[Congressional Record Volume 149, Number 116 (Thursday, July 31, 2003)]
[Senate]
[Pages S10623-S10631]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HAGEL (for himself, Mr. Sununu, and Mrs. Dole):
  S. 1508. A bill to address regulation of secondary mortgage market 
enterprises, and for other purposes; to the Committee on Banking, 
Housing, and Urban Affairs.
  Mr. HAGEL. Mr. President, I rise today to introduce, along with my 
colleagues Senator Sununu and Senator Dole, the Federal Enterprise 
Regulatory Reform Act of 2003. This is needed regulatory reform at a 
critical time for the Federal National Mortgage Association (Fannie 
Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
  There is no doubt that our housing government sponsored enterprises 
(GSEs) have been successful in carrying out their mission of creating a 
secondary market for home mortgages. The housing market has remained 
strong through tough economic times, and homeownership in this country 
is at an all-time high.
  The housing GSEs, however, are uncommon institutions with a unique 
set of responsibilities and stakeholders. Fannie and Freddie are 
chartered by Congress, limited in scope, and are subject to 
Congressional mandates, yet they are publicly traded companies with all 
the earnings pressure that Wall Street demands. Additionally, Fannie 
and Freddie enjoy an implicit guarantee by the Federal Government that 
has aided them in developing substantial clout on Wall Street. With 
their influence in the markets, their ability to raise capital at near-
Treasury Bill rates, and their use of the most sophisticated portfolio 
management tools, Fannie and Freddie today are no longer simply 
secondary market facilitators for mortgages.
  Freddie Mac's recent disclosure of management failures and accounting 
deficiencies resulting in upwards of $4.5 billion in understated 
earnings precipitated the need for Congress to exercise its oversight 
of the GSEs. The Senate Banking Committee has held one hearing already 
and more are planned after our August recess.
  If we are to continue to provide GSEs with the framework to operate 
under an implied government backing, I believe that they should be held 
to a higher standard than private organizations and subject to more 
scrutiny than the private sector. Furthermore, I believe it is possible 
to realign oversight and operating rules for Fannie and Freddie without 
jeopardizing the strong housing market that America enjoys today.
  It is my view that the Office of Federal Housing Enterprise Oversight 
(OFHEO) has not been given the tools needed to effectively regulate 
Fannie Mae and Freddie Mac. Our legislation would create a new, 
stronger regulator in the Department of the Treasury. Treasury 
regulates banks and other financial institutions through the Office of 
the Comptroller of the Currency (OCC) and the Office of Thrift 
Supervision (OTS), and it has the experience and expertise needed to 
supervise Fannie Mae and Freddie Mac. Our bill also would provide the 
new regulator with enhanced regulatory flexibility and enforcement 
tools like those afforded to OCC and OTS. Furthermore, the bill would: 
give OFES oversight of Fannie Mae and Freddie Mac's ``mission'' as well 
as safety and soundness; give OFES authority to regulate the type and 
amount of non-mission related assets Fannie Mae and Freddie Mac can 
hold; give OFES enhanced enforcement powers much like those of other 
financial regulators; fund OFES through assessments instead of through 
Congressional appropriations; require several government studies, 
including one on the risk implications of GSEs purchasing their own 
mortgage backed securities, one on the feasibility of merging OFES with 
the Federal Housing Finance Board (FHFB), and one on the feasibility of 
consolidating OFES with the Office of Thrift Supervision (OTS).
  This reform is important to restoring and maintaining the confidence 
that investors and the markets require. In light of the recent problems 
at Freddie Mac, it is even more important. I urge my colleagues to 
support this reform effort and invite them to cosponsor our bill.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1508

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Federal 
     Enterprise Regulatory Reform Act of 2003''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title and table of contents.

[[Page S10624]]

      TITLE I--REFORM OF REGULATION OF FANNIE MAE AND FREDDIE MAC

                 Subtitle A--Improvement of Supervision

Sec. 101. Establishment of Office of Federal Enterprise Supervision in 
              the Department of the Treasury.
Sec. 102. Duties and authorities of Director and HUD.
Sec. 103. Examiners and accountants.
Sec. 104. Regulations.
Sec. 105. Assessments.
Sec. 106. Independence of Director in congressional testimony and 
              recommendations.
Sec. 107. Limitation on nonmission-related assets.
Sec. 108. Reports.
Sec. 109. Risk-based capital test for enterprises.
Sec. 110. Minimum and critical capital levels.
Sec. 111. Definitions.

                  Subtitle B--Prompt Corrective Action

Sec. 131. Capital classifications.
Sec. 132. Supervisory actions applicable to undercapitalized 
              enterprises.
Sec. 133. Supervisory actions applicable to significantly 
              undercapitalized enterprises.

                    Subtitle C--Enforcement Actions

Sec. 151. Cease-and-desist proceedings.
Sec. 152. Temporary cease-and-desist proceedings.
Sec. 153. Removal and prohibition authority.
Sec. 154. Enforcement and jurisdiction.
Sec. 155. Civil money penalties.
Sec. 156. Criminal penalty.

                    Subtitle D--Reports to Congress

Sec. 161. Studies and reports.

                     Subtitle E--General Provisions

Sec. 171. Conforming and technical amendments.
Sec. 172. Effective date.

        TITLE II--TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY

Sec. 201. Abolishment of OFHEO.
Sec. 202. Continuation and coordination of certain regulations.
Sec. 203. Transfer and rights of employees of OFHEO.
Sec. 204. Transfer of property and facilities.

      TITLE I--REFORM OF REGULATION OF FANNIE MAE AND FREDDIE MAC

                 Subtitle A--Improvement of Supervision

     SEC. 101. ESTABLISHMENT OF OFFICE OF FEDERAL ENTERPRISE 
                   SUPERVISION IN THE DEPARTMENT OF THE TREASURY.

       (a) In General.--Part 1 of Subtitle A of title XIII of the 
     Housing and Community Development Act of 1992 is amended by 
     striking sections 1311 and 1312 (12 U.S.C. 4511, 4512) and 
     inserting the following:

     ``SEC. 1311. ESTABLISHMENT OF OFFICE OF FEDERAL ENTERPRISE 
                   SUPERVISION.

       ``(a) Establishment.--
       ``(1) In General.--There is established the Office of 
     Federal Enterprise Supervision, which shall be an office in 
     the Department of the Treasury.
       ``(2) Authority.--The Office shall succeed to the authority 
     of the Director of the Office of Federal Housing Enterprise 
     Oversight of the Department of Housing and Urban Development 
     and the general regulatory and any other authority of the 
     Secretary of Housing and Urban Development with respect to 
     the enterprises (except as specifically provided otherwise in 
     this Act, the Federal National Mortgage Association Charter 
     Act (12 U.S.C. 1716 et seq.), the Federal Home Loan Mortgage 
     Corporation Act (12 U.S.C. 1451 et seq.), and any other 
     provision of Federal law).
       ``(b) Prohibition of Merger of Office.--Notwithstanding any 
     other provision of this law, the Secretary of the Treasury 
     may not merge or consolidate the Office, or any of the 
     functions or responsibilities of the Office, with any 
     function or program administered by the Secretary.
       ``(c) Savings Provision.--The authority of the Director to 
     take actions under subtitles B and C does not in any way 
     limit the general supervisory and regulatory authority 
     granted to the Director under subsection (a).

     ``SEC. 1312. DIRECTOR.

       ``(a) Establishment of Position.--There is established the 
     position of the Director of the Office of Federal Enterprise 
     Supervision, who shall be the head of the Office.
       ``(b) Appointment; Term.--
       ``(1) Appointment.--The Director shall be appointed by the 
     President, by and with the advice and consent of the Senate, 
     from among individuals who are citizens of the United States.
       ``(2) Term.--The Director shall be appointed for a term of 
     5 years.
       ``(3) Vacancy.--
       ``(A) In general.--A vacancy in the position of Director 
     that occurs before the expiration of the term for which a 
     Director was appointed shall be filled in the manner 
     established under paragraph (1).
       ``(B) Term .--The Director appointed to fill a vacancy 
     under subparagraph (A) shall be appointed only for the 
     remainder of such term.
       ``(4) Service after end of term.--An individual may serve 
     as Director after the expiration of the term for which the 
     individual was appointed until a successor Director has been 
     appointed.
       ``(5) Transitional provision.--Notwithstanding paragraphs 
     (1) and (2), the Director of the Office of Federal Housing 
     Enterprise Oversight of the Department of Housing and Urban 
     Development on the date of enactment of the Federal 
     Enterprise Regulatory Reform Act of 2003, shall be the 
     Director until the date on which that individual's term as 
     Director of the Office of Federal Housing Enterprise 
     Oversight would have expired.
       ``(c) Prohibition on Financial Interests.--The Director 
     shall not have a direct or indirect financial interest in any 
     enterprise, nor hold any office, position, or employment in 
     any enterprise.''.
       (b) Appointment of Director.--Notwithstanding the effective 
     date under section 172 or any other provision of law, the 
     President may, at any time after the date of enactment of 
     this Act, appoint an individual to serve as the Director in 
     accordance with the provisions of the amendment made by 
     subsection (a) of this section.

     SEC. 102. DUTIES AND AUTHORITIES OF DIRECTOR AND HUD.

       (a) In General.--Section 1313 of the Housing and Community 
     Development Act of 1992 (12 U.S.C. 4513) is amended to read 
     as follows:

     ``SEC. 1313. DUTIES AND AUTHORITIES OF DIRECTOR.

