[Congressional Record (Bound Edition), Volume 145 (1999), Part 12]
[House]
[Pages 16818-16886]
[From the U.S. Government Publishing Office, www.gpo.gov]



              FINANCIAL SERVICES MODERNIZATION ACT OF 1999

  Mr. LEACH. Mr. Speaker, I ask unanimous consent to take from the 
Speaker's table 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, and ask for its 
immediate consideration.
  The Clerk read the title of the Senate bill.

                              {time}  1900

  The SPEAKER pro tempore (Mr. Pease). Is there objection to the 
request of the gentleman from Iowa?

[[Page 16819]]


  Mr. LaFALCE. Mr. Speaker, reserving the right to object, it is my 
understanding that it is fully the intent of the gentleman from Iowa 
(Mr. Leach) to have conferees appointed, then have those conferees meet 
on this legislation, and for that conference to proceed on the same 
inclusive bipartisan basis that characterized the development of H.R. 
10 in the Committee on Banking and Financial Services. If that 
understanding is correct, I would raise no objection.
  Mr. LEACH. Mr. Speaker, will the gentleman yield?
  Mr. LaFALCE. I yield to the gentleman from Iowa.
  Mr. LEACH. Mr. Speaker, let me tell the gentleman from New York (Mr. 
LaFalce) that that is the definitive intent of mine. I think it would 
be a mistake of the House not to proceed with proper order and that 
this bill should be considered under regular basis in a conference 
setting, and it would be my hope that conferees would be appointed in 
the very near future.
  Mr. LaFALCE. Mr. Speaker, I withdraw my reservation of objection.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Iowa.
  There was no objection.
  The Clerk read the Senate bill, as follows:

                                 S. 900

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.

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

                        Subtitle A--Affiliations

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 Glass-Steagall Act repealed.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

     Subtitle B--Streamlining Supervision of Bank Holding Companies

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

                Subtitle C--Activities of National Banks

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

    Subtitle D--National Treatment of Foreign Financial Institutions

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

                TITLE II--INSURANCE CUSTOMER PROTECTIONS

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

                   TITLE III--REGULATORY IMPROVEMENTS

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

         TITLE IV--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

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

         TITLE V--FUNCTIONAL REGULATION OF BROKERS AND DEALERS

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

          TITLE VI--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 601. Prevention of creation of new S&L holding companies with 
              commercial affiliates.
Sec. 602. Optional conversion of Federal savings associations.

                       TITLE VII--ATM FEE REFORM

Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is 
              issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.

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

                        Subtitle A--Affiliations

     SEC. 101. GLASS-STEAGALL ACT REPEALED.

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

     SEC. 102. FINANCIAL ACTIVITIES.

       (a) In General.--Section 4 of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1843) is amended by adding at the end the 
     following new subsections:
       ``(k) Engaging in Activities That Are Financial in 
     Nature.--
       ``(1) In general.--Notwithstanding subsection (a), a bank 
     holding company may engage in any activity, and may acquire 
     and retain the shares of any company engaged in any activity, 
     that the Board, in coordination with the Secretary of the 
     Treasury, determines (by regulation or order) to be financial 
     in nature or incidental to such financial activities.
       ``(2) Coordination between the board and the secretary of 
     the treasury.--
       ``(A) Proposals raised before the board.--
       ``(i) Consultation.--The Board shall notify the Secretary 
     of the Treasury of, and consult with the Secretary of the 
     Treasury concerning, any request, proposal, or application 
     under this subsection for a determination of whether an 
     activity is financial in nature or incidental to such a 
     financial activity.
       ``(ii) Treasury view.--The Board shall not determine that 
     any activity is financial in nature or incidental to a 
     financial activity under this subsection if the Secretary of 
     the Treasury notifies the Board in writing, not later than 30 
     days after the date of receipt of the notice described in 
     clause (i) (or such longer period as the Board determines to 
     be appropriate in light of the circumstances) that the 
     Secretary of the Treasury believes that the activity is not 
     financial in nature or incidental to a financial activity.
       ``(B) Proposals raised by the treasury.--
       ``(i) Treasury recommendation.--The Secretary of the 
     Treasury may, at any time, recommend in writing that the 
     Board find an activity to be financial in nature or 
     incidental to a financial activity.
       ``(ii) Time period for board action.--Not later than 30 
     days after the date of receipt of a written recommendation 
     from the Secretary of the Treasury under clause (i) (or such 
     longer period as the Secretary of the Treasury and the Board 
     determine to be appropriate in light of the circumstances), 
     the Board shall determine whether to initiate a public 
     rulemaking proposing that the subject recommended activity be 
     found to be financial in nature or incidental to a financial 
     activity under this subsection, and shall notify the 
     Secretary of the Treasury in writing of the determination of 
     the Board and, in the

[[Page 16820]]

     event that the Board determines not to seek public comment on 
     the proposal, the reasons for that determination.
       ``(3) Factors to be considered.--The Board shall determine 
     that an activity is financial in nature or incidental to 
     financial activities, if the Board finds that such activity 
     is consistent with--
       ``(A) the purposes of this Act and the Financial Services 
     Modernization Act of 1999;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which bank holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) fostering--
       ``(i) effective competition with any company seeking to 
     provide financial services in the United States;
       ``(ii) the efficient delivery of information and services 
     that are financial in nature through the use of technological 
     means, including any application necessary to protect the 
     security or efficacy of systems for the transmission of data 
     or financial transactions; and
       ``(iii) the provision to customers of any available or 
     emerging technological means for using financial services.
       ``(4) Activities that are financial in nature.--For 
     purposes of this subsection, the following activities shall 
     be considered to be financial in nature:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding money or securities.
       ``(B) Insuring, guaranteeing, or indemnifying against loss, 
     harm, damage, illness, disability, or death, or providing and 
     issuing annuities, and acting as principal, agent, or broker 
     for purposes of the foregoing, in any State, in full 
     compliance with the laws and regulations of that State that 
     apply to each type of insurance license or authorization in 
     that State.
       ``(C) Providing financial, investment, or economic advisory 
     services, including advising an investment company (as 
     defined in section 3 of the Investment Company Act of 1940).
       ``(D) Issuing or selling instruments representing interests 
     in pools of assets permissible for a bank to hold directly.
       ``(E) Underwriting, dealing in, or making a market in 
     securities.
       ``(F) Engaging in any activity that the Board has 
     determined, by order or regulation that is in effect on the 
     date of enactment of the Financial Services Modernization Act 
     of 1999, to be so closely related to banking or managing or 
     controlling banks as to be a proper incident thereto (subject 
     to the same terms and conditions contained in such order or 
     regulation, unless modified by the Board).
       ``(G) Engaging, in the United States, in any activity 
     that--
       ``(i) a bank holding company may engage in outside of the 
     United States; and
       ``(ii) the Board has determined, under regulations issued 
     pursuant to subsection (c)(13) (as in effect on the day 
     before the date of enactment of the Financial Services 
     Modernization Act of 1999) to be usual in connection with the 
     transaction of banking or other financial operations abroad.
       ``(H) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution or 
     subsidiary of a depository institution that the bank holding 
     company controls), or otherwise, shares, assets, or ownership 
     interests (including debt or equity securities, partnership 
     interests, trust certificates, or other instruments 
     representing ownership) of a company or other entity, whether 
     or not constituting control of such company or entity, 
     engaged in any activity not authorized pursuant to this 
     section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or subsidiary of 
     a depository institution; and
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by--

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

       ``(I) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution or 
     subsidiary of a depository institution, that the bank holding 
     company controls), or otherwise, shares, assets, or ownership 
     interests (including debt or equity securities, partnership 
     interests, trust certificates or other instruments 
     representing ownership) of a company or other entity, whether 
     or not constituting control of such company or entity, 
     engaged in any activity not authorized pursuant to this 
     section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or a subsidiary 
     of a depository institution;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by an insurance company that is 
     predominantly engaged in underwriting life, accident and 
     health, or property and casualty insurance (other than 
     credit-related insurance) or providing and issuing annuities; 
     and
       ``(iii) such shares, assets, or ownership interests 
     represent, as determined by the insurance authority of the 
     State of domicile of the insurance company, an investment 
     made in the ordinary course of business of such insurance 
     company in accordance with relevant State law governing such 
     investments.
       ``(J) Activities that the Board determines (by regulation 
     or order) are complementary to financial activities, or any 
     other service that the Board determines (by regulation or 
     order) not to pose a substantial risk to the safety or 
     soundness of depository institutions or the financial system 
     generally.
       ``(5) Actions required.--
       ``(A) In general.--The Board shall, by regulation or order, 
     define, consistent with the purposes of this Act, the 
     activities described in subparagraph (B) as financial in 
     nature, and the extent to which such activities are financial 
     in nature or incidental to activities that are financial in 
     nature.
       ``(B) Activities.--The activities described in this 
     subparagraph are--
       ``(i) lending, exchanging, transferring, investing for 
     others, or safeguarding financial assets other than money or 
     securities;
       ``(ii) providing any device or other instrumentality for 
     transferring money or other financial assets;
       ``(iii) arranging, effecting, or facilitating financial 
     transactions for the account of third parties; and
       ``(iv) activities that are complementary to financial 
     activities, or any other service that the Board determines 
     (by regulation or order) not to pose a substantial risk to 
     the safety or soundness of depository institutions or the 
     financial system generally.
       ``(6) Required notification.--
       ``(A) In general.--A bank holding company that acquires any 
     company or commences any activity pursuant to this subsection 
     shall provide written notice to the Board describing the 
     activity commenced or conducted by the company acquired not 
     later than 30 calendar days after commencing the activity or 
     consummating the acquisition, as applicable.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in subsection (j) with regard 
     to the acquisition of a savings association, a bank holding 
     company may commence any activity, or acquire any company, 
     pursuant to paragraph (4) or any regulation prescribed or 
     order issued under paragraph (5), without prior approval of 
     the Board.
       ``(l) Conditions for Engaging in Expanded Financial 
     Activities.--
       ``(1) In general.--Notwithstanding subsection (k), a bank 
     holding company may not engage in any activity, or directly 
     or indirectly acquire or retain shares of any company engaged 
     in any activity, under subsection (k), other than activities 
     permissible for a bank holding company under subsection 
     (c)(8), unless--
       ``(A) all of the insured depository institution 
     subsidiaries of the bank holding company are well 
     capitalized;
       ``(B) all of the insured depository institution 
     subsidiaries of the bank holding company are well managed; 
     and
       ``(C) the bank holding company has filed with the Board--
       ``(i) a declaration that the company elects to engage in 
     activities or acquire and retain shares of a company which 
     were not permissible for a bank holding company to engage in 
     or acquire before the enactment of the Financial Services 
     Modernization Act of 1999; and
       ``(ii) a certification that the company meets the 
     requirements of subparagraphs (A) and (B).
       ``(2) Foreign banks.--For purposes of paragraph (1), the 
     Board shall apply comparable capital and management standards 
     to a foreign bank that operates a branch or agency or owns or 
     controls a commercial lending company in the United States, 
     giving due regard to the principle of national treatment and 
     equality of competitive opportunity.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) the term `well capitalized' has the same meaning as 
     in section 38 of the Federal Deposit Insurance Act;
       ``(B) the term `well managed' means--
       ``(i) in the case of a depository institution that has been 
     examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency--

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

       ``(ii) in the case of any depository institution that has 
     not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory; and
       ``(iii) the terms `appropriate Federal banking agency' and 
     `depository institution' have

[[Page 16821]]

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

     SEC. 103. CONFORMING AMENDMENTS.

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

     SEC. 104. OPERATION OF STATE LAW.

       (a) State Regulation of the Business of Insurance.--The Act 
     entitled ``An Act to express the intent of Congress with 
     reference to the regulation of the business of insurance'' 
     and approved March 9, 1945 (15 U.S.C. 1011 et seq.), commonly 
     referred to as the ``McCarran-Ferguson Act'' remains the law 
     of the United States.
       (b) Mandatory Insurance Licensing Requirements.--No person 
     or entity shall provide insurance in a State as principal or 
     agent unless such person or entity is licensed, as required 
     by the appropriate insurance regulator of such State in 
     accordance with the relevant State insurance laws, subject to 
     subsections (c), (d), and (e).
       (c) Affiliations.--
       (1) In general.--Except as provided in paragraph (2), no 
     State may, by statute, regulation, order, interpretation, or 
     other action, prevent or restrict the affiliations authorized 
     or permitted by this Act and the amendments made by this Act.
       (2) Insurance.--With respect to affiliations between 
     insured depository institutions, or any subsidiary or 
     affiliate thereof, and persons or entities engaged in the 
     business of insurance, paragraph (1) does not prohibit any 
     State from collecting, reviewing, and taking actions on 
     required applications and other documents or reports as may 
     be necessary concerning proposed acquisitions, changes, or 
     continuations of control of any entity engaged in the 
     business of insurance and domiciled in that State, if the 
     State actions do not have the practical effect of 
     discriminating, either intentionally or unintentionally, 
     against an insured depository institution or a subsidiary or 
     affiliate thereof, or against any person or entity based upon 
     affiliation with an insured depository institution.
       (d) Activities.--
       (1) In general.--Except as provided in paragraph (3), and 
     except with respect to insurance sales, solicitation, and 
     cross marketing activities, which shall be governed by 
     paragraph (2), no State may, by statute, regulation, order, 
     interpretation or other action, prevent or restrict an 
     insured depository institution or subsidiary or affiliate 
     thereof from engaging directly or indirectly, either by 
     itself or in conjunction with a subsidiary, affiliate, or any 
     other entity or person, in any activity authorized or 
     permitted under this Act and the amendments made by this Act.
       (2) Insurance sales.--
       (A) In general.--In accordance with the legal standards for 
     preemption set forth in the decision of the Supreme Court of 
     the United States in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996), no State may, by statute, 
     regulation, order, interpretation, or other action, prevent 
     or significantly interfere with the ability of an insured 
     depository institution, or a subsidiary or affiliate thereof, 
     to engage, directly or indirectly, either by itself or in 
     conjunction with a subsidiary, affiliate, or any other party, 
     in any insurance sales, solicitation, or cross-marketing 
     activity.
       (B) Certain state laws preserved.--Notwithstanding 
     subparagraph (A), a State may impose any of the following 
     restrictions, or restrictions that are substantially the same 
     as but no more burdensome or restrictive than those in each 
     of the following clauses:
       (i) Restrictions prohibiting the rejection of an insurance 
     policy solely because the policy has been issued or 
     underwritten by any person not associated with such insured 
     depository institution, or any subsidiary or affiliate 
     thereof, when such insurance is required in connection with a 
     loan or extension of credit.
       (ii) Restrictions prohibiting a requirement for any debtor, 
     insurer, or insurance agent or broker to pay a separate 
     charge in connection with the handling of insurance that is 
     required in connection with a loan or other extension of 
     credit or the provision of another traditional banking 
     product, unless such charge would be required when the 
     insured depository institution, or any subsidiary or 
     affiliate thereof, is the licensed insurance agent or broker 
     providing the insurance.
       (iii) Restrictions prohibiting the use of any advertisement 
     or other insurance promotional material by an insured 
     depository institution, or any subsidiary or affiliate 
     thereof, that would cause a reasonable person to believe 
     mistakenly that--

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

[[Page 16822]]

       (II) a State, or the Federal Government guarantees any 
     returns on insurance products, or is a source of payment on 
     any insurance obligation of or sold by the institution, 
     affiliate, or subsidiary.

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

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

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

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

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

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

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

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

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

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

       (3) Insurance activities other than sales.--State statutes, 
     regulations, interpretations, orders, and other actions shall 
     not be preempted under paragraph (1) to the extent that 
     they--
       (A) relate to, or are issued, adopted, or enacted for the 
     purpose of regulating the business of insurance in accordance 
     with the Act of March 9, 1945 (commonly known as the 
     ``McCarran-Ferguson Act'');
       (B) apply only to persons or entities that are not insured 
     depository institutions, but that are directly engaged in the 
     business of insurance (except that they may apply to 
     depository institutions engaged in providing savings bank 
     life insurance as principal to the extent of regulating such 
     insurance);
       (C) do not relate to or directly or indirectly regulate 
     insurance sales, solicitations, or cross marketing 
     activities; and
       (D) are not prohibited under subsection (e).
       (4) Financial activities other than insurance.--No State 
     statute, regulation, interpretation, order, or other action 
     shall be preempted under paragraph (1) to the extent that--
       (A) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, insurance sales, solicitations, or cross 
     marketing activities covered under paragraph (2);
       (B) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, the business of insurance activities other than 
     sales, solicitations, or cross marketing activities, covered 
     under paragraph (3);
       (C) it does not relate to securities investigations or 
     enforcement actions referred to in subsection (f); and
       (D) it is not prohibited under subsection (e).
       (e) Nondiscrimination.--Except as provided in any 
     restriction described in subsection (d)(2)(B), no State may, 
     by statute, regulation, order, interpretation, or other 
     action, regulate the activities authorized or permitted under 
     this Act and the amendments made by this Act, or any other 
     provision of Federal law, of an insured depository 
     institution, or subsidiary or affiliate thereof, to the 
     extent that such statute, regulation, order, interpretation, 
     or other action--
       (1) distinguishes by its terms between insured depository 
     institutions, or subsidiaries or affiliates thereof, and 
     other persons or entities engaged in such activities, in a 
     manner that is in any way adverse to any such insured 
     depository institution, or subsidiary or affiliate thereof;
       (2) as interpreted or applied, has or will have an impact 
     on insured depository institutions, or subsidiaries or 
     affiliates thereof, that is substantially more adverse than 
     its impact on other persons or entities providing the same 
     products or services or engaged in the same activities that 
     are not insured depository institutions, or subsidiaries or 
     affiliates thereof, or persons or entities affiliated 
     therewith;
       (3) effectively prevents an insured depository institution, 
     or subsidiary or affiliate thereof, from engaging in 
     activities authorized or permitted by this Act and the 
     amendments made by this Act, or any other provision of 
     Federal law; or

[[Page 16823]]

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

     Subtitle B--Streamlining Supervision of Bank Holding Companies

     SEC. 111. STREAMLINING BANK HOLDING COMPANY SUPERVISION.

