenforceable under this subsection, the appropriate Federal 
     banking agency may assist the insured depository institution 
     in identifying a successor nongovernmental party to assume 
     the responsibilities of the agreement.
       ``(3) Inadvertent or de minimis reporting errors.--An error 
     in a report filed under subsection (c) that is inadvertent or 
     de minimis shall not subject the filing party to any penalty.
       ``(g) Rule of Construction.--No provision of this section 
     shall be construed as authorizing any appropriate Federal 
     banking agency to enforce the provisions of any agreement 
     described in subsection (a).
       ``(h) Regulations.--
       ``(1) In general.--Each appropriate Federal banking agency 
     shall prescribe regulations, in accordance with paragraph 
     (4), requiring procedures reasonably designed to ensure and 
     monitor compliance with the requirements of this section.
       ``(2) Protection of parties.--In carrying out paragraph 
     (1), each appropriate Federal banking agency shall--
       ``(A) ensure that the regulations prescribed by the agency 
     do not impose an undue burden on the parties and that 
     proprietary and confidential information is protected; and
       ``(B) establish procedures to allow any nongovernmental 
     entity or person who is a party to a large number of 
     agreements described in subsection (a) to make a single or 
     consolidated filing of a report under subsection (c) to an 
     insured depository institution or an appropriate Federal 
     banking agency.
       ``(3) Parties not subject to reporting requirements.--The 
     Board of Governors of the Federal Reserve System may 
     prescribe regulations--
       ``(A) to prevent evasions of subsection (e)(1)(B)(iii); and
       ``(B) to provide further exemptions under such subsection, 
     consistent with the purposes of this section.
       ``(4) Coordination, consistency, and comparability.--In 
     carrying out paragraph (1), each appropriate Federal banking 
     agency shall consult and coordinate with the other such 
     agencies for the purposes of assuring, to the extent 
     possible, that the regulations prescribed by each such agency 
     are consistent and comparable with the regulations prescribed 
     by the other such agencies.''.

     SEC. 712. SMALL BANK REGULATORY RELIEF.

       The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et 
     seq.) is amended by adding at the end the following new 
     section:

     ``SEC. 809. SMALL BANK REGULATORY RELIEF.

       ``(a) In General.--Except as provided in subsections (b) 
     and (c), any regulated financial institution with aggregate 
     assets of not more than $250,000,000 shall be subject to 
     routine examination under this title--
       ``(1) not more than once every 60 months for an institution 
     that has achieved a rating of `outstanding record of meeting 
     community credit needs' at its most recent examination under 
     section 804;
       ``(2) not more than once every 48 months for an institution 
     that has received a rating of `satisfactory record of meeting 
     community credit needs' at its most recent examination under 
     section 804; and
       ``(3) as deemed necessary by the appropriate Federal 
     financial supervisory agency, for an institution that has 
     received a rating of less than `satisfactory record of 
     meeting community credit needs' at its most recent 
     examination under section 804.
       ``(b) No Exception From CRA Examinations in Connection With 
     Applications for Deposit Facilities.--A regulated financial 
     institution described in subsection (a) shall remain subject 
     to examination under this title in connection with an 
     application for a deposit facility.
       ``(c) Discretion.--A regulated financial institution 
     described in subsection (a) may be subject to more frequent 
     or less frequent examinations for reasonable cause under such 
     circumstances as may be determined by the appropriate Federal 
     financial supervisory agency.''.

     SEC. 713. FEDERAL RESERVE BOARD STUDY OF CRA LENDING.

       The Board of Governors of the Federal Reserve System shall 
     conduct a comprehensive study, in consultation with the 
     Chairman and Ranking Member of the Committee on Banking and 
     Financial Services of the House of Representatives and the 
     Chairman and Ranking Member of the Committee on Banking, 
     Housing, and Urban Affairs of the Senate, of the Community 
     Reinvestment Act of 1977, which shall focus on--
       (1) the default rates;
       (2) the delinquency rates; and
       (3) the profitability;
     of loans made in conformity with such Act, and report on the 
     study to such Committees not later than March 15, 2000. Such 
     report and supporting data shall also be made available by 
     the Board of Governors of the Federal Reserve System to the 
     public.

     SEC. 714. PRESERVING THE COMMUNITY REINVESTMENT ACT OF 1977.

       Nothing in this Act shall be construed to repeal any 
     provision of the Community Reinvestment Act of 1977.

     SEC. 715. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL 
                   SERVICES.

       (a) Study.--The Secretary of the Treasury, in consultation 
     with the Federal banking agencies (as defined in section 3(z) 
     of the Federal Deposit Insurance Act), shall conduct a study 
     of the extent to which adequate services are being provided 
     as intended by the Community Reinvestment Act of 1977, 
     including services in low- and moderate-income neighborhoods 
     and for persons of modest means, as a result of the enactment 
     of this Act.
       (b) Reports.--

[[Page H11290]]

       (1) In general.--The Secretary of the Treasury shall--
       (A) before March 15, 2000, submit a baseline report to the 
     Congress on the study conducted pursuant to subsection (a); 
     and
       (B) before the end of the 2-year period beginning on the 
     date of the enactment of this Act, in consultation with the 
     Federal banking agencies, submit a final report to the 
     Congress on the study conducted pursuant to subsection (a).
       (2) Recommendations.--The final report submitted under 
     paragraph (1)(B) shall include such recommendations as the 
     Secretary determines to be appropriate for administrative and 
     legislative action with respect to institutions covered under 
     the Community Reinvestment Act of 1977.
               Subtitle C--Other Regulatory Improvements

     SEC. 721. 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 the Congress.--Not later than 6 months after 
     the date of the 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 meaning given the term in section 
     1361(a)(1) of the Internal Revenue Code of 1986.

     SEC. 722. ``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) Definition.--For purposes of this section, the term 
     ``Federal banking agency'' has the meaning given that term in 
     section 3 of the Federal Deposit Insurance Act.

     SEC. 723. 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 the enactment of the Gramm-Leach-Bliley Act 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 
     meanings given those terms in section 3 of the Federal 
     Deposit Insurance Act.''.

     SEC. 724. 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 ``1 
     or more'' before ``thrift institutions''.

     SEC. 725. PROVISION OF TECHNICAL ASSISTANCE TO 
                   MICROENTERPRISES.

       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 new subtitle:
    ``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, the following definitions 
     shall apply:
       ``(1) Administration.--The term `Administration' means the 
     Small Business Administration.
       ``(2) Administrator.--The term `Administrator' means the 
     Administrator of the Small Business Administration.
       ``(3) Capacity building services.--The term `capacity 
     building services' means services provided to an organization 
     that is, or that 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.
       ``(4) Collaborative.--The term `collaborative' means 2 or 
     more nonprofit entities that agree to act jointly as a 
     qualified organization under this subtitle.
       ``(5) Disadvantaged entrepreneur.--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.
       ``(6) Indian tribe.--The term `Indian tribe' has the 
     meaning given the term in section 103.
       ``(7) Intermediary.--The term `intermediary' means a 
     private, nonprofit entity that seeks to serve microenterprise 
     development organizations and programs as authorized under 
     section 175.
       ``(8) Low-income person.--The term `low-income person' has 
     the meaning given the term in section 103.
       ``(9) Microentrepreneur.--The term `microentrepreneur' 
     means the owner or developer of a microenterprise.
       ``(10) Microenterprise.--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) Microenterprise development organization or 
     program.--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.
       ``(12) Training and technical assistance.--The term 
     `training and technical assistance' means services and 
     support provided to disadvantaged 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.
       ``(13) Very low-income person.--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 Administration 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 Administration 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 person 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 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 serving diverse 
     populations.

[[Page H11291]]

       ``(e) Prohibition on Preferential Consideration of Certain 
     SBA Program Participants.--In making grants under this 
     subtitle, the Administrator shall ensure that any application 
     made by a qualified organization that is a participant in the 
     program established under section 7(m) of the Small Business 
     Act does not receive preferential consideration over 
     applications from other qualified organizations that are not 
     participants in such program.

     ``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 Administration.
       ``(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 Administration 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 Administrator shall establish.

     ``SEC. 179. RECORDKEEPING.

       ``The requirements of section 115 shall apply to a 
     qualified organization receiving assistance from the 
     Administration 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 Administrator 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.''.

     SEC. 726. FEDERAL RESERVE AUDITS.

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

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

       ``The Board shall order an annual independent audit of the 
     financial statements of each Federal reserve bank and the 
     Board.''.

     SEC. 727. AUTHORIZATION TO RELEASE REPORTS.

       (a) Federal Reserve Act.--The eighth undesignated paragraph 
     of section 9 of the Federal Reserve Act (12 U.S.C. 326) is 
     amended by striking the last sentence and inserting the 
     following: ``The Board of Governors of the Federal Reserve 
     System, at its discretion, may furnish any report of 
     examination or other confidential supervisory information 
     concerning any State member bank or other entity examined 
     under any other authority of the Board, to any Federal or 
     State agency or authority with supervisory or regulatory 
     authority over the examined entity, to any officer, director, 
     or receiver of the examined entity, and to any other person 
     that the Board determines to be proper.''.
       (b) Commodity Futures Trading Commission.--The Right to 
     Financial Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is 
     amended--
       (1) in section 1101(7)--
       (A) by redesignating subparagraphs (G) and (H) as 
     subparagraphs (H) and (I), respectively; and
       (B) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G) the Commodity Futures Trading Commission;''; and
       (2) in section 1112(e), by striking ``and the Securities 
     and Exchange Commission'' and inserting ``, the Securities 
     and Exchange Commission, and the Commodity Futures Trading 
     Commission''.

     SEC. 728. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF 
                   INTEREST.

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study analyzing the conflict of 
     interest faced by the Board of Governors of the Federal 
     Reserve System between its role as a primary regulator of the 
     banking industry and its role as a vendor of services to the 
     banking and financial services industry.
       (b) Specific Conflict Required To Be Addressed.--In the 
     course of the study required under subsection (a), the 
     Comptroller General shall address the conflict of interest 
     faced by the Board of Governors of the Federal Reserve System 
     between the role of the Board as a regulator of the payment 
     system, generally, and its participation in the payment 
     system as a competitor with private entities who are 
     providing payment services.
       (c) Report to the Congress.--Before the end of the 1-year 
     period beginning on the date of the enactment of this Act, 
     the Comptroller General shall submit a report to the Congress 
     containing the findings and conclusions of the Comptroller 
     General in connection with the study required under this 
     section, together with such recommendations for such 
     legislative or administrative actions as the Comptroller 
     General may determine to be appropriate, including 
     recommendations for resolving any such conflict of interest.

     SEC. 729. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE 
                   REQUIREMENTS TO ONLINE BANKING AND LENDING.

       (a) Study Required.--The Federal banking agencies shall 
     conduct a study of banking regulations regarding the delivery 
     of financial services, including those regulations that may 
     assume that there will be person-to-person contact during the 
     course of a financial services transaction, and report their 
     recommendations on adapting those existing requirements to 
     online banking and lending.
       (b) Report Required.--Before the end of the 2-year period 
     beginning on the date of the enactment of this Act, the 
     Federal banking agencies shall submit a report to the 
     Congress on the findings and conclusions of the agencies 
     with respect to the study required under subsection (a), 
     together with such recommendations for legislative or 
     regulatory action as the agencies may determine to be 
     appropriate.
       (c) Definition.--For purposes of this section, the term 
     ``Federal banking agencies'' means each Federal banking 
     agency (as defined in section 3(z) of the Federal Deposit 
     Insurance Act).

     SEC. 730. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.

       Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 
     1828) is amended by adding at the end the following new 
     subsection:
       ``(t) Limitation on Claims.--
       ``(1) In general.--No person may bring a claim against any 
     Federal banking agency (including in its capacity as 
     conservator or receiver) for the return of assets of an 
     affiliate or controlling shareholder of the insured 
     depository institution transferred to, or for the benefit of, 
     an insured depository institution by such affiliate or 
     controlling shareholder of the insured depository 
     institution, or a claim against such Federal banking agency 
     for monetary damages or other legal or equitable relief in 
     connection with such transfer, if at the time of the 
     transfer--
       ``(A) the insured depository institution is subject to any 
     direction issued in writing by a Federal banking agency to 
     increase its capital;
       ``(B) the insured depository institution is 
     undercapitalized (as defined in section 38 of this Act); and
       ``(C) for that portion of the transfer that is made by an 
     entity covered by section 5(g) of the Bank Holding Company 
     Act of 1956 or section 45 of this Act, the Federal banking 
     agency has followed the procedure set forth in such section.
       ``(2) Definition of claim.--For purposes of paragraph (1), 
     the term `claim'--
       ``(A) means a cause of action based on Federal or State law 
     that--
       ``(i) provides for the avoidance of preferential or 
     fraudulent transfers or conveyances; or
       ``(ii) provides similar remedies for preferential or 
     fraudulent transfers or conveyances; and
       ``(B) does not include any claim based on actual intent to 
     hinder, delay, or defraud pursuant to such a fraudulent 
     transfer or conveyance law.''.

     SEC. 731. INTEREST RATES AND OTHER CHARGES AT INTERSTATE 
                   BRANCHES.

       Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 
     1831u) is amended--
       (1) by redesignating subsection (f) as subsection (g); and
       (2) by inserting after subsection (e) the following new 
     subsection:
       ``(f) Applicable Rate and Other Charge Limitations.--
       ``(1) In general.--In the case of any State that has a 
     constitutional provision that sets a maximum lawful annual 
     percentage rate of interest on any contract at not more than 
     5 percent above the discount rate for 90-day commercial paper 
     in effect at the Federal reserve bank for the Federal reserve 
     district in which such State is located, except as provided 
     in paragraph (2), upon the establishment in such State of a 
     branch of any out-of-State insured depository institution in 
     such State under this section, the maximum interest rate or 
     amount of interest, discount points, finance charges, or 
     other similar charges that may be charged, taken, received, 
     or reserved from time to time in any loan or discount made or 
     upon any note, bill of exchange, financing transaction, or 
     other evidence of debt by any insured depository institution 
     whose home State is such State shall be equal to not more 
     than the greater of--
       ``(A) the maximum interest rate or amount of interest, 
     discount points, finance charges, or other similar charges 
     that may be charged, taken, received, or reserved in a 
     similar transaction under the constitution, statutory, or 
     other laws of the home State of the out-of-State insured 
     depository institution establishing any such branch, without 
     reference to this section, as such maximum interest rate or 
     amount of interest may change from time to time; or
       ``(B) the maximum rate or amount of interest, discount 
     points, finance charges, or other similar charges that may be 
     charged, taken, received, or reserved in a similar 
     transaction by a State insured depository institution 
     chartered under the laws of such State or a national bank or 
     Federal savings association whose main office is located in 
     such State without reference to this section.
       ``(2) Rule of construction.--No provision of this 
     subsection shall be construed as superseding or affecting--
       ``(A) the authority of any insured depository institution 
     to take, receive, reserve, and charge interest on any loan 
     made in any State other than the State referred to in 
     paragraph (1); or
       ``(B) the applicability of section 501 of the Depository 
     Institutions Deregulation and Monetary Control Act of 1980, 
     section 5197 of the Revised Statutes of the United States, or 
     section 27 of this Act.''.