       ``(a) Duties.--
       ``(1) Principal duties.--The principal duties of the 
     Director shall be to ensure that the enterprises--
       ``(A) operate in a financially safe and sound manner;
       ``(B) carry out their missions in a financially safe and 
     sound manner and only through activities that have been 
     authorized under, and are consistent with the purposes of, 
     the provisions of Federal law that charter the enterprises; 
     and
       ``(C) remain adequately capitalized.
       ``(2) Other duties.--To the extent consistent with 
     paragraph (1), the duty of the Director shall be to exercise 
     general supervisory and regulatory authority over the 
     enterprises, in accordance with this title, the Federal 
     National Mortgage Association Charter Act (12 U.S.C. 1716 et 
     seq.), the Federal Home Loan Mortgage Corporation Act (12 
     U.S.C. 1451 et seq.), and any other provisions of law.
       ``(b) Authority Exclusive of Secretary.--Except as 
     specifically provided under this Act, the Federal National 
     Mortgage Association Charter Act, the Federal Home Loan 
     Mortgage Corporation Act, or any other provision of Federal 
     law, the authority of the Director with respect to the 
     enterprises shall not be subject to the review, approval, or 
     intervention of the Secretary of the Treasury.
       ``(c) Delegation of Authority.--The Director may delegate 
     to officers and employees of the Director any of the 
     functions, powers, and duties of the Director, with respect 
     to supervision and regulation of the enterprises, as the 
     Director considers appropriate.''.
       (b) Prior Approval Authority for New Programs.--Part 1 of 
     Subtitle A of title XIII of the Housing and Community 
     Development Act of 1992 (12 U.S.C. 4501 et seq.) is amended 
     by adding at the end the following:

     ``SEC. 1319H. PRIOR APPROVAL AUTHORITY FOR NEW PROGRAMS.

       ``(a) In general.--The Director shall require each 
     enterprise to obtain the approval of the Director for any new 
     program of the enterprise before implementing the program.
       ``(b) Standard for approval.--The Director shall approve 
     any new program of an enterprise for purposes of subsection 
     (a) unless--
       ``(1) in the case of a new program of the Federal National 
     Mortgage Association, the Director determines that the 
     program is not authorized under section 304 or paragraph (2), 
     (3), (4), or (5) of section 302(b) of the Federal National 
     Mortgage Association Charter Act (12 U.S.C. 1717(b));
       ``(2) in the case of a new program of the Federal Home Loan 
     Mortgage Corporation, the Director determines that the 
     program is not authorized under paragraph (1), (4), or (5) of 
     section 305(a) of the Federal Home Loan Mortgage Corporation 
     Act (12 U.S.C. 1451 et seq.); or
       ``(3) the Director determines that the new program is not 
     in the public interest.
       ``(c) Procedure for Approval.--
       ``(1) Submission of request.--An enterprise shall submit to 
     the Director a written request for approval of a new program 
     under subparagraph (A) that describes the program in such 
     form as prescribed by order or regulation of the Director.
       ``(2) Response.--
       ``(A) In general.--Not later than 45 days after the date of 
     submission of a request for approval under paragraph (1), the 
     Director shall--
       ``(i) approve the request; or
       ``(ii) deny the request and submit a report explaining the 
     reasons for the denial to the Committee on Financial Services 
     of the House of Representatives and the Committee on Banking, 
     Housing and Urban Affairs of the Senate.
       ``(B) Extension.--The Director may extend the time period 
     under subparagraph (A) for a single additional 15 day period 
     only if the Director requests additional information from the 
     enterprise.
       ``(3) Failure to respond.--If the Director fails to approve 
     the request or fails to submit a report under paragraph 
     (2)(A)(ii) during the period provided, the request shall be 
     considered to have been approved by the Director.
       ``(4) Review of disapproval.--
       ``(A) Submission of new information.--If the Director 
     submits a report under paragraph (2)(A)(ii) denying a request 
     for reasons listed under paragraph (1) or (2) of subsection

[[Page S10625]]

     (b), the Director shall allow the enterprise to submit new 
     information in support of the request for approval.
       ``(B) New programs not in the public interest.--If the 
     Director submits a report under paragraph (2)(A)(ii) denying 
     a request after finding that the program is not in the public 
     interest under subsection (b)(3), the Director shall provide 
     the enterprise with notice and opportunity for a hearing on 
     the record regarding such denial.''.
       (c) Repeal of HUD Authority.--Part 2 of Subtitle A of title 
     XIII of the Housing and Community Development Act of 1992 (12 
     U.S.C.4501 et seq.) is amended by striking sections 1321 and 
     1322.
       (d) Authority of HUD for Housing Goals.--
       (1) In general.--Section 1331 of the Housing and Community 
     Development Act of 1992 (12 U.S.C. 4561) is amended--
       (A) in the first sentence of subsection (a), by inserting 
     ``of Housing and Urban Development'' after ``The Secretary''; 
     and
       (B) by adding at the end the following:
       ``(d) Definition.--For purposes of this part, the term 
     `Secretary' means the Secretary of Housing and Urban 
     Development.''.
       (2) Annual report on housing goals.--Section 1324 of the 
     Housing and Community Development Act of 1992 (12 U.S.C. 
     4544) is amended by inserting ``of Housing and Urban 
     Development'' after ``Secretary'' each place such term 
     appears.
       (e) Technical and Conforming Amendments.--
       (1) Fannie mae.--Section 302(b)(6) of the Federal National 
     Mortgage Association Charter Act (12 U.S.C. 1716(b)(6)) is 
     amended by striking ``Secretary under section 1322'' and 
     inserting ``Director under section 1319H''.
       (2) Freddie mac.--Section 305(c) of the Federal Home Loan 
     Mortgage Corporation Act (12 U.S.C. 1454(c)) is amended by 
     striking ``Secretary under section 1322'' and inserting 
     ``Director under section 1319H''.
       (3) Financial Institutions Examination Council.--Section 
     1004(a) of the Federal Financial Institutions Examination 
     Council Act of 1978 (12 U.S.C. 3303(a)) is amended--
       (A) in paragraph (5), by striking the period; and
       (B) by adding at the end the following:
       ``(6) the Director of the Office of Federal Enterprise 
     Supervision.''.

     SEC. 103. EXAMINERS AND ACCOUNTANTS.

       (a) Examinations.--Section 1317 of the Housing and 
     Community Development Act of 1992 (12 U.S.C. 4517) is 
     amended--
       (1) in the second sentence of subsection (c), by striking 
     ``The'' and inserting ``During the 3-year period that begins 
     upon the date of enactment of the Federal Enterprise 
     Regulatory Reform Act of 2003, the''; and
       (2) in subsection (d), by striking ``Federal Reserve 
     banks'' and inserting ``Director of the Office of Thrift 
     Supervision''.
       (b) Enhanced Authority To Hire Examiners and Accountants.--
     Section 1317 of the Housing and Community Development Act of 
     1992 (12 U.S.C. 4517) is amended by adding at the end the 
     following:
       ``(g) Appointment of Accountants, Economists, and 
     Examiners.--
       ``(1) Applicability.--This section applies with respect to 
     any position of examiner, accountant, and economist at the 
     Office, with respect to supervision and regulation of the 
     enterprises, that is in the competitive service.
       ``(2) Appointment authority.--
       ``(A) In general.--The Director may appoint candidates to 
     any position described in paragraph (1)--
       ``(i) in accordance with the statutes, rules, and 
     regulations governing appointments in the excepted service; 
     and
       ``(ii) notwithstanding any statutes, rules, and regulations 
     governing appointments in the competitive service.
       ``(B) Rule of construction.--The appointment of a candidate 
     to a position under this paragraph shall not be considered to 
     cause such position to be converted from the competitive 
     service to the excepted service.
       ``(3) Reports.--
       ``(A) In general.--Not later than 90 days after the end of 
     fiscal year 2003 (for fiscal year 2003) and 90 days after the 
     end of fiscal year 2005 (for fiscal years 2004 and 2005), the 
     Director shall submit a report with respect to its exercise 
     of the authority granted by paragraph (2) during such fiscal 
     years to the--
       ``(i) Committee on Government Reform and the Committee on 
     Financial Services of the House of Representatives; and
       ``(ii) Committee on Governmental Affairs and the Committee 
     on Banking, Housing, and Urban Affairs of the Senate.
       ``(B) Contents.--The reports submitted under subparagraph 
     (A) shall describe the changes in the hiring process 
     authorized by paragraph (2), including relevant information 
     related to--
       ``(i) the quality of candidates;
       ``(ii) the procedures used by the Director to select 
     candidates through the streamlined hiring process;
       ``(iii) the numbers, types, and grades of employees hired 
     under the authority;
       ``(iv) any benefits or shortcomings associated with the use 
     of the authority;
       ``(v) the effect of the exercise of the authority on the 
     hiring of veterans and other demographic groups; and
       ``(vi) the way in which managers were trained in the 
     administration of the streamlined hiring system.''.

     SEC. 104. REGULATIONS.

       Section 1319G of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4526) is amended--
       (1) by striking subsection (a) and inserting the following:
       ``(a) Authority.--The Director shall issue any regulations 
     and orders necessary to carry out the duties of the Director, 
     with respect to supervision and regulation of the 
     enterprises, under this title, the Federal National Mortgage 
     Association Charter Act (12 U.S.C. 1716 et seq.), and the 
     Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 et 
     seq.), and to ensure that the purposes of this title and such 
     Acts are accomplished.''; and
       (2) in subsection (c), by striking ``Committee on Banking, 
     Finance and Urban Affairs'' and inserting ``Committee on 
     Financial Services''.

     SEC. 105. ASSESSMENTS.