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

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

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

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

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

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

       ``(D) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, for the purposes of this 
     paragraph, use the reports of examinations of depository 
     institutions made by the appropriate Federal and State 
     depository institution supervisory authority.
       ``(E) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, forego an examination by the 
     Board

[[Page 16824]]

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

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

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

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

       Section 5 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844) is amended by adding at the end the following 
     new subsection:
       ``(g) Authority of State Insurance Regulator and the 
     Securities and Exchange Commission.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, any regulation, order, or other action of the Board that 
     requires a bank holding company to provide funds or other 
     assets to an insured depository institution subsidiary shall 
     not be effective nor enforceable, if--
       ``(A) such funds or assets are to be provided by--
       ``(i) a bank holding company that is an insurance company 
     or that is a broker or dealer registered under the Securities 
     Exchange Act of 1934; or
       ``(ii) an affiliate of the insured depository institution 
     that is an insurance company or a broker or dealer registered 
     under the Securities Exchange Act of 1934; and
       ``(B) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker or dealer, as the case may be, determines 
     in a written notice sent to the bank holding company and to 
     the Board that the bank holding company shall not provide 
     such funds or assets because such action would have a 
     material adverse effect on the financial condition of the 
     insurance company or the broker or dealer, as the case may 
     be.
       ``(2) Notice to state insurance authority or sec 
     required.--If the Board requires a bank holding company, or 
     an affiliate of a bank holding company, that is an insurance 
     company or a broker or dealer, as described in paragraph 
     (1)(A), to provide funds or assets to an insured depository 
     institution subsidiary of the bank holding company pursuant 
     to any regulation, order, or other action of the Board 
     referred to in paragraph (1), the Board shall promptly notify 
     the State insurance authority for the insurance company or 
     the Securities and Exchange Commission, as the case may be, 
     of such requirement.
       ``(3) Divestiture in lieu of other action.--If the Board 
     receives a notice described in paragraph (1)(B) from a State 
     insurance authority or the Securities and Exchange Commission 
     with regard to a bank holding company or affiliate referred 
     to in that paragraph, the Board may order the bank holding 
     company to divest the insured depository institution 
     subsidiary not later than 180 days after receiving the 
     notice, or such longer period as the Board determines to be 
     consistent with the safe and sound operation of the insured 
     depository institution.
       ``(4) Conditions before divestiture.--During the period 
     beginning on the date on which an order to divest is issued 
     by the Board under paragraph (3) to a bank holding company 
     and ending on the date on which the divestiture is completed, 
     the Board may impose any conditions or restrictions on 
     ownership or operation by the bank holding company of the 
     insured depository institution, including restricting or 
     prohibiting transactions between the insured depository 
     institution and any affiliate of the institution, as are 
     appropriate under the circumstances.
       ``(5) Rule of construction.--No provision of this 
     subsection may be construed to limit or otherwise affect the 
     regulatory authority, including the scope of the authority, 
     of any Federal agency or department with regard to any entity 
     that is within the jurisdiction of such agency or 
     department.''.

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

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

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

       ``(a) Limitation on Direct Action.--The Board may not 
     prescribe regulations, issue or seek entry of orders, impose 
     restraints, restrictions, guidelines, requirements, 
     safeguards, or standards, or otherwise take any action under 
     or pursuant to any provision of this Act or section 8 of the 
     Federal Deposit Insurance Act against or with respect to a

[[Page 16825]]

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

     SEC. 114. EXAMINATION OF INVESTMENT COMPANIES.

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

     SEC. 115. EQUIVALENT REGULATION AND SUPERVISION.

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

     SEC. 116. INTERAGENCY CONSULTATION.

       (a) Examination Results and Other Information.--
       (1) Information of the board.--Upon the request of the 
     appropriate insurance regulator of any State, the Board may 
     provide to that regulator any information of the Board 
     regarding the financial condition, risk management policies, 
     and operations of any bank holding company that controls a 
     company that is engaged in insurance activities and is 
     regulated by that State insurance regulator, and regarding 
     any transaction or relationship between such an insurance 
     company and any affiliated depository institution. The Board 
     may provide any other information to the appropriate State 
     insurance regulator that the Board believes is necessary or 
     appropriate to permit the State insurance regulator to 
     administer and enforce applicable State insurance laws.
       (2) Banking agency information.--Upon the request of the 
     appropriate insurance regulator of any State, the appropriate 
     Federal banking agency may provide to that regulator any 
     information of the agency regarding any transaction or 
     relationship between a depository institution supervised by 
     that Federal banking agency and any affiliated company that 
     is engaged in insurance activities regulated by the State 
     insurance regulator. The appropriate Federal banking agency 
     may provide any other information to the appropriate State 
     insurance regulator that the agency believes is necessary or 
     appropriate to permit the State insurance regulator to 
     administer and enforce applicable State insurance laws.
       (3) State insurance regulator information.--Upon the 
     request of the appropriate Federal banking agency, a State 
     insurance regulator may provide any examination or other 
     reports, records, or other information to which the State 
     insurance regulator may have access with respect to a company 
     that--
       (A) is engaged in insurance activities and is regulated by 
     that insurance regulator; and
       (B) is an affiliate of an insured depository institution or 
     a bank holding company.
       (b) Consultation.--Before making any determination relating 
     to the initial affiliation of, or the continuing affiliation 
     of, an insured depository institution or bank holding company 
     with a company engaged in insurance activities, the 
     appropriate Federal banking agency shall consult with the 
     appropriate State insurance regulator of such company and 
     take the views of such insurance regulator into account in 
     making such determination.
       (c) Effect on Other Authority.--Nothing in this section 
     shall limit in any respect the authority of the appropriate 
     Federal banking agency with respect to an insured depository 
     institution or bank holding company or any affiliate thereof 
     under any provision of law.
       (d) Confidentiality and Privilege.--
       (1) Confidentiality.--The appropriate Federal banking 
     agency may not provide any information or material that is 
     entitled to confidential treatment under applicable Federal 
     banking agency regulations, or other applicable law, to a 
     State insurance regulator, unless such regulator agrees to 
     maintain the information or material in confidence and to 
     take all reasonable steps to oppose any effort to secure 
     disclosure of the information or material by the regulator. 
     The appropriate Federal banking agency shall treat as 
     confidential any information or material obtained from a 
     State insurance regulator that is entitled to confidential 
     treatment under applicable State regulations, or other 
     applicable law, and take all reasonable steps to oppose any 
     effort to secure disclosure of the information or material by 
     the Federal banking agency.
       (2) Privilege.--The provision pursuant to this section of 
     information or material by a Federal banking agency or a 
     State insurance regulator shall not constitute a waiver of, 
     or

[[Page 16826]]

     otherwise affect, any privilege to which the information or 
     material is otherwise subject.
       (e) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Appropriate federal banking agency; insured depository 
     institution.--The terms ``appropriate Federal banking 
     agency'' and ``insured depository institution'' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.
       (2) Board; bank holding company.--The terms ``Board'' and 
     ``bank holding company'' have the same meanings as in section 
     2 of the Bank Holding Company Act of 1956.

     SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.

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

                Subtitle C--Activities of National Banks

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

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

     SEC. 122. SUBSIDIARIES OF NATIONAL BANKS.

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

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

       ``(a) Authorization To Conduct in Operating Subsidiaries 
     Certain Activities That Are Financial in Nature.--
       ``(1) In general.--Subject to paragraph (2), a national 
     bank may control a financial subsidiary, or hold an interest 
     in a financial subsidiary, only if--
       ``(A) the consolidated total assets of the national bank do 
     not exceed $1,000,000,000;
       ``(B) the national bank is not an affiliate of a bank 
     holding company;
       ``(C) the subject activities are not real estate 
     development or real estate investment activities, unless 
     otherwise expressly authorized by law;
       ``(D) the national bank and each insured depository 
     institution affiliate of the national bank is well 
     capitalized and well managed; and
       ``(E) the national bank has received the approval of the 
     Comptroller of the Currency to engage in such activities, 
     which approval shall be based solely upon the factors set 
     forth in subparagraph (D) and factors set forth in subsection 
     (c).
       ``(2) Regulations required.--The Comptroller of the 
     Currency shall, by regulation, prescribe procedures for the 
     enforcement of this section.
       ``(b) Safety and Soundness Fire Walls.--
       ``(1) Capital reduction required.--In determining 
     compliance with applicable capital standards for purposes of 
     subsection (a)(1)(D)--
       ``(A) the aggregate amount of outstanding equity 
     investments by a national bank in a financial subsidiary 
     shall be deducted from the assets and tangible equity of the 
     national bank; and
       ``(B) the assets and liabilities of the financial 
     subsidiary shall not be consolidated with those of the 
     national bank.
       ``(2) Investment limitation.--A national bank may not, 
     without the prior approval of the Comptroller of the 
     Currency, make any equity investment in a financial 
     subsidiary of the bank if that investment would, when made, 
     exceed the amount that the national bank could pay as a 
     dividend without obtaining prior regulatory approval.
       ``(c) Safeguards for the Bank.--A national bank that 
     establishes or maintains a financial subsidiary shall assure 
     that--
       ``(1) the procedures of the national bank for identifying 
     and managing financial and operational risks within the 
     national bank and financial subsidiary adequately protect the 
     national bank from such risks;
       ``(2) the bank has, for the protection of the national 
     bank, reasonable policies and procedures to preserve the 
     separate corporate identity and limited liability of the 
     national bank and the financial subsidiaries of the national 
     bank; and
       ``(3) the national bank is in compliance with this section.
       ``(d) Streamlining Regulation and Supervision and 
     Encouraging Consultation Among Federal and State 
     Regulators.--
       ``(1) In general.--To the extent that a national bank 
     engages in activities that are authorized by subsection (a) 
     through a functionally regulated financial subsidiary, the 
     regulation and supervision of such subsidiary by the 
     Comptroller of the Currency, including its ability to require 
     a contribution of capital or assets to the national bank from 
     that functionally regulated financial subsidiary, shall be 
     limited, as set forth under section 115 of the Financial 
     Services Modernization Act of 1999.
       ``(2) Interagency consultation.--The provisions of section 
     116 of the Financial Services Modernization Act of 1999, 
     relating to interagency consultation, shall apply to the 
     Comptroller of the Currency and the appropriate State 
     regulators of functionally regulated financial subsidiaries 
     of a national bank.
       ``(e) Preservation of Existing Operating Subsidiary 
     Authority.--Notwithstanding any other provision of this 
     section--
       ``(1) a national bank may retain control of a company, or 
     retain an interest in a company, and conduct through such 
     company any activities lawfully conducted therein as of the 
     date of enactment of the Financial Services Modernization Act 
     of 1999; and
       ``(2) a national bank may own shares of or any other 
     interest in any company that is engaged only in activities 
     that are permissible for the national bank to engage in 
     directly, if such activities are engaged in under the same 
     terms and conditions that would govern the conduct if 
     conducted by a national bank directly.
       ``(f) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(1) Financial subsidiary.--The term `financial 
     subsidiary' means a company that--
       ``(A) is a subsidiary of a national bank; and
       ``(B) is engaged as principal in any activity that is 
     permissible for a bank holding company under section 4(k) of 
     the Bank Holding Company Act of 1956 and is not permissible 
     for national banks to engage in directly.
       ``(2) Functionally regulated.--The term `functionally 
     regulated financial subsidiary' means a financial subsidiary 
     that is--
       ``(A) a broker or dealer that is registered under the 
     Securities Exchange Act of 1934;
       ``(B) an investment adviser that is registered under the 
     Investment Advisers Act of 1940, or with any State, with 
     respect to the investment advisory activities of such 
     investment adviser and activities incidental to such 
     investment advisory activities;
       ``(C) an insurance company that is subject to supervision 
     by a State insurance commission, agency, or similar 
     authority; and
       ``(D) an entity that is subject to regulation by the 
     Commodity Futures Trading Commission, with respect to the 
     commodities activities of such entity and activities 
     incidental to such commodities activities.
       ``(3) Subsidiary.--The term `subsidiary' has the same 
     meaning as in section 2 of the Bank Holding Company Act of 
     1956.
       ``(4) Well capitalized.--The term `well capitalized' has 
     the same meaning as in section 38 of the Federal Deposit 
     Insurance Act.
       ``(5) Well managed.--The term `well managed' means--
       ``(A) in the case of a depository institution that has been 
     examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency--
       ``(i) the achievement of a composite rating of 1 or 2 under 
     the Uniform Financial Institutions Rating System (or an 
     equivalent rating under an equivalent rating system) in 
     connection with the most recent examination or subsequent 
     review of the depository institution; and
       ``(ii) at least a rating of 2 for management, if such 
     rating is given; or
       ``(B) in the case of any depository institution that has 
     not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory.
       ``(6) Incorporated definitions.--The terms `appropriate 
     Federal banking agency', `depository institution', and 
     `insured depository institution', have the same meanings as 
     in section 3 of the Federal Deposit Insurance Act.''.
       (b) Limiting the Credit Exposure of a National Bank to a 
     Financial Subsidiary to the Amount of Permissible Credit 
     Exposure to an Affiliate.--Section 23A of the Federal Reserve 
     Act (12 U.S.C. 371c) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d), the following new 
     subsection:
       ``(e) Rules Relating to National Banks With Financial 
     Subsidiaries.--
       ``(1) Financial subsidiary defined.--For purposes of this 
     section and section 23B, the term `financial subsidiary' has 
     the same meaning as in section 5136A(f) of the Revised 
     Statutes of the United States.
       ``(2) Application to transactions between a financial 
     subsidiary of a national bank and the national bank.--For 
     purposes of applying this section and section 23B to a 
     transaction between a financial subsidiary of a national bank 
     and the national bank (or between such financial subsidiary 
     and any other subsidiary of the national bank that is not a 
     financial subsidiary), and notwithstanding subsection (b)(2) 
     of this section or section 23B(d)(1)--

[[Page 16827]]

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

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

     SEC. 123. AGENCY ACTIVITIES.

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

     SEC. 124. PROHIBITING FRAUDULENT REPRESENTATIONS.

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

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

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

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

     SEC. 125. INSURANCE UNDERWRITING BY NATIONAL BANKS.

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

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

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

    Subtitle D--National Treatment of Foreign Financial Institutions

     SEC. 151. NATIONAL TREATMENT OF FOREIGN FINANCIAL 
                   INSTITUTIONS.

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

     SEC. 152. REPRESENTATIVE OFFICES.

       (a) Definition of ``Representative Office''.--Section 
     1(b)(15) of the International Banking Act of 1978 (12 U.S.C. 
     3101(15)) is amended by striking ``State agency, or 
     subsidiary of a foreign bank'' and inserting ``or State 
     agency''.
       (b) Examinations.--Section 10(c) of the International 
     Banking Act of 1978 (12 U.S.C. 3107(c)) is amended by adding 
     at the end the following: ``The Board may also make 
     examinations of any affiliate of a foreign bank conducting 
     business in any State, if the Board deems it necessary to 
     determine and enforce compliance with this Act, the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or 
     other applicable Federal banking law.''.

[[Page 16828]]



                TITLE II--INSURANCE CUSTOMER PROTECTIONS

     SEC. 201. FUNCTIONAL REGULATION OF INSURANCE.

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

     SEC. 202. INSURANCE CUSTOMER PROTECTIONS.

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

     ``SEC. 45. INSURANCE CUSTOMER PROTECTIONS.

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

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

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

[[Page 16829]]

       ``(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.
       ``(f) Non-Discrimination Against Non-Affiliated Agents.--
     The Federal banking agencies shall ensure that the 
     regulations prescribed pursuant to subsection (a) shall not 
     have the practical effect of discriminating, either 
     intentionally or unintentionally, against any person engaged 
     in insurance sales or solicitations that is not affiliated 
     with an insured depository institution.''.

     SEC. 203. FEDERAL AND STATE DISPUTE RESOLUTION.

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

                   TITLE III--REGULATORY IMPROVEMENTS

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

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

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

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

     SEC. 303. MEANINGFUL CRA EXAMINATIONS.

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

     SEC. 304. FINANCIAL INFORMATION PRIVACY PROTECTION.

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

          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

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

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

          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

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

     ``SEC. 1002. DEFINITIONS.

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

[[Page 16830]]



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

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

     ``SEC. 1004. ADMINISTRATIVE ENFORCEMENT.

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

     ``SEC. 1005. CIVIL LIABILITY.

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

     ``SEC. 1006. CRIMINAL PENALTY.

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

     ``SEC. 1007. RELATION TO STATE LAWS.

       ``(a) In General.--This title shall not be construed as 
     superseding, altering, or affecting the statutes, 
     regulations, orders, or interpretations in effect in any 
     State, except

[[Page 16831]]

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

     ``SEC. 1008. AGENCY GUIDANCE.

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

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

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

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

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

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

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

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

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

     SEC. 308. COMMUNITY REINVESTMENT ACT EXEMPTION.

       (a) In General.--No community financial institution shall 
     be subject to the Community Reinvestment Act of 1977 (12 
     U.S.C. 2901 et seq.).
       (b) Definition of Community Financial Institution.--As used 
     in this section, the term ``community financial institution'' 
     means an insured depository institution (as defined in 
     section 3 of the Federal Deposit Insurance Act), that has 
     aggregate assets of not more than $100,000,000, and that is 
     located in a non-metropolitan area.

[[Page 16832]]

       (c) Adjustments.--The dollar amount referred to in 
     subsection (b) shall be adjusted annually after December 31, 
     1999, by the annual percentage increase in the Consumer Price 
     Index for Urban Wage Earners and Clerical Workers published 
     by the Bureau of Labor Statistics.
       (d) Definition.--For purposes of this section, the term 
     ``non-metropolitan area'' means any area, no part of which is 
     within an area designated as a metropolitan statistical area 
     by the Office of Management and Budget.

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

       Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b)) 
     is amended--
       (1) by striking ``(b) After six'' and inserting the 
     following:
       ``(b) Interlocking Directorates.--
       ``(1) In general.--After 6''; and
       (2) by adding at the end the following:
       ``(2) Applicability.--
       ``(A) In general.--In the circumstances described in 
     subparagraph (B), paragraph (1) shall not apply to a person 
     that holds or proposes to hold the positions of--
       ``(i) officer or director of a public utility; and
       ``(ii) officer or director of a bank, trust company, 
     banking association, or firm authorized by law to underwrite 
     or participate in the marketing of securities of a public 
     utility.
       ``(B) Circumstances.--The circumstances described in this 
     subparagraph are that--
       ``(i) a person described in subparagraph (A) does not 
     participate in any deliberations or decisions of the public 
     utility regarding the selection of a bank, trust company, 
     banking association, or firm to underwrite or participate in 
     the marketing of securities of the public utility, if the 
     person serves as an officer or director of a bank, trust 
     company, banking association, or firm that is under 
     consideration in the deliberation process;
       ``(ii) the bank, trust company, banking association, or 
     firm of which the person is an officer or director does not 
     engage in the underwriting of, or participate in the 
     marketing of, securities of the public utility of which the 
     person holds the position of officer or director;
       ``(iii) the public utility for which the person serves or 
     proposes to serve as an officer or director selects 
     underwriters by competitive procedures; or
       ``(iv) the issuance of securities the public utility for 
     which the person serves or proposes to serve as an officer or 
     director has been approved by all Federal and State 
     regulatory agencies having jurisdiction over the issuance.''.

     SEC. 310. CONTROL OF BANKERS' BANKS.

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

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

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

     SEC. 312. CRA SUNSHINE REQUIREMENTS.

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

     ``SEC. 46. CRA SUNSHINE REQUIREMENTS.