[[Page H11292]]

     SEC. 732. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.

       Section 5(a)(7) of the International Banking Act of 1978 
     (12 U.S.C. 3103(a)(7)) is amended to read as follows:
       ``(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; 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 subparagraph (A)(ii), located in a State 
     outside the foreign bank's home State, into a Federal or 
     State branch if--
       ``(i) the establishment and operation of such branch is 
     permitted by such State; and
       ``(ii) such agency or branch--

       ``(I) was in operation in such State on the day before 
     September 29, 1994; or
       ``(II) has been in operation in such State for a period of 
     time that meets the State's minimum age requirement permitted 
     under section 44(a)(5) of the Federal Deposit Insurance 
     Act.''.

     SEC. 733. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.

       It is the sense of the Congress that individuals offering 
     financial advice and products should offer such services and 
     products in a nondiscriminatory, nongender-specific manner.

     SEC. 734. MEMBERSHIP OF LOAN GUARANTEE BOARDS.

       (a) Emergency Steel Loan Guarantee Board.--Section 101(e) 
     of the Emergency Steel Loan Guarantee Act of 1999 is 
     amended--
       (1) in paragraph (2), by inserting ``, or a member of the 
     Board of Governors of the Federal Reserve System designated 
     by the Chairman'' after ``the Chairman of the Board of 
     Governors of the Federal Reserve System''; and
       (2) in paragraph (3), by inserting ``, or a commissioner of 
     the Securities and Exchange Commission designated by the 
     Chairman'' before the period.
       (b) Emergency Oil and Gas Loan Guarantee Board.--Section 
     201(d)(2) of the Emergency Oil and Gas Guarantee Loan Program 
     Act is amended--
       (1) in subparagraph (B), by inserting ``, or a member of 
     the Board of Governors of the Federal Reserve System 
     designated by the Chairman'' after ``the Chairman of the 
     Board of Governors of the Federal Reserve System''; and
       (2) in subparagraph (C), by inserting ``, or a commissioner 
     of the Securities and Exchange Commission designated by the 
     Chairman'' before the period.

     SEC. 735. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.

       Section 11 of the Federal Reserve Act (12 U.S.C. 248) is 
     amended by striking the paragraph designated as ``(m)'' and 
     inserting ``(m) [Repealed]''.

     SEC. 736. 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 the 
     enactment of this Act.

     SEC. 737. 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--
       ``(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. 738. 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. 739. 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 or state bank.--
       ``(A) In general.--Any Federal savings association 
     chartered and in operation before the date of the enactment 
     of the Gramm-Leach-Bliley Act, with branches in operation 
     before such date of enactment in 1 or more States, may 
     convert, at its option, with the approval of the Comptroller 
     of the Currency or the appropriate State bank supervisor, 
     into 1 or more national or State banks, each of which may 
     encompass 1 or more of the branches of the Federal savings 
     association in operation before such date of enactment in 1 
     or more States, but only if each resulting national or State 
     bank will meet all financial, management, and capital 
     requirements applicable to the resulting national or State 
     bank.
       ``(B) Definitions.--For purposes of this paragraph, the 
     terms `State bank' and `State bank supervisor' have the 
     meanings given those terms in section 3 of the Federal 
     Deposit Insurance Act.''.

     SEC. 740. GRAND JURY PROCEEDINGS.

       Section 3322(b) of title 18, United States Code, is 
     amended--
       (1) in paragraph (1), by inserting ``Federal or State'' 
     before ``financial institution''; and
       (2) in paragraph (2), by inserting ``at any time during or 
     after the completion of the investigation of the grand 
     jury,'' before ``upon''.

       And the House agree to the same.

  That the House recede from its amendment to the title of the bill.
     From the Committee on Banking and Financial Services, for 
     consideration of the Senate bill, and the House amendment, 
     and modifications committed to conference:
     James A. Leach,
     Bill McCollum,
     Marge Roukema,
     Doug Bereuter,
     Rick Lazio,
     Spencer Bachus,
     Michael N. Castle,
     John J. LaFalce,
     Bruce F. Vento,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of titles I, III 
     (except section 304), IV, and VII of the Senate bill, and 
     title I of the House amendment, and modifications committed 
     to conference:
     Paul E. Kanjorski,
     Carol B. Maloney,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title V of the 
     Senate bill, and title II of the House amendment, and 
     modifications committed to conference:
     Paul E. Kanjorski,
     Carol B. Maloney,
     James H. Maloney,
     As additional conferees from the Committee on Banking and 
     Financial Service, for consideration of title II of the 
     Senate bill, and title III of the House amendment, and 
     modifications committed to conference:
     Paul E. Kanjorski,
     Carol B. Maloney,
     Nydia M. Velazquez,
     Darlene Hooley,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title VI of the 
     Senate bill, and title IV of the House amendment, and 
     modifications committed to conference:
     Carol B. Maloney,
     Luis V. Gutierrez,
     Ken Bentsen,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of section 304 of the 
     Senate bill, and title V of the House amendment, and 
     modifications committed to conference:
     Paul E. Kanjorski,
     Gary L. Ackerman,
     From the Committee on Commerce, for consideration of the 
     Senate bill, and the House amendment, and modifications 
     committed to conference:
     Tom Bliley,
     Michael G. Oxley,
     Billy Tauzin,

[[Page H11293]]

     Paul Gillmor,
     James Greenwood,
     Chris Cox,
     Steve Largent,
     Brian Bilbray
     E. Towns,
     Diana DeGette,
     Lois Capps,
     Provided that Mr. Rush is appointed in lieu of Mrs. Capps for 
     consideration of section 316 of the Senate bill:
     Bobby L. Rush,
     From the Committee on Agriculture, for consideration of title 
     V of the House amendment, and modifications committed to 
     conference:
     Larry Combest,
     Thomas W. Ewing,
     Charles W. Stenholm,
     From the Committee on the Judiciary, for consideration of 
     sections 104(a), 104(d)(3), and 104(f)(2) of the Senate bill, 
     and sections 104(a)(3), 104(b)(3)(A), 104(b)(4)(B), 136(b), 
     136(d)-(e), 141-44, 197, 301, and 306 of the House amendment, 
     and modifications committed to conference:
     Henry Hyde,
     George W. Gekas,
     From the Committee on Banking and Financial Services, for 
     consideration of section 101 of the Senate bill and section 
     101 of the House amendment: Mr. King is appointed in lieu of 
     Mr. Bachus; Mr. Royce is appointed in lieu of Mr. Castle:
     Peter T. King,
     Ed Royce,
     From the Committee on Commerce, for consideration of section 
     101 of the Senate bill and section 101 of the House 
     amendment: Mrs. Wilson is appointed in lieu of Mr. Largent; 
     Mr. Fossella is appointed in lieu of Mr. Bilbray:
     Heather Wilson,
     Vito Fossella,
                                Managers on the Part of the House.

     Phil Gramm,
     Connie Mack,
     Robert F. Bennett,
     Rod Grams,
     Wayne Allards,
     Michael B. Enzi,
     Chuck Hagel,
     Rick Santorum
     Jim Bunning,
     Mike Crapo
     Paul Sarbanes,
     Christopher J. Dodd,
     John F. Kerry,
     Tim Johnson,
     Jack Reed,
     Charles, Schumer,
     Evan Bayh
     John Edwards,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The Managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendments of the House to the bill (S. 900), to enhance 
     competition in the financial services industry by providing a 
     prudential framework for the affiliation of banks, securities 
     firms, insurance companies, and other financial service 
     providers, and for other purposes, submit the following joint 
     statement to the House and the Senate in explanation of the 
     effect of the action agreed upon by the managers and 
     recommended in the accompanying conference report:
       The House amendment to the text of the bill struck all of 
     the Senate bill after the enacting clause and inserted a 
     substitute text.
       The Senate recedes from its disagreement to the amendment 
     of the House with an amendment that is a substitute for the 
     Senate bill and the House amendment. The differences between 
     the Senate bill, the house amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clerical 
     changes.

 Title I--Facilitating Affiliations Among Banks, Securities Firms, and 
                          Insurance Companies

       The legislation approved by the Conference Managers 
     eliminates many Federal and State law barriers to 
     affiliations among banks and securities firms, insurance 
     companies, and other financial service providers. The House 
     and Senate bills established an identical statutory framework 
     (except for minor drafting differences) pursuant to which 
     full affiliations can occur between banks and securities 
     firms, insurance companies, and other financial companies. 
     The Conferees adopted this framework. Furthermore, the 
     legislation provides financial organizations with flexibility 
     in structuring these new financial affiliations through a 
     holding company structure, or a financial subsidiary (with 
     certain prudential limitations on activities and appropriate 
     safeguards). Reflected in the legislation is the 
     determination made by both Houses to preserve the role of the 
     Board of Governors of the Federal Reserve System (the 
     ``Federal Reserve Board'' or the ``Board'') as the umbrella 
     supervisor for holding companies, but to incorporate a system 
     of functional regulation designed to utilize the strengths of 
     the various Federal and State financial supervisors. 
     Incorporating provisions found in both the House and Senate 
     bills, the legislation establishes a mechanism for 
     coordination between the Federal Reserve Board and the 
     Secretary of the Treasury (``the Secretary'') regarding the 
     approval of new financial activities for both holding 
     companies and national bank financial subsidiaries. The 
     legislation enhances safety and soundness and improves access 
     to financial services by requiring that banks may not 
     participate in the new financial affiliations unless the 
     banks are well capitalized and well managed. The appropriate 
     regulators are given clear authority to address any failure 
     to maintain these safety and soundness standards in a prompt 
     manner. The legislation also requires that Federal bank 
     regulators prohibit banks from participating in the new 
     financial affiliations if, at the time of certification, any 
     bank affiliate had received a less than ``satisfactory'' 
     Community Reinvestment Act of 1977 (``CRA'') rating as of its 
     most recent examination.

                   Subtitle A--Financial Affiliations

       Senate Position: The Senate bill contains provisions 
     repealing restrictions in the Glass-Steagall Act and the Bank 
     Holding Company Act of 1956 (``BHCA'') on affiliations 
     involving securities firms and insurance companies, 
     respectively. The Senate bill establishes a new framework in 
     section 4 of the BHCA for bank holding companies to engage in 
     financial activities. It does not create a separate 
     designation for bank holding companies engaged in the new 
     financial activities but it does require that the subsidiary 
     insured depository institutions of such holding companies be 
     well capitalized and well managed in order to take advantage 
     of the new activities. In the event that a bank holding 
     company's subsidiary depository institutions fall out of 
     compliance, a ``cure'' procedure is established. The Senate 
     bill authorizes bank holding companies to engage in 
     activities that the Federal Reserve Board has determined to 
     be financial in nature and incidental to such financial 
     activities. It also authorizes qualifying bank holding 
     companies to engage in activities that the Federal Reserve 
     Board determines are complementary to financial 
     activities, or any other service that the Federal Reserve 
     Board determines not to pose a substantial risk to the 
     safety and soundness of depository institutions or the 
     financial system generally. It contains a list of pre-
     approved activities that includes merchant banking and 
     insurance company portfolio investment activities. There 
     is also a grandfather provision for the commodities 
     activities engaged in by a company as of September 30, 
     1997, if that company becomes a bank holding company after 
     the date of enactment.
       House Position: The House bill also repeals the 
     restrictions contained in the Glass-Steagall Act on 
     affiliations between banks and securities firms engaged in 
     underwriting and in the BHCA on affiliations between banks 
     and insurance companies and insurance agents. It creates a 
     new section 6 of the BHCA which authorizes new financial 
     activities for bank holding companies that qualify as 
     ``financial holding companies.'' In order for a bank holding 
     company to qualify as a financial holding company (``FHC''), 
     its subsidiary depository institutions must be well managed, 
     well capitalized, and have received at least a 
     ``satisfactory'' CRA rating as of their last examination. In 
     the event that an FHC falls out of compliance, a ``cure'' 
     procedure is established. It authorizes FHCs to engage in 
     activities that the Federal Reserve Board has determined to 
     be financial in nature, incidental to such financial 
     activities or complementary to financial activities to the 
     extent that the amount of such complementary activities 
     remains small. It contains a list of pre-approved activities 
     that includes investment banking and insurance company 
     portfolio investment activities. The House bill also 
     authorizes FHCs to engage in developing activities to a 
     limited extent. A ten-year grandfather is included for the 
     nonfinancial activities of companies that become bank holding 
     companies after enactment of this legislation and are 
     predominantly financial in nature at the time they become 
     FHCs.
       Conference Substitute: The Conferees acceded to the Senate 
     by agreeing to amend section 4 of the BHCA to add a series of 
     new subsections that contain the framework for engaging in 
     new financial activities. The Conferees have acceded to the 
     House in designating as FHCs those bank holding companies 
     qualifying to engage in the new financial activities.
       New section 4(k) permits bank holding companies that 
     qualify as FHCs to engage in activities, and acquire 
     companies engaged in activities, that are financial in nature 
     or incidental to such financial activities. FHCs are also 
     permitted to engage in activities that are complementary to 
     financial activities if the Federal Reserve Board determines 
     that the activity does not pose a substantial risk to the 
     safety or soundness of depository institutions or the 
     financial system in general.
       Permitting banks to affiliate with firms engaged in 
     financial activities represents a significant expansion from 
     the current requirement that bank affiliates may only be 
     engaged in activities that are closely related to banking. 
     The Board has primary jurisdiction for determining what 
     activities are financial in nature, incidental to financial 
     in nature, or complementary. The Board may act by regulation 
     or order. In determining what activities are financial in 
     nature or incidental, the Federal Reserve Board must notify 
     the Secretary of applications or requests to engage in new 
     financial activities. The Federal Reserve Board may not 
     determine that an activity is financial or incidental to a 
     financial activity if the Secretary objects. The Secretary 
     may also propose to the Federal Reserve Board that the 
     Board find that