       Section 1316 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4516) is amended--
       (1) by striking subsection (a) and inserting the following:
       ``(a) Annual Assessments.--The Director shall establish and 
     collect from the enterprises annual assessments in an amount 
     not exceeding the amount sufficient to provide for all 
     reasonable costs and expenses of the Office, including--
       ``(1) the expenses of any examinations under section 1317; 
     and
       ``(2) the expenses of obtaining any reviews and credit 
     assessments under subsection section 1319.'';
       (2) in subsection (b), in paragraph (2), by moving the 
     margin 2 ems to the right;
       (3) in subsection (c), by adding at the end the following: 
     ``The Director may adjust the amounts of any semiannual 
     assessments for an assessment under subsection (a) that are 
     to be paid pursuant to subsection (b) by an enterprise, as 
     necessary in the discretion of the Director, to ensure that 
     the costs of enforcement activities under subtitles B and C 
     for an enterprise are borne only by that enterprise.'';
       (4) in subsection (f), by striking ``Any assessments 
     collected'' and all that follows and inserting the following: 
     ``Notwithstanding any other provision of law, any assessments 
     collected by the Director pursuant to this section shall be 
     deposited in the Fund in an account for the Director. Any 
     amounts in the Fund are hereby made available, without fiscal 
     year limitation, to the Director (to the extent of amounts in 
     the Director's account) for carrying out the supervisory and 
     regulatory responsibilities of the Director, with respect to 
     the enterprises, including any necessary administrative and 
     nonadministrative expenses of the Director in carrying out 
     the purposes of this title, the Federal National Mortgage 
     Association Charter Act (12 U.S.C. 1716 et seq.), and the 
     Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 et 
     seq.).''; and
       (5) in subsection (g), by striking paragraphs (1) and (2) 
     and inserting the following:
       ``(1) Financial operating plans and forecasts.--Before the 
     beginning of each fiscal year, the Director shall submit a 
     copy of the financial operating plans and forecasts for the 
     Office to the Director of the Office of Management and 
     Budget.
       ``(2) Reports of operations.--As soon as practicable after 
     the end of each fiscal year and each quarter thereof, the 
     Director shall submit a copy of the report of the results of 
     the operations of the Office during such period to the 
     Director of the Office of Management and Budget.''.

     SEC. 106. INDEPENDENCE OF DIRECTOR IN CONGRESSIONAL TESTIMONY 
                   AND RECOMMENDATIONS.

       Section 111 of Public Law 93-495 (12 U.S.C. 250) is amended 
     by inserting ``the Director of the Office of Federal 
     Enterprise Supervision of the Department of the Treasury,'' 
     after ``the Federal Housing Finance Board,''.

     SEC. 107. LIMITATION ON NONMISSION-RELATED ASSETS.

       Subtitle B of title XIII of the Housing and Community 
     Development Act of 1992 (12 U.S.C. 4611 et seq.) is amended--
       (1) by striking the subtitle designation and heading and 
     inserting the following:

    ``Subtitle B--Required Capital Levels for Enterprises, Special 
   Enforcement Powers, and Limitation on Nonmission-Related Assets'';

     and
       (2) by adding at the end the following:

     ``SEC. 1369E. LIMITATION ON NONMISSION-RELATED ASSETS.

       ``(a) In General.--The Director may, by regulation, 
     determine the type and amount of nonmission-related assets 
     that an enterprise may hold at any time. The Director shall, 
     in any such regulation, define the term `nonmission-related 
     asset' for purposes of this section.
       ``(b) Rule of Construction.--Subsection (a) may not be 
     construed to authorize an enterprise to engage in any new 
     program relating to any nonmission-related asset without 
     obtaining the prior approval of the Director in accordance 
     with section 1319H.''.

     SEC. 108. REPORTS.

       Sections 1327 and 1328 of the Housing and Community 
     Development Act of 1992 (12 U.S.C. 4547, 4548) are amended by 
     striking ``Secretary'' each place it appears and inserting 
     ``Director''.

     SEC. 109. RISK-BASED CAPITAL TEST FOR ENTERPRISES.

       Section 1361 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4611) is amended--

[[Page S10626]]

       (1) in subsection (a)(2)(A), by inserting ``, or change in 
     such other manner as the Director considers appropriate,'' 
     after ``subparagraph (C),'';
       (2) in subsection (b)(1), by adding at the end the 
     following: ``Notwithstanding subsection (a), the Director 
     may, in the sole discretion of the Director, make any 
     assumptions that the Director considers appropriate regarding 
     interest rates, home prices, and new business. Such 
     assessment shall ensure that enterprise risk-based capital 
     standards are, to the greatest extent feasible, comparable to 
     those imposed by the appropriate Federal banking agency (as 
     defined in section 3 of the Federal Deposit Insurance Act (12 
     U.S.C. 1813)) for comparable risk. The risk-based assessment 
     relating to new business under this paragraph shall ensure 
     that the enterprise is able to remain a viable enterprise in 
     full compliance with all applicable risk-based capital and 
     minimum capital standards, and that it can fulfill its role 
     of ensuring appropriate secondary market liquidity throughout 
     the stress test.''; and
       (3) in subsection (c)(2), by inserting ``, or such other 
     percentage as the Director considers appropriate'' before the 
     period at the end.

     SEC. 110. MINIMUM AND CRITICAL CAPITAL LEVELS.

       (a) Minimum Capital Level.--Section 1362 of the Housing and 
     Community Development Act of 1992 (12 U.S.C. 4612) is 
     amended--
       (1) by striking subsection (b);
       (2) by striking ``(a) In General.--''; and
       (3) in the matter preceding paragraph (1), by inserting 
     before ``the sum of'' the following: ``the amount established 
     by the Director, by regulation or order, as such amount may 
     be adjusted from time-to-time by the Director to achieve the 
     purposes of this title, that is not less than''.
       (b) Critical Capital Level.--Section 1363 of the Housing 
     and Community Development Act of 1992 (12 U.S.C. 4613) is 
     amended, in the matter preceding paragraph (1), by inserting 
     before ``the sum of'' the following: ``the amount established 
     by the Director, by regulation or order, as such amount may 
     be adjusted from time-to-time by the Director to achieve the 
     purposes of this title, that is not less than''.

     SEC. 111. DEFINITIONS.

       Section 1303 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4502) is amended--
       (1) in paragraph (5), by striking ``Federal Housing 
     Enterprise Oversight of the Department of Housing and Urban 
     Development'' and inserting ``Federal Enterprise Supervision 
     of the Department of the Treasury'';
       (2) in paragraphs (8), (9), (10), and (19), by inserting 
     ``of Housing and Urban Development'' after ``Secretary'' each 
     place such term appears;
       (3) in paragraph (14), by striking ``Federal Housing 
     Enterprise Oversight of the Department of Housing and Urban 
     Development'' and inserting ``Federal Enterprise Supervision 
     of the Department of the Treasury'';
       (4) by striking paragraph (15);
       (5) by redesignating paragraphs (7) through (14) (as 
     amended by the preceding provisions of this Act) as 
     paragraphs (8) through (15), respectively; and
       (6) by inserting after paragraph (6) the following:
       ``(7) Enterprise-affiliated party.--The term `enterprise-
     affiliated party' means--
       ``(A) any director, officer, employee, or controlling 
     stockholder of, or agent for, an enterprise;
       ``(B) any shareholder, consultant, joint venture partner, 
     and any other person as determined by the Director (by 
     regulation or case-by-case) who participates in the conduct 
     of the affairs of an enterprise; and
       ``(C) any independent contractor (including any attorney, 
     appraiser, or accountant) who knowingly or recklessly 
     participates in--
       ``(i) any violation of any law or regulation;
       ``(ii) any breach of fiduciary duty; or
       ``(iii) any unsafe or unsound practice,
     which caused or is likely to cause more than a minimal 
     financial loss to, or a significant adverse effect on, the 
     enterprise.''.

                  Subtitle B--Prompt Corrective Action

     SEC. 131. CAPITAL CLASSIFICATIONS.

       Section 1364 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4614) is amended--
       (1) by striking subsection (b) and inserting the following:
       ``(b) Discretionary Classification.--
       ``(1) Grounds for reclassification.--The Director may 
     reclassify an enterprise under paragraph (2) if--
       ``(A) at any time, the Director determines in writing that 
     an enterprise is engaging in conduct that could result in a 
     rapid depletion of core capital or that the value of the 
     property subject to mortgages held or securitized by the 
     enterprise has decreased significantly;
       ``(B) after notice and an opportunity for hearing, the 
     Director determines that an enterprise is in an unsafe or 
     unsound condition; or
       ``(C) pursuant to section 1371(b), the Director deems an 
     enterprise to be engaging in an unsafe or unsound practice.
       ``(2) Reclassification.--In addition to any other action 
     authorized under this title, including the reclassification 
     of an enterprise for any reason not specified in this 
     subsection, if the Director takes any action described in 
     paragraph (1) the Director may classify an enterprise--
       ``(A) as undercapitalized, if the enterprise is otherwise 
     classified as adequately capitalized;
       ``(B) as significantly undercapitalized, if the enterprise 
     is otherwise classified as undercapitalized; and
       ``(C) as critically undercapitalized, if the enterprise is 
     otherwise classified as significantly undercapitalized.'';
       (2) by redesignating subsection (d) as subsection (e); and
       (3) by inserting after subsection (c) the following:
       ``(d) Restriction on Capital Distributions.--
       ``(1) In general.--An enterprise shall make no capital 
     distribution if, after making the distribution, the 
     enterprise would be undercapitalized.
       ``(2) Exception.--Notwithstanding paragraph (1), the 
     Director may permit an enterprise to repurchase, redeem, 
     retire, or otherwise acquire shares or ownership interests if 
     the repurchase, redemption, retirement, or other 
     acquisition--
       ``(A) is made in connection with the issuance of additional 
     shares or obligations of the enterprise in at least an 
     equivalent amount; and
       ``(B) will reduce the financial obligations of the 
     enterprise or otherwise improve the financial condition of 
     the enterprise.''.