       ``(a) Public Disclosure of Agreements.--Any agreement 
     entered into by an insured depository institution or 
     affiliate with a nongovernmental entity or person made 
     pursuant to or in connection with the Community Reinvestment 
     Act involving funds or other resources of such insured 
     depository institution or affiliate shall be in its entirety 
     fully disclosed, and the full text thereof made available to 
     the appropriate Federal banking agency with supervisory 
     responsibility over the insured depository institution and to 
     the public and shall obligate each party to comply with the 
     provisions of this section.
       ``(b) Annual Report of Activity.--Each party to the 
     agreement shall report, as applicable, to the appropriate 
     Federal banking agency with supervisory responsibility over 
     the insured depository institution, no less frequently than 
     once each year, such information as the Federal banking 
     agency may by rule require relating to the following actions 
     taken by the party pursuant to an agreement described in 
     subsection (a) during the previous 12-month period--
       ``(1) payments, fees or loans made to any party to the 
     agreement or received from any party to the agreement and the 
     terms and conditions of the same; and
       ``(2) aggregate data on loans, investments and services 
     provided by each party in its community or communities 
     pursuant to the agreement; and
       ``(3) such other pertinent matters as determined by rule by 
     the appropriate Federal banking agency with supervisory 
     responsibility over the insured depository institution.
     The Federal banking agency shall ensure that the regulations 
     implementing this section do not impose an undue burden on 
     the parties and that proprietary and confidential information 
     is protected.
       ``(c) Existing Agreements.--The requirements of subsection 
     (b) (1), (2), and (3) shall be deemed to be fulfilled with 
     respect to any agreement made prior to May 5, 1999.
       ``(d) Secondary Agreements.--Any agreement made on or after 
     May 5, 1999 pursuant to an agreement described in subsection 
     (a) also is subject to the requirements of subsections (a) 
     and (b).
       ``(e) Definitions.--
       ``(1) Agreement.--As used in this section, the term 
     `agreement' refers to any written contract, written 
     arrangement, or other written understanding with a value in 
     excess of $10,000 annually, or a group of substantively 
     related contracts with an aggregate value of $10,000 
     annually, made pursuant to or in connection with the 
     Community Reinvestment Act of 1977, at least one party to 
     which is an insured depository institution or affiliate 
     thereof, or entity owned or controlled by an insured 
     depository institution or affiliate, whether organized on a 
     profit or not-for-profit basis. The term `agreement' shall 
     not include any specific contract or commitment for a loan or 
     extension of credit to individuals, businesses, farms, or 
     other entities, where the purpose of the loan or extension of 
     credit does not include any re-lending of the borrowed funds 
     to other parties.
       ``(2) Appropriate federal banking agency and insured 
     depository institution.--As used in this section, the terms 
     `appropriate Federal banking agency' and `insured depository 
     institution' have the same meanings as defined in section 3 
     of this Act.
       ``(d) Violations.--Any violation of the provisions of this 
     section shall be considered a violation of this Act. If the 
     party to the agreement that is not an insured depository 
     institution or affiliate fails to comply with this section, 
     the agreement shall not be enforceable after being given 
     notice and a reasonable period of time to perform or comply.
       ``(e) Limitation.--Nothing in this section is intended to 
     provide any authority upon any appropriate Federal banking 
     agency to enforce the provisions of the agreements that are 
     subject to the requirements of subsection (a).
       ``(f) Regulations.--Each appropriate Federal banking agency 
     shall prescribe regulations requiring procedures reasonably 
     designed to assure and monitor compliance with the 
     requirements of this section.''.

[[Page 16833]]



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

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

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

       ``Notwithstanding paragraphs (1) and (2), a foreign bank 
     may--
       ``(A) with the approval of the Board and the Comptroller of 
     the Currency, establish and operate a Federal branch or 
     Federal agency or, with the approval of the Board and the 
     appropriate State bank supervisor, a State branch or State 
     agency in any State outside the foreign bank's home State 
     if--
       ``(i) the establishment and operation of such branch or 
     agency is permitted by the State in which the branch or 
     agency is to be established; and
       ``(ii) in the case of a Federal or State branch, the branch 
     receives only such deposits as would be permitted for a 
     corporation organized under section 25A of the Federal 
     Reserve Act (12 U.S.C. 611 et seq.); or
       ``(B) with the approval of the Board and the relevant 
     licensing authority (the Comptroller in the case of a Federal 
     branch or the appropriate State supervisor in the case of a 
     State branch), upgrade an agency, or a branch of the type 
     referred to in subsection (a)(7)(A)(ii), located in a State 
     outside the foreign bank's home State, into a Federal or 
     State branch if the establishment and operation of such 
     branch is permitted by such State and--
       ``(i) such agency or branch was in operation in such State 
     on the day before September 29, 1994, or
       ``(ii) such agency or branch has been in operation in such 
     State for a period of time that meets the State's minimum age 
     requirement permitted under section 1831u(a)(5) of title 12, 
     United States Code.''.

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

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

     SEC. 315. APPROVAL FOR PURCHASES OF SECURITIES.

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

     SEC. 316. PROVISION OF TECHNICAL ASSISTANCE TO 
                   MICROENTERPRISES.

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

    ``Subtitle C--Microenterprise Technical Assistance and Capacity 
                            Building Program

     ``SEC. 171. SHORT TITLE.

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

     ``SEC. 172. DEFINITIONS.

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

     ``SEC. 173. ESTABLISHMENT OF PROGRAM.

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

     ``SEC. 174. USES OF ASSISTANCE.

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

[[Page 16834]]

       ``(4) for such other activities as the Administrator 
     determines are consistent with the purposes of this subtitle.

     ``SEC. 175. QUALIFIED ORGANIZATIONS.

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

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

       ``(a) Allocation of Assistance.--
       ``(1) In general.--The Administrator shall allocate 
     assistance from the Fund under this subtitle to ensure that--
       ``(A) activities described in section 174(1) are funded 
     using not less than 75 percent of amounts made available for 
     such assistance; and
       ``(B) activities described in section 174(2) are funded 
     using not less than 15 percent of amounts made available for 
     such assistance.
       ``(2) Limit on individual assistance.--No single 
     organization or entity may receive more than 10 percent of 
     the total funds appropriated under this subtitle in a single 
     fiscal year.
       ``(b) Targeted Assistance.--The Administrator shall ensure 
     that not less than 50 percent of the grants made under this 
     subtitle are used to benefit very low-income persons, 
     including those residing on Indian reservations.
       ``(c) Subgrants Authorized.--
       ``(1) In general.--A qualified organization receiving 
     assistance under this subtitle may provide grants using that 
     assistance to qualified small and emerging microenterprise 
     organizations and programs, subject to such rules and 
     regulations as the Administrator determines to be 
     appropriate.
       ``(2) Limit on administrative expenses.--Not more than 7.5 
     percent of assistance received by a qualified organization 
     under this subtitle may be used for administrative expenses 
     in connection with the making of subgrants under paragraph 
     (1).
       ``(d) Diversity.--In making grants under this subtitle, the 
     Administrator shall ensure that grant recipients include both 
     large and small microenterprise organizations, serving urban, 
     rural, and Indian tribal communities and racially and 
     ethnically diverse populations.

     ``SEC. 177. MATCHING REQUIREMENTS.

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

     ``SEC. 178. APPLICATIONS FOR ASSISTANCE.

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

     ``SEC. 179. RECORDKEEPING.

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

     ``SEC. 180. AUTHORIZATION.

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

     ``SEC. 181. IMPLEMENTATION.

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

     SEC. 317. FEDERAL RESERVE AUDITS.

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

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

       ``(a) Audit Required.--Each Federal reserve bank shall 
     annually obtain an audit of the financial statements of each 
     Federal reserve bank (which shall have been prepared in 
     accordance with generally accepted accounting principles) 
     using generally accepted auditing standards from an 
     independent auditor that meets the requirements of subsection 
     (b).
       ``(b) Auditor's Qualifications.--The independent auditor 
     referred to in subsection (a) shall--
       ``(1) be a certified public accountant who is independent 
     of the Federal Reserve System; and
       ``(2) meet any other qualifications that the Board may 
     establish.
       ``(c) Certification Required.--In each audit required under 
     subsection (a), the auditor shall certify to the Federal 
     reserve bank and to the Board that the auditor--
       ``(1) is a certified public accountant and is independent 
     of the Federal Reserve System; and
       ``(2) conducted the audit using generally accepted auditing 
     standards.
       ``(d) Certification by Federal Reserve Bank.--Not later 
     than 30 days after the completion of each audit required 
     under subsection (a), the Federal reserve bank shall provide 
     to the Comptroller General of the United States--
       ``(1) a certification that--
       ``(A) the Federal reserve bank has obtained the audit 
     required under subsection (a);
       ``(B) the Federal reserve bank has received the 
     certifications of the auditor required under subsection (c); 
     and
       ``(C) the audit fully complies with subsection (a).
       ``(e) Detection of Illegal Acts.--
       ``(1) Audit procedures.--Each audit required by this 
     section shall include procedures designed to provide 
     reasonable assurance of detecting illegal acts that would 
     have a direct and material effect on the determination of 
     financial statement amounts.
       ``(2) Reporting possible illegalities.--If, in the course 
     of conducting an audit required by this section, the 
     independent auditor detects or otherwise becomes aware of 
     information indicating that an illegal act (whether or not 
     perceived to have an effect on the financial statements of 
     the Federal reserve bank) has or may have occurred, the 
     auditor--
       ``(A) shall determine whether it is likely that the illegal 
     act has occurred; and
       ``(B) shall, if the auditor determines that the illegal act 
     is likely to have occurred--
       ``(i) determine and consider the possible effect of the 
     illegal act on the financial statements of the Federal 
     reserve bank; and
       ``(ii) as soon as practicable, inform the Board that the 
     illegal act is likely to have occurred.
       ``(3) Report to congress.--The independent auditor under 
     this section shall, as soon as practicable, directly report 
     its conclusions to the Committee on Governmental Affairs of 
     the Senate and the Committee on Government Reform of the 
     House of Representatives with regard to any possible illegal 
     act that has been detected or has otherwise come to the 
     attention of the auditor during the course of the audit 
     required by this section, if, after determining that the 
     Board is adequately informed with respect to such possible 
     illegal act, the auditor concludes that--
       ``(A) the possible illegal act has a direct and material 
     effect on the financial statements of the Federal reserve 
     bank;
       ``(B) the Board has not taken timely and appropriate 
     remedial actions with respect to the possible illegal act; 
     and
       ``(C) the failure to take remedial action is reasonably 
     expected to warrant departure from a standard report of the 
     auditor when made, or warrant resignation from the audit 
     engagement.
       ``(4) Resignation of auditor.--If an independent auditor 
     resigns from its engagement to audit a Federal reserve bank 
     under paragraph (3), the auditor shall furnish to the 
     Committee on Governmental Affairs of the Senate and the 
     Committee on Government Reform of the House of 
     Representatives, not

[[Page 16835]]

     later than 1 business day after such resignation, a copy of 
     the report of the auditor (or documentation of any oral 
     report given).
       ``(f) Recordkeeping.--To facilitate compliance with this 
     section, each Federal reserve bank shall--
       ``(1) ensure that the books, records, and accounts of the 
     Federal reserve bank are maintained and kept in sufficient 
     detail to accurately and fairly reflect the transactions and 
     dispositions of the assets of the bank;
       ``(2) devise and maintain a system of internal controls 
     sufficient to provide reasonable assurance that transactions 
     are recorded as necessary to permit preparation of financial 
     statements in conformity with generally accepted accounting 
     principles and to maintain accountability for assets;
       ``(3) ensure that access to assets of the Federal reserve 
     bank is permitted only in accordance with the general or 
     specific authorization of the Board; and
       ``(4) ensure that--
       ``(A) the recorded accountability for assets is compared 
     with the existing assets at reasonable intervals; and
       ``(B) appropriate action is taken with respect to any 
     differences.
       ``(g) Reports to Board, Congress.--Not later than April 30 
     of each year, each Federal reserve bank shall submit a copy 
     of each audit conducted under this section to the Board, and 
     to the Committee on Governmental Affairs of the Senate and 
     the Committee on Government Reform of the House of 
     Representatives.

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

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

[[Page 16836]]

     Register all elements of the methodology in use by the Board 
     in the calculation of the private sector adjustment factor 
     pursuant to section 11A(c)(3) provide notice and solicit 
     public comment on the methodology, requesting commentators to 
     identify areas of the methodology that are outdated, 
     inappropriate, unnecessary, or that contribute to an 
     inaccurate result in the calculation of the private sector 
     adjustment factor.
       ``(iii) The Board shall--
       ``(I) publish in the Federal Register a summary of the 
     comments received under this subparagraph, identifying 
     significant issues raised; and
       ``(II) provide comment on such issues and make changes to 
     the methodology to the extent that the Board considers to be 
     appropriate.
       ``(iv) Not later than 30 days after the completion of each 
     review under clause (i), the Board shall submit to Congress a 
     report which shall include--
       ``(I) a summary of any significant issues raised by public 
     comments received by the Board under this subparagraph and 
     the relative merits of such issues; and
       ``(II) an analysis of whether the Board is able to address 
     the concerns raised, or whether such concerns should be 
     addressed by legislation.''.

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

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

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

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

         TITLE IV--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

     SEC. 401. SHORT TITLE.

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

     SEC. 402. DEFINITIONS.

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

     SEC. 403. SAVINGS ASSOCIATION MEMBERSHIP.

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

     SEC. 404. ADVANCES TO MEMBERS; COLLATERAL.

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

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

     SEC. 405. ELIGIBILITY CRITERIA.

       Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 
     1424(a)) is amended--
       (1) in paragraph (2)(A), by inserting, ``(other than a 
     community financial institution)'' after ``institution'';
       (2) in the matter immediately following paragraph (2)(C)--
       (A) by striking ``An insured'' and inserting the following:
       ``(3) Certain institutions.--An insured''; and

[[Page 16837]]

       (B) by striking ``preceding sentence'' and inserting 
     ``paragraph (2)''; and
       (3) by adding at the end the following new paragraph:
       ``(4) Limited exemption for community financial 
     institutions.--A community financial institution that 
     otherwise meets the requirements of paragraph (2) may become 
     a member without regard to the percentage of its total assets 
     that is represented by residential mortgage loans, as 
     described in subparagraph (A) of paragraph (2).''.

     SEC. 406. MANAGEMENT OF BANKS.

       (a) Board of Directors.--Section 7(d) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1427(d)) is amended--
       (1) by striking ``(d) The term'' and inserting the 
     following:
       ``(d) Terms of Office.--The term''; and
       (2) by striking ``shall be two years''.
       (b) Compensation.--Section 7(i) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) is amended by striking ``subject 
     to the approval of the board''.
       (c) Repeal of Sections 22A and 27.--The Federal Home Loan 
     Bank Act (12 U.S.C. 1421 et seq.) is amended by striking 
     sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
       (d) Section 12.--Section 12 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1432) is amended--
       (1) in subsection (a)--
       (A) by striking ``, but, except'' and all that follows 
     through ``ten years'';
       (B) by striking ``subject to the approval of the Board'' 
     each place that term appears;
       (C) by striking ``and, by its Board of directors,'' and all 
     that follows through ``agent of such bank,'' and inserting 
     ``and, by the board of directors of the Bank, to prescribe, 
     amend, and repeal by-laws governing the manner in which its 
     affairs may be administered, consistent with applicable laws 
     and regulations, as administered by the Finance Board. No 
     officer, employee, attorney, or agent of a Federal Home Loan 
     Bank''; and
       (D) by striking ``Board of directors'' each place that term 
     appears and inserting ``board of directors''; and
       (2) in subsection (b), by striking ``loans banks'' and 
     inserting ``loan banks''.
       (e) Powers and Duties of Federal Housing Finance Board.--
       (1) Issuance of notices of violations.--Section 2B(a) of 
     the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) To issue and serve a notice of charges upon a Federal 
     Home Loan Bank or upon any executive officer or director of a 
     Federal Home Loan Bank if, in the determination of the 
     Finance Board, the Bank, executive officer, or director is 
     engaging or has engaged in, or the Finance Board has 
     reasonable cause to believe that the Bank, executive officer, 
     or director is about to engage in, any conduct that violates 
     any provision of this Act or any law, order, rule, or 
     regulation or any condition imposed in writing by the Finance 
     Board in connection with the granting of any application or 
     other request by the Bank, or any written agreement entered 
     into by the Bank with the agency, in accordance with the 
     procedures provided in section 1371(c) of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992. Such 
     authority includes the same authority to take affirmative 
     action to correct conditions resulting from violations or 
     practices or to limit activities of a Bank or any executive 
     officer or director of a Bank as appropriate Federal banking 
     agencies have to take with respect to insured depository 
     institutions under paragraphs (6) and (7) of section 8(b) of 
     the Federal Deposit Insurance Act, and to have all other 
     powers, rights, and duties to enforce this Act with respect 
     to the Federal Home Loan Banks and their executive officers 
     and directors as the Office of Federal Housing Enterprise 
     Oversight has to enforce the Federal Housing Enterprises 
     Financial Safety and Soundness Act of 1992, the Federal 
     National Mortgage Association Charter Act, or the Federal 
     Home Loan Mortgage Corporation Act with respect to the 
     Federal housing enterprises under the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992.
       ``(6) To sue and be sued, by and through its own 
     attorneys.''.
       (2) Technical amendment.--Section 111 of Public Law 93-495 
     (12 U.S.C. 250) is amended by inserting ``Federal Housing 
     Finance Board,'' after ``Director of the Office of Thrift 
     Supervision,''.
       (f) Eligibility To Secure Advances.--
       (1) Section 9.--Section 9 of the Federal Home Loan Bank Act 
     (12 U.S.C. 1429) is amended--
       (A) in the second sentence, by striking ``with the approval 
     of the Board''; and
       (B) in the third sentence, by striking ``, subject to the 
     approval of the Board,''.
       (2) Section 10.--Section 10 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1430) is amended--
       (A) in subsection (c)--
       (i) in the first sentence, by striking ``Board'' and 
     inserting ``Federal Home Loan Bank''; and
       (ii) in the second sentence, by striking ``held by'' and 
     all that follows before the period; and
       (B) in subsection (d)--
       (i) in the first sentence, by striking ``and the approval 
     of the Board''; and
       (ii) by striking ``Subject to the approval of the Board, 
     any'' and inserting ``Any''.
       (g) Section 16.--Section 16(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1436(a)) is amended--
       (1) in the third sentence--
       (A) by striking ``net earnings'' and inserting ``previously 
     retained earnings or current net earnings''; and
       (B) by striking ``, and then only with the approval of the 
     Federal Housing Finance Board''; and
       (2) by striking the fourth sentence.
       (h) Section 18.--Section 18(b) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1438(b)) is amended by striking paragraph 
     (4).

     SEC. 407. RESOLUTION FUNDING CORPORATION.

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

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

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

         TITLE V--FUNCTIONAL REGULATION OF BROKERS AND DEALERS

     SEC. 501. DEFINITION OF BROKER.