[[Page H11294]]

     a particular activity is financial in nature or incidental 
     to a financial activity. A similar procedure is included 
     in the legislation with regard to the determination of 
     financial activities and activities that are incidental to 
     financial activities for financial subsidiaries of 
     national banks. The intent of the Conferees is that the 
     Federal Reserve Board and the Secretary of the Treasury 
     will establish a consultative process that will negate the 
     need for either agency to veto a proposal of the other 
     agency. Establishing such a process should bring balance 
     to the determinations regarding the type of activities 
     that are financial and limit regulatory arbitrage.
       Section 4(k) contains a list of activities that are 
     considered to be financial in nature. An FHC may engage in 
     the activities on this list without obtaining prior approval 
     from the Federal Reserve Board. Notice must be given to the 
     Federal Reserve Board not later than 30 days after the 
     activity is commenced or a company is acquired. The list 
     includes securities underwriting, dealing, and market making 
     without any revenue limitation such as sponsoring and 
     distributing all types of mutual funds and investment 
     companies. Other activities include insurance underwriting 
     and agency activities, merchant banking, and insurance 
     company portfolio investments. The reference to ``. . . 
     insuring, guaranteeing or indemnifying against . . . 
     illness,'' is meant to include activities commonly thought of 
     as health insurance, including such activities when provided 
     by companies such as Blue Cross and Blue Shield organizations 
     which are licensed under State laws to provide health 
     insurance benefits in consideration of the payment of 
     premiums or subscriber contributions. Such reference is not 
     meant to include the activity of directly providing health 
     care on a basis other than to the extent that it may be 
     incidental to the business of insurance as defined in section 
     4(k)(4)(B) of the BHCA.
     Merchant banking
       The authorization of merchant banking activities as 
     provided in new section 4(k)(4)(H) of the BHCA is designed to 
     recognize the essential role that these activities play in 
     modern finance and permits an FHC that has a securities 
     affiliate or an affiliate of an insurance company engaged in 
     underwriting life, accident and health, or property and 
     casualty insurance, or providing and issuing annuities, to 
     conduct such activities. Under this provision, the FHC may 
     directly or indirectly acquire or control any kind of 
     ownership interest (including debt and equity securities, 
     partnership interests, trust certificates, or other 
     instruments representing ownership) in an entity engaged in 
     any kind of trade or business whatsoever. The FHC may make 
     such acquisition whether acting as principal, on behalf of 
     one or more entities (e.g., as adviser to a fund, regardless 
     of whether the FHC is also an investor in the fund), 
     including entities that the FHC controls (other than a 
     depository institution or a subsidiary of a depository 
     institution), or otherwise.
       Section 122 provides that after a 5 year period from the 
     date of enactment, the Board and the Secretary may jointly 
     adopt rules permitting financial subsidiaries to engage in 
     the activities under section 4(k)(4)(H) of the BHCA subject 
     to the conditions that the agencies may jointly determine.
     Insurance company portfolio investments
       New section 4(k)(4)(I) of the BHCA recognizes that as part 
     of the ordinary course of business, insurance companies 
     frequently invest funds received from policyholders by 
     acquiring most or all the shares of stock of a company that 
     may not be engaged in a financial activity. These investments 
     are made in the ordinary course of business pursuant to state 
     insurance laws governing investments by insurance companies, 
     and are subject to ongoing review and approval by the 
     applicable state regulator. Section 4(k)(4)(I) permits an 
     insurance company that is affiliated with a depository 
     institution to continue to directly or indirectly acquire or 
     control any kind of ownership interest in any company if 
     certain requirements are met. The shares held by such a 
     company: (i) must not be acquired or held by a depository 
     institution or a subsidiary of a depository institution; (ii) 
     must be acquired and held by an insurance company that is 
     predominantly engaged in underwriting life, accident and 
     health, or property and casualty (other than credit-related 
     insurance) or in providing and issuing annuities; and (iii) 
     must represent an investment made in the ordinary course of 
     business of such insurance company in accordance with 
     relevant state law governing such investments. In addition, 
     during the period such ownership interests are held, the FHC 
     must not routinely manage or operate the portfolio company 
     except as may be necessary or required to obtain a reasonable 
     return on the investment. To the extent an FHC participates 
     in the management or operation of a portfolio company, such 
     participation would ordinarily be for the purpose of 
     safeguarding the investment of the insurance company in 
     accordance with the applicable requirements of state 
     insurance law. This is irrespective of any overlap between 
     board members and officers of the FHC and the portfolio 
     company.


                 CONDITIONS TO ENGAGE IN NEW ACTIVITIES

       New section 4(l) of the BHCA establishes the requirements 
     for permitting a bank holding company to engage in the new 
     financial activities and affiliations. A bank holding company 
     may elect to become a financial holding company if all of its 
     subsidiary banks are well capitalized and well managed. A 
     bank holding company that meets such requirements may file a 
     certification to that effect with the Board and a declaration 
     that the company chooses to be an FHC.
       After the filing of such a declaration and certification, 
     an FHC may engage either de novo, or through an acquisition, 
     in any activity that has been determined by the Board to be 
     financial in nature or incidental to such financial activity. 
     FHCs may engage in activities on the preapproved list of 
     financial activities contained in section 4(k) of the BHCA 
     and any other financial activity approved by the Board 
     without prior notice. Complementary activities, however, must 
     be approved by the Board on a case-by-case basis under the 
     notice procedures contained in section 4(j) of the BHCA.
       The legislation also amends the CRA to provide that an 
     election of a bank holding company to become an FHC shall not 
     be effective if the Board finds that as of the date of the 
     election not all of the subsidiary insured depository 
     institutions of the holding company had received a 
     ``satisfactory'' or better CRA rating at their most recent 
     CRA examinations. In addition, the legislation amends the 
     BHCA to require the appropriate Federal banking agency to 
     prohibit an FHC, or a bank through a financial subsidiary, 
     from commencing any new activities or acquiring any companies 
     under sections 4(k) or (n) of the BHCA, section 5136A(a) of 
     the Revised Statutes of the United States, or section 46(a) 
     of the Federal Deposit Insurance Act, in the event that the 
     bank or any of its insured depository institution affiliates 
     or any insured depository institution affiliate of the FHC 
     fails to have at least a ``satisfactory'' CRA rating at the 
     time of its last examination. It is the most recent rating 
     alone that shall be looked to by the regulator in connection 
     with these provisions. This provision does not authorize any 
     agency to require the divestiture of any company already 
     owned by the FHC prior to the time that the prohibition 
     becomes effective or to limit in any way any activity already 
     engaged in by the FHC prior to that time. The prohibition 
     ceases to apply once all of the insured depository 
     institutions controlled by the FHC or the bank and all of its 
     insured depository institution affiliates have restored their 
     CRA performance rating to at least the ``satisfactory'' 
     level.
       This provision applies to the ownership and activities of 
     financial subsidiaries of national banks to the same extent 
     as it applies to FHCs. It also applies in the same way to 
     subsidiaries held by insured State banks subject to newly 
     added section 46(a) of the Federal Deposit Insurance Act.


                         OPERATION OF STATE LAW

       Senate Position: The Senate bill establishes in section 104 
     the parameters for the appropriate balance between Federal 
     and State regulation of the activities and affiliations 
     allowed under this legislation.
       House Position: The House provision is similar, with 
     parallel provisions contained in sections 104, 301, and 302 
     of the House bill.
       Conference Substitute: The House agreed to incorporate its 
     sections 301 and 302 into section 104, and the Senate agreed 
     to adopt the language of the House's section 302. The House 
     discrimination standard was adopted with modifications, and 
     the Conferees agreed to incorporate House provisions 
     protecting the ability of the States to require restoration 
     of an entity's capital, and restricting changes in stock 
     ownership of demutualizing insurers, as modified. The House 
     receded on its provision specifically addressing a North 
     Carolina Blue-Cross Blue-Shield organization, as the State 
     laws governing those types of entities would not be preempted 
     so long as the State laws do not discriminate, as set forth 
     in the legislation.
       This section reaffirms the McCarran-Ferguson Act, 
     recognizing the primacy and legal authority of the States to 
     regulate insurance activities of all persons. No persons are 
     permitted to engage in the business of insurance unless they 
     are licensed by the States, as required under State law. 
     States are not allowed to prevent certain affiliations or 
     activities or discriminate against depository institutions in 
     providing such insurance licenses.
       In general, States are not allowed to prevent or restrict 
     affiliations permitted under Federal law. With respect to an 
     affiliation by an insurer, States may collect information, 
     and the insurer's State of domicile may take action on the 
     affiliation (including approval or disapproval), but only 
     within 60 days of receiving notice of the affiliation, and 
     only if the actions do not discriminate against the insurer 
     based on an association with a depository institution. An 
     affiliating insurer's State of domicile may require capital 
     restoration to the level required under State law, so long as 
     such request is made within 60 days of notice of the 
     affiliation. Any State, as permitted under State law, may 
     restrict changes in ownership of a demutualizing insurer so 
     long as the restrictions are not discriminatory as set forth 
     in the legislation. Section 104(c)(2)(C) means that State 
     laws and State regulators shall not discriminate against 
     depository institutions or their affiliates with respect to 
     acquiring or otherwise changing the ownership of stock in 
     newly demutualized insurance companies relative to other 
     persons.
       Except with respect to insurance, States may not prevent or 
     restrict a depository institution or affiliate thereof from 
     engaging in any activity set forth under the Gramm-Leach-
     Bliley Act. With respect to insurance

[[Page H11295]]

     sales, solicitations, and cross-marketing, States may not 
     prevent or significantly interfere with the activities of 
     depository institutions or their affiliates, as set forth in 
     Barnett Bank of Marion County N.A. v. Nelson, 517 U.S. 25 
     (1996). However, State restrictions that are substantially 
     the same as but no more burdensome than the thirteen general 
     safe harbors provided are not subject to potential 
     preemption. States are also allowed to continue the 
     regulation of insurance activities other than sales, 
     solicitation, and cross-marketing, and the preemption 
     standard does not apply to such regulation if consistent with 
     the standards set forth in the legislation.
       State regulation other than of insurance or securities 
     activities is not preempted even if it does prevent or 
     restrict an activity so long as it does not discriminate. The 
     Conferees adopted the House discrimination standard with 
     respect to insurance activities. The discrimination standard 
     does not apply to State regulations governing insurance 
     sales, solicitations, or cross-marketing activities adopted 
     before September 3, 1998, and does not apply to State 
     regulations that are substantially the same as but no more 
     burdensome than the safe harbors. State securities regulation 
     is not preempted by the ``prevent or restrict'' standard with 
     regard to a State securities commission's ability to 
     investigate and enforce certain unlawful securities 
     transactions or to require the licensure or registration of 
     securities and securities brokers, dealers, and investment 
     advisors and their associates. State actions of general 
     corporate applicability applying to companies domiciled or 
     incorporated in the State are also protected from the 
     ``prevent or restrict'' preemption, as well as State laws 
     similar to the antitrust laws, so long as the State actions 
     are not inconsistent with the intent of this Act to permit 
     affiliations. The term ``depository institution'' is defined 
     as including foreign banks and their domestic affiliates and 
     subsidiaries. The term ``affiliate'' is defined for section 
     104 to include any person under common control (including a 
     subsidiary).

     Subtitle B--Streamlining Supervision of Bank Holding Companies

       Both the House and Senate bills generally adhere to the 
     principle of functional regulation, which holds that similar 
     activities should be regulated by the same regulator. 
     Different regulators have expertise at supervising different 
     activities. It is inefficient and impractical to expect a 
     regulator to have or develop expertise in regulating all 
     aspects of financial services. Accordingly, the legislation 
     intends to ensure that banking activities are regulated by 
     bank regulators, securities activities are regulated by 
     securities regulators, and insurance activities are regulated 
     by insurance regulators.
       In keeping with the Board's role as an umbrella supervisor, 
     the legislation provides that the Board may require any bank 
     holding company or subsidiary thereof to submit reports 
     regarding its financial condition, systems for monitoring and 
     controlling financial and operating risks, transactions with 
     depository institutions, and compliance with the BHCA or 
     other Federal laws that the Board has specific jurisdiction 
     to enforce. The Board is directed to use existing examination 
     reports prepared by other regulators, publicly reported 
     information, and reports filed with other agencies, to the 
     fullest extent possible.
       The Board is authorized to examine each holding company and 
     its subsidiaries. It may examine functionally regulated 
     subsidiaries only if: (1) the Board has reasonable cause to 
     believe that such a subsidiary is engaged in activities that 
     pose a material risk to an affiliate depository institution; 
     (2) it reasonably believes after reviewing the relevant 
     reports that examining the subsidiary is necessary to 
     adequately inform the Board of the systems for monitoring 
     risks; or, (3) based on reports and other available 
     information, the Board has reasonable cause to believe that a 
     subsidiary is not in compliance with the BHCA or other 
     Federal law that the Board has specific jurisdiction to 
     enforce and the Board cannot make such a determination 
     through examination of an affiliated depository institution 
     or the holding company. The Board is directed to use, to the 
     fullest extent possible, examinations made by appropriate 
     Federal and State regulators.
       The Board is not authorized to prescribe capital 
     requirements for any functionally regulated subsidiary that 
     is in compliance with applicable capital requirements of 
     another Federal regulatory authority, a State insurance 
     authority, or is a registered investment adviser or licensed 
     insurance agent. The legislation also makes it clear that 
     securities and insurance activities conducted in regulated 
     entities are subject to functional regulation by the relevant 
     State securities authorities, the Securities and Exchange 
     (``SEC''), or State insurance regulators.
       The Board is prohibited from requiring a broker-dealer or 
     insurance company that is a bank holding company to infuse 
     funds into a depository institution if the company's 
     functional regulator determines, in writing, such action 
     would have a material adverse effect on the broker-dealer or 
     insurance company. If the functional regulator makes such a 
     determination, the Board may require the holding company to 
     divest its depository institution. All the Federal banking 
     agencies are subject to the same limits on reports, 
     examinations and capital requirements for functionally 
     regulated affiliates which apply to the Board. This ensures 
     that the Office of the Comptroller of the Currency (``OCC''), 
     the Office of Thrift Supervision (``OTS''), and the Federal 
     Deposit Insurance Corporation (``FDIC'') will not be able to 
     assume and duplicate the function of being the general 
     supervisor over functionally regulated subsidiaries. The 
     legislation specifically preserves, however, the FDIC's 
     authority to examine a functionally regulated affiliate. This 
     authority, which should be used sparingly, is necessary to 
     protect the deposit insurance funds.
       The legislation also specifically addresses indirect action 
     by the Board against functionally regulated affiliates. 
     Consistent with functional regulation, the Board's authority 
     to take indirect action against a functionally regulated 
     affiliate is limited. The Board may not promulgate rules, 
     adopt restrictions, safeguards or any other requirement 
     affecting a functionally regulated affiliate unless the 
     action is necessary to address a ``material risk'' to the 
     safety and soundness of the depository institution or the 
     domestic or international payments system and it is not 
     possible to guard against such material risk through 
     requirements imposed directly upon the depository 
     institution.
       The Federal banking regulators are empowered to adopt 
     prudential safeguards governing transactions between 
     depository institutions, their subsidiaries and affiliates so 
     as to avoid, among other items, significant risk to the 
     safety and soundness of the institution. The regulators are 
     required to review these safeguards regularly and modify or 
     eliminate those requirements which are no longer necessary.
       Bank holding companies may elect to become FHCs by meeting 
     the statutory requirements and filing a declaration and a 
     certification with the Board. The legislation makes it clear 
     that a duplicative registration statement under section 5 of 
     the BHCA is not required. The integrity of the deposit 
     insurance funds is preserved by prohibiting the use of 
     deposit insurance funds to benefit any shareholder, 
     subsidiary or nondepository affiliate of an FHC. This section 
     ensures that the federal safety net is not extended to 
     persons who are not entitled to Federal deposit insurance 
     coverage.
       The savings bank restrictions in the BHCA are repealed. 
     This repeal is designed to conform the regulation of savings 
     bank life insurance to other provisions of Federal banking 
     law.
       The Conferees intend that the Board be flexible in its 
     application of holding company consolidated capital standards 
     for the leverage requirement and the timing of the asset 
     calculations to FHCs of which the predominant regulated 
     subsidiary is a broker-dealer. The Conferees intend that, to 
     the extent the Board deems feasible and consistent with the 
     overall financial condition and activities of the holding 
     company, the capital requirements for such holding companies 
     be consistent with the capital standards applied by the SEC 
     to the broker-dealer, which accounts for the predominant 
     amount of assets and activities of the holding company.