     SEC. 132. SUPERVISORY ACTIONS APPLICABLE TO UNDERCAPITALIZED 
                   ENTERPRISES.

       (a) Effective Date for Supervisory Actions.--Section 
     1365(c) of the Housing and Community Development Act of 1992 
     (12 U.S.C. 4615(c)) is amended by striking ``1-year'' and 
     inserting ``6-month''.
       (b) Supervisory Actions.--Section 1365 of the Housing and 
     Community Development Act of 1992 (12 U.S.C. 4615) is 
     amended--
       (1) in subsection (a)--
       (A) by redesignating paragraphs (1) and (2) as paragraphs 
     (2) and (3), respectively;
       (B) by inserting before paragraph (2) the following:
       ``(1) Required monitoring.--The Director shall--
       ``(A) closely monitor the condition of any undercapitalized 
     enterprise;
       ``(B) closely monitor compliance with the capital 
     restoration plan, restrictions, and requirements imposed 
     under this section; and
       ``(C) periodically review the plan, restrictions, and 
     requirements applicable to the undercapitalized enterprise to 
     determine whether the plan, restrictions, and requirements 
     are achieving the purpose of this section.''; and
       (C) by inserting at the end the following:
       ``(4) Restriction of asset growth.--An undercapitalized 
     enterprise shall not permit its average total assets during 
     any calendar quarter to exceed its average total assets 
     during the preceding calendar quarter unless--
       ``(A) the Board has accepted the enterprise's capital 
     restoration plan;
       ``(B) any increase in total assets is consistent with the 
     plan; and
       ``(C) the ratio of tangible equity to assets of the 
     enterprise increases during the calendar quarter at a rate 
     sufficient to enable the enterprise to become adequately 
     capitalized within a reasonable time.
       ``(5) Prior approval of acquisitions and issuance of new 
     products.--An undercapitalized enterprise shall not, directly 
     or indirectly, acquire any interest in any entity or issue a 
     new product unless--
       ``(A) the Director has accepted the capital restoration 
     plan of the enterprise, the enterprise is implementing the 
     plan, and the Director determines that the proposed action is 
     consistent with and will further the achievement of the plan; 
     or
       ``(B) the Director determines that the proposed action will 
     further the purpose of this section.''; and
       (2) in the subsection heading for subsection (b), by 
     striking ``From Undercapitalized to Significantly 
     Undercapitalized'';
       (3) by redesignating subsection (c) (as amended by 
     subsection (a)) as subsection (d); and
       (4) by inserting after subsection (b) the following:
       ``(c) Other Discretionary Safeguards.--The Director may 
     take, with respect to an undercapitalized enterprise, any of 
     the actions authorized to be taken under section 1366 with 
     respect to a significantly undercapitalized enterprise, if 
     the Director determines that such actions are necessary to 
     carry out the purpose of this subtitle.''.

     SEC. 133. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFICANTLY 
                   UNDERCAPITALIZED ENTERPRISES.

       Section 1366 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4616) is amended--
       (1) in subsection (b)--
       (A) in the subsection heading, by striking ``Discretionary 
     Supervisory Actions'' and inserting ``Specific Actions'';
       (B) in the matter preceding paragraph (1), by striking 
     ``may, at any time, take any'' and inserting ``shall carry 
     out this section by taking, at any time, 1 or more'';
       (C) by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively;
       (D) by inserting after paragraph (4) the following:
       ``(5) Improvement of management.--Take one or more of the 
     following actions:
       ``(A) New election of board.--Order a new election for the 
     board of directors of the enterprise.
       ``(B) Dismissal of directors or executive officers.--
     Require the enterprise to dismiss from office any director or 
     executive officer who had held office for more than 180 days

[[Page S10627]]

     immediately before the enterprise became undercapitalized. 
     Dismissal under this subparagraph shall not be construed to 
     be a removal pursuant to the Director's enforcement powers 
     under section 1377.
       ``(C) Employ qualified executive officers.--Require the 
     enterprise to employ qualified executive officers (who, if 
     the Director so specifies, shall be subject to approval by 
     the Director).''; and
       (E) by inserting at the end the following:
       ``(8) Other action.--Require the enterprise to take any 
     other action that the Director determines will better carry 
     out the purpose of this section than any of the actions 
     specified in this paragraph.'';
       (2) by redesignating subsection (c) as subsection (d); and
       (3) by inserting after subsection (b) the following:
       ``(c) Restriction on Compensation of Executive Officers.--
     An enterprise that is classified as significantly 
     undercapitalized may not, without prior written approval by 
     the Director--
       ``(A) pay any bonus to any executive officer; or
       ``(B) provide compensation to any executive officer at a 
     rate exceeding that officer's average rate of compensation 
     (excluding bonuses, stock options, and profit sharing) during 
     the 12 calendar months preceding the calendar month in which 
     the enterprise became undercapitalized.''.

                    Subtitle C--Enforcement Actions

     SEC. 151. CEASE-AND-DESIST PROCEEDINGS.

       Section 1371 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4631) is amended--
       (1) by striking subsections (a) and (b) and inserting the 
     following:
       ``(a) Issuance for Unsafe or Unsound Practices and 
     Violations of Rules or Laws.--
       ``(1) In general.--If, in the opinion of the Director, an 
     enterprise or any enterprise-affiliated party is engaging or 
     has engaged, or the Director has reasonable cause to believe 
     that the enterprise or any enterprise-affiliated party is 
     about to engage, in an unsafe or unsound practice in 
     conducting the business of the enterprise or is violating or 
     has violated, or the Director has reasonable cause to believe 
     that the enterprise or any enterprise-affiliated party is 
     about to violate, a law, rule, or regulation, or any 
     condition imposed in writing by the Director in connection 
     with the granting of any application or other request by the 
     enterprise or any written agreement entered into with the 
     Director, the Director may issue and serve upon the 
     enterprise or such party a notice of charges in respect 
     thereof.
       ``(2) Limitations.--The Director may not enforce compliance 
     with--
       ``(A) any housing goal established under subpart B of part 
     2 of subtitle A of this title;
       ``(B) section 1336 or 1337 of this title;
       ``(C) subsection (m) or (n) of section 309 of the Federal 
     National Mortgage Association Charter Act (12 U.S.C. 
     1723a(m), (n)); or
       ``(D) subsection (e) or (f) of section 307 of the Federal 
     Home Loan Mortgage Corporation Act (12 U.S.C. 1456(e), (f)).
       ``(b) Issuance for Unsatisfactory Rating.--If an enterprise 
     receives, in its most recent report of examination, a less-
     than-satisfactory rating for asset quality, management, 
     earnings, or liquidity, the Director may (if the deficiency 
     is not corrected) deem the enterprise to be engaging in an 
     unsafe or unsound practice for purposes of this 
     subsection.''; and
       (2) in subsection (c)(2), by striking ``or director'' and 
     inserting ``director, or enterprise-affiliated party''.

     SEC. 152. TEMPORARY CEASE-AND-DESIST PROCEEDINGS.

       Section 1372 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4632) is amended--
       (1) by striking subsection (a) and inserting the following:
       ``(a) Grounds for Issuance.--Whenever the Director 
     determines that the violation or threatened violation or the 
     unsafe or unsound practice or practices specified in the 
     notice of charges served upon the enterprise or any 
     enterprise-affiliated party under section 1371(a), or the 
     continuation thereof, is likely to cause insolvency or 
     significant dissipation of assets or earnings of the 
     enterprise, or is likely to weaken the condition of the 
     enterprise prior to the completion of the proceedings 
     conducted pursuant to sections 1371 and 1373, the Director 
     may issue a temporary order requiring the enterprise or such 
     party to cease and desist from any such violation or practice 
     and to take affirmative action to prevent or remedy such 
     insolvency, dissipation, condition, or prejudice pending 
     completion of such proceedings. Such order may include any 
     requirement authorized under subsection 1371(d).'';
       (2) in subsection (b), by striking ``or director'' and 
     inserting ``director, or enterprise-affiliated party'';
       (3) in subsection (d), striking ``or director'' and 
     inserting ``director, or enterprise-affiliated party''; and
       (4) by striking subsection (e) and in inserting the 
     following:
       ``(e) Enforcement.--In the case of violation or threatened 
     violation of, or failure to obey, a temporary cease-and-
     desist order issued under this section, the Director may 
     apply to the United States District Court for the District of 
     Columbia or the United States district court within the 
     jurisdiction of which the headquarters of the enterprise is 
     located, for an injunction to enforce such order, and, if the 
     court determines that there has been such violation or 
     threatened violation or failure to obey, it shall be the duty 
     of the court to issue such injunction.''.

     SEC. 153. REMOVAL AND PROHIBITION AUTHORITY.

       (a) In General.--Subtitle C of title XIII of the Housing 
     and Community Development Act of 1992 is amended--
       (1) by redesignating sections 1377 through 1379B (12 U.S.C. 
     4637-41) as sections 1379 through 1379D, respectively; and
       (2) by inserting after section 1376 (12 U.S.C. 4636) the 
     following:

     ``SEC. 1377. REMOVAL AND PROHIBITION AUTHORITY.