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

[[Page 16838]]

     or other arrangement with a broker or dealer registered under 
     this title under which the broker or dealer offers brokerage 
     services on or off the premises of the bank, if--

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

       ``(iii) the trade is conducted in some other manner 
     permitted under such rules, regulations, or orders as the 
     Commission may prescribe or issue.
       ``(D) No effect of bank exemptions on other commission 
     authority.--The exception to being considered a broker for a 
     bank engaged in activities described in subparagraphs (B) and 
     (C) shall not affect the authority of the Commission under 
     any other provision of this title or any other securities 
     law.
       ``(E) Fiduciary capacity.--For purposes of subparagraph 
     (B)(ii) of this paragraph and paragraph (5)(C), the term 
     `fiduciary capacity' means--

[[Page 16839]]

       ``(i) in the capacity as trustee, executor, administrator, 
     registrar of stocks and bonds, transfer agent, guardian, 
     assignee, receiver, or custodian, either under a uniform gift 
     to minor act or for an individual retirement account, or as 
     an investment adviser if the bank receives a fee for its 
     investment advice or services, or as a service provider to 
     any pension, retirement, profit sharing, bonus, thrift, 
     savings, incentive, or other similar benefit plan;
       ``(ii) in any capacity in which the bank possesses 
     investment discretion on behalf of another; or
       ``(iii) in any other similar capacity.
       ``(F) Exception for entities subject to section 15(e).--The 
     term `broker' does not include a bank that--
       ``(i) was, on the day before the date of enactment of the 
     Financial Services Modernization Act of 1999, subject to 
     section 15(e); and
       ``(ii) is subject to such restrictions and requirements as 
     the Commission considers appropriate.''.

     SEC. 502. DEFINITION OF DEALER.

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

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

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

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

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

     SEC. 503. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

       (a) Definition of Traditional Banking Product.--For 
     purposes of this title and paragraphs (4) and (5) of section 
     3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(4), (5)), as amended by this title, the term 
     ``traditional banking product'' means--
       (1) a deposit account, savings account, certificate of 
     deposit, or other deposit instrument issued by a bank;
       (2) a banker's acceptance;
       (3) a letter of credit issued or loan made by a bank;
       (4) a debit account at a bank arising from a credit card or 
     similar arrangement;
       (5) a participation in a loan which the bank or an 
     affiliate of the bank (other than a broker or dealer) funds, 
     participates in, or owns that is sold--
       (A) to qualified investors; or
       (B) to other persons that--
       (i) have the opportunity to review and assess any material 
     information, including information regarding the borrower's 
     creditworthiness; and
       (ii) based on such factors as financial sophistication, net 
     worth, and knowledge and experience in financial matters, 
     have the capability to evaluate the information available, as 
     determined under generally applicable banking standards or 
     guidelines; and
       (6) any swap agreement (as defined in section 
     11(e)(8)(D)(vi) of the Federal Deposit Insurance Act), 
     including credit swaps and equity swaps, unless the 
     appropriate Federal banking agency determines that credit 
     swaps and equity swaps shall not be included in the 
     definition of such term.
       (b) Transactions Involving Hybrid Products.--
       (1) Commission authority.--The Commission may, with the 
     concurrence of the Board, determine, by regulation published 
     in the Federal Register, that a bank that effects 
     transactions in, or buys or sells, a new product should be 
     subject to the registration requirements of this section.
       (2) Limitation.--The Commission may not impose the 
     registration requirements of this section on any bank that 
     effects transactions in, or buys or sells, a product under 
     this subsection unless the Commission, with the concurrence 
     of the Board, determines in the regulations described in 
     paragraph (1) that--
       (A) the subject product is a new product;
       (B) the subject product is a security; and
       (C) imposing the registration requirements of this section 
     is necessary or appropriate in the public interest and for 
     the protection of investors.
       (c) Classification Limited.--Classification of a particular 
     product or instrument as a traditional banking product 
     pursuant to this section shall not be construed as finding or 
     implying that such product or instrument is or is not a 
     security for any purpose under the securities laws, or is or 
     is not an account, agreement, contract, or transaction for 
     any purpose under the Commodity Exchange Act.
       (d) No Limitation on Other Authority To Challenge.--Nothing 
     in this section shall affect the right or authority of the 
     Board, any appropriate Federal banking agency, or any 
     interested party under any other provision of law to object 
     to or seek judicial review as to whether a product or 
     instrument is or is not appropriately classified as a 
     traditional banking product under subsection (a).
       (e) Other Definitions.--For purposes of this section--
       (1) the term ``appropriate Federal banking agency'' has the 
     same meaning as in section 3 of the Federal Deposit Insurance 
     Act;
       (2) the term ``bank'' has the same meaning as in section 
     3(a)(6) of the Securities Exchange Act of 1934;
       (3) the term ``Board'' means the Board of Governors of the 
     Federal Reserve System;
       (4) the term ``Commission'' means the Securities and 
     Exchange Commission;
       (5) the term ``government securities'' has the same meaning 
     as in section 3(a)(42) of the Securities Exchange Act of 
     1934, and, for purposes of this subsection, commercial paper, 
     bankers acceptances, and commercial bills shall be treated in 
     the same manner as government securities;
       (6) the term ``new product'' means a product or instrument 
     offered or provided by a bank that--
       (i) was not subject to regulation by the Commission as a 
     security under the Federal securities laws before the date of 
     enactment of this Act; and
       (ii) is not a traditional banking product; and
       (7) the term ``qualified investor'' has the same meaning as 
     in section 3(a)(54) of the Securities Exchange Act of 1934, 
     as added by this title.

     SEC. 504. QUALIFIED INVESTOR DEFINED.

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

[[Page 16840]]

       ``(xii) any natural person who owns and invests on a 
     discretionary basis, not less than $10,000,000 in 
     investments;
       ``(xiii) any government or political subdivision, agency, 
     or instrumentality of a government who owns and invests on a 
     discretionary basis, not less than $50,000,000 in 
     investments; or
       ``(xiv) any multinational or supranational entity or any 
     agency or instrumentality thereof.
       ``(B) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person not 
     described in subparagraph (A), taking into consideration such 
     factors as the financial sophistication of the person, net 
     worth, and knowledge and experience in financial matters.''.

     SEC. 505. GOVERNMENT SECURITIES DEFINED.

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

     SEC. 506. EFFECTIVE DATE.

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

     SEC. 507. RULE OF CONSTRUCTION.

       Nothing in this title shall supersede, affect, or otherwise 
     limit the scope and applicability of the Commodity Exchange 
     Act (7 U.S.C. 1 et seq.).

          TITLE VI--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

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

       (a) In General.--Section 10(c) of the Home Owners' Loan Act 
     (12 U.S.C. 1467a(c)) is amended by adding at the end the 
     following new paragraph:
       ``(9) Prevention of new affiliations between s&l holding 
     companies and commercial firms.--
       ``(A) In general.--Notwithstanding paragraph (3), no 
     company may directly or indirectly, including through any 
     merger, consolidation, or other type of business combination, 
     acquire control of a savings association after May 4, 1999, 
     unless the company is engaged, directly or indirectly 
     (including through a subsidiary other than a savings 
     association), only in activities that are permitted--
       ``(i) under paragraph (1)(C) or (2) of this subsection; or
       ``(ii) for financial holding companies under section 4(k) 
     of the Bank Holding Company Act of 1956.
       ``(B) Prevention of new commercial affiliations.--
     Notwithstanding paragraph (3), no savings and loan holding 
     company may engage directly or indirectly (including through 
     a subsidiary other than a savings association) in any 
     activity other than as described in clauses (i) and (ii) of 
     subparagraph (A).
       ``(C) Preservation of authority of existing unitary s&l 
     holding companies.--Subparagraphs (A) and (B) do not apply 
     with respect to any company that was a savings and loan 
     holding company on May 4, 1999, or that becomes a savings and 
     loan holding company pursuant to an application pending 
     before the Office on or before that date, and that--
       ``(i) meets and continues to meet the requirements of 
     paragraph (3); and
       ``(ii) continues to control not fewer than 1 savings 
     association that it controlled on May 4, 1999, or that it 
     acquired pursuant to an application pending before the Office 
     on or before that date, or the successor to such savings 
     association.
       ``(D) Corporate reorganizations permitted.--This paragraph 
     does not prevent a transaction that--
       ``(i) involves solely a company under common control with a 
     savings and loan holding company from acquiring, directly or 
     indirectly, control of the savings and loan holding company 
     or any savings association that is already a subsidiary of 
     the savings and loan holding company; or
       ``(ii) involves solely a merger, consolidation, or other 
     type of business combination as a result of which a company 
     under common control with the savings and loan holding 
     company acquires, directly or indirectly, control of the 
     savings and loan holding company or any savings association 
     that is already a subsidiary of the savings and loan holding 
     company.
       ``(E) Authority to prevent evasions.--The Director may 
     issue interpretations, regulations, or orders that the 
     Director determines necessary to administer and carry out the 
     purpose and prevent evasions of this paragraph, including a 
     determination that, notwithstanding the form of a 
     transaction, the transaction would in substance result in a 
     company acquiring control of a savings association.
       ``(F) Preservation of authority for family trusts.--
     Subparagraphs (A) and (B) do not apply with respect to any 
     trust that becomes a savings and loan holding company with 
     respect to a savings association, if--
       ``(i) not less than 85 percent of the beneficial ownership 
     interests in the trust are continuously owned, directly or 
     indirectly, by or for the benefit of members of the same 
     family, or their spouses, who are lineal descendants of 
     common ancestors who controlled, directly or indirectly, such 
     savings association on May 4, 1999, or a subsequent date, 
     pursuant to an application pending before the Office on or 
     before May 4, 1999; and
       ``(ii) at the time at which such trust becomes a savings 
     and loan holding company, such ancestors or lineal 
     descendants, or spouses of such descendants, have directly or 
     indirectly controlled the savings association continuously 
     since May 4, 1999, or a subsequent date, pursuant to an 
     application pending before the Office on or before May 4, 
     1999.''.
       (b) Conforming Amendment.--Section 10(o)(5)(E) of the Home 
     Owners' Loan Act (15 U.S.C. 1467a(o)(5)(E)) is amended by 
     striking ``, except subparagraph (B)'' and inserting ``or 
     (c)(9)(A)(ii)''.

     SEC. 602. OPTIONAL CONVERSION OF FEDERAL SAVINGS 
                   ASSOCIATIONS.

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

                       TITLE VII--ATM FEE REFORM

     SEC. 701. SHORT TITLE.

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

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

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

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

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

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

       Section 905(a) of the Electronic Fund Transfer Act (15 
     U.S.C. 1693c(a)) is amended--

[[Page 16841]]

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

     SEC. 704. FEASIBILITY STUDY.

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

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

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


                      Motion Offered By Mr. Leach

  Mr. LEACH. Mr. Speaker, I offer a motion.
  The Clerk read as follows:

       Mr. Leach of Iowa moves to strike out all after the 
     enacting clause of Senate bill, S. 900, and to insert in lieu 
     thereof the provisions contained in H.R. 10 as passed by the 
     House, as follows:

     SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Financial 
     Services Act of 1999''.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To enhance competition in the financial services 
     industry, in order to foster innovation and efficiency.
       (2) To ensure the continued safety and soundness of 
     depository institutions.
       (3) To provide necessary and appropriate protections for 
     investors and ensure fair and honest markets in the delivery 
     of financial services.
       (4) To avoid duplicative, potentially conflicting, and 
     overly burdensome regulatory requirements through the 
     creation of a regulatory framework for financial holding 
     companies that respects the divergent requirements of each of 
     the component businesses of the holding company, and that is 
     based upon principles of strong functional regulation and 
     enhanced regulatory coordination.
       (5) To reduce and, to the maximum extent practicable, to 
     eliminate the legal barriers preventing affiliation among 
     depository institutions, securities firms, insurance 
     companies, and other financial service providers and to 
     provide a prudential framework for achieving that result.
       (6) To enhance the availability of financial services to 
     citizens of all economic circumstances and in all geographic 
     areas.
       (7) To enhance the competitiveness of United States 
     financial service providers internationally.
       (8) To ensure compliance by depository institutions with 
     the provisions of the Community Reinvestment Act of 1977 and 
     enhance the ability of depository institutions to meet the 
     capital and credit needs of all citizens and communities, 
     including underserved communities and populations.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; purposes; table of contents.

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

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
              which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public meetings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. GAO study of economic impact on community banks, other small 
              financial institutions, insurance agents, and consumers.
Sec. 110. Responsiveness to community needs for financial services.
Sec. 110A. Study of financial modernization's affect on the 
              accessibility of small business and farm loans.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding 
              companies.
Sec. 113. Authority of State insurance regulator and Securities and 
              Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and 
              enforcement authority of the Board.
Sec. 117. Equivalent regulation and supervision.
Sec. 118. Prohibition on FDIC assistance to affiliates and 
              subsidiaries.
Sec. 119. Repeal of savings bank provisions in the Bank Holding Company 
              Act of 1956.
Sec. 120. Technical amendment.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Safety and soundness firewalls between banks and their 
              financial subsidiaries.
Sec. 123. Misrepresentations regarding depository institution liability 
              for obligations of affiliates.
Sec. 124. Repeal of stock loan limit in Federal Reserve Act.

Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            Chapter 1--Wholesale Financial Holding Companies

Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.

              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

               Subtitle E--Preservation of FTC Authority

Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify 
              notification and post-approval waiting period for section 
              3 transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.

                     Subtitle F--National Treatment

Sec. 151. Foreign banks that are financial holding companies.
Sec. 152. Foreign banks and foreign financial institutions that are 
              wholesale financial institutions.
Sec. 153. Representative offices.
Sec. 154. Reciprocity.

        Subtitle G--Federal Home Loan Bank System Modernization

Sec. 161. Short title.

[[Page 16842]]

Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.

                       Subtitle H--ATM Fee Reform

Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM card is 
              issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.

                 Subtitle I--Direct Activities of Banks

Sec. 181. Authority of national banks to underwrite certain municipal 
              bonds.

                  Subtitle J--Deposit Insurance Funds

Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.

                  Subtitle K--Miscellaneous Provisions

Sec. 191. Termination of ``know your customer'' regulations.
Sec. 192. Study and report on Federal electronic fund transfers.
Sec. 193. General Accounting Office study of conflicts of interest.
Sec. 194. Study of cost of all Federal banking regulations.
Sec. 195. Study and report on adapting existing legislative 
              requirements to online banking and lending.
Sec. 196. Regulation of uninsured State member banks.
Sec. 197. Clarification of source of strength doctrine.
Sec. 198. Interest rates and other charges at interstate branches.
Sec. 198A. Interstate branches and agencies of foreign banks.
Sec. 198B. Fair treatment of women by financial advisers.

                  Subtitle L--Effective Date of Title

Sec. 199. 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 excepted 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. Investment advisers prohibited from having controlling 
              interest in registered investment company.
Sec. 223. Statutory disqualification for bank wrongdoing.
Sec. 224. Conforming change in definition.
Sec. 225. Conforming amendment.
Sec. 226. Church plan exclusion.
Sec. 227. 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--Disclosure of Customer Costs of Acquiring Financial 
                                Products

Sec. 241. Improved and consistent disclosure.

              Subtitle E--Banks and Bank Holding Companies

Sec. 251. Consultation.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. Title insurance activities of national banks and their 
              affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal 
              regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance 
              companies and affiliates.
Sec. 309. Interagency consultation.
Sec. 310. 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.

                      Subtitle E--Confidentiality

Sec. 351. Confidentiality of health and medical information.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Prohibition on new unitary savings and loan holding 
              companies.
Sec. 402. Retention of ``Federal'' in name of converted Federal savings 
              association.

                            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. Fair Credit Reporting Act amendment.
Sec. 507. Relation to other provisions.
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 I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS

                        Subtitle A--Affiliations

     SEC. 101. GLASS-STEAGALL ACT REFORMED.

       (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 WHICH 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 Financial Services Act of 1999, to be so closely 
     related to banking as to be a proper incident thereto 
     (subject to such terms and conditions contained in such 
     regulation 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

[[Page 16843]]

     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 striking the period and adding at the end the 
     following: ``as of the day before the date of the enactment 
     of the Financial Services Act of 1999.''.

     SEC. 103. FINANCIAL HOLDING COMPANIES.

       (a) In General.--The Bank Holding Company Act of 1956 is 
     amended by inserting after section 5 (12 U.S.C. 1844) the 
     following new section:

     ``SEC. 6. FINANCIAL HOLDING COMPANIES.

       ``(a) Financial Holding Company Defined.--For purposes of 
     this section, the term `financial holding company' means a 
     bank holding company which meets the requirements of 
     subsection (b).
       ``(b) Eligibility Requirements for Financial Holding 
     Companies.--
       ``(1) In general.--No bank holding company may engage in 
     any activity or directly or indirectly acquire or retain 
     shares of any company under this section unless the bank 
     holding company meets the following requirements:
       ``(A) All of the subsidiary depository institutions of the 
     bank holding company are well capitalized.
       ``(B) All of the subsidiary depository institutions of the 
     bank holding company are well managed.
       ``(C) All of the subsidiary depository institutions of the 
     bank holding company have achieved a rating of `satisfactory 
     record of meeting community credit needs', or better, at the 
     most recent examination of each such institution.
       ``(D) The company has filed with the Board a declaration 
     that the company elects to be a financial holding company and 
     certifying that the company meets the requirements of 
     subparagraphs (A), (B), and (C).
       ``(2) Foreign banks and companies.--For purposes of 
     paragraph (1), the Board shall establish and apply comparable 
     capital and other operating standards to a foreign bank that 
     operates a branch or agency or owns or controls a bank or 
     commercial lending company in the United States, and any 
     company that owns or controls such foreign bank, giving due 
     regard to the principle of national treatment and equality of 
     competitive opportunity.
       ``(3) Limited exclusions from community needs requirements 
     for newly acquired depository institutions.--Any depository 
     institution acquired by a bank holding company during the 12-
     month period preceding the submission of a notice under 
     paragraph (1)(D) and any depository institution acquired 
     after the submission of such notice may be excluded for 
     purposes of paragraph (1)(C) 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 banking 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.
       ``(c) Engaging in Activities That Are Financial in 
     Nature.--
       ``(1) Financial activities.--
       ``(A) In general.--Notwithstanding section 4(a), a 
     financial holding company may engage in any activity, and 
     acquire and retain the shares of any company engaged in any 
     activity, that the Board has determined (by regulation or 
     order and in accordance with subparagraph (B)) to be--
       ``(i) financial in nature or incidental to such financial 
     activities; or
       ``(ii) complementary to activities authorized under this 
     subsection to the extent that the amount of such 
     complementary activities remains small.
       ``(B) Coordination between the board and the secretary of 
     the treasury.--
       ``(i) 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, including a regulation or order 
     proposed under paragraph (4), for a determination of whether 
     an activity is financial in nature or incidental to such a 
     financial activity.
       ``(II) Treasury view.--The Board shall not determine that 
     any activity is financial in nature or incidental to a 
     financial activity under this subsection if the Secretary of 
     the Treasury notifies the Board in writing, not later than 30 
     days after the date of receipt of the notice described in 
     subclause (I) (or such longer period as the Board determines 
     to be appropriate in light of the circumstances) that the 
     Secretary of the Treasury believes that the activity is not 
     financial in nature or incidental to a financial activity.