               Subtitle C--Subsidiaries of National Banks

       Senate Position: The Senate bill authorizes a national bank 
     to control a subsidiary engaged in financial activities 
     permissible for a bank holding company (but not permissible 
     for a national bank directly) under section 4(k) if the bank 
     has consolidated total assets not exceeding $1 billion, is 
     not affiliated with a bank holding company, is well 
     capitalized, and well managed. For the purpose of determining 
     a parent national bank's regulatory capital, a deduction from 
     assets and tangible equity is required for the amount of 
     outstanding equity investments made in a financial 
     subsidiary. In addition, the assets and liabilities of the 
     financial subsidiary must not be consolidated with those of 
     the parent bank. Equity investments in the operating 
     subsidiary by a parent national bank must not exceed the 
     amount the bank could pay as a dividend without obtaining 
     prior regulatory approval. The Senate bill also clarifies 
     that a national bank may conduct through a subsidiary any 
     activity which the national bank may engage directly and any 
     activity lawfully conducted as of the date of enactment of 
     this legislation.
       House Position: The House bill authorizes a national bank 
     subsidiary to engage only in activities permissible for 
     national banks to engage in directly, activities otherwise 
     expressly authorized by statute, and activities that are 
     financial in nature or incidental to financial activities. 
     Financial activities are defined as those activities 
     permissible for an FHC or activities that the Secretary of 
     the Treasury determines to be financial in nature or 
     incidental to financial activities in consultation and 
     coordination with the Federal Reserve Board. Excluded from 
     the list of permissible financial activities are insurance 
     underwriting, insurance company portfolio investments, and 
     real estate investment and development. National bank 
     operating subsidiaries also may engage in developing 
     activities. In order for a national bank operating subsidiary 
     to engage in activities that are financial in nature, its 
     parent bank and all its depository institution affiliates 
     must be well capitalized, well managed, and have a 
     satisfactory CRA rating. A cure procedure is established to 
     address situations where there is a failure to comply with 
     these conditions. It also requires that the aggregate amount 
     of the national bank parent's equity investments in the bank 
     be deducted from the bank's capital including the operating 
     subsidiary's retained earnings. In addition,

[[Page H11296]]

     the assets and liabilities of the subsidiary must not be 
     consolidated with those of its parent bank. Equity 
     investments in the operating subsidiary by a parent national 
     bank must not exceed the amount the bank could pay as a 
     dividend without obtaining prior regulatory approval.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       Under the amendment, national banks of any size are 
     permitted to engage through a financial subsidiary only in 
     financial activities (with exceptions) authorized by this 
     Act. Section 121 specifically excludes four types of 
     activities for financial subsidiaries: insurance or annuity 
     underwriting, insurance company portfolio investments, real 
     estate investment and development, and merchant banking 
     (subject to section 122). These types of financial activities 
     may only be done in FHC affiliates. The federal banking 
     regulators are prohibited from interpreting these provisions 
     to provide for any expansion of these activities contrary to 
     the express language of this statute. It is the intent of the 
     Conferees that these new statutory provisions--and the 
     regulations to be adopted pursuant thereto--supercede and 
     replace the OCC's Part 5 regulations on operating 
     subsidiaries.

               Subtitle D--Preservation of FTC Authority

     Section 131. Amendment to the Bank Holding Company Act of 
         1956 to modify notification and post-approval waiting 
         period for section 3 transactions
       Senate Position: No provision.
       House Position: Section 141 of the House amendment amends 
     section 11(b)(1) of the BHCA (12 U.S.C. section 1849(b)(1)) 
     to provide for notice to the Federal Trade Commission 
     (``FTC'') when the Board of Governors of the Federal Reserve 
     System approves a transaction under section 3 of the BHCA if 
     that transaction also involves a transaction under section 4 
     or 6 of the BHCA.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       Under section 131 of the Conference Report, the 
     modification simply eliminated the reference to section 6 
     because the new activities for FHCs are now included within 
     section 4 of the BHCA as amended by the Conference Report. 
     The FTC currently has no role in reviewing pure section 3 
     transactions, and this amendment does not change that. 
     However, the FTC does perform reviews of certain section 4 
     transactions. This amendment will simply allow the FTC to 
     coordinate its review with the Board in those cases that also 
     involve a section 3 transaction.
     Section 132. Interagency data sharing
       Senate Position: No provision.
       House Position: Section 142 of the House amendment provided 
     that, except as otherwise prohibited by law, the banking 
     regulators who review mergers or acquisitions (the OCC, the 
     OTS, the FDIC, and Federal Reserve Board) shall make 
     available to the antitrust agencies (the Department of 
     Justice and the Federal Trade Commission (``FTC'')) any 
     information in the bank regulators' possession that the 
     antitrust agencies deem necessary for their antitrust review 
     under sections 3, 4, or 6 of the BHCA, section 18(c) of the 
     Federal Deposit Insurance Act, the National Bank 
     Consolidation and Merger Act, section 10 of the Home 
     Owners' Loan Act, or the antitrust laws.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       Under section 132 of the Conference Report, the 
     modification eliminated the reference to section 6 of the 
     BHCA because the new activities for FHCs are now included 
     within section 4 of the BHCA as amended by the Conference 
     Report. In addition, the modification added new sections 
     132(b) and 132(c). New section 132(b) requires that any 
     information shared under this provision be kept confidential; 
     that before any information shared under this provision is 
     disclosed to a third party, the agency which shared it must 
     be notified in writing and given a chance to oppose or limit 
     the disclosure; that any sharing under this provision does 
     not affect any claim of privilege with respect to such 
     information; and that nothing in this section shall be 
     construed to limit access to any information by the Congress 
     or the Comptroller General. New section 132(c) simply applies 
     the provisions of new section 132(b) to the sharing of 
     information between Federal banking agencies and State 
     regulators or any other party.
       In the past, there have been difficulties with banking 
     agencies sharing bank examination reports with the antitrust 
     agencies because of doubts about whether they had sufficient 
     authority to do so. The reports have generally been shared in 
     the end. However, in cases of failing institutions in which 
     review has been expedited or of institutions taken over by 
     the government, delays in providing these reports have 
     sometimes impeded antitrust review. This language simply 
     allows all of the involved agencies to do their respective 
     tasks in the most expeditious manner possible.
     Section 133. Clarification of status of subsidiaries and 
         affiliates
       Senate Position: No provision.
       House Position: Section 143(a) of the House amendment 
     provided that subsidiaries or affiliates of banks or savings 
     associations which are not themselves banks or savings 
     associations shall not be treated as banks or savings 
     associations for purposes of the FTC Act or any other law 
     enforced by the FTC. Section 143(b) clarified that nothing in 
     this section shall be construed as restricting the authority 
     of any Federal banking agency.
       Section 143(c) amended the existing BHCA exceptions to the 
     Hart-Scott-Rodino (``H-S-R'') Act, 15 U.S.C. section 
     18a(c)(7) and 18a(c)(8). Under current law, transactions 
     subject to approval under section 3 of the BHCA are exempt 
     from H-S-R review. Likewise, assuming certain conditions are 
     met, transactions subject to approval under section 4 are 
     also exempt. The amendments in section 143(c) clarified that 
     when FHCs acquire other FHCs and either of those companies 
     was involved in new activities under section 6 of the BHCA as 
     amended by the House amendment, the portion of the 
     transaction involving those section 6 activities would be 
     subject to H-S-R review. However, the remainder of the 
     transaction will continue to be reviewed under the existing 
     BHCA.
       Conference Substitute: The Senate receded to the House with 
     modifications.
       Under section 133 of the conference report, the 
     modification to section 133(a) clarified that the language 
     applied to any provision of law applied by the FTC under the 
     FTC Act. This clarification makes it clear that the section 
     is limited to laws that the FTC currently enforces and is not 
     intended to provide authority to enforce any new statutes. 
     Under current law, section 5(a)(2) of the FTC Act prohibits 
     the FTC from enforcing the Act against banks or savings 
     associations. The conference report will, however, allow 
     these entities to acquire other kinds of businesses, for 
     example, securities firms, against which the FTC can 
     currently enforce the Act. This provision simply makes it 
     clear that these kinds of businesses do not fall within the 
     bank or savings association exemption because they are owned 
     by such an entity.
       There was no modification to the savings provision 
     contained in section 133(b).
       The modification to section 133(c) replaced the reference 
     to section 6 of the BHCA as amended by the House amendment 
     with a reference to section 4(k) of the BHCA as amended by 
     the conference report. Under the conference report, section 
     4(k) now contains the language allowing FHCs to engage in new 
     activities. This amendment to the H-S-R exemptions will allow 
     the antitrust agencies to continue to review mergers between 
     insurance companies, securities firms, and other businesses 
     newly allowed to FHCs as they are today, notwithstanding the 
     ownership interest of the FHC. This clarification for the new 
     FHC structure is consistent with, and does not disturb, 
     existing law and precedents under which mergers involving 
     complex corporate entities, some parts of which are in 
     industries subject to merger review by specialized regulatory 
     agencies and other parts of which are not, are considered 
     according to agency jurisdiction over their respective parts, 
     so that normal H-S-R Act requirements apply to those parts 
     that do not fall within the specialized agency's specific 
     authority. See 16 C.F.R. section 802.6.
     Annual GAO report (section 144 of the House amendment)
       Senate Position: No provision.
       House Position: Section 144 of the House amendment provided 
     for the General Accounting Office to submit an annual report 
     to Congress on market concentration in the financial services 
     industry for each of the next five years.
       Conference Substitute: The House receded to the Senate.

                     Subtitle E--National Treatment

     Section 141. Foreign Banks that are Financial Holding 
         Companies
       Senate Position: The Senate bill, at section 151, permits 
     termination of the financial grandfathering authority granted 
     by the International Banking Act and other statutes to 
     foreign banks to engage in certain financial activities. 
     Foreign banks with grandfathered financial affiliates would 
     be permitted to retain these grandfathered companies on the 
     same terms that domestic banking organizations are permitted 
     to establish them.
       House Position: The House amendment, at section 151, is 
     similar.
       Conference Substitute: The Senate receded to the House.
     Section 142. Representative offices
       Senate Position: The Senate bill, at section 152, requires 
     prior approval by the Federal Reserve Board for the 
     establishment of representative offices that are subsidiaries 
     of a foreign bank.
       House Position: The House bill, at section 153, contains 
     the same provision.
       Conference Substitute: The Senate receded to the House.

                 Subtitle F--Direct Activities of Banks

       Senate Position: The Senate bill authorizes national banks 
     to deal in, underwrite, and purchase municipal bonds for 
     their own investment accounts.
       House Position: The House amendment is identical.
       Conference Substitute: The House receded to the Senate.

                                Title II

                    Subtitle A--Brokers and Dealers

       Senate Position: The Senate bill repeals the exemptions 
     from the definition of broker and dealer under the Federal 
     securities laws that currently apply to banks, generally 
     subjecting banks and their affiliates and subsidiaries to the 
     same regulation as all other providers of securities 
     products. However, the Senate bill replaces the general bank 
     exemption with specific exemptions for certain bank 
     activities.