       ``(a) Authority To Issue Order.--Whenever the Director 
     determines that--
       ``(1) any enterprise-affiliated party has, directly or 
     indirectly--
       ``(A) violated--
       ``(i) any law or regulation;
       ``(ii) any cease-and-desist order which has become final;
       ``(iii) any condition imposed in writing by the Director in 
     connection with the grant of any application or other request 
     by such enterprise; or
       ``(iv) any written agreement between such enterprise and 
     the Director;
       ``(B) engaged or participated in any unsafe or unsound 
     practice in connection with any enterprise; or
       ``(C) committed or engaged in any act, omission, or 
     practice which constitutes a breach of such party's fiduciary 
     duty;
       ``(2) by reason of the violation, practice, or breach 
     described in any subparagraph of paragraph (1)--
       ``(A) such enterprise has suffered or will probably suffer 
     financial loss or other damage; or
       ``(B) such party has received financial gain or other 
     benefit by reason of such violation, practice, or breach; and
       ``(3) such violation, practice, or breach--
       ``(A) involves personal dishonesty on the part of such 
     party; or
       ``(B) demonstrates willful or continuing disregard by such 
     party for the safety or soundness of such enterprise,

     the Director may serve upon such party a written notice of 
     the Director's intention to remove such party from office or 
     to prohibit any further participation by such party, in any 
     manner, in the conduct of the affairs of any enterprise.
       ``(b) Suspension Order.--
       ``(1) Suspension or prohibition authority.--If the Director 
     serves written notice under subsection (a) to any enterprise-
     affiliated party of the Director's intention to issue an 
     order under, the Director may suspend such party from office 
     or prohibit such party from further participation in any 
     manner in the conduct of the affairs of the enterprise, if 
     the Director--
       ``(A) determines that such action is necessary for the 
     protection of the enterprise; and
       ``(B) serves such party with written notice of the 
     suspension order.
       ``(2) Effective period.--Any suspension order issued under 
     subsection (a)--
       ``(A) shall become effective upon service; and
       ``(B) unless a court issues a stay of such order under 
     subsection (g) of this section, shall remain in effect and 
     enforceable until--
       ``(i) the date the Director dismisses the charges contained 
     in the notice served under subsection (a) with respect to 
     such party; or
       ``(ii) the effective date of an order issued by the 
     Director to such party under subsection (a).
       ``(3) Copy of order.--If the Director issues a suspension 
     order under subsection (a) to any enterprise-affiliated 
     party, the Director shall serve a copy of such order on any 
     enterprise with which such party is affiliated at the time 
     such order is issued.
       ``(c) Notice, Hearing, and Order.--A notice of intention to 
     remove an enterprise-affiliated party from office or to 
     prohibit such party from participating in the conduct of the 
     affairs of an enterprise shall contain a statement of the 
     facts constituting grounds for such action, and shall fix a 
     time and place at which a hearing will be held on such 
     action. Such hearing shall be fixed for a date not earlier 
     than 30 days nor later than 60 days after the date of service 
     of such notice, unless an earlier or a later date is set by 
     the Director at the request of (1) such party, and for good 
     cause shown, or (2) the Attorney General of the United 
     States. Unless such party shall appear at the hearing in 
     person or by a duly authorized representative, such party 
     shall be deemed to have consented to the issuance of an order 
     of such removal or prohibition. In the event of such consent, 
     or if upon the record made at any such hearing the Director 
     shall find that any of the grounds specified in such notice 
     have been established, the Director may issue such orders of 
     suspension or removal from office, or prohibition from 
     participation in the conduct of the affairs of the 
     enterprise, as it may deem appropriate. Any such order shall 
     become effective at the expiration of 30 days after service 
     upon such enterprise and such party (except in the case of an 
     order issued upon consent, which shall become effective at 
     the time specified therein). Such order shall remain 
     effective and enforceable except to such extent as it is 
     stayed, modified, terminated, or set aside by action of the 
     Director or a reviewing court.

[[Page S10628]]

       ``(d) Prohibition of Certain Specific Activities.--Any 
     person subject to an order issued under this section shall 
     not--
       ``(1) participate in any manner in the conduct of the 
     affairs of any enterprise;
       ``(2) solicit, procure, transfer, attempt to transfer, 
     vote, or attempt to vote any proxy, consent, or authorization 
     with respect to any voting rights in any enterprise;
       ``(3) violate any voting agreement previously approved by 
     the Director; or
       ``(4) vote for a director, or serve or act as an 
     enterprise-affiliated party.
       ``(e) Industry-Wide Prohibition.--
       ``(1) In general.--Except as provided in subparagraph (2), 
     any person who, pursuant to an order issued under subsection 
     (h), has been removed or suspended from office in an 
     enterprise or prohibited from participating in the conduct of 
     the affairs of an enterprise may not, while such order is in 
     effect, continue or commence to hold any office in, or 
     participate in any manner in the conduct of the affairs of 
     any enterprise.
       ``(2) Exception if director provides written consent.--If, 
     on or after the date an order is issued under this section 
     which removes or suspends from office any enterprise-
     affiliated party or prohibits such party from participating 
     in the conduct of the affairs of an enterprise, such party 
     receives the written consent of the Director, the order 
     shall, to the extent of such consent, cease to apply to such 
     party with respect to the enterprise described in the written 
     consent. If the Director grants such a written consent, it 
     shall publicly disclose such consent.
       ``(3) Violation of paragraph (1) treated as violation of 
     order.--Any violation of paragraph (1) by any person who is 
     subject to an order described in such subsection shall be 
     treated as a violation of the order.
       ``(f) Applicability.--This section shall only apply to a 
     person who is an individual, unless the Director specifically 
     finds that it should apply to a corporation, firm, or other 
     business enterprise.
       ``(g) Stay of Suspension and Prohibition of Enterprise-
     Affiliated Party.--Within 10 days after any enterprise-
     affiliated party has been suspended from office or prohibited 
     from participation in the conduct of the affairs of an 
     enterprise under this section, such party may apply to the 
     United States District Court for the District of Columbia, or 
     the United States district court for the judicial district in 
     which the headquarters of the enterprise is located, for a 
     stay of such suspension or prohibition pending the completion 
     of the administrative proceedings pursuant to the notice 
     served upon such party under this section, and such court 
     shall have jurisdiction to stay such suspension or 
     prohibition.
       ``(h) Suspension or Removal of Enterprise-Affiliated Party 
     Charged With Felony.--
       ``(1) Suspension or prohibition.--
       ``(A) In general.--Whenever any enterprise-affiliated party 
     is charged in any information, indictment, or complaint, with 
     the commission of or participation in a crime involving 
     dishonesty or breach of trust which is punishable by 
     imprisonment for a term exceeding one year under State or 
     Federal law, the Director may, if continued service or 
     participation by such party may pose a threat to the 
     enterprise or impair public confidence in the enterprise, by 
     written notice served upon such party, suspend such party 
     from office or prohibit such party from further participation 
     in any manner in the conduct of the affairs of any 
     enterprise.
       ``(B) Provisions applicable to notice.--
       ``(i) Copy.--A copy of any notice under paragraph (1)(A) 
     shall also be served upon the enterprise.
       ``(ii) Effective period.--A suspension or prohibition under 
     subparagraph (A) shall remain in effect until the 
     information, indictment, or complaint referred to in such 
     subparagraph is finally disposed of or until terminated by 
     the Director.
       ``(2) Removal or prohibition.--
       ``(A) In general.--If a judgment of conviction or an 
     agreement to enter a pretrial diversion or other similar 
     program is entered against an enterprise-affiliated party in 
     connection with a crime described in paragraph (1)(A), at 
     such time as such judgment is not subject to further 
     appellate review, the Director may, if continued service or 
     participation by such party may pose a threat to the 
     enterprise or impair public confidence in the enterprise, 
     issue and serve upon such party an order removing such party 
     from office or prohibiting such party from further 
     participation in any manner in the conduct of the affairs of 
     the enterprise without the prior written consent of the 
     Director.
       ``(B) Provisions applicable to order.--
       ``(i) Copy.--A copy of any order under paragraph (2)(A) 
     shall also be served upon the enterprise, whereupon the 
     enterprise-affiliated party who is subject to the order (if a 
     director or an officer) shall cease to be a director or 
     officer of such enterprise.
       ``(ii) Effect of acquittal.--A finding of not guilty or 
     other disposition of the charge shall not preclude the 
     Director from instituting proceedings after such finding or 
     disposition to remove such party from office or to prohibit 
     further participation in enterprise affairs under subsection 
     (a), (d), or (e).
       ``(iii) Effective period.--Any notice of suspension or 
     order of removal issued under this subsection shall remain 
     effective and outstanding until the completion of any hearing 
     or appeal authorized under paragraph (4) unless terminated by 
     the Director.
       ``(3) Authority of remaining board members.--
       ``(A) In general.--If at any time, because of the 
     suspension of one or more directors pursuant to this section, 
     there shall be on the board of directors of an enterprise 
     less than a quorum of directors not so suspended, all powers 
     and functions vested in or exercisable by such board shall 
     vest in and be exercisable by the director or directors on 
     the board not so suspended, until such time as there shall be 
     a quorum of the board of directors.
       ``(B) Suspension of all directors.--In the event all of the 
     directors of an enterprise are suspended pursuant to this 
     section, the Director shall appoint persons to serve 
     temporarily as directors in their place and stead pending the 
     termination of such suspensions, or until such time as those 
     who have been suspended, cease to be directors of the 
     enterprise and their respective successors take office.
       ``(4) Hearing regarding continued participation.--Within 30 
     days from service of any notice of suspension or order of 
     removal issued pursuant to paragraph (1) or (2) of this 
     subsection, the enterprise-affiliated party concerned may 
     request in writing an opportunity to appear before the 
     Director to show that the continued service to or 
     participation in the conduct of the affairs of the enterprise 
     by such party does not, or is not likely to, pose a threat to 
     the interests of the enterprise or threaten to impair public 
     confidence in the enterprise. Upon receipt of any such 
     request, the Director shall fix a time (not more than 30 days 
     after receipt of such request, unless extended at the request 
     of such party) and place at which such party may appear, 
     personally or through counsel, before one or more members of 
     the Director or designated employees of the Director to 
     submit written materials (or, at the discretion of the 
     Director, oral testimony) and oral argument. Within 60 days 
     of such hearing, the Director shall notify such party whether 
     the suspension or prohibition from participation in any 
     manner in the conduct of the affairs of the enterprise will 
     be continued, terminated, or otherwise modified, or whether 
     the order removing such party from office or prohibiting such 
     party from further participation in any manner in the conduct 
     of the affairs of the enterprise will be rescinded or 
     otherwise modified. Such notification shall contain a 
     statement of the basis for the Director's decision, if 
     adverse to such party. The Director is authorized to 
     prescribe such rules as may be necessary to effectuate the 
     purposes of this subsection.
       ``(i) Hearings and Judicial Review.--
       ``(1) Venue and procedure.--Any hearing provided for in 
     this section shall be held in the District of Columbia or in 
     the Federal judicial district in which the headquarters of 
     the enterprise is located, unless the party afforded the 
     hearing consents to another place, and shall be conducted in 
     accordance with the provisions of chapter 5 of title 5, 
     United States Code. After such hearing, and within 90 days 
     after the Director has notified the parties that the case has 
     been submitted to the court for final decision, the court 
     shall render its decision (which shall include findings of 
     fact upon which its decision is predicated) and shall issue 
     and serve upon each party to the proceeding an order or 
     orders consistent with the provisions of this section. 
     Judicial review of any such order shall be exclusively as 
     provided in this subsection. Unless a petition for review is 
     timely filed in a court of appeals of the United States, as 
     provided in paragraph (2), and thereafter until the record in 
     the proceeding has been filed as so provided, the Director 
     may at any time, upon such notice and in such manner as it 
     shall deem proper, modify, terminate, or set aside any such 
     order. Upon such filing of the record, the Director may 
     modify, terminate, or set aside any such order with 
     permission of the court.
       ``(2) Review of order.--Any party to any proceeding under 
     paragraph (1) may obtain a review of any order served 
     pursuant to paragraph (1) (other than an order issued with 
     the consent of the enterprise or the enterprise-affiliated 
     party concerned, or an order issued under subsection (h) of 
     this section) by the filing in the United States Court of 
     Appeals for the District of Columbia Circuit or court of 
     appeals of the United States for the circuit in which the 
     headquarters of the enterprise is located, within 30 days 
     after the date of service of such order, a written petition 
     praying that the order of the Director be modified, 
     terminated, or set aside. A copy of such petition shall be 
     transmitted by the clerk of the court to the Director, and 
     thereupon the Director shall file in the court the record in 
     the proceeding, as provided in section 2112 of title 28, 
     United States Code. Upon the filing of such petition, such 
     court shall have jurisdiction, which upon the filing of the 
     record shall (except as provided in the last sentence of 
     paragraph (1)) be exclusive, to affirm, modify, terminate, or 
     set aside, in whole or in part, the order of the Director. 
     Review of such proceedings shall be had as provided in 
     chapter 7 of title 5, United States Code. The judgment and 
     decree of the court shall be final, except that the same 
     shall be subject to review by the Supreme Court upon 
     certiorari, as provided in section 1254 of title 28, United 
     States Code.
       ``(3) Proceedings not treated as stay.--The commencement of 
     proceedings for judicial review under paragraph (2) shall 
     not, unless specifically ordered by the court, operate as a 
     stay of any order issued by the Director.''.
       (b) Conforming Amendments.--
       (1) 1992 act.--Section 1317(f) of the Housing and Community 
     Development Act of 1992 (12