       ``(ii) 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 subclause (I) (or 
     such longer period as the Secretary of the Treasury and the 
     Board determine to be appropriate in light of the 
     circumstances), the Board shall determine whether to initiate 
     a public rulemaking proposing that the subject recommended 
     activity be found to be financial in nature or incidental to 
     a financial activity under this subsection, and shall notify 
     the Secretary of the Treasury in writing of the determination 
     of the Board and, in the event that the Board determines not 
     to seek public comment on the proposal, the reasons for that 
     determination.

       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to financial 
     activities, the Board shall take into account--
       ``(A) the purposes of this Act and the Financial Services 
     Act of 1999;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which bank holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) whether such activity is necessary or appropriate to 
     allow a bank holding company and the affiliates of a bank 
     holding company to--
       ``(i) compete effectively with any company seeking to 
     provide financial services in the United States;
       ``(ii) use any available or emerging technological means, 
     including any application necessary to protect the security 
     or efficacy of systems for the transmission of data or 
     financial transactions, in providing financial services; and
       ``(iii) offer customers any available or emerging 
     technological means for using financial services.
       ``(3) Activities that are financial in nature.--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.
       ``(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 Financial Services Act of 1999, 
     to be so closely related to banking or managing or 
     controlling banks as to be a proper incident thereto (subject 
     to the same terms and conditions contained in such order or 
     regulation, unless modified by the Board).
       ``(G) Engaging, in the United States, in any activity 
     that--
       ``(i) a bank holding company may engage in outside the 
     United States; and
       ``(ii) the Board has determined, under regulations issued 
     pursuant to section 4(c)(13) of this Act (as in effect on the 
     day before the date of the enactment of the Financial 
     Services Act of 1999) to be usual in connection with the 
     transaction of banking or other financial operations abroad.
       ``(H) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of one or more entities 
     (including entities, other than a depository institution, 
     that the bank holding company controls) or otherwise, shares, 
     assets, or ownership interests (including without limitation 
     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;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by an affiliate of the bank holding company 
     that is a registered broker or dealer that is engaged in 
     securities underwriting activities, or an affiliate of such 
     broker or dealer, as part of a bona fide underwriting 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 only for such a period of time as will permit the sale 
     or disposition thereof on a reasonable basis consistent with 
     the nature 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 
     actively participate in the day to day management or 
     operation of such company or entity, except insofar as 
     necessary to achieve the objectives of clause (ii).

[[Page 16844]]

       ``(I) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of one 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 without limitation debt or equity 
     securities, partnership interests, trust certificates or 
     other instruments representing ownership) of a company or 
     other entity, whether or not constituting control of such 
     company or entity, engaged in any activity not authorized 
     pursuant to this section if--
       ``(i) the shares, assets, or ownership interests are not 
     acquired or held by a depository institution or a subsidiary 
     of a depository institution;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by an insurance company that is 
     predominantly engaged in underwriting life, accident and 
     health, or property and casualty insurance (other than 
     credit-related insurance) or providing and issuing annuities;
       ``(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 
     directly or indirectly participate in the day-to-day 
     management or operation of the company or entity except 
     insofar as necessary to achieve the objectives of clauses 
     (ii) and (iii).
       ``(4) Authorization of new financial activities.--The Board 
     shall, by regulation or order and in accordance with 
     paragraph (1)(B), define, consistent with the purposes of 
     this Act, the following activities as, and the extent to 
     which such activities are, financial in nature or incidental 
     to activities which are financial in nature:
       ``(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.
       ``(5) Post-consummation 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 no later than 30 calendar days after commencing the 
     activity or consummating the acquisition.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in section 4(j) with regard 
     to the acquisition of a savings association or in paragraph 
     (6) of this subsection, a financial holding company may 
     commence any activity, or acquire any company, pursuant to 
     paragraph (3) or any regulation prescribed or order issued 
     under paragraph (4), without prior approval of the Board.
       ``(6) Notice required for large combinations.--
       ``(A) In general.--No financial holding company shall 
     directly or indirectly acquire, and no company that becomes a 
     financial holding company shall directly or indirectly 
     acquire control of, any company in the United States, 
     including through merger, consolidation, or other type of 
     business combination, that--
       ``(i) is engaged in activities permitted under this 
     subsection or subsection (g); and
       ``(ii) has consolidated total assets in excess of 
     $40,000,000,000,
     unless such holding company has provided notice to the Board, 
     not later than 60 days prior to such proposed acquisition or 
     prior to becoming a financial holding company, and during 
     that time period, or such longer time period not exceeding an 
     additional 60 days, as established by the Board, the Board 
     has not issued a notice disapproving the proposed acquisition 
     or retention.
       ``(B) Factors for consideration.--In reviewing any prior 
     notice filed under this paragraph, the Board shall take into 
     consideration--
       ``(i) whether the company is in compliance with all 
     applicable criteria set forth in subsection (b) and the 
     provisions of subsection (d);
       ``(ii) whether the proposed combination represents an undue 
     aggregation of resources;
       ``(iii) whether the proposed combination poses a risk to 
     the deposit insurance system;
       ``(iv) whether the proposed combination poses a risk to 
     State insurance guaranty funds;
       ``(v) whether the proposed combination can reasonably be 
     expected to be in the best interests of depositors or 
     policyholders of the respective entities;
       ``(vi) whether the proposed transaction can reasonably be 
     expected to further the purposes of this Act and produce 
     benefits to the public; and
       ``(vii) whether, and the extent to which, the proposed 
     combination poses an undue risk to the stability of the 
     financial system in the United States.
       ``(C) Required information.--The Board may disapprove any 
     prior notice filed under this paragraph if the company 
     submitting such notice neglects, fails, or refuses to furnish 
     to the Board all relevant information required by the Board.
       ``(D) Solicitation of views of other supervisory 
     agencies.--
       ``(i) In general.--Upon receiving a prior notice under this 
     paragraph, in order to provide for the submission of their 
     views and recommendations, the Board shall give notice of the 
     proposal to--

       ``(I) the appropriate Federal banking agency of any bank 
     involved;
       ``(II) the appropriate functional regulator of any 
     functionally regulated nondepository institution (as defined 
     in section 5(c)(1)(C)) involved; and
       ``(III) the Secretary of the Treasury, the Attorney 
     General, and the Federal Trade Commission.

       ``(ii) Timing.--The views and recommendations of any agency 
     provided notice under this paragraph shall be submitted to 
     the Board not later than 30 calendar days after the date on 
     which notice to the agency was given, unless the Board 
     determines that another shorter time period is appropriate.
       ``(d) Provisions Applicable to Financial Holding Companies 
     That Fail To Meet Requirements.--
       ``(1) In general.--If the Board finds, after notice from or 
     consultation with the appropriate Federal banking agency, 
     that a financial holding company is not in compliance with 
     the requirements of subparagraph (A), (B), or (C) of 
     subsection (b)(1), the Board shall give notice of such 
     finding to the company.
       ``(2) Agreement to correct conditions required.--Within 45 
     days of receipt by a financial holding company of a notice 
     given under paragraph (1) (or such additional period as the 
     Board may permit), the company shall execute an agreement 
     acceptable to the Board to comply with the requirements 
     applicable to a financial holding company.
       ``(3) Authority to impose limitations.--Until the 
     conditions described in a notice to a financial holding 
     company under paragraph (1) are corrected--
       ``(A) the Board may impose such limitations on the conduct 
     or activities of the company or any affiliate of the company 
     as the Board determines to be appropriate under the 
     circumstances; and
       ``(B) the appropriate Federal banking agency may impose 
     such limitations on the conduct or activities of an 
     affiliated depository institution or subsidiary of a 
     depository institution as the appropriate Federal banking 
     agency determines to be appropriate under the circumstances.
       ``(4) Failure to correct.--If, after receiving a notice 
     under paragraph (1), a financial holding company does not--
       ``(A) execute and implement an agreement in accordance with 
     paragraph (2);
       ``(B) comply with any limitations imposed under paragraph 
     (3);
       ``(C) in the case of a notice of failure to comply with 
     subsection (b)(1)(A), restore each depository institution 
     subsidiary to well capitalized status before the end of the 
     180-day period beginning on the date such notice is received 
     by the company (or such other period permitted by the Board); 
     or
       ``(D) in the case of a notice of failure to comply with 
     subparagraph (B) or (C) of subsection (b)(1), restore 
     compliance with any such subparagraph by the date the next 
     examination of the depository institution subsidiary is 
     completed or by the end of such other period as the Board 
     determines to be appropriate,
     the Board may require such 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 Board's 
     discretion, to divest control of any depository institution 
     subsidiary or, at the election of the financial holding 
     company, instead to cease to engage in any activity conducted 
     by such company or its subsidiaries pursuant to this section.
       ``(5) Consultation.--In taking any action under this 
     subsection, the Board shall consult with all relevant Federal 
     and State regulatory agencies.
       ``(e) Safeguards for Bank Subsidiaries.--A financial 
     holding company shall assure that--
       ``(1) the procedures of the holding company for identifying 
     and managing financial and operational risks within the 
     company, and the subsidiaries of such company, adequately 
     protect the subsidiaries of such company which are insured 
     depository institutions or wholesale financial institution 
     from such risks;
       ``(2) the holding company has reasonable policies and 
     procedures to preserve the separate corporate identity and 
     limited liability of such company and the subsidiaries of 
     such company, for the protection of the company's subsidiary 
     insured depository institutions and wholesale financial 
     institutions; and
       ``(3) the holding company complies with this section.
       ``(f) Authority To Retain Limited Nonfinancial Activities 
     and Affiliations.--
       ``(1) In general.--Notwithstanding section 4(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

[[Page 16845]]

     of 1978) and becomes a financial holding company after the 
     date of the enactment of the Financial Services Act of 1999 
     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, 
     1997;
       ``(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, 1997, 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 
     activities that are financial in nature under subsection (c) 
     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 which is engaged in any activity which the Board has 
     not determined to be financial in nature or incidental to 
     activities that are financial in nature under subsection (c), 
     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 
     have been controlled by an insurance company since January 1, 
     1998.
       ``(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 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 depository institution controlled by a 
     financial holding company shall not--
       ``(A) 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 (c)(3); or
       ``(B) permit any of its products or services to be offered 
     or marketed, directly or through any arrangement, by or 
     through any company described in subparagraph (A).
       ``(6) Transactions with nonfinancial affiliates.--A 
     depository institution controlled by a financial holding 
     company may not engage in a covered transaction (as defined 
     by section 23A(b)(7) of the Federal Reserve Act) with any 
     affiliate controlled by the company pursuant to section 
     10(c), this subsection, or subparagraph (H) or (I) of 
     subsection (c)(3).
       ``(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 Financial Services Act of 1999. 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.
       ``(g) Developing Activities.--A financial holding company 
     may engage directly or indirectly, or acquire shares of any 
     company engaged, in any activity that the Board has not 
     determined to be financial in nature or incidental to 
     financial activities under subsection (c) if--
       ``(1) the holding company reasonably concludes that the 
     activity is financial in nature or incidental to financial 
     activities;
       ``(2) the gross revenues from all activities conducted 
     under this subsection represent less than 5 percent of the 
     consolidated gross revenues of the holding company;
       ``(3) the aggregate total assets of all companies the 
     shares of which are held under this subsection do not exceed 
     5 percent of the holding company's consolidated total assets;
       ``(4) the total capital invested in activities conducted 
     under this subsection represents less than 5 percent of the 
     consolidated total capital of the holding company;
       ``(5) neither the Board nor the Secretary of the Treasury 
     has determined that the activity is not financial in nature 
     or incidental to financial activities under subsection (c);
       ``(6) the holding company is not required to provide prior 
     written notice of the transaction to the Board under 
     subsection (c)(6); and
       ``(7) the holding company provides written notification to 
     the Board describing the activity commenced or conducted by 
     the company acquired no later than 10 business days after 
     commencing the activity or consummating the acquisition.''.
       (b) Factors For Consideration in Reviewing Application by 
     Financial Holding Company to Acquire Bank.--Section 3(c) of 
     the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)) is 
     amended by adding at the end the following new paragraph:
       ``(6) `Too big to fail' factor.--In considering an 
     acquisition, merger, or consolidation under this section 
     involving a financial holding company or a company that would 
     be any such holding company upon the consummation of the 
     transaction, the Board shall consider whether, and the extent 
     to which, the proposed acquisition, merger, or consolidation 
     poses an undue risk to the stability of the financial system 
     of the United States.''.
       (c) Technical and Conforming Amendments.--
       (1) Section 2 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1841) is amended by adding at the end the following 
     new subsection:
       ``(p) Insurance Company.--For purposes of sections 5, 6, 
     and 10, the term `insurance company' includes any person 
     engaged in the business of insurance to the extent of such 
     activities.''.
       (2) Section 4(j) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1843(j)) is amended--
       (A) in paragraph (1)(A), by inserting ``or in any 
     complementary activity under section 6(c)(1)(B)'' after 
     ``subsection (c)(8) or (a)(2)''; and
       (B) in paragraph (3)--
       (i) by inserting ``, other than any complementary activity 
     under section 6(c)(1)(B),'' after ``to engage in any 
     activity''; and
       (ii) by inserting ``or a company engaged in any 
     complementary activity under section 6(c)(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 and every 4 years 
     thereafter, 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 
     which are financial in nature, including grandfathered 
     commercial activities, in which any financial holding company 
     is engaged pursuant to subsection (c)(1) or (f) of section 6 
     of the Bank Holding Company Act of 1956 (as added by 
     subsection (a)).
       (2) Other contents.--Each 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 which are 
     incidental to activities 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 6 of the Bank Holding Company Act 
     of 1956 on market concentration in the financial services 
     industry.
       (D) An analysis and discussion, by the Board and the 
     Secretary in consultation with the other Federal banking 
     agencies (as defined in section 3(z) of the Federal Deposit 
     Insurance Act), of the impact of the implementation of this 
     Act, and the amendments made by this Act, on the extent of 
     meeting community credit needs and capital availability under 
     the Community Reinvestment Act of 1977.

     SEC. 104. OPERATION OF STATE LAW.

       (a) Affiliations.--
       (1) In general.--Except as provided in paragraph (2), no 
     State may, by statute, regulation, order, interpretation, or 
     other action, prevent or restrict an insured depository 
     institution or wholesale financial institution, or a 
     subsidiary or affiliate thereof, from being affiliated 
     directly or indirectly or associated with any person or 
     entity, as authorized or permitted by this Act or any other 
     provision of Federal law.
       (2) Insurance.--With respect to affiliations between 
     insured depository institutions or wholesale financial 
     institutions, or any subsidiary or affiliate thereof, and 
     persons or entities engaged in the business of insurance, 
     paragraph (1) does not prohibit--
       (A) any State from requiring any person or entity that 
     proposes to acquire control of an entity that is engaged in 
     the business of insurance and domiciled in that State 
     (hereafter in this subparagraph referred to as the 
     ``insurer'') to furnish to the insurance regulatory authority 
     of that State, not later than 60 days before the effective 
     date of the proposed acquisition--

[[Page 16846]]

       (i) the name and address of each person by whom, or on 
     whose behalf, the affiliation referred to in this 
     subparagraph is to be effected (hereafter in this 
     subparagraph referred to as the ``acquiring party'');
       (ii) if the acquiring party is an individual, his or her 
     principal occupation and all offices and positions held 
     during the 5 years preceding the date of notification, and 
     any conviction of crimes other than minor traffic violations 
     during the 10 years preceding the date of notification;
       (iii) if the acquiring party is not an individual--

       (I) a report of the nature of its business operations 
     during the 5 years preceding the date of notification, or for 
     such shorter period as such person and any predecessors 
     thereof shall have been in existence;
       (II) an informative description of the business intended to 
     be done by the acquiring party and any subsidiary thereof; 
     and
       (III) a list of all individuals who are, or who have been 
     selected to become, directors or executive officers of the 
     acquiring party or who perform, or will perform, functions 
     appropriate to such positions, including, for each such 
     individual, the information required by clause (ii);