[[Page H11297]]

       House Position: The House amendment also repeals the 
     general bank exemptions from the definition of broker and 
     dealer under the Federal securities laws but provides more 
     limited exemptions than does the Senate bill.
       Conference Substitute: Subtitle A of title II of the Gramm-
     Leach-Bliley Act provides for functional regulation of bank 
     securities activities. The Conferees retained certain limited 
     exemptions to facilitate certain activities in which banks 
     have traditionally engaged. These exceptions relate to third-
     party networking arrangements, trust activities, traditional 
     banking transactions such as commercial paper and exempted 
     securities, employee and shareholder benefit plans, sweep 
     accounts, affiliate transactions, private placements, 
     safekeeping and custody services, asset-backed securities, 
     derivatives, and identified banking products.
       The Conferees provided for an exception for networking 
     arrangements between banks and brokers. Revisions to Rule 
     1060 recently approved by the National Association of 
     Securities Dealers (``NASD'') are in conflict with this 
     provision. As a consequence, revisions to the rule should be 
     made to exempt banks and their employees from the provisions' 
     coverage.
       The Conferees provided that banks that effect transactions 
     in a trustee or fiduciary capacity under certain conditions 
     will be exempt from registration under the Federal securities 
     laws if the bank: (1) is chiefly compensated by means of 
     administration and certain other fees, including a 
     combination of such fees, and (2) does not publicly solicit 
     brokerage business. The Conferees expect that the SEC will 
     not disturb traditional bank trust activities under this 
     provision.
       The Conferees also provided that classification of a 
     particular product as an identified banking product shall not 
     be construed as a finding or implication that such product is 
     or is not a security for purposes of the securities laws, or 
     is or is not a transaction for any purpose under the 
     Commodity Exchange Act. The Conferees do not intend in the 
     Gramm-Leach-Bliley Act to express an opinion upon or to 
     address the issue of legal certainty for swap agreements 
     under the securities and commodity exchange laws.
       The Conferees also provided that the Commodity Exchange Act 
     is not amended by the Gramm-Leach-Bliley Act, and no 
     transaction or person which is otherwise subject to the 
     jurisdiction of the Commodity Futures Trading Commission 
     pursuant to the Commodity Exchange Act is exempted from such 
     jurisdiction because of the provisions of the Gramm-Leach-
     Bliley Act.
       For new hybrid products, the Conferees codified in the 
     securities laws a process that requires the SEC to act by 
     rulemaking prior to seeking to regulate any bank sales of any 
     such new product. This rulemaking process is designed to give 
     notice to the banking industry in an area that could involve 
     complex new products with many elements.
       The process contemplated by the Conferees would work as 
     follows. Prior to seeking to require a bank to register as a 
     broker or dealer with respect to sales of any new hybrid 
     product, the SEC would have to engage in a rulemaking. In its 
     rulemaking, the SEC would need to find that the new product 
     is a security. In addition, the SEC would have to determine 
     that the product is a ``new hybrid product.''
       A new hybrid product is not one of the products listed in 
     the definition of ``identified banking product''. Including a 
     product on the list of identified banking products shall not 
     be construed as a finding or implication that such product is 
     or is not a security, but it would not be a new hybrid 
     product. The Conferees codified the definition of Identified 
     Banking Products as a freestanding provision of law, neither 
     in the securities laws nor in the banking laws.
       In addition, during the rulemaking process, the SEC must 
     also make a number of findings. When considering whether such 
     an action is in the public interest, the SEC must also 
     consider whether the action will promote efficiency, 
     competition and capital formation, as set forth in section 
     3(f) of the Securities Exchange Act of 1934 (``Exchange 
     Act''). The Conferees note that the SEC's record in 
     implementing section 3(f) has failed to meet Congressional 
     intent. The Conferees expect that the SEC will improve in 
     this area.
       Prior to commencing a rulemaking process, the SEC is 
     required to consult with and seek the concurrence of the 
     Federal Reserve Board concerning the imposition of broker or 
     dealer registration requirements with respect to any new 
     hybrid product. In developing and promulgating rules under 
     this subsection, the SEC shall consider the views of the 
     Board, including views with respect to the nature of the new 
     hybrid product; the history, purpose, extent, and 
     appropriateness of the regulation of the new product under 
     the Federal banking laws; and the impact of the proposed rule 
     on the banking industry.
       If the Board seeks review of any final regulation under 
     this section, such review will serve as a stay on the 
     rulemaking until final adjudication of the matter between the 
     SEC and the Board. In considering such an appeal, the United 
     States Court of Appeals for the District of Columbia Circuit 
     shall determine to affirm and enforce or set aside a 
     regulation of the SEC under this subsection, based on the 
     determination of the court as to whether: (1) the subject 
     product is a new hybrid product; (2) the subject product is a 
     security; (3) imposing a requirement to register as a broker 
     or dealer for banks engaging in transactions in such product 
     is appropriate in light of the history, purpose and extent of 
     regulation under the Federal securities laws and under the 
     Federal banking laws, giving deference neither to the views 
     of the SEC nor to the Board.

             Subtitle B--Bank Investment Company Activities

       Senate Position: No provision.
       House Position: The House bill amends the Investment 
     Advisers Act and the Investment Company Act to subject banks 
     that advise mutual funds to the same regulatory scheme as 
     other advisers to mutual funds. It also requires banks to 
     make additional disclosure when a fund is sold or advised by 
     a bank.
       Conference Substitute: The Senate recedes to the House 
     provision with an amendment.

     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

       Senate Position: No provision.
       House Position: The House amendment creates a new 
     investment bank holding company structure under the Exchange 
     Act. This subtitle is designed to implement a new concept of 
     SEC supervision of broker/dealer holding companies (that do 
     not control depository institutions with certain exceptions) 
     that voluntarily elect SEC supervision. This provision is 
     designed to assure that the supervision of an investment bank 
     holding company by the SEC is a meaningful option. Non-U.S. 
     financial institutions supervisors, when reviewing regulatory 
     applications or notices submitted by a U.S. financial 
     institution supervised in the United States as an investment 
     bank holding company by the SEC under section 231, shall 
     treat the SEC as the principal U.S. consolidated home country 
     supervisor of such financial institution on the same basis 
     and terms as if the Federal Reserve Board were the principal 
     U.S. consolidated home country supervisor.
       Conference Substitute: The Senate recedes with an 
     amendment. The Conferees eliminated the authority of the SEC 
     to regulate investment bank holding company capital.

              Subtitle D--Banks and Bank Holding Companies

       Senate Position: No provision.
       House Position: The House amendment requires the SEC to 
     consult and coordinate comments with the appropriate Federal 
     banking regulators before any action or rendering any opinion 
     with respect to the manner in which an insured depository 
     institution or insured depository holding company reports 
     loan loss reserves.
       Conference Substitute: The Senate recedes to the House 
     provision. The Conferees note that the SEC's actions with 
     respect to the reporting of loan loss reserves by certain 
     insured depository institutions did not reflect adequate 
     consultation with the Federal banking agencies with respect 
     to potential implications on the safety and soundness of the 
     Federal deposit insurance fund. The Conferees expect that 
     this provision will facilitate better coordination and 
     decision-making by the SEC in this area.

                          Title III--Insurance

               Subtitle A--State Regulation of Insurance

       Senate Position: The Senate bill contains a number of 
     provisions intended to preserve State regulation of 
     insurance.
       House Position: The House amendment similarly contains a 
     number of provisions intended to preserve and enhance State 
     regulation of insurance.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       In general, Subtitle A of Title III reaffirms that States 
     are the regulators for the insurance activities for all 
     persons, including acting as the functional regulator for the 
     insurance activities of federally chartered banks. This 
     functional regulatory power is subject to section 104 of 
     Title I, however, which sets forth the appropriate balance of 
     protections against discriminatory actions. Federally 
     chartered banks and their subsidiaries are prohibited from 
     underwriting insurance, except for authorized products. A 
     rule of construction was added by the Conference Committee to 
     prevent evasion of State insurance regulation by foreign 
     reinsurance subsidiaries or offices of domestic banks, 
     clarifying that providing insurance (including reinsurance) 
     outside of the United States to indemnify an insurance 
     product or company in a State shall be considered to be 
     providing insurance as principal in that State.
       Federally chartered banks are prohibited from engaging in 
     any activity involving the underwriting or sale of title 
     insurance, except that national banks may sell title 
     insurance products in any State in which state-chartered 
     banks are authorized to do so (other than through a ``wild 
     card provision''), so long as such sales are undertaken ``in 
     the same manner, to the same extent, and under the same 
     restrictions'' that apply to such state-chartered banks. 
     Certain currently and lawfully conducted title insurance 
     activities of banks are grandfathered, and existing State 
     laws prohibiting all persons from providing title insurance 
     are protected.
       An expedited and equalized dispute resolution mechanism is 
     established to guide the courts in deciding conflicts between 
     Federal and State regulators regarding insurance issues. The 
     ``without unequal deference'' standard of review does not 
     apply to State regulation of insurance agency activities that 
     were issued before September 3, 1998 (other than those 
     protected by the scope of the safe harbor provision of 
     section 104).

[[Page H11298]]

       The Federal banking agencies are required to issue final 
     consumer protection regulations within one year, to provide 
     additional safeguards for the sale of insurance by any bank 
     or other depository institution, or by any person at or on 
     behalf of such institution.
       State laws that prevent or significantly interfere with the 
     ability of insurers to affiliate, become an FHC, or 
     demutualize, are preempted, except as provided in section 
     104(c)(2), and with respect to demutualizing insurers for the 
     State of domicile (and as set forth in the Redomestication 
     Subtitle). State laws limiting the investment of an insurer's 
     assets in a depository institution are also preempted, except 
     that an insurer's State of domicile may limit such investment 
     as provided.
       The Federal banking agencies and the State insurance 
     regulators are directed to coordinate efforts to supervise 
     companies that control both depository institutions and 
     persons engaged in the business of insurance, and to share, 
     on a confidential basis, supervisory information including 
     financial health and business unit transactions. The agencies 
     are further directed to provide notice and to consult with 
     the State regulators before taking actions which effect any 
     affiliates engaging in insurance activities. A banking 
     regulator is not required to provide confidential information 
     to a State insurance regulator unless such State regulator 
     agrees to keep the information in confidence and make all 
     reasonable efforts to oppose disclosure of such information. 
     Conversely, Federal banking regulators are directed to treat 
     as confidential any information received from a State 
     regulator which is entitled to confidential treatment under 
     State law, and to make similar reasonable efforts to oppose 
     disclosure of the information.

             Subtitle B--Redomestication of Mutual Insurers

       Senate Position: No provision.
       House Position: The House bill allows mutual insurance 
     companies to redomesticate to another state and reorganize 
     into a mutual holding company or stock company. It only 
     applies to insurers in States which have not established 
     reasonable terms and conditions for allowing mutual insurance 
     companies to reorganize into a mutual holding company. All 
     licenses of the insurer are preserved, and all outstanding 
     policies, contracts, and forms remain in full force. A 
     redomesticating company must provide notice to the state 
     insurance regulators of each State for which the company is 
     licensed. A mutual insurance company may only redomesticate 
     under this Subtitle if the State insurance regulator of the 
     new (transferee) domicile affirmatively determines that the 
     company's reorganization plan meets certain reasonable terms 
     and conditions: the reorganization is approved by a majority 
     of the company's board of directors and voting policyholders, 
     after notice and disclosure of the reorganization and its 
     effects on policyholder contractual rights; the policyholders 
     have equivalent voting rights in the new mutual holding 
     company as compared to the original mutual insurer; any 
     initial public offering of stock shall be in accordance with 
     applicable securities laws and under the supervision of the 
     State insurance regulator of the transferee domicile; the new 
     mutual holding company may not award any stock options or 
     grants to its elected officers or directors for six months; 
     all contractual rights of the policyholders are preserved; 
     and the reorganization is approved as fair and equitable 
     to the policyholders by the insurance regulators of 
     transferee domicile.
       Conference Substitute: The Senate receded to the House with 
     an amendment.

   Subtitle C--National Association of Registered Agents and Brokers

       Senate Position: The Senate bill contains a sense of the 
     Congress statement that States should provide for a uniform 
     insurance agent and broker licensing system.
       House Position: The House bill encourages the States to 
     establish uniform or reciprocal requirements for the 
     licensing of insurance agents. If a majority of the States do 
     not establish uniform or reciprocal licensing provisions 
     within a three-year period (as determined by the National 
     Association of Insurance Commissioners [''NAIC'']), then the 
     National Association of Registered Agents and Brokers 
     (``NARAB'') would be established as a private, non-profit 
     entity managed and supervised by the State insurance 
     regulators. State insurance laws and regulations shall not be 
     affected except to the extent that they are inconsistent with 
     a specific requirement of the Subtitle. Membership in NARAB 
     is voluntary and does not affect the rights of a producer 
     under each individual state license. Any state-licensed 
     insurance producer whose license has not been suspended or 
     revoked is eligible to join NARAB. NARAB shall be base 
     membership criteria on the highest levels insurance producer 
     qualification set by the States on standards such as 
     integrity, personal qualification, education, training, and 
     experience. NARAB members shall continue to pay the 
     appropriate fees required by each State in which they are 
     licensed, and shall renew their membership annually. NARAB 
     may inspect members records, and revoke a membership where 
     appropriate. NARAB shall establish an Office of Consumer 
     Complaints, which shall have a toll-free phone number (and 
     Internet website) to receive and investigate consumer 
     complaints and recommend disciplinary actions. The Office 
     shall maintain records of such complaints, which shall be 
     made available to the NAIC and individual State insurance 
     regulators, and shall refer complaints where appropriate to 
     such regulators.
       If the NAIC determines that the States have not met the 
     uniformity or reciprocity requirements, then the NAIC has two 
     years to establish NARAB. The NAIC shall appoint NARAB's 
     board of directors, some of whom must have significant 
     experience with the regulation of commercial insurance lines 
     in the 20 States with the most commercial lines business. If 
     within the time period allotted for NARAB's creation, the 
     NAIC has still not appointed the initial board of directors 
     for NARAB, then the initial directors shall be the State 
     insurance regulators of the seven States with the greatest 
     amount of commercial lines insurance. NARAB's bylaws are 
     required to be filed with the NAIC, taking effect 30 days 
     after filing unless disapproves by the NAIC as being contrary 
     to the public interest or requiring a public hearing. The 
     NAIC may require NARAB to adopt or repeal additional bylaws 
     or rules as it determines appropriate to the public interest. 
     The NAIC is given the responsibility of overseeing NARAB, and 
     is authorized to examine and inspect NARAB's records, and 
     require NARAB to furnish it with any reports.
       If at the end of two years after NARAB is required to be 
     established, (1) a majority of the States representing at 
     least 50% of the total commercial-lines insurance premiums in 
     the United States have not established uniform or reciprocal 
     licensing regulations, or (2) the NAIC has not approved 
     NARAB's bylaws or is unable to operate or supervise NARAB (or 
     if NARAB is not conducting its activities under this Act), 
     then NARAB shall be created and supervised by the President, 
     and shall exist without NAIC oversight. The President shall 
     appoint NARAB's board, with the advice and consent of the 
     Senate, from lists of candidates submitted by the NAIC. If 
     the President determines that NARAB's board is not acting in 
     the public interest, the President may replace the entire 
     board with new members (subject to the advice and consent of 
     the Senate). The President may also suspend the effectiveness 
     of any rule or action by NARAB which the President determines 
     is contrary to the public interest. NARAB shall report 
     annually to the President and Congress on its activities.
       State laws regulating insurance licensing that discriminate 
     against NARAB members based on non-residency are preempted, 
     as well as State laws and regulations which impose additional 
     licensing requirements on non-resident NARAB members beyond 
     those established by the NARAB board (pursuant to this 
     Subtitle), except that State unfair trade practices and 
     consumer protection laws are protected from preemption, 
     including counter-signature requirements. NARAB is required 
     to coordinate its multistate licensing with the various 
     States. It is also required to coordinate with the States on 
     establishing a central clearinghouse for license issuance and 
     renewal, and for the collection of regulatory information on 
     insurance producer activities. NARAB shall further coordinate 
     with the NASD to facilitate joint membership. Any dispute 
     involving NARAB shall be brought in the appropriate U.S. 
     District Court under federal law, after all administrative 
     remedies through NARAB and the NAIC have been exhausted.
       Conference Substitute: The Senate receded to the House.