[[Page S10629]]

     U.S.C. 4517(f)) is amended by striking ``section 1379B'' and 
     inserting ``section 1379D''.
       (2) Fannie mae charter act.--The second sentence of 
     subsection (b) of section 308 of the Federal National 
     Mortgage Association Charter Act (12 U.S.C. 1723(b)) is 
     amended by striking ``The'' and inserting ``Except to the 
     extent that action under section 1377 of the Housing and 
     Community Development Act of 1992 temporarily results in a 
     lesser number, the''.
       (3) Freddie mac act.--The second sentence of subparagraph 
     (A) of section 303(a)(2) of the Federal Home Loan Mortgage 
     Corporation Act (12 U.S.C. 1452(a)(2)(A)) is amended by 
     striking ``The'' and inserting ``Except to the extent action 
     under section 1377 of the Housing and Community Development 
     Act of 1992 temporarily results in a lesser number, the''.

     SEC. 154. ENFORCEMENT AND JURISDICTION.

       Section 1375 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4635) is amended--
       (1) by striking subsection (a) and inserting the following:
       ``(a) Enforcement.--The Director may, in the discretion of 
     the Director, apply to the United States District Court for 
     the District of Columbia, or the United States district court 
     within the jurisdiction of which the headquarters of the 
     enterprise is located, for the enforcement of any effective 
     and outstanding notice or order issued under this subtitle or 
     subtitle B, or request that the Attorney General of the 
     United States bring such an action. Such court shall have 
     jurisdiction and power to order and require compliance with 
     such notice or order.''; and
       (2) in subsection (b), by striking ``or 1376'' and 
     inserting ``1376, or 1377''.

     SEC. 155. CIVIL MONEY PENALTIES.

       Section 1376 of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4636) is amended--
       (1) in subsection (a), in the matter preceding paragraph 
     (1), by striking ``or any executive officer or'' and 
     inserting ``any executive officer of an enterprise, any 
     enterprise-affiliated party, or any'';
       (2) by striking subsection (b) and inserting the following:
       ``(b) Amount of Penalty.--
       ``(1) First tier.--Any enterprise which, or any enterprise-
     affiliated party who--
       ``(A) violates any provision of this title, the Federal 
     National Mortgage Association Charter Act (12 U.S.C. 1716 et 
     seq.), the Federal Home Loan Mortgage Corporation Act (12 
     U.S.C. 1451 et seq.), or any order, condition, rule, or 
     regulation under any such title or Act, except that the 
     Director may not enforce compliance with any housing goal 
     established under subpart B of part 2 of subtitle A of this 
     title, with section 1336 or 1337 of this title, with 
     subsection (m) or (n) of section 309 of the Federal National 
     Mortgage Association Charter Act (12 U.S.C. 1723a(m), (n)), 
     or with subsection (e) or (f) of section 307 of the Federal 
     Home Loan Mortgage Corporation Act (12 U.S.C. 1456(e), (f));
       ``(B) violates any final or temporary order or notice 
     issued pursuant to this title;
       ``(C) violates any condition imposed in writing by the 
     Director in connection with the grant of any application or 
     other request by such enterprise;
       ``(D) violates any written agreement between the enterprise 
     and the Director; or
       ``(E) engages in any conduct the Director determines to be 
     an unsafe or unsound practice,

     shall forfeit and pay a civil penalty of not more than 
     $10,000 for each day during which such violation continues.
       ``(2) Second tier.--Notwithstanding paragraph (1)--
       ``(A) if an enterprise, or an enterprise-affiliated party--
       ``(i) commits any violation described in any subparagraph 
     of paragraph (1);
       ``(ii) recklessly engages in an unsafe or unsound practice 
     in conducting the affairs of such enterprise; or
       ``(iii) breaches any fiduciary duty; and
       ``(B) the violation, practice, or breach--
       ``(i) is part of a pattern of misconduct;
       ``(ii) causes or is likely to cause more than a minimal 
     loss to such enterprise; or
       ``(iii) results in pecuniary gain or other benefit to such 
     party,

     the enterprise or enterprise-affiliated party shall forfeit 
     and pay a civil penalty of not more than $50,000 for each day 
     during which such violation, practice, or breach continues.
       ``(3) Third tier.--Notwithstanding paragraphs (1) and (2), 
     any enterprise which, or any enterprise-affiliated party 
     who--
       ``(A) knowingly--
       ``(i) commits any violation described in any subparagraph 
     of paragraph (1);
       ``(ii) engages in any unsafe or unsound practice in 
     conducting the affairs of such enterprise; or
       ``(iii) breaches any fiduciary duty; and
       ``(B) knowingly or recklessly causes a substantial loss to 
     such enterprise or a substantial pecuniary gain or other 
     benefit to such party by reason of such violation, practice, 
     or breach,

     shall forfeit and pay a civil penalty in an amount not to 
     exceed the applicable maximum amount determined under 
     paragraph (4) for each day during which such violation, 
     practice, or breach continues.
       ``(4) Maximum amounts of penalties for any violation 
     described in paragraph (3).--The maximum daily amount of any 
     civil penalty which may be assessed pursuant to paragraph (3) 
     for any violation, practice, or breach described in such 
     paragraph is--
       ``(A) in the case of any person other than an enterprise, 
     an amount not to exceed $2,000,000; and
       ``(B) in the case of any enterprise, $2,000,000.''; and
       (3) in subsection (d)--
       (A) by striking ``or director'' each place such term 
     appears and inserting ``director, or enterprise-affiliated 
     party'';
       (B) by striking ``request the Attorney General of the 
     United States to'';
       (C) by inserting ``, or the United States district court 
     within the jurisdiction of which the headquarters of the 
     enterprise is located,'' after ``District of Columbia''; and
       (D) by striking ``, or may, under the direction and control 
     of the Attorney General, bring such an action''.

     SEC. 156. CRIMINAL PENALTY.