       (iv) the source, nature, and amount of the consideration 
     used, or to be used, in effecting the merger or other 
     acquisition of control, a description of any transaction 
     wherein funds were, or are to be, obtained for any such 
     purpose, and the identity of persons furnishing such 
     consideration, except that, if a source of such consideration 
     is a loan made in the lender's ordinary course of business, 
     the identity of the lender shall remain confidential if the 
     person filing such statement so requests;
       (v) fully audited financial information as to the earnings 
     and financial condition of each acquiring party for the 5 
     fiscal years preceding the date of notification of each such 
     acquiring party, or for such lesser period as such acquiring 
     party and any predecessors thereof shall have been in 
     existence, and similar unaudited information as of a date not 
     earlier than 90 days before the date of notification, except 
     that, in the case of an acquiring party that is an insurer 
     actively engaged in the business of insurance, the financial 
     statements of such insurer need not be audited, but such 
     audit may be required if the need therefor is determined by 
     the insurance regulatory authority of the State;
       (vi) any plans or proposals that each acquiring party may 
     have to liquidate such insurer, to sell its assets, or to 
     merge or consolidate it with any person or to make any other 
     material change in its business or corporate structure or 
     management;
       (vii) the number of shares of any security of the insurer 
     that each acquiring party proposes to acquire, the terms of 
     any offer, request, invitation, agreement, or acquisition, 
     and a statement as to the method by which the fairness of the 
     proposal was arrived at;
       (viii) the amount of each class of any security of the 
     insurer that is beneficially owned or concerning which there 
     is a right to acquire beneficial ownership by each acquiring 
     party;
       (ix) a full description of any contracts, arrangements, or 
     understandings with respect to any security of the insurer in 
     which any acquiring party is involved, including transfer of 
     any of the securities, joint ventures, loan or option 
     arrangements, puts or calls, guarantees of loans, guarantees 
     against loss or guarantees of profits, division of losses or 
     profits, or the giving or withholding of proxies, and 
     identification of the persons with whom such contracts, 
     arrangements, or understandings have been entered into;
       (x) a description of the purchase of any security of the 
     insurer during the 12-month period preceding the date of 
     notification by any acquiring party, including the dates of 
     purchase, names of the purchasers, and consideration paid, or 
     agreed to be paid, therefor;
       (xi) a description of any recommendations to purchase any 
     security of the insurer made during the 12-month period 
     preceding the date of notification by any acquiring party or 
     by any person based upon interviews or at the suggestion of 
     such acquiring party;
       (xii) copies of all tender offers for, requests or 
     invitations for tenders of, exchange offers for and 
     agreements to acquire or exchange any securities of the 
     insurer and, if distributed, of additional soliciting 
     material relating thereto; and
       (xiii) the terms of any agreement, contract, or 
     understanding made with any broker-dealer as to solicitation 
     of securities of the insurer for tender and the amount of any 
     fees, commissions, or other compensation to be paid to 
     broker-dealers with regard thereto;
       (B) in the case of a person engaged in the business of 
     insurance which is the subject of an acquisition or change or 
     continuation in control, the State of domicile of such person 
     from reviewing or taking action (including approval or 
     disapproval) with regard to the acquisition or change or 
     continuation in control, as long as the State reviews and 
     actions--
       (i) are completed by the end of the 60-day period beginning 
     on the later of the date the State received notice of the 
     proposed action or the date the State received the 
     information required under State law regarding such 
     acquisition or change or continuation in control;
       (ii) do not have the effect of discriminating, 
     intentionally or unintentionally, against an insured 
     depository institution or affiliate thereof or against any 
     other person based upon affiliation with an insured 
     depository institution; and
       (iii) are based on standards or requirements relating to 
     solvency or managerial fitness;
       (C) any State from requiring an entity that is acquiring 
     control of an entity that is engaged in the business of 
     insurance and domiciled in that State to maintain or restore 
     the capital requirements of that insurance entity 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 entity, 
     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);
       (D) any State from taking actions with respect to the 
     receivership or conservatorship of any insurance company;
       (E) any State from restricting a change in the ownership of 
     stock in an insurance company, or a company formed for the 
     purpose of controlling such insurance company, for a period 
     of not more than 3 years beginning on the date of the 
     conversion of such company from mutual to stock form; or
       (F) any State from requiring an organization which has been 
     eligible at any time since January 1, 1987, to claim the 
     special deduction provided by section 833 of the Internal 
     Revenue Code of 1986 to meet certain conditions in order to 
     undergo, as determined by the State, a reorganization, 
     recapitalization, conversion, merger, consolidation, sale or 
     other disposition of substantial operating assets, 
     demutualization, dissolution, or to undertake other similar 
     actions and which is governed under a State statute enacted 
     on May 22, 1998, relating to hospital, medical, and dental 
     service corporation conversions.
       (3) Preservation of state antitrust and general corporate 
     laws.--
       (A) In general.--Subject to subsection (c) and the 
     nondiscrimination provisions contained in such subsection, no 
     provision in paragraph (1) shall be construed as affecting 
     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.
       (B) Definition.--The term ``antitrust laws'' has the same 
     meaning as in subsection (a) of the first section of the 
     Clayton Act, and includes section 5 of the Federal Trade 
     Commission Act to the extent that such section 5 relates to 
     unfair methods of competition.
       (b) Activities.--
       (1) In general.--Except as provided in paragraph (3), and 
     except with respect to insurance sales, solicitation, and 
     cross marketing activities, which shall be governed by 
     paragraph (2), no State may, by statute, regulation, order, 
     interpretation, or other action, prevent or restrict an 
     insured depository institution, wholesale financial 
     institution, or subsidiary or affiliate thereof from engaging 
     directly or indirectly, either by itself or in conjunction 
     with a subsidiary, affiliate, or any other entity or person, 
     in any activity authorized or permitted under this Act.
       (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 an insured 
     depository institution or wholesale financial institution, or 
     a subsidiary or affiliate thereof, to engage, directly or 
     indirectly, either by itself or in conjunction with a 
     subsidiary, affiliate, or any other party, in any insurance 
     sales, solicitation, or cross-marketing activity.
       (B) Certain state laws preserved.--Notwithstanding 
     subparagraph (A), a State may impose any of the following 
     restrictions, or restrictions which 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 an insured depository institution, wholesale 
     financial institution, or any subsidiary or affiliate 
     thereof, solely because the policy has been issued or 
     underwritten by any person who is not associated with such 
     insured depository institution or wholesale financial 
     institution, or any subsidiary or affiliate thereof, when 
     such insurance is required in connection with a loan or 
     extension of credit.
       (ii) Restrictions prohibiting a requirement for any debtor, 
     insurer, or insurance agent or broker to pay a separate 
     charge in connection with the handling of insurance that is

[[Page 16847]]

     required in connection with a loan or other extension of 
     credit or the provision of another traditional banking 
     product by an insured depository institution, wholesale 
     financial institution, or any subsidiary or affiliate 
     thereof, unless such charge would be required when the 
     insured depository institution or wholesale financial 
     institution, or any subsidiary or affiliate thereof, is the 
     licensed insurance agent or broker providing the insurance.
       (iii) Restrictions prohibiting the use of any advertisement 
     or other insurance promotional material by an insured 
     depository institution or wholesale financial institution, or 
     any subsidiary or affiliate thereof, that would cause a 
     reasonable person to believe mistakenly that--

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

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

       (I) a transfer of insurance information to an unaffiliated 
     insurance company, agent, or broker in connection with 
     transferring insurance in force on existing insureds of the 
     insured depository institution or wholesale financial 
     institution, or subsidiary or affiliate thereof, or in 
     connection with a merger with or acquisition of an 
     unaffiliated insurance company, agent, or broker; or
       (II) the release of information as otherwise authorized by 
     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 an insured depository 
     institution, wholesale financial institution, a subsidiary or 
     affiliate thereof, or a particular insurer, agent, or broker, 
     other than a prohibition that would prevent any insured 
     depository institution or wholesale financial institution, or 
     any subsidiary or affiliate thereof--

       (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 insured depository 
     institution or wholesale financial institution, or any 
     subsidiary or affiliate thereof.

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

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

       (xi) Restrictions requiring that, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or 
     wholesale financial institution, or its subsidiaries or 
     affiliates, or any person soliciting the purchase of or 
     selling insurance on the premises thereof, the credit and 
     insurance transactions be completed through separate 
     documents.
       (xii) Restrictions prohibiting, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or 
     wholesale financial institution or its subsidiaries or 
     affiliates, or any person soliciting the purchase of or 
     selling insurance on the premises thereof, inclusion of the 
     expense of insurance premiums in the primary credit 
     transaction without the express written consent of the 
     customer.
       (xiii) Restrictions requiring 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 306(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 (c) 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 to limit the applicability of the decision of the 
     Supreme Court in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996) with respect to a State 
     statute, regulation, order, interpretation, or other action 
     that is not described in subparagraph (B).
       (iv) Limitation on inferences.--Nothing in this paragraph 
     shall be construed to create any inference with respect to 
     any State statute, regulation, order, interpretation, or 
     other action that is not referred to or described in this 
     paragraph.
       (3) Insurance activities other than sales.--State statutes, 
     regulations, interpretations, orders, and other actions shall 
     not be preempted under subsection (b)(1) to the extent that 
     they--
       (A) relate to, or are issued, adopted, or enacted for the 
     purpose of regulating the business of insurance in accordance 
     with the Act of March 9, 1945 (commonly known as the 
     ``McCarran-Ferguson Act'');
       (B) apply only to persons or entities that are not insured 
     depository institutions or wholesale financial institutions, 
     but that are directly engaged in the business of insurance 
     (except that they may apply to depository institutions 
     engaged in providing savings bank life insurance as principal 
     to the extent of regulating such insurance);
       (C) do not relate to or directly or indirectly regulate 
     insurance sales, solicitations, or cross-marketing 
     activities; and
       (D) are not prohibited under subsection (c).
       (4) Financial activities other than insurance.--No State 
     statute, regulation, interpretation, order, or other action 
     shall be preempted under subsection (b)(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 (d); and
       (D) it--

[[Page 16848]]

       (i) does not distinguish by its terms between insured 
     depository institutions, wholesale financial institutions, 
     and subsidiaries and affiliates thereof engaged in the 
     activity at issue and other persons or entities 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 insured 
     depository institution, wholesale financial institution, or 
     subsidiary or affiliate thereof engaged in the activity at 
     issue;
       (ii) as interpreted or applied, does not have, and will not 
     have, an impact on depository institutions, wholesale 
     financial institutions, or subsidiaries or affiliates thereof 
     engaged in the activity at issue, or any person or entity 
     affiliated therewith, that is substantially more adverse than 
     its impact on other persons or entities engaged in the same 
     activity that are not insured depository institutions, 
     wholesale financial institutions, or subsidiaries or 
     affiliates thereof, or persons or entities affiliated 
     therewith;
       (iii) does not effectively prevent a depository 
     institution, wholesale financial institution, or subsidiary 
     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.
       (c) Nondiscrimination.--Except as provided in any 
     restrictions described in subsection (b)(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 an insured depository institution or wholesale 
     financial institution, or subsidiary or affiliate thereof, to 
     the extent that such statute, regulation, order, 
     interpretation, or other action--
       (1) distinguishes by its terms between insured depository 
     institutions or wholesale financial institutions, or 
     subsidiaries or affiliates thereof, and other persons or 
     entities engaged in such activities, in a manner that is in 
     any way adverse to any such insured depository institution or 
     wholesale financial institution, or subsidiary or affiliate 
     thereof;
       (2) as interpreted or applied, has or will have an impact 
     on depository institutions or wholesale financial 
     institutions, or subsidiaries or affiliates thereof, that is 
     substantially more adverse than its impact on other persons 
     or entities providing the same products or services or 
     engaged in the same activities that are not insured 
     depository institutions, wholesale financial institutions, or 
     subsidiaries or affiliates thereof, or persons or entities 
     affiliated therewith;
       (3) effectively prevents a depository institution or 
     wholesale financial institution, or subsidiary 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 insured depository institutions or 
     wholesale financial institutions, or subsidiaries or 
     affiliates thereof, and persons and entities engaged in the 
     business of insurance.
       (d) Limitation.--Subsections (a) and (b) shall not be 
     construed to affect the jurisdiction of the securities 
     commission (or any agency or office performing like 
     functions) of any State, under the laws of such State--
       (1) to investigate and bring enforcement actions, 
     consistent with section 18(c) of the Securities Act of 1933, 
     with respect to fraud or deceit or unlawful conduct by any 
     person, in connection with securities or securities 
     transactions; or
       (2) 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).
       (e) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Insured depository institution.--The term ``insured 
     depository institution'' includes any foreign bank that 
     maintains a branch, agency, or commercial lending company in 
     the United States.
       (2) 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. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISITIONS AND 
                   MERGERS.

       (a) Bank Holding Company Act of 1956.--Section 3(c)(2) of 
     the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)(2)) 
     is amended--
       (1) by striking ``factors.--In every case'' and inserting 
     ``factors.--
       ``(A) In general.--In every case''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) Public meetings.--In each case involving one or more 
     insured depository institutions each of which has total 
     assets of $1,000,000,000 or more, the Board shall, as 
     necessary and on a timely basis, conduct public meetings in 
     one or more areas where the Board believes, in the sole 
     discretion of the Board, there will be a substantial public 
     impact.''.
       (b) Federal Deposit Insurance Act.--Section 18(c) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1828(c)) is amended 
     by adding at the end the following new paragraph:
       ``(12) Public Meetings.--In each merger transaction 
     involving one or more insured depository institutions each of 
     which has total assets of $1,000,000,000 or more, the 
     responsible agency shall, as necessary and on a timely basis, 
     conduct public meetings in one or more areas where the agency 
     believes, in the sole discretion of the agency, there will be 
     a substantial public impact.''.
       (c) National Bank Consolidation and Merger Act.--The 
     National Bank Consolidation and Merger Act (12 U.S.C. 215 et 
     seq.) is amended by adding at the end the following new 
     section:

     ``SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDATIONS AND 
                   MERGERS.

       ``In each case of a consolidation or merger under this Act 
     involving one or more banks each of which has total assets of 
     $1,000,000,000 or more, the Comptroller shall, as necessary 
     and on a timely basis, conduct public meetings in one or more 
     areas where the Comptroller believes, in the sole discretion 
     of the Comptroller, there will be a substantial public 
     impact.''.
       (d) Home Owners' Loan Act.--Section 10(e) of the Home 
     Owners' Loan Act (12 U.S.C. 1463) is amended by adding at the 
     end the following new paragraph:
       ``(7) Public meetings for large depository institution 
     acquisitions and mergers.--In each case involving one or more 
     insured depository institutions each of which has total 
     assets of $1,000,000,000 or more, the Director shall, as 
     necessary and on a timely basis, conduct public meetings in 
     one or more areas where the Director believes, in the sole 
     discretion of the Director, there will be a substantial 
     public impact.''.

     SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

       (a) In General.--Section 109(d) of the Riegle-Neal 
     Interstate Banking and Branching Efficiency Act of 1994 (12 
     U.S.C. 1835a(d)) is amended--
       (1) by inserting ``, the Financial Services Act of 1999,'' 
     after ``pursuant to this title''; and
       (2) by inserting ``or such Act'' after ``made by this 
     title''.
       (b) Technical and Conforming Amendment.--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. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

       Section 42(d)(4)(A) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1831r-1(d)(4)(A)) is amended by inserting ``and 
     any 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. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

       (a) In General.--Section 4(f) of the Bank Holding Company 
     Act of 1956 (12 U.S.C. 1843(f)) is amended--
       (1) in paragraph (2)(A)(ii)--
       (A) by striking ``and'' at the end of subclause (IX);
       (B) by inserting ``and'' after the semicolon at the end of 
     subclause (X); and
       (C) by inserting after subclause (X) the following new 
     subclause:

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

       (2) in paragraph (2), by striking subparagraph (B) and 
     inserting the following new subparagraphs:
       ``(B) any bank subsidiary of such company engages in any 
     activity in which the bank was not lawfully engaged as of 
     March 5, 1987, unless the bank is well managed and well 
     capitalized;
       ``(C) any bank subsidiary of such company both--
       ``(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 
     (and, for purposes of this clause, loans made in the ordinary 
     course of a credit card operation shall not be treated as 
     commercial loans); or
       ``(D) 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 such bank's 
     account at a Federal Reserve bank, on behalf of an affiliate, 
     other than an overdraft described in paragraph (3).''; and

[[Page 16849]]

       (3) by striking paragraphs (3) and (4) and inserting the 
     following new paragraphs:
       ``(3) Permissible overdrafts described.--For purposes of 
     paragraph (2)(D), 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 
     which 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 which 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 incurred on behalf of an affiliate solely in 
     connection with an activity that is so closely related to 
     banking, or managing or controlling banks, as to be a proper 
     incident thereto, to the extent the bank incurring the 
     overdraft and the affiliate on whose behalf the overdraft is 
     incurred each document that the overdraft is incurred for 
     such purpose; 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 member bank, or by virtue of 
     section 18(j) of the Federal Deposit Insurance Act, in the 
     case of a nonmember bank.
       ``(4) Divestiture in case of loss of exemption.--If any 
     company described in paragraph (1) fails to qualify for the 
     exemption provided under such paragraph 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 that 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) corrected the condition or ceased the activity that 
     caused the company to fail to continue to qualify for the 
     exemption; and
       ``(B) implemented procedures that are reasonably adapted to 
     avoid the reoccurrence of such condition or activity.
     The issuance of any notice under this paragraph that relates 
     to the activities of a bank shall not be construed as 
     affecting the authority of the bank to continue to engage in 
     such activities until the expiration of such 180-day 
     period.''.
       (b) Industrial Loan Companies Affiliate Overdrafts.--
     Section 2(c)(2)(H) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(c)(2)(H)) is amended by inserting before the 
     period at the end ``, or that is otherwise permissible for a 
     bank controlled by a company described in section 4(f)(1)''.

     SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMUNITY BANKS, 
                   OTHER SMALL FINANCIAL INSTITUTIONS, INSURANCE 
                   AGENTS, AND CONSUMERS.

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study of the projected economic impact 
     and the actual economic impact that the enactment of this Act 
     will have on financial institutions, including community 
     banks, registered brokers and dealers and insurance 
     companies, which have total assets of $100,000,000 or less, 
     insurance agents, and consumers.
       (b) Reports to the Congress.--
       (1) In general.--The Comptroller General of the United 
     States shall submit reports to the Congress, at the times 
     required under paragraph (2), containing the findings and 
     conclusions of the Comptroller General with regard to the 
     study required under subsection (a) and such recommendations 
     for legislative or administrative action as the Comptroller 
     General may determine to be appropriate.
       (2) Timing of reports.--The Comptroller General shall 
     submit--
       (A) an interim report before the end of the 6-month period 
     beginning after the date of the enactment of this Act;
       (B) another interim report before the end of the next 6-
     month period; and
       (C) a final report before the end of the 1-year period 
     after such second 6-month period,''.

     SEC. 110. 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) Report.--Before the end of the 2-year period beginning 
     on the date of the enactment of this Act, the Secretary of 
     the Treasury, 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 with respect to 
     institutions covered under the Community Reinvestment Act of 
     1977.

     SEC. 110A. STUDY OF FINANCIAL MODERNIZATION'S AFFECT 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 business and farms, as a result of 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 Financial Holding Companies

     SEC. 111. STREAMLINING FINANCIAL 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 
     any 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 holding 
     company; and
       ``(ii) compliance by the company or subsidiary with 
     applicable provisions of this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that a bank 
     holding company or any subsidiary of such company has 
     provided or been required to provide to other Federal and 
     State supervisors or to appropriate self-regulatory 
     organizations.
       ``(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) Required use of publicly reported information.--The 
     Board shall, to the fullest extent possible, accept in 
     fulfillment of any reporting or recordkeeping requirements 
     under this Act information that is otherwise required to be 
     reported publicly and externally audited financial 
     statements.
       ``(iv) Reports filed with other agencies.--In the event the 
     Board requires a report from a functionally regulated 
     nondepository institution subsidiary of a bank holding 
     company of a kind that is not required by another Federal or 
     State regulator or appropriate self-regulatory organization, 
     the Board shall request that the appropriate regulator or 
     self-regulatory organization obtain such report. If the 
     report is not made available to the Board, and the report is 
     necessary to assess a material risk to the bank holding 
     company or any of its subsidiary depository institutions or 
     compliance with this Act, the Board may require such 
     subsidiary to provide such a report to the Board.
       ``(C) Definition.--For purposes of this subsection, the 
     term `functionally regulated nondepository institution' 
     means--
       ``(i) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(ii) an investment adviser registered under the 
     Investment Advisers Act of 1940, or with any State, with 
     respect to the investment advisory activities of such 
     investment adviser and activities incidental to such 
     investment advisory activities;
       ``(iii) an insurance company subject to supervision by a 
     State insurance commission, agency, or similar authority; and
       ``(iv) an entity 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.
       ``(2) Examinations.--
       ``(A) Examination authority.--
       ``(i) In general.--The Board may make examinations of each 
     bank holding company and each subsidiary of a bank holding 
     company.
       ``(ii) Functionally regulated nondepository institution 
     subsidiaries.--Notwithstanding clause (i), the Board may make 
     examinations of a functionally regulated nondepository 
     institution subsidiary of a bank holding company only if--

       ``(I) the Board has reasonable cause to believe that such 
     subsidiary is engaged in activities that pose a material risk 
     to an affiliated depository institution; or
       ``(II) based on reports and other available information, 
     the Board has reasonable cause to believe that a subsidiary 
     is not in compliance with this Act or with provisions 
     relating to transactions with an affiliated depository 
     institution and the Board cannot make such determination 
     through examination of the affiliated depository institution 
     or bank holding company.