           Subtitle D--Rental Car Agency Insurance Activities

       Senate Position: The Senate bill provides that the 
     requirements under section 104 with respect to mandatory 
     licensing do not apply to persons who offer insurance 
     connected with a short term motor vehicle rental so long as 
     the State does not require such licensing.
       House Position: The House bill creates a Federal 
     presumption for a three-year period that no State law imposes 
     any licensing, appointment, or education requirements on 
     persons who rent motor vehicles for a period of 90 days or 
     less and sell insurance to customers in connection with the 
     rental transaction. This presumption shall not apply to a 
     State statute, the prospective application of a statutorily-
     authorized final State regulation or order interpreting a 
     State statute, or the prospective application of a court 
     judgment interpreting or applying a State statute, if such 
     State statute or final State regulation or order specifically 
     and expressly regulates (or exempts from regulation) persons 
     who solicit or sell such short term vehicle rental insurance. 
     This presumption shall apply to the retroactive application 
     of a final State regulation or order interpreting a general 
     State insurance licensing statute, or the retroactive 
     application of a court judgment interpreting or applying a 
     general State insurance licensing statute, with respect to 
     the regulation of persons who solicit or sell such short 
     term vehicle rental insurance.
       Conference Substitute: The Senate receded to the House.

                      Subtitle E--Confidentiality

       Senate Position: No provision.
       House Position: The House bill requires insurance companies 
     and their affiliates to protect the confidentiality of 
     individually identifiable customer health and medical and 
     genetic information. Such companies may only disclose such 
     information with the consent of the customer or for 
     statutorily specified purposes.
       Conference Substitute: The House receded to the Senate.

[[Page H11299]]

          Title IV--Unitary Thrift Holding Company Provisions

     Sec. 401. Prohibition on new unitary savings and loan holding 
         companies
       Senate Position: The Senate bill, at section 601(a), amends 
     the Home Owners' Loan Act to prohibit (except for corporate 
     reorganizations) new unitary savings and loan holding 
     companies from engaging in nonfinancial activities or 
     affiliating with nonfinancial entities. The prohibition 
     applies to a company that becomes a unitary savings and loan 
     holding company pursuant to an application filed with the OTS 
     after May 4, 1999. A grandfathered unitary thrift holding 
     company (one in existence or applied for on or before May 4, 
     1999) retains its authority to engage in nonfinancial 
     activities. The Senate bill, at section 601(b), allows mutual 
     savings and loan holding companies to engage in new financial 
     activities authorized under the Gramm-Leach-Bliley Act.
       House Position: The House bill, at section 401(a), 
     prohibits new unitary thrift holding companies after the 
     grandfather date of March 4, 1999, from engaging in 
     nonfinancial activities or from affiliating with a 
     nonfinancial entity. The provision also allows a nonfinancial 
     company to purchase a grandfathered unitary thrift holding 
     company upon approval of an application filed with the OTS 
     and approval or no objection to a notice filed with the 
     Federal Reserve Board. The House bill, at section 401(b), 
     permits a mutual holding company to engage in activities 
     permissible for multiple stock holding companies and permits 
     unitary mutual savings and loan holding companies to engage 
     in the new financial activities authorized for FHCs.
       Conference Substitute: The House receded to the Senate.

                            Title V--Privacy

        Subtitle A--Disclosure of Nonpublic Personal Information

       Senate Position: No provision.
       House Position: The House bill contained important 
     provisions providing consumers with new protections with 
     respect to the transfer and use of their nonpublic personal 
     information by financial institutions.
       Among other things, the House bill directed relevant 
     regulators to establish comprehensive standards for ensuring 
     the security and confidentiality of consumers' personal 
     information maintained by financial institutions; allowed 
     customers of financial institutions to ``opt out'' of having 
     their personal financial information shared with 
     nonaffiliated third parties, subject to certain exceptions; 
     barred financial institutions from disclosing customer 
     account numbers or similar forms of access codes to 
     nonaffiliated third parties for telemarketing or other direct 
     marketing purposes; and mandated annual disclosure--in clear 
     and conspicuous terms--of a financial institution's policies 
     and procedures for protecting customers' nonpublic personal 
     information.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       The amendment modified the House position in the following 
     ways:
       1. The Federal functional regulators, the Secretary of the 
     Treasury, and the FTC, in consultation with State insurance 
     authorities, are directed to prescribe such regulations as 
     may be necessary to carry out the purposes of the privacy 
     subtitle. The House bill had called for a joint rulemaking. 
     The relevant agencies are required to consult and coordinate 
     with one another in order to assure to the maximum extent 
     possible that the regulations each prescribes are consistent 
     and comparable with those prescribed by the other agencies. 
     It is the hope of the Conferees that State insurance 
     authorities would implement regulations necessary to carry 
     out the purposes of this title and enforce such regulations 
     as provided in this title.
       2. To address the concern that the House bill failed to 
     provide a mechanism for enforcing the subtitle's provisions 
     against non-financial institutions, the Conferees agreed to 
     clarify that the FTC's enforcement authority extends to such 
     entities.
       3. The Conferees agreed to clarify the relation between 
     Title V's privacy provisions and other consumer protections 
     already in law, by stating that nothing in the title shall be 
     construed to modify, limit, or supersede the operation of the 
     Fair Credit Reporting Act, and no inference shall be drawn on 
     the basis of the provisions of the title regarding whether 
     information is transaction or experience information under 
     section 603 of that Act.
       4. At the request of the Conferees from the Committee on 
     Agriculture, the Conferees agreed to exclude from the scope 
     of the privacy title any person or entity that is subject to 
     the jurisdiction of the Commodity Futures Trading Commission 
     under the Commodity Exchange Act, as well as the Federal 
     Agricultural Mortgage Corporation or any entity chartered 
     and operating under the Farm Credit Act of 1971. The 
     Conferees also excluded from this subtitle institutions 
     chartered by Congress specifically to engage in 
     securitization or secondary market transactions, so long 
     as such institutions do not sell or transfer nonpublic 
     personal information to nonaffiliated third parties. The 
     Conferees granted the exception based on the understanding 
     that the covered entities do not market products directly 
     to consumers.
       5. The Conferees agreed to clarify that a financial 
     institution's annual disclosure of its privacy policy to its 
     customers must include a statement of the institution's 
     policies and practices regarding the sharing of nonpublic 
     personal information with affiliated entities, as well as 
     with nonaffiliated third parties.
       6. The Conferees agreed to provide that the disclosure of 
     nonpublic personal information contained in a consumer report 
     reported by a consumer reporting agency does not fall within 
     section 502's notice and opt out requirements.
       7. The Conferees agreed to modify the statutory definition 
     of ``nonpublic personal information'' by clarifying that such 
     term does not encompass any list, description, or other 
     grouping of consumers (and publicly available information 
     pertaining to them) that is derived without using any 
     nonpublic personal information.
       8. The Conferees agreed to exclude disclosures to consumer 
     reporting agencies from section 502(d)'s limitations on the 
     sharing of account number information.
       9. The Conferees agreed to give the relevant regulatory 
     agencies the authority to prescribe exceptions to subsections 
     (a) through (d) of section 502, rather than just sections 
     502(a) and (b), as provided for in the House bill.
       10. The Conferees inserted language stating that the 
     privacy provisions in the subtitle do not supersede any State 
     statutes, regulations, orders, or interpretations, except to 
     the extent that such State provisions are inconsistent with 
     the provisions of the subtitle, and then only to the extent 
     of the inconsistency. The amendment provides that a State 
     statute, regulation, order, or interpretation is not 
     inconsistent with the provisions of this subtitle if the 
     protection such statute, regulation, order, or interpretation 
     affords any consumer is greater than the protection provided 
     under this subtitle, as determined by the FTC in consultation 
     with the agency or authority with jurisdiction under section 
     505(a) over either the person that initiated the complaint or 
     that is the subject of the complaint, on its own motion or 
     upon the petition of any interested party.
       11. Section 506 authorizes the Federal banking agencies and 
     the National Credit Union Administration to prescribe joint 
     regulations governing the institutions under their 
     jurisdiction with respect to the Fair Credit Reporting Act; 
     the Conferees agreed to an amendment giving the Board of 
     Governors of the Federal Reserve the authority to prescribe 
     FCRA regulations governing bank holding companies and their 
     affiliates.
       12. The Conferees agreed to modify section 502(e)(5), to 
     include the Secretary of the Treasury as a ``law enforcement 
     agency'' for the purposes of the Bank Secrecy Act, to avoid 
     unintended interference with the existing functions of the 
     Treasury's anti-money laundering unit, the Financial Crimes 
     Enforcement Network (``FinCEN'').
       The Conferees wish to ensure that smaller financial 
     institutions are not placed at a competitive disadvantage by 
     a statutory regime that permits certain information to be 
     shared freely within an affiliate structure while limiting 
     the ability to share that same information with 
     nonaffiliated third parties. Accordingly, in prescribing 
     regulations pursuant to this subtitle, the agencies and 
     authorities described in section 504(a)(1) should take 
     into consideration any adverse competitive effects upon 
     small commercial banks, thrifts, and credit unions. In 
     issuing regulations under section 503, the regulators 
     should take into account the degree of consumer access to 
     disclosure by electronic means.
       In exercising their authority under section 504(b), the 
     agencies and authorities described in section 504(a)(1) may 
     consider it consistent with the purposes of this subtitle to 
     permit the disclosure of customer account numbers or similar 
     forms of access numbers or access codes in an encrypted, 
     scrambled, or similarly coded form, where the disclosure is 
     expressly authorized by the customer and is necessary to 
     service or process a transaction expressly requested or 
     authorized by the customer.
       The Conferees recognize the need to foster technological 
     innovation in the financial services and related industries. 
     The Conferees believe that the development of new 
     technologies that facilitate consumers' access to the broad 
     range of products and services available through online media 
     should be encouraged, provided that such technologies 
     continue to incorporate safeguards for consumer privacy.

         Subtitle B--Fraudulent Access to Financial Information

       Senate Position: The Senate bill contained provisions 
     making it a Federal crime--punishable by up to five years in 
     prison--to obtain or attempt to obtain, or cause to be 
     disclosed or attempt to cause to be disclosed, customer 
     information of a financial institution through fraudulent or 
     deceptive means, such as by misrepresenting the identity of 
     the person requesting the information or otherwise misleading 
     an institution or customer into making unwitting disclosures 
     of such information. In addition, it provided for a private 
     right of action and enforcement by state attorneys general.
       House Position: Similar provisions, with no private right 
     of action or enforcement by State Attorneys General.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       The amendment provided that authority for enforcing the 
     subtitle would be placed in the FTC, the Federal banking 
     agencies and the National Credit Union Administration (for 
     enforcement of these provisions with respect to compliance by 
     depository institutions within their jurisdiction).

[[Page H11300]]