       Subtitle C of title XIII of the Housing and Community 
     Development Act of 1992 (12 U.S.C. 4631 et seq.) is amended 
     by inserting after section 1377 (as added by this Act) the 
     following:

     ``SEC. 1378. CRIMINAL PENALTY.

       ``Whoever, being subject to an order in effect under 
     section 1377, without the prior written approval of the 
     Director, knowingly participates, directly or indirectly, in 
     any manner (including by engaging in an activity specifically 
     prohibited in such an order) in the conduct of the affairs of 
     any enterprise shall, notwithstanding section 3571 of title 
     18, be fined not more than $1,000,000, imprisoned for not 
     more than 5 years, or both.''.

                    Subtitle D--Reports to Congress

     SEC. 161. STUDIES AND REPORTS.

       (a) Insured Depository Institution Holdings of Enterprise 
     Debt and Mortgage-Backed Securities.--Not later than 180 days 
     after the date of enactment of the Federal Enterprise 
     Regulatory Reform Act of 2003, the Secretary of the Treasury, 
     the Board of Governors of the Federal Reserve System, the 
     Board of Directors of the Federal Deposit Insurance 
     Corporation, and the National Credit Union Administration 
     Board shall jointly submit a report to Congress regarding--
       (1) the extent to which obligations issued or guaranteed by 
     the enterprises (including mortgage-backed securities) are 
     held by federally insured depository institutions, including 
     such extent by type of institution and such extent relative 
     to the capital of the institution;
       (2) the extent to which the unlimited holdings by federally 
     insured depository institutions of the obligations of the 
     enterprises could produce systemic risk issues, particularly 
     for the safety and soundness of the banking system in the 
     United States, in the event of default or failure by an 
     enterprise; and
       (3) the effects on the enterprises, the banking industry, 
     and mortgage markets, if prudent limits on the holdings of 
     enterprise obligations were placed on federally insured 
     depository institutions.
       (b) Portfolio Operations, Risk Management, and Mission.--
       (1) In general.--Not later than one year after the date of 
     enactment of the Federal Enterprise Regulatory Reform Act of 
     2003, the Director shall submit a report to Congress--
       (A) describing the holdings of the enterprises in retained 
     mortgages and repurchased mortgage-backed securities and the 
     use of derivatives for hedging purposes;
       (B) describing the extent of such holdings relative to 
     other assets and the risk implications of such holdings;
       (C) containing an analysis of such holdings for safety and 
     soundness or mission compliance purposes; and
       (D) containing an assessment of whether such holdings and 
     other assets of the enterprises fulfill the mission purposes 
     of the enterprises under the Federal National Mortgage 
     Association Charter Act (12 U.S.C. 1716 et seq.) and the 
     Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 et 
     seq.).
       (2) Consultation.--The Director shall consult with the 
     Comptroller General of the United States in preparing the 
     report under this subsection and in conducting any research, 
     analyses, and assessments for the report.
       (c) Study of Merger of FHFB With OFES.--
       (1) In General.--The Secretary of the Treasury, after 
     consultation with the Secretary of Housing and Urban 
     Development and the Board of Governors of the Federal Reserve 
     System, shall study the feasibility and advisability of 
     merging the Federal Housing Finance Board and the Office of 
     Federal Enterprise Supervision of the Department of the 
     Treasury.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of the Treasury shall 
     submit a report to Congress on the results of the study 
     conducted under paragraph (1).
       (d) Study of Consolidation of OTS With OFES.--
       (1) Study.--The Secretary of the Treasury shall study the 
     feasibility and efficacy of consolidating the Office of 
     Thrift Supervision with the Office of Federal Enterprise 
     Supervision of the Department of the Treasury.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of the Treasury shall 
     submit a report to Congress on the results of the study 
     conducted under paragraph (1).
       (e) Recommendations.--Each report submitted pursuant to 
     this section shall include specific recommendations of 
     appropriate

[[Page S10630]]

     policies, limitations, regulations, legislation, or other 
     actions to deal appropriately and effectively with the issues 
     addressed by such report.
       (f) Definitions.--As used in this section, the terms 
     ``Director'' and ``enterprise'' have the meanings given those 
     terms under section 1303 of the Housing and Community 
     Development Act of 1992 (42 U.S.C. 4502).
       (g) Clerical Amendments.--Part 3 of subtitle A of title 
     XIII the Housing and Community Development Act of 1992 (106 
     Stat. 3969) is amended--
       (1) by striking sections 1351, 1352, and 1353 (Public Law 
     102-550; 106 Stat. 3969), except that the provisions of law 
     amended by such sections repealed shall not be affected by 
     such repeal; and
       (2) by striking sections 1354, 1355, and 1356 (12 U.S.C. 
     4601-3).

                     Subtitle E--General Provisions

     SEC. 171. CONFORMING AND TECHNICAL AMENDMENTS.

       (a) Amendments to 1992 Act.--Title XIII of the Housing and 
     Community Development Act of 1992 (12 U.S.C. 4501 et seq.), 
     as amended this Act, is further amended--
       (1) in section 1315 (12 U.S.C. 4515)--
       (A) in subsection (a)--
       (i) in the subsection heading, by striking ``Office 
     Personnel'' and inserting ``In General''; and
       (ii) by striking ``The'' and inserting ``Subject to title 
     II of the Federal Enterprise Regulatory Reform Act of 2003, 
     the'';
       (B) in subsection (d)--
       (i) in the subsection heading, by striking ``HUD'' and 
     inserting ``Department of the Treasury''; and
       (ii) by striking ``Housing and Urban Development'' and 
     inserting ``the Department of the Treasury''; and
       (C) by striking subsection (f);
       (2) in section 1319A (12 U.S.C. 4520)--
       (A) by striking ``(a) In General.--''; and
       (B) by striking subsection (b);
       (3) in section 1319F (12 U.S.C. 4525), by striking 
     paragraph (2);
       (4) in the section heading for section 1328, by striking 
     ``SECRETARY'' and inserting ``DIRECTOR'';
       (5) in section 1361 (12 U.S.C. 4611)--
       (A) in subsection (e)(1), by striking the first sentence 
     and inserting the following: ``The Director shall establish 
     the risk-based capital test under this section by 
     regulation.''; and
       (B) in subsection (f), by striking ``the Secretary,'';
       (6) in section 1364(c) (12 U.S.C. 4614(c)), by striking the 
     last sentence;
       (7) in section 1367(a)(2) (12 U.S.C. 4617(a)(2)), by 
     striking ``with the written concurrence of the Secretary of 
     the Treasury,'';
       (8) by striking section 1383;
       (9) by striking ``Committee on Banking, Finance and Urban 
     Affairs'' and inserting ``Committee on Financial Services'' 
     each place such term appears in sections 1319B, 1319G(c), 
     1328(a), 1336(b)(3)(C), 1337, and 1369(a)(3); and
       (10) by striking ``Secretary'' and inserting ``Director'' 
     each place such term appears in--
       (A) subpart A of part 2 of subtitle A (except in sections 
     1322, 1324, and 1325); and
       (B) subtitle B (except in section 1361(d)(1) and 1369E); 
     and
       (b) Amendments to Fannie Mae Charter Act.--The Federal 
     National Mortgage Association Charter Act (12 U.S.C. 1716 et 
     seq.) is amended--
       (1) by striking ``Director of the Office of Federal Housing 
     Enterprise Oversight of the Department of Housing and Urban 
     Development'' each place such term appears, and inserting 
     ``Director of the Office of Federal Enterprise Supervision of 
     the Department of the Treasury'', in--
       (A) section 303(c)(2) (12 U.S.C. 1718(c)(2));
       (B) section 309(d)(3)(B) (12 U.S.C. 1723a(d)(3)(B)); and
       (C) section 309(k)(1); and
       (2) in section 309(n)--
       (A) in paragraph (1), by inserting ``the Director of the 
     Office of Federal Enterprise Supervision of the Department of 
     the Treasury,'' after ``Senate,''; and
       (B) in paragraph (3)(B), by striking ``Secretary'' and 
     inserting ``Director of the Office of Federal Enterprise 
     Supervision of the Department of the Treasury''.
       (c) Amendments to Freddie Mac Act.--The Federal Home Loan 
     Mortgage Corporation Act (12 U.S.C. 1451 et seq.) is 
     amended--
       (1) by striking ``Director of the Office of Federal Housing 
     Enterprise Oversight of the Department of Housing and Urban 
     Development'' each place such term appears, and inserting 
     ``Director of the Office of Federal Enterprise Supervision of 
     the Department of the Treasury'', in--
       (A) section 303(b)(2) (12 U.S.C. 1452(b)(2));
       (B) section 303(h)(2) (12 U.S.C. 1452(h)(2)); and
       (C) section 307(c)(1) (12 U.S.C. 1456(c)(1));
       (2) in section 306(i) (12 U.S.C. 1455(i))--
       (A) by striking ``section 1316(c)'' and inserting ``section 
     306(c)''; and
       (B) by striking ``section 106'' and inserting ``section 
     1316''; and
       (3) in section 307 (12 U.S.C. 1456)--
       (A) in subsection (f)--
       (i) in paragraph (1), by inserting ``the Director of the 
     Office of Federal Enterprise Supervision of the Department of 
     the Treasury,'' after ``Senate,''; and
       (ii) in paragraph (3)(B), by striking ``Secretary'' and 
     inserting ``Director of the Office of Federal Enterprise 
     Supervision of the Department of the Treasury''.
       (d) Amendment to Title 18, United States Code.--Section 
     1905 of title 18, United States Code, is amended by striking 
     ``Office of Federal Housing Enterprise Oversight'' and 
     inserting ``Office of Federal Enterprise Supervision of the 
     Department of the Treasury''.
       (e) Amendments to Flood Disaster Protection Act of 1973.--
     Section 102(f)(3)(A) of the Flood Disaster Protection Act of 
     1973 (42 U.S.C. 4012a(f)(3)(A)) is amended by striking 
     ``Director of the Office of Federal Housing Enterprise 
     Oversight of the Department of Housing and Urban 
     Development'' and inserting ``Director of the Office of 
     Federal Enterprise Supervision of the Department of the 
     Treasury''.
       (f) Amendment to Department of Housing and Urban 
     Development Act.--Section 5 of the Department of Housing and 
     Urban Development Act (42 U.S.C. 3534) is amended by striking 
     subsection (d).
       (g) Amendment to Title 5, United States Code.--Section 5315 
     of title 5, United States Code, is amended by striking the 
     item relating to the Director of the Office of Federal 
     Housing Enterprise Oversight, Department of Housing and Urban 
     Development and inserting the following new item:

       ``Director of the Office of Federal Enterprise Oversight, 
     Department of the Treasury.''.