[[Page 16850]]

       ``(B) Limitations on examination authority for bank holding 
     companies and subsidiaries.--Subject to subparagraph (A)(ii), 
     the Board may make examinations under subparagraph (A)(i) of 
     each bank holding company and each subsidiary of such holding 
     company in order to--
       ``(i) inform the Board of the nature of the operations and 
     financial condition of the holding company and such 
     subsidiaries;
       ``(ii) 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 subsidiary depository institution of 
     such holding company; and
       ``(II) the systems for monitoring and controlling such 
     risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any subsidiary depository institution and its affiliates.
       ``(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 holding company that, because 
     of--

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

     could have a materially adverse effect on the safety and 
     soundness of any depository institution affiliate of the 
     holding company.
       ``(D) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use, for the purposes of this 
     paragraph, 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, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and instead reviewing the reports 
     of examination made of--
       ``(i) any registered broker or dealer by or on behalf of 
     the Securities and Exchange Commission;
       ``(ii) any investment adviser registered by or on behalf of 
     either the Securities and Exchange Commission or any State, 
     whichever is required by law;
       ``(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 shall not, by regulation, 
     guideline, order or otherwise, prescribe or impose any 
     capital or capital adequacy rules, guidelines, standards, or 
     requirements on any subsidiary of a financial holding company 
     that is not a depository institution and--
       ``(i) is in compliance with applicable capital requirements 
     of another Federal regulatory authority (including the 
     Securities and Exchange Commission) or State insurance 
     authority;
       ``(ii) is registered as an investment adviser under the 
     Investment Advisers Act of 1940, or with any State, whichever 
     is required by law; 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 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 holding company capital or capital 
     adequacy rules, guidelines, standards, or requirements for 
     purposes of this paragraph, the Board shall 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) Transfer of board authority to appropriate federal 
     banking agency.--
       ``(A) In general.--In the case of any bank holding company 
     which is not significantly engaged in nonbanking activities, 
     the Board, in consultation with the appropriate Federal 
     banking agency, may designate the appropriate Federal banking 
     agency of the lead insured depository institution subsidiary 
     of such holding company as the appropriate Federal banking 
     agency for the bank holding company.
       ``(B) Authority transferred.--An agency designated by the 
     Board under subparagraph (A) shall have the same authority as 
     the Board under this Act to--
       ``(i) examine and require reports from the bank holding 
     company and any affiliate of such company (other than a 
     depository institution) under section 5;
       ``(ii) approve or disapprove applications or transactions 
     under section 3;
       ``(iii) take actions and impose penalties under subsections 
     (e) and (f) of section 5 and section 8; and
       ``(iv) take actions regarding the holding company, any 
     affiliate of the holding company (other than a depository 
     institution), or any institution-affiliated party of such 
     company or affiliate under the Federal Deposit Insurance Act 
     and any other statute which the Board may designate.
       ``(C) Agency orders.--Section 9 of this Act and section 105 
     of the Bank Holding Company Act Amendments of 1970 shall 
     apply to orders issued by an agency designated under 
     subparagraph (A) in the same manner such sections apply to 
     orders issued by the Board.
       ``(5) Functional regulation of securities and insurance 
     activities.--The Board shall defer to--
       ``(A) the Securities and Exchange Commission with regard to 
     all interpretations of, and the enforcement of, applicable 
     Federal securities laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of registered brokers, 
     dealers, investment advisers, and investment companies;
       ``(B) the relevant State securities authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State securities laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of brokers, dealers, and 
     investment advisers required to be registered under State 
     law; and
       ``(C) the relevant State insurance authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State insurance laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of insurance companies 
     and insurance agents.''.

     SEC. 112. 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 the following new sentence at the end: ``A 
     declaration filed in accordance with section 6(b)(1)(D) 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--
       ``(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. 113. 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 
     which requires a bank holding company to provide funds or 
     other assets to a subsidiary insured 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 which is 
     an insurance company or a broker or dealer registered under 
     the Securities Exchange Act of 1934, an investment

[[Page 16851]]

     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, which is an insurance 
     company or a broker, dealer, investment company, or 
     investment adviser described in paragraph (1)(A) to provide 
     funds or assets to an insured 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 insured 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 insured 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 insured depository 
     institution, including restricting or prohibiting 
     transactions between the insured depository institution and 
     any affiliate of the institution, as are appropriate under 
     the circumstances.''.
       (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, any regulation, order, or other action of the 
     appropriate Federal banking agency which requires a 
     subsidiary to provide funds or other assets to an insured 
     depository institution shall not be effective nor enforceable 
     with respect to an entity described in paragraph (1) if--
       ``(1) such funds or assets are to be provided by a 
     subsidiary which 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; and
       ``(2) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker or dealer, the investment company, or the 
     investment adviser, as the case may be, determines in writing 
     sent to the insured depository institution and the 
     appropriate Federal banking agency that the subsidiary 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.
       ``(b) Notice to State Insurance Authority or SEC 
     Required.--If the appropriate Federal banking agency requires 
     a subsidiary, which is an insurance company, a broker or 
     dealer, an investment company, or an investment adviser 
     (solely with respect to investment advisory activities or 
     activities incidental thereto) described in subsection (a)(1) 
     to provide funds or assets to an insured depository 
     institution pursuant to any regulation, order, or other 
     action of the appropriate Federal banking agency referred to 
     in subsection (a), the appropriate Federal banking agency 
     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.
       ``(c) Divestiture in Lieu of Other Action.--If the 
     appropriate Federal banking agency receives a notice 
     described in subsection (a)(2) from a State insurance 
     authority or the Securities and Exchange Commission with 
     regard to a subsidiary referred to in that subsection, the 
     appropriate Federal banking agency may order the insured 
     depository institution to divest the subsidiary not later 
     than 180 days after receiving the notice, or such longer 
     period as the appropriate Federal banking agency determines 
     consistent with the safe and sound operation of the insured 
     depository institution.
       ``(d) Conditions Before Divestiture.--During the period 
     beginning on the date an order to divest is issued by the 
     appropriate Federal banking agency under subsection (c) to an 
     insured depository institution and ending on the date the 
     divestiture is complete, the appropriate Federal banking 
     agency may impose any conditions or restrictions on the 
     insured depository institution's ownership of the subsidiary 
     including restricting or prohibiting transactions between the 
     insured depository institution and the subsidiary, as are 
     appropriate under the circumstances.''.

     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 which the Comptroller finds 
     are consistent with the public interest, the purposes of this 
     Act, title LXII of the Revised Statutes of the United States, 
     and other Federal law applicable to national banks, and the 
     standards in paragraph (2).
       (2) Standards.--The Comptroller of the Currency may 
     exercise authority under paragraph (1) if the Comptroller 
     finds that such action will have any of the following 
     effects:
       (A) Avoid any significant risk to the safety and soundness 
     of depository institutions or any Federal deposit insurance 
     fund.
       (B) Enhance the financial stability of banks.
       (C) Avoid conflicts of interest or other abuses.
       (D) Enhance the privacy of customers of the national bank 
     or any subsidiary of the bank.
       (E) Promote the application of national treatment and 
     equality of competitive opportunity between subsidiaries 
     owned or controlled by domestic banks and subsidiaries owned 
     or controlled by foreign banks operating in the United 
     States.
       (3) 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 any purpose 
     described in paragraph (2); and
       (B) modify or eliminate any 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,
     which the Board finds are consistent with the public 
     interest, 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 banks (as the case may be), and 
     the standards in paragraph (2).
       (2) Standards.--The Board of Governors of the Federal 
     Reserve System may exercise authority under paragraph (1) if 
     the Board finds that such action will have any of the 
     following effects:
       (A) Avoid any significant risk to the safety and soundness 
     of depository institutions or any Federal deposit insurance 
     fund.
       (B) Enhance the financial stability of bank holding 
     companies.
       (C) Avoid conflicts of interest or other abuses.
       (D) Enhance the privacy of customers of the State member 
     bank or any subsidiary of the bank.
       (E) Promote the application of national treatment and 
     equality of competitive opportunity between nonbank 
     affiliates owned or controlled by domestic bank holding 
     companies and nonbank affiliates owned or controlled by 
     foreign banks operating in the United States.
       (3) Review.--The Board of Governors of the Federal Reserve 
     System 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 any purpose 
     described in paragraph (2); and
       (B) modify or eliminate any restriction or requirement the 
     Board finds is no longer required for such purposes.
       (4) Foreign banks.--
       (A) In general.--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 consistent with the public interest, the 
     purposes of this Act, the Bank Holding Company Act of 1956, 
     the Federal Reserve

[[Page 16852]]

     Act, and other Federal law applicable to foreign banks and 
     their affiliates in the United States, and the standards in 
     paragraphs (2) and (3).
       (B) Evasion.--In the event that the Board determines that 
     there may be circumstances that would result in an evasion of 
     this paragraph, the Board may also impose restrictions or 
     requirements on relationships or transactions between a 
     foreign bank outside the United States and any affiliate in 
     the United States of such foreign bank that are consistent 
     with national treatment and equality of competitive 
     opportunity.
       (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 which the Corporation finds are consistent 
     with the public interest, the purposes of this Act, the 
     Federal Deposit Insurance Act, or other Federal law 
     applicable to State nonmember banks and the standards in 
     paragraph (2).
       (2) Standards.--The Federal Deposit Insurance Corporation 
     may exercise authority under paragraph (1) if the Corporation 
     finds that such action will have any of the following 
     effects:
       (A) Avoid any significant risk to the safety and soundness 
     of depository institutions or any Federal deposit insurance 
     fund.
       (B) Enhance the financial stability of banks.
       (C) Avoid conflicts of interest or other abuses.
       (D) Enhance the privacy of customers of the State nonmember 
     bank or any subsidiary of the bank.
       (E) Promote the application of national treatment and 
     equality of competitive opportunity between subsidiaries 
     owned or controlled by domestic banks and subsidiaries owned 
     or controlled by foreign banks operating in the United 
     States.
       (3) 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 any purpose 
     described in paragraph (2); and
       (B) modify or eliminate any restriction or requirement the 
     Corporation finds is no longer required for such purposes.

     SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

       (a) Exclusive Commission Authority.--
       (1) In general.--Except as provided in paragraph (3), the 
     Commission shall be the sole Federal agency with authority to 
     inspect and examine any registered investment company that is 
     not a bank holding company or a savings and loan holding 
     company.
       (2) Prohibition on banking agencies.--Except as provided in 
     paragraph (3), 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.
       (3) Certain examinations authorized.-- Nothing in this 
     subsection prevents the Federal Deposit Insurance 
     Corporation, if the Corporation finds it necessary to 
     determine the condition of an insured depository institution 
     for insurance purposes, from examining an affiliate of any 
     insured depository institution, pursuant to its authority 
     under section 10(b)(4) of the Federal Deposit Insurance Act, 
     as may be necessary to disclose fully the relationship 
     between the depository institution and the affiliate, and the 
     effect of such relationship on the depository institution.
       (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) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Bank holding company.--The term ``bank holding 
     company'' has the same meaning as in section 2 of the Bank 
     Holding Company Act of 1956.
       (2) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (3) Federal banking agency.--The term ``Federal banking 
     agency'' has the same meaning as in section 3(z) of the 
     Federal Deposit Insurance Act.
       (4) Registered investment company.--The term ``registered 
     investment company'' means an investment company which is 
     registered with the Commission under the Investment Company 
     Act of 1940.
       (5) Savings and loan holding company.--The term ``savings 
     and loan holding company'' has the same meaning as in section 
     10(a)(1)(D) of the Home Owners' Loan Act.

     SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, 
                   AND ENFORCEMENT AUTHORITY OF THE BOARD.

       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.--
       ``(1) In general.--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 regulated 
     subsidiary of a bank holding company unless 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.
       ``(2) Criteria for board action.--The Board shall not take 
     action otherwise permitted under paragraph (1) unless the 
     Board finds that it is not reasonably possible to effectively 
     protect 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 
     financial holding company or a wholesale financial holding 
     company where the purpose or effect of doing so would be to 
     take action indirectly against or with respect to a regulated 
     subsidiary that may not be taken directly against or with 
     respect to such subsidiary in accordance with subsection (a).
       ``(c) Actions Specifically Authorized.--Notwithstanding 
     subsection (a), the Board may take action under this Act or 
     section 8 of the Federal Deposit Insurance Act to enforce 
     compliance by a regulated subsidiary with Federal law that 
     the Board has specific jurisdiction to enforce against such 
     subsidiary.
       ``(d) Regulated Subsidiary Defined.--For purposes of this 
     section, the term `regulated subsidiary' means any company 
     that is not a bank holding company and is--
       ``(1) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(2) an investment adviser registered by or on behalf of 
     either the Securities and Exchange Commission or any State, 
     whichever is required by law, with respect to the investment 
     advisory activities of such investment adviser and activities 
     incidental to such investment advisory activities;
       ``(3) an investment company registered under the Investment 
     Company Act of 1940;
       ``(4) an insurance company or an insurance agency, with 
     respect to the insurance activities and activities incidental 
     to such insurance activities, subject to supervision by a 
     State insurance commission, agency, or similar authority; or
       ``(5) an entity 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. 117. EQUIVALENT REGULATION AND SUPERVISION.

       (a) In General.--Notwithstanding any other provision of 
     law, the provisions of--
       (1) section 5(c) of the Bank Holding Company Act of 1956 
     (as amended by this Act) that limit the authority of the 
     Board of Governors of the Federal Reserve System to require 
     reports from, to make examinations of, or to impose capital 
     requirements on bank holding companies and their nonbank 
     subsidiaries or that require deference to other regulators; 
     and
       (2) section 10A of the Bank Holding Company Act of 1956 (as 
     added by this Act) that limit whatever authority the Board 
     might otherwise have to take direct or indirect action with 
     respect to bank holding companies and their nonbank 
     subsidiaries,
     shall also limit whatever authority that a Federal banking 
     agency (as defined in section 3(z) of the Federal Deposit 
     Insurance Act) might otherwise have under any statute to 
     require reports, make examinations, impose capital 
     requirements or take any other direct or indirect action with 
     respect to bank holding companies and their nonbank 
     subsidiaries (including nonbank subsidiaries of depository 
     institutions), subject to the same standards and requirements 
     as are applicable to the Board under such provisions.
       (b) Certain Examinations Authorized.--No provision of this 
     section shall be construed as preventing the Federal Deposit 
     Insurance Corporation, if the Corporation finds it necessary 
     to determine the condition of an insured depository 
     institution for insurance purposes, from examining an 
     affiliate of any insured depository institution, pursuant to 
     its authority under section 10(b)(4) of the Federal Deposit 
     Insurance Act, as may be necessary to disclose fully the 
     relationship between the depository institution and the 
     affiliate, and the effect of such relationship on the 
     depository institution.

[[Page 16853]]



     SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND 
                   SUBSIDIARIES.

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

     SEC. 119. 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. 120. 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. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL 
                   BANKS.

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

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

       ``(a) Subsidiaries of National Banks Authorized To Engage 
     in Financial Activities.--
       ``(1) Exclusive authority.--No provision of section 5136 or 
     any other provision of this title LXII of the Revised 
     Statutes of the United States shall be construed as 
     authorizing a subsidiary of a national bank to engage in, or 
     own any share of or any other interest in any company engaged 
     in, any activity that--
       ``(A) is not permissible for a national bank to engage in 
     directly; or
       ``(B) is conducted under terms or conditions other than 
     those that would govern the conduct of such activity by a 
     national bank,
     unless a national bank is specifically authorized by the 
     express terms of a Federal statute and not by implication or 
     interpretation to acquire shares of or an interest in, or to 
     control, such subsidiary, such as by paragraph (2) of this 
     subsection and section 25A of the Federal Reserve Act.
       ``(2) Specific authorization to conduct activities which 
     are financial in nature.--Subject to paragraphs (3) and (4), 
     a national bank may control a financial subsidiary, or hold 
     an interest in a financial subsidiary, that is controlled by 
     insured depository institutions or subsidiaries thereof.
       ``(3) Eligibility requirements.--A national bank may 
     control or hold an interest in a company pursuant to 
     paragraph (2) only if--
       ``(A) the national bank and all depository institution 
     affiliates of the national bank are well capitalized;
       ``(B) the national bank and all depository institution 
     affiliates of the national bank are well managed;
       ``(C) the national bank and all depository institution 
     affiliates of such national bank have achieved a rating of 
     `satisfactory record of meeting community credit needs', or 
     better, at the most recent examination of each such bank or 
     institution; and
       ``(D) the bank has received the approval of the Comptroller 
     of the Currency.
       ``(4) Activity limitations.--In addition to any other 
     limitation imposed on the activity of subsidiaries of 
     national banks, a subsidiary of a national bank may not, 
     pursuant to paragraph (2)--
       ``(A) engage as principal in insuring, guaranteeing, or 
     indemnifying against loss, harm, damage, illness, disability, 
     or death (other than in connection with credit-related 
     insurance) or in providing or issuing annuities;
       ``(B) engage in real estate investment or development 
     activities; or
       ``(C) engage in any activity permissible for a financial 
     holding company under paragraph (3)(I) of section 6(c) of the 
     Bank Holding Company Act of 1956 (relating to insurance 
     company investments).
       ``(5) Size factor with regard to free-standing national 
     banks.--Notwithstanding paragraph (2), a national bank which 
     has total assets of $10,000,000,000 or more may not control a 
     subsidiary engaged in financial activities pursuant to such 
     paragraph unless such national bank is a subsidiary of a bank 
     holding company.
       ``(6) Limited exclusions from community needs requirements 
     for newly affiliated depository institutions.--Any depository 
     institution which becomes an affiliate of a national bank 
     during the 12-month period preceding the date of an approval 
     by the Comptroller of the Currency under paragraph (3)(D) for 
     such bank, and any depository institution which becomes an 
     affiliate of the national bank after such date, may be 
     excluded for purposes of paragraph (3)(C) during the 12-month 
     period beginning on the date of such affiliation if--
       ``(A) the national bank or such depository institution has 
     submitted an affirmative plan to the appropriate Federal 
     banking 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.
       ``(7) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(A) Company; control; affiliate; subsidiary.--The terms 
     `company', `control', `affiliate', and `subsidiary' have the 
     same meanings as in section 2 of the Bank Holding Company Act 
     of 1956.
       ``(B) Financial subsidiary.--The term `financial 
     subsidiary' means a company which is a subsidiary of an 
     insured bank and is engaged in financial activities that have 
     been determined to be financial in nature or incidental to 
     such financial activities in accordance with subsection (b) 
     or permitted in accordance with subsection (b)(4), other than 
     activities that are permissible for a national bank to engage 
     in directly or that are authorized under the Bank Service 
     Company Act, section 25 or 25A of the Federal Reserve Act, or 
     any other Federal statute (other than this section) that 
     specifically authorizes the conduct of such activities by its 
     express terms and not by implication or interpretation.
       ``(C) Well capitalized.--The term `well capitalized' has 
     the same meaning as in section 38 of the Federal Deposit 
     Insurance Act and, for purposes of this section, the 
     Comptroller shall have exclusive jurisdiction to determine 
     whether a national bank is well capitalized.
       ``(D) Well managed.--The term `well managed' means--
       ``(i) in the case of a depository institution that has been 
     examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency--

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

       ``(ii) in the case of any depository institution that has 
     not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory.
       ``(E) Incorporated definitions.--The terms `appropriate 
     Federal banking agency' and `depository institution' have the 
     same meanings as in section 3 of the Federal Deposit 
     Insurance Act.
       ``(b) Activities That Are Financial in Nature.--
       ``(1) Financial activities.--
       ``(A) In general.--For purposes of subsection (a)(7)(B), an 
     activity shall be considered to have been determined to be 
     financial in nature or incidental to such financial 
     activities only if--
       ``(i) such activity is permitted for a financial holding 
     company pursuant to section 6(c)(3) of the Bank Holding 
     Company Act of 1956 (to the extent such activity is not 
     otherwise prohibited under this section or any other 
     provision of law for a subsidiary of a national bank engaged 
     in activities pursuant to subsection (a)(2)); or
       ``(ii) the Secretary of the Treasury determines the 
     activity to be financial in nature or incidental to such 
     financial activities in accordance with subparagraph (B) or 
     paragraph (3).
       ``(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 subsection, 
     including any regulation or order proposed under paragraph 
     (3), for a determination of whether an activity is financial 
     in nature or incidental to such 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 subsection 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 in light of the circumstances) 
     that the Board believes that the activity is not financial in 
     nature or incidental to a financial activity.