         Title VI--Federal Home Loan Bank System Modernization

       The Senate and House bills reform the Federal Home Loan 
     Bank (``FHLBank'') System in several important ways. 
     Mandatory FHLBank membership for Federal savings associations 
     is eliminated, in order to provide completely voluntary 
     membership. Small bank members are given expanded access to 
     FHLBank advances. Governance of the FHLBanks is decentralized 
     from the Federal Housing Finance Board (``FHFB'') to the 
     individual FHLBanks. The Resolution Funding Corporation 
     (``REFCORP'') obligation of the FHLBanks, stemming from the 
     savings and loan crisis, is changed from a fixed dollar 
     amount to a fixed percentage of annual net earnings. The 
     Senate bill directs the General Accounting Office to study 
     FHLBank capital and the House bill establishes a new capital 
     structure for the FHLBanks. The conference committee 
     addressed three of these major areas.
     Sec. 604. Advances to members; collateral
       Senate Position: The Senate bill authorizes community 
     financial institutions (FDIC-insured depository institutions 
     with assets less than $500 million) to obtain long-term 
     FHLBank advances for lending to small businesses, small 
     farms, and small agri-businesses. Eligible collateral for 
     community financial institutions receiving any FHLBank 
     advances could include secured loans for small business, 
     agriculture, or securities representing a whole interest in 
     such loans.
       House Position: The House bill authorizes community 
     financial institutions to obtain long-term FHLBank advances 
     for small business, agricultural, rural development, or low-
     income community development lending. Eligible collateral for 
     community financial institutions receiving any FHLBank 
     advances could include secured loans for small business, 
     agriculture, rural development, or low-income community 
     development, or securities representing a whole interest in 
     such loans. Such advances-funded non-housing loans are 
     treated as qualified thrift investments in determining 
     required FHLBank stock purchases for community financial 
     institutions that are not qualified thrift lenders 
     (``QTLs'').
       Conference Substitute: The House receded to the Senate on 
     the purposes and collateral for advances to community 
     financial institutions. Greater stock purchases required of 
     FHLBank members, that are not QTLs, when they receive 
     advances are eliminated as is the requirement that such 
     members only apply for advances for housing finance purposes. 
     A priority for making advances to QTL members and a 30% limit 
     on total advances to non-QTL members are also removed. 
     Restrictions on obtaining new advances and having to repay 
     advances after three years, applicable to savings 
     associations that are not QTLs, are eliminated.
     Sec. 606. Management of FHLBanks
       Senate Position: The Senate bill changed the term of 
     elected FHLBank directors from two to four years to make the 
     term the same as for appointed directors. It transferred from 
     the FHFB to the individual FHLBanks authority over a number 
     of operational areas. It also gave the FHFB the same 
     enforcement authority over FHLBanks and their executive 
     officers and directors as the Federal banking agencies and 
     the Office of Federal Housing Enterprise Oversight have under 
     their statutes.
       House Position: The House bill contained the same 
     provisions. It also empowered the FHFB to address any capital 
     insufficiencies resulting from voluntary membership and 
     eliminated the 20:1 advances to stock ratio limit for a 
     FHLBank member.
       Conference Substitute: The Conference set terms for both 
     elected and appointed directors at 3 years (staggered with 
     approximately one-third of the terms expiring each year). A 
     FHLBank's board of directors is authorized to elect by 
     majority vote the board's Chairperson and Vice Chairperson. 
     The term of office for the Chairperson and Vice Chairperson 
     is two years. The annual salaries of FHLBank directors may 
     not exceed specified amounts plus reimbursement of expenses. 
     The maximum amounts are: Chairperson--$25,000; Vice 
     Chairperson--$20,000; and other directors--$15,000. FHLBank 
     directors may reside outside the FHLBank district if they are 
     an officer or director of a member institution located in the 
     district. The Senate receded to the House regarding the 
     provisions on capital insufficiencies and the advances to 
     stock ratio limit.
     Sec. 608. Capital structure of the FHLBanks
       Senate Position: The Senate bill directs the General 
     Accounting Office to submit to Congress within one year of 
     enactment a study on possible revisions to the FHLBanks' 
     capital structure, including the need for more permanent 
     capital, a statutory leverage ratio, and a risk-based capital 
     structure. GAO would also study the impact such revisions 
     might have on the FHLBanks' operations, including the REFCORP 
     payment obligation.
       House Position: The House bill establishes a new capital 
     structure for the FHLBanks. The FHLBanks were authorized to 
     issue three classes of stock: Class A (redeemable on 6-months 
     notice), Class B (redeemable on 5-years notice), and Class C 
     (nonredeemable). FHLBanks were required to meet a 5% leverage 
     minimum tied to total capital and a risk-based requirement 
     tied to permanent capital. Permanent capital included Class C 
     stock, retained earnings, and up to 1% of a FHLBank's assets 
     in Class B stock. Total capital included permanent capital 
     plus Class A stock, Class B stock (other than what counted 
     toward permanent capital), and a general allowance for 
     losses. A FHLBank must at all times comply with both the 
     leverage and risk-based capital requirements. In determining 
     compliance with the 5% minimum leverage ratio, Class A stock 
     was counted at paid-in value, Class B stock was weighted at 
     1.5 times paid-in value, and Class C stock and retained 
     earnings at 2.0 times. The current capital structure of the 
     FHLBanks must be maintained until the new capital 
     requirements are fully implemented. Within one year of 
     enactment, the FHFB must issue implementing regulations. The 
     board of directors of each FHLBank must develop a capital 
     plan, subject to FHFB approval. The FHLBanks have up to 
     three years to carry out their plans.
       Conference Substitute: The Senate receded to the House with 
     an amendment regarding a new capital structure. Two classes 
     of stock are authorized: Class A (redeemable on 6-months 
     notice) and Class B (redeemable on 5-years notice). FHLBanks 
     are required to meet a 5% leverage minimum tied to total 
     capital and a risk-based requirement tied to permanent 
     capital. Permanent capital includes Class B stock and 
     retained earnings. Total capital includes permanent capital 
     plus Class A stock, generally. In determining compliance with 
     the 5% minimum leverage ratio, Class A stock is counted at 
     paid-in value and Class B stock and retained earnings are 
     weighted at 1.5 times; however, a FHLBank's total capital, 
     determined without taking into account any multiplier, must 
     not be less than 4% of total assets.
       The weighting provision is included to encourage the 
     FHLBanks to build more permanent, longer-term capital. Using 
     the capital multiplier, the paid-in value of outstanding 
     Class A stock plus 1.5 times the paid-in value of outstanding 
     Class B stock and retained earnings must be at least 5% of 
     total assets. Using no weighting factor, total capital must 
     be at least 4% of total assets. For example, a FHLBank with 
     $100 million in assets would comply with $5 million in Class 
     A capital stock or $2 million in Class A capital stock and an 
     unweighted $2 million in Class B capital stock and retained 
     earnings (which would constitute $3 million on a weighted 
     basis).
       A FHLBank's permanent capital, used to measure its 
     compliance with the risk-based capital requirement, consists 
     of the amounts paid by members for Class B stock and the 
     amount of the FHLBank's retained earnings. The amount of 
     retained earnings that may be included in permanent capital 
     must be determined in accordance with generally accepted 
     accounting principles (GAAP), which precludes the use of non-
     GAAP regulatory accounting standards for measuring retained 
     earnings. The amount of Class B stock that is to be included 
     in permanent capital is the full amount paid by a member to 
     the FHLBank for the purchase of Class B stock.
       A FHLBank's total capital, used to measure its compliance 
     with the statutory leverage ratio, consists of permanent 
     capital, the amounts paid by members for Class A stock, any 
     general allowance for losses (consistent with GAAP and 
     subject to FHFB regulation), and any other amounts from 
     sources determined by the FHFB to be available to absorb 
     losses incurred by the FHLBank and appropriate for including 
     as capital. Any loss reserve that is held or established 
     against a specific asset of the FHLBank is expressly 
     prohibited from being included in total capital, as such 
     reserves are not capable of absorbing potential losses on 
     other assets.
       In recognition of Congressional concern regarding the 
     Financial Management and Mission Achievement (``FMMA'') rule 
     recently proposed by the FHFB, the Chairman of the FHFB sent 
     a letter on October 18, 1999 to the Senate and House Banking 
     Committee Chairmen (inserted below) providing assurances that 
     the proposal would be withdrawn, upon enactment of this 
     legislation. It is the conference committee's understanding 
     and expectation that the FMMA will be withdrawn and that the 
     FHFB will take no action to promulgate proposed or final 
     regulations limiting assets or advances beyond those 
     currently in effect until the statutorily required FHLBank 
     System capital rules are finalized and the statutory period 
     for submission of capital plans by the FHLBanks has expired. 
     If and when the FHFB develops a new FMMA, or similar rules, 
     we expect that the FHFB will provide ample opportunity for 
     public comment and hearings. It is the desire of the 
     conference committee that the FHFB consult with the Banking 
     Committees regarding both the capital regulations and any 
     financial management and/or mission related rules prior to 
     issuing them in proposed form.

                                Federal Housing Finance Board,

                                 Washington, DC, October 18, 1999.
     Hon. Phil Gramm,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         Washington, DC.
     Hon. Jim Leach,
     Chairman, Committee on Banking and Financial Services, 
         Washington, DC.
       Dear Senator Gramm and Congressman Leach: As you proceed to 
     consider legislation to modernize the Federal Home Loan Bank 
     System as part of the S. 900/H.R. 10 conference, I am aware 
     that there is substantial concern regarding our proposed 
     Financial Management and Mission Achievement regulation 
     (FMMA). Unfortunately, this legitimate concern regarding a 
     far-reaching

[[Page H11301]]

     regulatory initiative has resulted in a proposal for a 
     statutory moratorium on our regulatory authority. Despite the 
     best efforts of well-meaning advocates, such statutory 
     language can only lead to serious ambiguity and potential 
     litigation over the independent regulatory authority of the 
     Finance Board.
       Therefore, this letter is intended to give you and your 
     colleagues on the Committee of Conference solid assurances 
     about our intentions upon final enactment of the statute 
     being drafted in conference. Upon such enactment, the Finance 
     Board will:
       1. Withdraw, forthwith, its proposed FMMA.
       2. Proceed in accordance with the statutory instructions 
     regarding regulations governing a risk-based capital system 
     and a minimum leverage requirement for the Federal Home Loan 
     Banks.
       3. Take no action to promulgate proposed or final 
     regulations limiting assets or advances beyond those 
     currently in effect (except to the extent necessary to 
     protect the safety and soundness of the Federal Home Loan 
     Banks) until such time as the regulations described in number 
     2 have become final and the statutory period for submission 
     of capital plans by the Banks has expired.
       4. Consult with each of you and your colleagues on the 
     Banking Committees of the House and the Senate, regarding the 
     content of both the capital regulations and any regulations 
     on the subjects described in number 3, prior to issuing them 
     in proposed form.
       I believe that these commitments cover the areas of concern 
     which have led to a proposal for moratorium legislation. You 
     can rely on this commitment to achieve those legitimate ends 
     sought by moratorium proponents without clouding the 
     necessary regulatory authority of the Finance Board which 
     could result from statutory language.
       Thank you for your consideration.
           Sincerely,
                                                Bruce A. Morrison.

                      Title VII--Other Provisions

                       Subtitle A--ATM Fee Reform

       Senate Position: The Senate bill at Title VII requires 
     automated teller machine (``ATM'') operators who impose a fee 
     for use of an ATM by a noncustomer to post a notice on the 
     machine and on the screen that a fee will be charged and the 
     amount of the fee. This notice must be posted before the 
     consumer is irrevocably committed to completing the 
     transaction. A paper notice issued from the machine may be 
     used in lieu of a posting to the screen. No surcharge may be 
     imposed unless the notices are made and the consumer elects 
     to proceed with the transaction. A notice is required when 
     ATM cards are issued that surcharges may be imposed by other 
     parties when transactions are initiated from ATMs not 
     operated by the card issuer. ATM operators are exempt from 
     liability if properly placed notices on the machines are 
     subsequently removed, damaged, or altered by anyone other 
     than the ATM operator.
       House Position: Same.
       Conference Substitute: The House receded to the Senate with 
     an amendment.
       The amendment grants a temporary exemption for those older 
     machines that are unable to provide certain of the notices 
     required.

                   Subtitle B--Community Reinvestment

     Sec. 711. CRA sunshine requirements
       Senate Position: Section 312 of the Senate bill amends the 
     Federal Deposit Insurance Act by creating a new Section 46, 
     to require full disclosure of agreements entered into between 
     insured depository institutions or their affiliates and 
     nongovernmental entities or persons made pursuant to or in 
     connection with the fulfillment of the CRA. The section does 
     not confer any authority on the Federal banking agencies to 
     enforce the provisions of these agreements.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate, 
     with an amendment.
       As recommended by the Conferees, the provision requires 
     full disclosure of agreements, as defined in this section, 
     between an insured depository institution or affiliate and a 
     nongovernmental entity or person where the agreement is made 
     pursuant to or in connection with the CRA, involving funds or 
     other resources of an insured depository institution or 
     affiliate.
       The provision is not intended to define as a CRA agreement 
     an individual mortgage loan (although it could apply to 
     agreements involving, for example, parties acting as mortgage 
     intermediaries or facilitators), or other specific contract 
     to an individual, business, farm, or other entity, where 
     funds are loaned at rates not substantially below market 
     rates and if the purpose of the loan or extension of credit 
     does not include any re-lending of borrowed funds to other 
     parties. In addition, the scope of the provision does not 
     extend to an agreement entered into by an insured depository 
     institution or affiliate with a nongovernmental entity or 
     person who has not commented on, testified about, or 
     discussed with the institution, or otherwise contacted the 
     institution, concerning the CRA. This exception to the 
     coverage could include, for example, service organizations 
     such as civil rights groups, community groups providing 
     housing or other services in low-income neighborhoods, the 
     American Legion, community theater groups, and so forth. The 
     Federal Reserve Board may prescribe regulations to provide 
     further exemptions consistent with the purposes of the 
     provision.
       In defining the agreements to which this provision would 
     apply, the legislation assigns to the appropriate Federal 
     banking agency the responsibility to identify a list of 
     factors that the agency determines have a material impact on 
     the agency's decision to approve or disapprove an application 
     for a deposit facility or to assign a rating in an 
     examination under the CRA. It is expected that the regulator 
     will include in such list a full enumeration of the relevant 
     factors that the agency reviews and considers in examining 
     the performance of an insured financial institution in 
     connection with the CRA, including any and all items a 
     regulator would attach importance to in determining the 
     evaluation under the act of the performance of a financial 
     institution.
       The Conferees note that while an agency may not give a 
     great deal of weight to a mere agreement to perform certain 
     CRA-related activities, per se, the agency does look 
     carefully at the activities that the institution may have 
     actually performed in fact pursuant to such an agreement. The 
     disclosure and reporting requirements of this section apply 
     to agreements defined in subsection (a) in either event.
       As a general rule, the parties are required to disclose 
     fully such agreements and make them available to the public 
     and to the Federal banking agencies.
       In addition, parties to each CRA agreement are required to 
     report at least once each year on the use of resources 
     provided pursuant to each agreement. A bank would file its 
     report directly with its Federal regulator. A nongovernmental 
     party is required to file its report with the appropriate 
     Federal banking agency with supervisory responsibility over 
     the insured depository institution that is a party to the 
     agreement, either directly with the agency or via the 
     insured depository institution, which would be required 
     promptly to transmit the report to the Federal banking 
     agency.
       The Federal banking agencies are directed, in implementing 
     regulations under this provision, to minimize the regulatory 
     burden on reporting parties. One way in which to accomplish 
     this goal would be wherever possible and appropriate with the 
     purposes of this section, to make use of existing reporting 
     and auditing requirements and practices of reporting parties, 
     and thus avoid unnecessary duplication of effort. The 
     Managers intend that, in issuing regulations under this 
     section, the appropriate Federal supervisory agency may 
     provide that the nongovernmental entity or person that is not 
     an insured depository institution may, where appropriate and 
     in keeping with the provisions of this section, fulfill the 
     requirements of subsection (c) by the submission of its 
     annual audited financial statement or its Federal income tax 
     return.
     Sec. 712. Small bank regulatory relief
       Senate Position: The Senate provision amended the CRA to 
     exempt from the provisions of that Act banks and savings and 
     loan associations with total assets less than $100 million 
     and that are located in nonmetropolitan areas.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate 
     provision with an amendment.
       The provision directs that ``regulated financial 
     institutions'' with aggregate assets not exceeding $250 
     million will be subject to routine examinations under the CRA 
     as follows: (i) not more than once every 60 months if the 
     institution received a rating of `outstanding record of 
     meeting community credit needs' at its most recent 
     examination; (ii) not more than once every 48 months if the 
     institution received a rating of `satisfactory record of 
     meeting community credit needs' at its most recent 
     examination; and (iii) as deemed necessary by the appropriate 
     Federal banking agency if the institution received a rating 
     of less than `satisfactory record of meeting community credit 
     needs' at its most recent examination. The provision also 
     states that the Federal banking agencies may subject an 
     institution to more frequent or less frequent examinations 
     for reasonable cause. A regulated financial institution shall 
     remain subject to examination under this title in connection 
     with an application for a deposit facility.
     Sec. 713-715. Federal Reserve Board and Treasury studies, 
         Impact on CRA
       Senate Position: No provision.
       House Position: The House bill at Section 110 requires a 
     study by the Secretary of the Treasury, in consultation with 
     the Federal banking agencies, of the extent to which adequate 
     services are being provided as intended by the CRA, including 
     services in low- and moderate-income neighborhoods and for 
     persons of modest means, as a result of the enactment of the 
     Gramm-Leach-Bliley Act. The report must be submitted to the 
     Congress within two years.
       Conference Substitute: The Senate receded to the House with 
     an amendment directing, in addition, that the Federal Reserve 
     Board conduct a comprehensive study of the CRA, in 
     consultation with the Chairman and Ranking Member of the 
     House Banking and Financial Services Committee and the 
     Chairman and Ranking Member of the Senate Banking, Housing, 
     and Urban Affairs Committee. The study is to focus on default 
     rates, delinquency rates, and the profitability of loans made 
     in conformity with that Act. The report must be submitted to 
     the House and Senate Banking Committees no later than March 
     15, 2000. The provision also directs that the report and all 
     of the supporting data be made available at the same time to 
     the public by the Federal Reserve Board, to the extent that 
     the data are not confidential.

[[Page H11302]]

       The Conferees recommended further amending the House study 
     with an amendment permitting the Secretary of the Treasury to 
     submit to the Congress by March 15, 2000, a baseline report 
     in addition to the final report as required in the House 
     provision. The purpose of the baseline report is to give a 
     set of data against which the Secretary will be able to 
     measure change by the end of the two-year reporting period.
       The Conferees also recommended an amendment to the House 
     language to state that nothing in the Gramm-Leach-Bliley Act 
     shall be construed to repeal any provision of the CRA.