     SEC. 172. EFFECTIVE DATE.

       Except as specifically provided otherwise in this title, 
     the amendments made by this title shall take effect on, and 
     shall apply beginning on, the expiration of the 1-year period 
     beginning on the date of enactment of this Act.

        TITLE II--TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY

     SEC. 201. ABOLISHMENT OF OFHEO.

       (a) In General.--Effective at the end of the 1-year period 
     beginning on the date of enactment of this Act, the Office of 
     Federal Housing Enterprise Oversight of the Department of 
     Housing and Urban Development and the positions of the 
     Director and Deputy Director of such Office are abolished.
       (b) Disposition of Affairs.--During the 1-year period 
     beginning on the date of enactment of this Act, the Director 
     of the Office of Federal Housing Enterprise Oversight shall, 
     solely for the purpose of winding up the affairs of the 
     Office of Federal Housing Enterprise Oversight--
       (1) manage the employees of such Office and provide for the 
     payment of the compensation and benefits of any such employee 
     which accrue before the effective date of any transfer of 
     such employee pursuant to section 203; and
       (2) may take any other action necessary for the purpose of 
     winding up the affairs of the Office.
       (c) Status of Employees as Federal Agency Employees.--The 
     amendments made by title I and the abolishment of the Office 
     of Federal Housing Enterprise Oversight under subsection (a) 
     of this section may not be construed to affect the status of 
     any employee of such Office as employees of an agency of the 
     United States for purposes of any other provision of law 
     during any time such employee is so employed.
       (d) Use of Property and Services.--
       (1) Property.--The Director of the Office of Federal 
     Enterprise Supervision of the Department of the Treasury may 
     use the property of the Office of Federal Housing Enterprise 
     Oversight to perform functions that have been transferred to 
     the Director of the Office of Federal Enterprise Supervision 
     for such time as is reasonable to facilitate the orderly 
     transfer of functions under any other provision of this Act, 
     or any amendment made by this Act to any other provision of 
     law.
       (2) Agency services.--Any agency, department, or other 
     instrumentality of the United States, and any successor to 
     any such agency, department, or instrumentality, which was 
     providing supporting services to the Office of Federal 
     Housing Enterprise Oversight before the expiration of the 
     period under subsection (a) in connection with functions that 
     are transferred to the Director of the Office of Federal 
     Enterprise Supervision of the Department of the Treasury 
     shall--
       (A) continue to provide such services, on a reimbursable 
     basis, until the transfer of such functions is complete; and
       (B) consult with any such agency to coordinate and 
     facilitate a prompt and reasonable transition.
       (e) Savings Provisions.--
       (1) Existing rights, duties, and obligations not 
     affected.--Subsection (a) shall not affect the validity of 
     any right, duty, or obligation of the United States, the 
     Director of the Office of Federal Housing Enterprise 
     Oversight, or any other person, which--
       (A) arises under or pursuant to the title XIII of the 
     Housing and Community Development Act of 1992 (12 U.S.C. 4501 
     et seq.), the Federal National Mortgage Association Charter 
     Act (12 U.S.C. 1716 et seq.), the Federal Home Loan Mortgage 
     Corporation Act (12 U.S.C. 1451 et seq.), or any other 
     provision of law applicable with respect to such Office; and
       (B) existed on the day before the abolishment under 
     subsection (a) of this section.
       (2) Continuation of suits.--No action or other proceeding 
     commenced by or against the Director of the Office of Federal 
     Housing Enterprise Oversight shall abate by reason of the 
     enactment of this Act, except that the Director of the Office 
     of Federal Enterprise Supervision of the Department of the 
     Treasury shall be substituted for the Director of the Office 
     of Federal Housing Enterprise Oversight as a party to any 
     such action or proceeding.

[[Page S10631]]

     SEC. 202. CONTINUATION AND COORDINATION OF CERTAIN 
                   REGULATIONS.

       All regulations, orders, determinations, and resolutions 
     that--
       (1) were issued, made, prescribed, or allowed to become 
     effective by--
       (A) the Office of Federal Housing Enterprise Oversight;
       (B) the Secretary of Housing and Urban Development and that 
     relate to the Secretary's authority under--
       (i) title XIII of the Housing and Community Development Act 
     of 1992 (12 U.S.C. 4501 et seq.);
       (ii) under the Federal National Mortgage Association 
     Charter Act (12 U.S.C. 1716 et seq.), with respect to the 
     Federal National Mortgage Association; or
       (iii) the Federal Home Loan Mortgage Corporation Act (12 
     U.S.C. 1451 et seq.); or
       (C) a court of competent jurisdiction and that relate to 
     functions transferred by this Act; and
       (2) are in effect on the date of the abolishment under 
     section 201(a) of this Act,

     shall remain in effect according to the terms of such 
     regulations, orders, determinations, and resolutions, and 
     shall be enforceable by or against the Director of the Office 
     of Federal Enterprise Supervision of the Department of the 
     Treasury until modified, terminated, set aside, or superseded 
     in accordance with applicable law by such Board, any court of 
     competent jurisdiction, or operation of law.

     SEC. 203. TRANSFER AND RIGHTS OF EMPLOYEES OF OFHEO.

       (a) Authority to Transfer.--The Director of the Office of 
     Federal Enterprise Supervision of the Department of the 
     Treasury may transfer employees of the Office of Federal 
     Housing Enterprise Oversight to the Office of Federal 
     Enterprise Supervision for employment no later than the date 
     of the abolishment under section 201(a) of this Act, as the 
     Director considers appropriate. This Act and the amendments 
     made by this Act shall not be considered to result in the 
     transfer of any function from one agency to another or the 
     replacement of one agency by another, for purposes of section 
     3505 of title 5, United States Code, except to the extent 
     that the Director of the Office of Federal Enterprise 
     Supervision specifically provides so.
       (b) Appointment Authority for Excepted and Senior Executive 
     Service Employees.--
       (1) In general.--Subject to paragraph (2), in the case of 
     employees occupying positions in the excepted service or the 
     Senior Executive Service, any appointment authority 
     established pursuant to law or regulations of the Office of 
     Personnel Management for filling such positions shall be 
     transferred.
       (2) Decline of transfer.--The Director of the Office of 
     Federal Enterprise Supervision of the Department of the 
     Treasury may decline a transfer of authority under paragraph 
     (1) (and the employees appointed pursuant thereto) to the 
     extent that such authority relates to positions excepted from 
     the competitive service because of their confidential, 
     policy-making, policy-determining, or policy-advocating 
     character, and noncareer positions in the Senior Executive 
     Service (within the meaning of section 3132(a)(7) of title 5, 
     United States Code).
       (c) Reorganization.--If the Director of the Office of 
     Federal Enterprise Supervision of the Department of the 
     Treasury determines, after the end of the 1-year period 
     beginning on the date of the abolishment under section 
     201(a), that a reorganization of the combined work force is 
     required, that reorganization shall be deemed a major 
     reorganization for purposes of affording affected employees 
     retirement under section 8336(d)(2) or 8414(b)(1)(B) of title 
     5, United States Code.
       (d) Employee Benefit Programs.--
       (1) In general.--Any employee of the Office of Federal 
     Housing Enterprise Oversight accepting employment with the 
     Director of the Office of Federal Enterprise Supervision of 
     the Department of the Treasury as a result of a transfer 
     under subsection (a) may retain for 18 months after the date 
     such transfer occurs membership in any employee benefit 
     program of the Director of the Office of Federal Enterprise 
     Supervision of the Department of the Treasury or the Office 
     of Federal Housing Enterprise Oversight, as applicable, 
     including insurance, to which such employee belongs on the 
     date of the abolishment under section 201(a) if--
       (A) the employee does not elect to give up the benefit or 
     membership in the program; and
       (B) the benefit or program is continued by the Director of 
     the Office of Federal Enterprise Supervision.
       (2) Payment of differential.--The difference in the costs 
     between the benefits which would have been provided by such 
     agency and those provided by this section shall be paid by 
     the Director of the Office of Federal Enterprise Supervision. 
     If any employee elects to give up membership in a health 
     insurance program or the health insurance program is not 
     continued by such Director, the employee shall be permitted 
     to select an alternate Federal health insurance program 
     within 30 days of such election or notice, without regard to 
     any other regularly scheduled open season.

     SEC. 204. TRANSFER OF PROPERTY AND FACILITIES.

       Upon the abolishment under section 201(a), all property of 
     the Office of Federal Housing Enterprise Oversight shall 
     transfer to the Director of the Office of Federal Enterprise 
     Supervision of the Department of the Treasury.
                                 ______