               Subtitle C--Other Regulatory Improvements

     Sec. 721. Expanded small bank access to S corporation 
         treatment
       Senate Position: The Senate bill at section 302 requires 
     the GAO to study and report to Congress within six months of 
     the date of enactment on certain revisions to S corporation 
     rules permitting greater access by community banks to S 
     corporation treatment.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate.
     Sec. 722. ``Plain Language'' requirement for Federal banking 
         agency rules
       Senate Position: The Senate bill at section 306 directs the 
     Federal banking agencies to use plain language in all 
     proposed and final rule-makings published by the agency in 
     the Federal Register after January 1, 2000, and to report to 
     Congress by no later than March 1, 2001 on how they have 
     complied with the plain language requirement.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate.
     Sec. 723. Retention of ``Federal'' in name of converted 
         Federal savings associations
       Senate Position: The Senate bill at section 307 would 
     permit Federal savings associations that convert to national 
     or state bank charters to keep the word ``Federal'' in their 
     names.
       House Position: Same.
       Conference Substitute: The Senate receded to the House.
     Sec. 724. Control of Bankers' Banks
       Senate Position: The Senate bill at section 310 allows one 
     or more thrift institutions to own a state-chartered bank or 
     trust company, whose business is restricted to accepting 
     deposits from thrift institutions or savings banks, deposits 
     arising from the corporate business of the thrift 
     institutions or savings banks that own the bank or trust 
     company, or deposits of public funds.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate.
     Sec. 725. Provision of technical assistance to 
         microenterprises
       Senate Position: The Senate bill at section 316 establishes 
     a grant program to fund nonprofit microenterprise development 
     organizations, programs, collaboratives, or intermediaries 
     engaged in (1) providing training and technical assistance to 
     low-income and disadvantaged entrepreneurs interested in 
     starting or expanding their own businesses; (2) building the 
     capacity of organizations that serve low-income and 
     disadvantaged entrepreneurs; and (3) supporting research and 
     development aimed at identifying and promoting training and 
     technical assistance programs that effectively serve low-
     income and disadvantaged entrepreneurs.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate with 
     an amendment.
       While the Senate bill made the new microenterprise program 
     a part of the Treasury Department's Community Development 
     Financial Institutions program, the Conferees chose to have 
     the new program administered by the Small Business 
     Administration.
     Sec. 726. Federal Reserve audits
       Senate Position: The Senate bill at section 317 requires 
     annual outside independent accounting firm audits of the 
     Federal Reserve Banks and the Federal Reserve Board. In 
     addition, the bill changes the definitions and rules that 
     apply to the pricing of Federal Reserve System services under 
     the Monetary Control Act.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate with 
     an amendment in the nature of a substitute. The substitute 
     provision requires the Federal Reserve Board to order an 
     annual independent audit of the financial statements of each 
     Federal Reserve Bank and of the Board.
     Sec. 727. Authorization to release reports
       Senate Position: No provision.
       House Position: The House bill at section 132 permits the 
     Federal Reserve Board, at its discretion, to furnish exam 
     reports and other confidential supervisory information 
     concerning State member banks or other entities it examines 
     to any Federal or State authorities with supervisory 
     authority over an examined entity, to officers, directors, or 
     receivers of the entity, or any other person that the Federal 
     Reserve Board determines is proper. In addition, the House 
     bill includes the Commodity Futures Trading Commission under 
     definitions in the Right to Financial Privacy Act.
       Conference Substitute: The Senate receded to the House with 
     an amendment.
       The amendment adds to the provision allowing the disclosure 
     of reports and information by applying certain 
     confidentiality requirements and procedures for disclosure.
     Sec. 728. General Accounting Office study of conflicts of 
         interest
       Senate Position: No provision.
       House Position: The House bill at section 193 requires the 
     Comptroller General of the GAO to study the conflict of 
     interest faced by the Federal Reserve Board between its role 
     as a primary regulator of the banking industry and its role 
     as a vendor of services. Specifically, the GAO should address 
     the conflict between the Board's role as a regulator of the 
     payment system and its role as a competitor with private 
     sector providers of payment services, and how best to resolve 
     that conflict. The study is due one year after enactment of 
     the legislation.
       Conference Substitute: The Senate receded to the House.
     Sec. 729. Study and report on adapting existing legislative 
         requirements to on-line banking and lending
       Senate Position: No provision.
       House Position: The House bill at section 195 requires the 
     Federal banking agencies to conduct a study of banking 
     regulations regarding the delivery of financial services, 
     including those regulations that may assume that there will 
     be face-to-face contact, and report their recommendations on 
     adapting those existing requirements to online banking and 
     lending. The report, with any recommended legislative or 
     regulatory action, is due one year after the date of 
     enactment of the legislation.
       Conference Substitute: The Senate receded to the House with 
     an amendment changing the due date of the study to two years 
     after date of enactment.
     Sec. 730. Clarification of source of strength doctrine
       Senate Position: No provision.
       House Position: The House bill at section 197 enhances the 
     source of strength doctrine by, in certain circumstances, 
     protecting the Federal banking agencies and the deposit 
     insurance funds from claims brought by the bankruptcy trustee 
     of a depository institution holding company or other person 
     for the return of capital infusions.
       Conference Substitute: The Senate receded to the House with 
     an amendment in the nature of a substitute.
       The substitute narrows and clarifies the circumstances 
     under which a Federal banking agency would be protected from 
     a claim. First, it clarifies that the transferred assets must 
     be those of an affiliate or a controlling shareholder of an 
     insured depository institution. The House amendment did not 
     so specify. Second, section 730 provides that the transfer 
     must be to or for the benefit of an insured depository 
     institution and that it must be made by an affiliate or 
     controlling shareholder of such insured depository 
     institution. The House amendment did not include such 
     clarifying language. Third, section 730 specifies that no 
     person may bring a claim against a Federal banking agency for 
     monetary damages, return of assets, or for other legal or 
     equitable relief in connection with such transfer, consistent 
     with certain limitations. The House amendment only referred 
     to claims for monetary damages or for the return of assets or 
     other property. Fourth, section 730 adds a definition of the 
     term ``claim.'' For purposes of this provision, a claim is 
     defined as a cause of action based on Federal or State law 
     providing for the avoidance of preferential or fraudulent 
     transfers or conveyances, or providing for similar remedies. 
     The definition, however, explicitly excepts any claim based 
     on actual intent to hinder, delay or defraud pursuant to such 
     fraudulent transfer or conveyance law.
       This section does not limit the right of a depository 
     institution, a controlling stockholder, or a depository 
     institution holding company to seek direct review of an order 
     or directive of a Federal banking agency under the 
     Administrative Procedure Act in accordance with various 
     banking statutes. In addition, the provision does not limit 
     the rights of a claimant to bring suit against the United 
     States for a breach of contract or a taking under the 5th 
     Amendment to the Constitution.
     Sec. 731. Interest rates and other charges at interstate 
         branches
       Senate Position: No provision.
       House Position: The House bill at section 198 provides loan 
     pricing parity among interstate banks. Specifically, if an 
     interstate bank can charge a particular interest rate, then a 
     local bank in the State into which the interstate bank has 
     branched, may charge a comparable rate.
       Conference Substitute: The Senate receded to the House.
     Sec. 732. Interstate branches and agencies of foreign banks
       Senate Position: The Senate bill at section 313 allows a 
     Federal or State agency of a foreign bank to upgrade to a 
     branch with the approval of the appropriate chartering 
     authority and the Federal Reserve Board.
       House Position: Same.
       Conference Substitute: The House receded to the Senate.
     Sec. 733. Fair treatment of women by financial advisers
       Senate Position: No provision.
       House Position: The House bill at section 198B establishes 
     the sense of the Congress that estate planners, trust 
     officers, investment advisers, and other financial planners 
     and advisors should eliminate examples in their training 
     materials which portray women as incapable and foolish, and 
     develop

[[Page H11303]]

     fairer and more balanced presentations that eliminate 
     outmoded and stereotypical examples which lead clients to 
     take actions that are financially detrimental to their wives 
     and daughters.
       Conference Substitute: The Senate receded to the House with 
     an amendment in the nature of a substitute.
       The substitute establishes the sense of the Congress that 
     individuals offering financial advice and products should do 
     so in a nondiscriminatory, nongender-specific manner.
     Sec. 734. Membership of loan guarantee boards
       Senate Position: No provision.
       House Position: No provision.
       Conference Substitute: The Conferees adopted a provision 
     that would modify the membership of the Emergency Steel Loan 
     Guarantee Board and the Emergency Oil and Gas Loan Guarantee 
     Board. Where under existing law the Chairmen of the Federal 
     Reserve Board and SEC were designated as members, the 
     provision permits both to designate another Member of the 
     Board or another Commissioner as appropriate.
     Sec. 735. Repeal of stock loan limit in Federal Reserve Act
       Senate Position: No provision.
       House Position: The House bill at section 124 repeals the 
     restrictions in section 11(m) of the Federal Reserve Act on 
     loans by Federal Reserve member banks secured by stock or 
     bond collateral. Limitations on loans to one borrower imposed 
     pursuant to other statutory authority are not affected.
       Conference Substitute: The Senate receded to the House.
     Sec. 736. Elimination of SAIF and DIF Special Reserves
       Senate Position: The Senate bill at section 301 eliminates 
     the need for the establishment of a SAIF ``special reserve'' 
     which the FDIC was required to establish beginning in 1999. 
     This revision becomes effective on the date of enactment.
       House Position: Same other than the effective date.
       Conference Substitute: The House receded to the Senate.
     Sec. 737. Bank officers and directors as officers and 
         directors of public utilities
       Senate Position: The Senate bill at section 309 amends the 
     Federal Power Act to permit officers or directors of public 
     utilities to serve as officers or directors of banks, trust 
     companies, or securities firms, if certain safeguards against 
     conflicts of interest are complied with.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate.
     Sec. 738. Approval for purchases of securities
       Senate Position: The Senate bill at section 315 authorizes 
     a majority of the entire board of directors of a bank to vote 
     on the purchase of securities from an affiliate, based on a 
     determination that the purchase is a sound investment for the 
     bank. Such a standard does not exist under current law, which 
     simply requires the vote to be taken by a majority of 
     independent directors.
       House Position: No provision.
       Conference Substitute: The House receded to the Senate.
     Sec. 739. Optional conversion of Federal savings associations
       Senate Position: The Senate bill at section 602 allows a 
     Federal savings association chartered prior to the date of 
     enactment to convert into one or more national banks, subject 
     to the approval of the OCC, each of which may encompass one 
     or more of the branches of the Federal savings association in 
     one or more States.
       House Position: No provision.
       Conference Substitute: The House recedes to the Senate with 
     an amendment.
       The amendment would allow the conversion to State as well 
     as national banks.
     Sec. 740. Grand jury proceedings
       Senate Position: No provision.
       House Position: No provision.
       Conference Substitute: The Conferees adopted a provision 
     that would permit U.S. Attorneys offices to seek a court 
     order to provide financial institution regulatory agencies 
     with access to grand jury material, giving State regulatory 
     agencies parity with Federal regulatory agencies.

     From the Committee on Banking and Financial Services, for 
     consideration of the Senate bill, and the House amendment, 
     and modifications committed to conference:
     James A. Leach,
     Bill McCollum,
     Marge Roukema,
     Doug Bereuter,
     Rick Lazio,
     Spencer Bachus,
     Michael N. Castle,
     John J. LaFalce,
     Bruce F. Vento,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of titles I, III 
     (except section 304), IV, and VII of the Senate bill, and the 
     title I of the House amendment, and modifications committed 
     to conference:
     Paul E. Kanjorski,
     Carol B. Maloney,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title V of the 
     Senate bill, and title II of the House amendment, and 
     modifications committed to conference:
     Paul E. Kanjorski,
     Carol B. Maloney,
     James H. Maloney,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title II of the 
     Senate bill, and title III of the House amendment, and 
     modifications committed to conference:
     Paul E. Kanjorski,
     Carol B. Maloney,
     Nydia M. Velazquez,
     Darlene Hooley,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title VI of the 
     Senate bill, and title IV of the House amendment, and 
     modifications committed to conference:
     Carol B. Maloney,
     Luis V. Gutierrez,
     Ken Bentsen,
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of section 304 of the 
     Senate bill, and title V of the House amendment, and 
     modifications committed to conference:
     Paul E. Kanjorski,
     Gary L. Ackerman,
     From the Committee on Commerce, for consideration of the 
     Senate bill, and the House amendment, and modifications 
     committed to conference:
     Tom Bliley,
     Michael G. Oxley,
     Billy Tauzin,
     Paul Gillmor,
     James Greenwood,
     Chris Cox,
     Steve Largent,
     Brian Bilbray,
     E. Towns,
     Diana DeGette,
     Lois Capps,
     Provided that Mr. Rush is appointed in lieu of Mrs. Capps for 
     consideration of section 316 of the Senate bill:
     Bobby L. Rush,
     From the Committee on Agriculture, for consideration of title 
     V of the House amendment, and modifications committed to 
     conference:
     Larry Combest,
     Thomas W. Ewing,
     Charles W. Stenholm,
     From the Committee on the Judiciary, for consideration of 
     sections 104(a), 104(d)(3), and 104(f)(2) of the Senate bill, 
     and sections 104(a)(3), 104(d)(3)(A), 104(b)(4)(B), 136(b), 
     136(d)-(e), 141-44, 197, 301, 306 of the House amendment, and 
     modifications committed to conference:
     Henry Hyde,
     George W. Gekas,
     From the Committee on Banking and Financial Services, for 
     consideration of section 101 of the Senate bill and section 
     101 of the House amendment: Mr. King is appointed in lieu of 
     Mr. Bachus; Mr. Royce is appointed in lieu of Mr. Castle
     Peter T. King,
     Ed Royce,
     From the Committee on Commerce, for consideration of section 
     101 of the Senate bill and section 101 of the House 
     amendment: Mrs. Wilson is appointed in lieu of Mr. Largent; 
     Mr. Fossella is appointed in lieu of Mr. Bilbray
     Heather Wilson,
     Vito Fossella,
                                Managers on the Part of the House.

     Phil Gramm,
     Connie Mack,
     Robert F. Bennett,
     Rod Grams,
     Wayne Allard,
     Michael B. Enzi,
     Chuck Hagel,
     Rick Santorum,
     Jim Bunning,
     Mike Crapo,
     Paul Sarbanes,
     Christopher J. Dodd,
     John F. Kerry,
     Tim Johnson,
     Jack Reed,
     Charles Schumer,
     Evan Bayh,
     John Edwards,
                               Managers on the Part of the Senate.

     

                          ____________________