       ``(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 (other than an activity which the Board 
     has sole authority to regulate under subparagraph (C)).
       ``(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 in light of 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 subsection, and shall notify

[[Page 16854]]

     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.

       ``(C) Authority over merchant banking.--The Board shall 
     have sole authority to prescribe regulations and issue 
     interpretations to implement this paragraph with respect to 
     activities described in section 6(c)(3)(H) of the Bank 
     Holding Company Act of 1956.
       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to financial 
     activities, the Secretary shall take into account--
       ``(A) the purposes of this Act and the Financial Services 
     Act of 1999;
       ``(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) use any available or emerging technological means, 
     including any application necessary to protect the security 
     or efficacy of systems for the transmission of data or 
     financial transactions, in providing financial services; and
       ``(iii) offer customers any available or emerging 
     technological means for using financial services.
       ``(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, the following activities as, and 
     the extent to which such activities are, financial in nature 
     or incidental to activities which are financial in nature:
       ``(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.
       ``(4) Developing activities.--Subject to subsection (a)(2), 
     a financial subsidiary of a national bank may engage directly 
     or indirectly, or acquire shares of any company engaged, in 
     any activity that the Secretary has not determined to be 
     financial in nature or incidental to financial activities 
     under this subsection if--
       ``(A) the subsidiary reasonably concludes that the activity 
     is financial in nature or incidental to financial activities;
       ``(B) the gross revenues from all activities conducted 
     under this paragraph represent less than 5 percent of the 
     consolidated gross revenues of the national bank;
       ``(C) the aggregate total assets of all companies the 
     shares of which are held under this paragraph do not exceed 5 
     percent of the national bank's consolidated total assets;
       ``(D) the total capital invested in activities conducted 
     under this paragraph represents less than 5 percent of the 
     consolidated total capital of the national bank;
       ``(E) neither the Secretary of the Treasury nor the Board 
     has determined that the activity is not financial in nature 
     or incidental to financial activities under this subsection; 
     and
       ``(F) the national bank provides written notice to the 
     Secretary of the Treasury describing the activity commenced 
     by the subsidiary or conducted by the company acquired no 
     later than 10 business days after commencing the activity or 
     consummating the acquisition.
       ``(c) Provisions Applicable to National Banks That Fail To 
     Meet Requirements.--
       ``(1) In general.--If a national bank or depository 
     institution affiliate is not in compliance with the 
     requirements of subparagraph (A), (B), or (C) of subsection 
     (a)(3), the appropriate Federal banking agency shall notify 
     the Comptroller of the Currency, who shall give notice of 
     such finding to the national bank.
       ``(2) Agreement to correct conditions required.--Not later 
     than 45 days after 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 
     and any relevant affiliated depository institution shall 
     execute an agreement acceptable to the Comptroller of the 
     Currency and the other appropriate Federal banking agencies, 
     if any, to comply with the requirements applicable under 
     subsection (a)(3).
       ``(3) Comptroller of the currency may impose limitations.--
     Until the conditions described in a notice to a national bank 
     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 bank as the Comptroller of the 
     Currency determines to be appropriate under the 
     circumstances; and
       ``(B) the appropriate Federal banking agency may impose 
     such limitations on the conduct or activities of an 
     affiliated depository institution or any subsidiary of the 
     depository institution as such agency determines to be 
     appropriate under the circumstances.
       ``(4) Failure to correct.--If, after receiving a notice 
     under paragraph (1), a national bank and other affiliated 
     depository institutions do not--
       ``(A) execute and implement an agreement in accordance with 
     paragraph (2);
       ``(B) comply with any limitations imposed under paragraph 
     (3);
       ``(C) in the case of a notice of failure to comply with 
     subsection (a)(3)(A), restore the national bank or any 
     depository institution affiliate of the bank to well 
     capitalized status before the end of the 180-day period 
     beginning on the date such notice is received by the national 
     bank (or such other period permitted by the Comptroller of 
     the Currency); or
       ``(D) in the case of a notice of failure to comply with 
     subparagraph (B) or (C) of subsection (a)(3), restore 
     compliance with any such subparagraph on or before the date 
     on which the next examination of the depository institution 
     subsidiary is completed or by the end of such other period as 
     the Comptroller of the Currency determines to be appropriate,
     the Comptroller of the Currency may require such national 
     bank, under such terms and conditions as may be imposed by 
     the Comptroller of the Currency and subject to such extension 
     of time as may be granted in the Comptroller of the 
     Currency's discretion, to divest control of any subsidiary 
     engaged in activities pursuant to subsection (a)(2) or, at 
     the election of the national bank, instead to cease to engage 
     in any activity conducted by a subsidiary of the national 
     bank pursuant to subsection (a)(2).
       ``(5) Consultation.--In taking any action under this 
     subsection, the Comptroller of the Currency shall consult 
     with all relevant Federal and State regulatory agencies.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     1 of title LXII of the Revised Statutes of the United States 
     is amended--
        (1) by redesignating the item relating to section 5136A as 
     section 5136C; and
        (2) by inserting after the item relating to section 5136 
     the following new item:

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

     SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN BANKS AND 
                   THEIR FINANCIAL SUBSIDIARIES.

       (a) Purposes.--The purposes of this section are--
       (1) to protect the safety and soundness of any insured bank 
     that has a financial subsidiary;
       (2) to apply to any transaction between the bank and the 
     financial subsidiary (including a loan, extension of credit, 
     guarantee, or purchase of assets), other than an equity 
     investment, the same restrictions and requirements as would 
     apply if the financial subsidiary were a subsidiary of a bank 
     holding company having control of the bank; and
       (3) to apply to any equity investment of the bank in the 
     financial subsidiary restrictions and requirements equivalent 
     to those that would apply if--
       (A) the bank paid a dividend in the same dollar amount to a 
     bank holding company having control of the bank; and
       (B) the bank holding company used the proceeds of the 
     dividend to make an equity investment in a subsidiary that 
     was engaged in the same activities as the financial 
     subsidiary of the bank.
       (b) Safety and Soundness Firewalls Applicable to 
     Subsidiaries of Banks.--The Federal Deposit Insurance Act (12 
     U.S.C. 1811 et seq.) is amended by inserting after section 45 
     (as added by section 113(b) of this title) the following new 
     section:

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

       ``(a) Limiting the Equity Investment of a Bank in a 
     Subsidiary.--
       ``(1) Capital deduction.--In determining whether an insured 
     bank complies with applicable regulatory capital standards--
       ``(A) the appropriate Federal banking agency shall deduct 
     from the assets and tangible equity of the bank the aggregate 
     amount of the outstanding equity investments of the bank in 
     financial subsidiaries of the bank; and
       ``(B) the assets and liabilities of such financial 
     subsidiaries shall not be consolidated with those of the 
     bank.
       ``(2) Investment limitation.--An insured bank shall not, 
     without the prior approval of the appropriate Federal banking 
     agency, make any equity investment in a financial subsidiary 
     of the bank if that investment would, when made, exceed the 
     amount that the bank could pay as a dividend without 
     obtaining prior regulatory approval.
       ``(3) Treatment of retained earnings.--The amount of any 
     net earnings retained by a financial subsidiary of an insured 
     depository institution shall be treated as an outstanding 
     equity investment of the bank in the subsidiary for purposes 
     of paragraph (1).
       ``(b) Operational and Financial Safeguards for the Bank.--
     An insured bank that has a financial subsidiary shall 
     maintain procedures for identifying and managing any 
     financial and operational risks posed by the financial 
     subsidiary.
       ``(c) Maintenance of Separate Corporate Identity and 
     Separate Legal Status.--

[[Page 16855]]

       ``(1) In general.--Each insured bank shall ensure that the 
     bank maintains and complies with reasonable policies and 
     procedures to preserve the separate corporate identity and 
     legal status of the bank and any financial subsidiary or 
     affiliate of the bank.
       ``(2) Examinations.--The appropriate Federal banking 
     agency, as part of each examination, shall review whether an 
     insured bank is observing the separate corporate identity and 
     separate legal status of any subsidiaries and affiliates of 
     the bank.
       ``(d) Financial Subsidiary Defined.--For purposes of this 
     section, the term `financial subsidiary' has the meaning 
     given to such term in section 5136A(a)(7)(B) of the Revised 
     Statutes of the United States.
       ``(e) Regulations.--The appropriate Federal banking 
     agencies shall jointly prescribe regulations implementing 
     this section.''.
       (c) Transactions Between Financial Subsidiaries and Other 
     Affiliates.--Section 23A of the Federal Reserve Act (12 
     U.S.C. 371c) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d), the following new 
     subsection:
       ``(e) Rules Relating to Banks With Financial 
     Subsidiaries.--
       ``(1) Financial subsidiary defined.--For purposes of this 
     section and section 23B, the term `financial subsidiary' 
     means a company which is a subsidiary of a bank and is 
     engaged in activities that are financial in nature or 
     incidental to such financial activities pursuant to 
     subsection (a)(2) or (b)(4) of section 5136A of the Revised 
     Statutes of the United States.
       ``(2) Application to transactions between a financial 
     subsidiary of a bank and the bank.--For purposes of applying 
     this section and section 23B to a transaction between a 
     financial subsidiary of a bank and the bank (or between such 
     financial subsidiary and any other subsidiary of the bank 
     which is not a financial subsidiary) and notwithstanding 
     subsection (b)(2) and section 23B(d)(1), the financial 
     subsidiary of the bank--
       ``(A) shall be an affiliate of the bank and any other 
     subsidiary of the bank which is not a financial subsidiary; 
     and
       ``(B) shall not be treated as a subsidiary of the bank.
       ``(3) Application to transactions between financial 
     subsidiary and nonbank affiliates.--
       ``(A) In general.--A transaction between a financial 
     subsidiary and an affiliate of the financial subsidiary shall 
     not be deemed to be a transaction between a subsidiary of a 
     national bank and an affiliate of the bank for purposes of 
     section 23A or section 23B of the Federal Reserve Act.
       ``(B) Certain affiliates excluded.--For purposes of 
     subparagraph (A) and notwithstanding paragraph (4), the term 
     `affiliate' shall not include a bank, or a subsidiary of a 
     bank, which is engaged exclusively in activities permissible 
     for a national bank to engage in directly or which are 
     authorized by any Federal law other than section 5136A of the 
     Revised Statutes of the United States.
       ``(4) Equity investments excluded subject to the approval 
     of the banking agency.--Subsection (a)(1) shall not apply so 
     as to limit the equity investment of a bank in a financial 
     subsidiary of such bank, except that any investment that 
     exceeds the amount of a dividend that the bank could pay at 
     the time of the investment without obtaining prior approval 
     of the appropriate Federal banking agency and is in excess of 
     the limitation which would apply under subsection (a)(1), but 
     for this paragraph, may be made only with the approval of the 
     appropriate Federal banking agency (as defined in section 
     3(q) of the Federal Deposit Insurance Act) with respect to 
     such bank.''.
       (d) Antitying.--Section 106(a) of the Bank Holding Company 
     Act Amendments of 1970 is amended by adding at the end the 
     following new sentence: ``For purposes of this section, a 
     subsidiary of a national bank which engages in activities 
     pursuant to subsection (a)(2) or (b)(4) of section 5136A 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.''.

     SEC. 123. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION 
                   LIABILITY FOR OBLIGATIONS OF AFFILIATES.

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

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

       ``(a) In General.--No institution-affiliated party of an 
     insured depository institution or institution-affiliated 
     party of a subsidiary or affiliate of an insured depository 
     institution shall fraudulently represent that the institution 
     is or will be liable for any obligation of a subsidiary or 
     other affiliate of the institution.
       ``(b) Criminal Penalty.--Whoever violates subsection (a) 
     shall be fined under this title, imprisoned for not more than 
     5 years, or both.
       ``(c) Institution-Affiliated Party Defined.--For purposes 
     of this section, the term `institution-affiliated party' has 
     the same meaning as in section 3 of the Federal Deposit 
     Insurance Act and any reference in that section shall also be 
     deemed to refer to a subsidiary or affiliate of an insured 
     depository institution.
       ``(d) Other Definitions.--For purposes of this section, the 
     terms `affiliate', `insured depository institution', and 
     `subsidiary' have same meanings as in section 3 of the 
     Federal Deposit Insurance Act.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     47 of title 18, United States Code, is amended by inserting 
     after the item relating to section 1007 the following new 
     item:

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

     SEC. 124. 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]''.

Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

     SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.

       Section 10 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1841 et seq.) is amended to read as follows:

     ``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

       ``(a) Companies That Control Wholesale Financial 
     Institutions.--
       ``(1) Wholesale financial holding company defined.--The 
     term `wholesale financial holding company' means any company 
     that--
       ``(A) is registered as a bank holding company;
       ``(B) is predominantly engaged in financial activities as 
     defined in section 6(f)(2);
       ``(C) controls one or more wholesale financial 
     institutions;
       ``(D) does not control--
       ``(i) a bank other than a wholesale financial institution;
       ``(ii) an insured bank other than an institution permitted 
     under subparagraph (D), (F), or (G) of section 2(c)(2); or
       ``(iii) a savings association; and
       ``(E) is not a foreign bank (as defined in section 1(b)(7) 
     of the International Banking Act of 1978).
       ``(2) Savings association transition period.--
     Notwithstanding paragraph (1)(D)(iii), the Board may permit a 
     company that controls a savings association and that 
     otherwise meets the requirements of paragraph (1) to become 
     supervised under paragraph (1), if the company divests 
     control of any such savings association within such period 
     not to exceed 5 years after becoming supervised under 
     paragraph (1) as permitted by the Board.
       ``(b) Supervision by the Board.--
       ``(1) In general.--The provisions of this section shall 
     govern the reporting, examination, and capital requirements 
     of wholesale financial holding companies.
       ``(2) Reports.--
       ``(A) In general.--The Board from time to time may require 
     any wholesale financial holding company and any subsidiary of 
     such company to submit reports under oath to keep the Board 
     informed as to--
       ``(i) the company's or subsidiary's activities, financial 
     condition, policies, systems for monitoring and controlling 
     financial and operational risks, and transactions with 
     depository institution subsidiaries of the holding company; 
     and
       ``(ii) the extent to which the company or subsidiary has 
     complied with the provisions of this Act and regulations 
     prescribed and orders issued under this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that the 
     wholesale financial holding company or any subsidiary of such 
     company has provided or been required to provide to other 
     Federal and State supervisors or to appropriate self-
     regulatory organizations.
       ``(ii) Availability.--A wholesale financial 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).
       ``(C) Exemptions from reporting requirements.--
       ``(i) In general.--The Board may, by regulation or order, 
     exempt any company or class of companies, under such terms 
     and conditions and for such periods as the Board shall 
     provide in such regulation or order, from the provisions of 
     this paragraph and any regulation prescribed under this 
     paragraph.
       ``(ii) Criteria for consideration.--In making any 
     determination under clause (i) with regard to any exemption 
     under such clause, the Board shall consider, among such other 
     factors as the Board may determine to be appropriate, the 
     following factors:

       ``(I) Whether information of the type required under this 
     paragraph is available from a supervisory agency (as defined 
     in section 1101(7) of the Right to Financial Privacy Act of 
     1978) or a foreign regulatory authority of a similar type.
       ``(II) The primary business of the company.

[[Page 16856]]

       ``(III) The nature and extent of the domestic and foreign 
     regulation of the activities of the company.

       ``(3) Examinations.--
       ``(A) Limited use of examination authority.--The Board may 
     make examinations of each wholesale financial holding company 
     and each subsidiary of such company in order to--
       ``(i) inform the Board regarding the nature of the 
     operations and financial condition of the wholesale financial 
     holding company and its subsidiaries;
       ``(ii) inform the Board regarding--

       ``(I) the financial and operational risks within the 
     wholesale financial holding company system that may affect 
     any depository institution owned by such holding company; and
       ``(II) the systems of the holding company and its 
     subsidiaries for monitoring and controlling those risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any depository institution controlled by the wholesale 
     financial holding company and any of the company's other 
     subsidiaries.
       ``(B) Restricted focus of examinations.--The Board shall, 
     to the fullest extent possible, limit the focus and scope of 
     any examination of a wholesale financial holding company 
     under this paragraph to--
       ``(i) the holding company; and
       ``(ii) any subsidiary (other than an insured depository 
     institution subsidiary) of the holding company that, because 
     of the size, condition, or activities of the subsidiary, the 
     nature or size of transactions between such subsidiary and 
     any affiliated depository institution, or the centralization 
     of functions within the holding company system, could have a 
     materially adverse effect on the safety and soundness of any 
     depository institution affiliate of the holding company.
       ``(C) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use the reports of examination 
     of depository institutions made by the Comptroller of the 
     Currency, the Federal Deposit Insurance Corporation, the 
     Director of the Office of Thrift Supervision or the 
     appropriate State depository institution supervisory 
     authority for the purposes of this section.
       ``(D) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and by instead reviewing the 
     reports of examination made of--
       ``(i) any registered broker or dealer or any registered 
     investment adviser by or on behalf of the Commission; and
       ``(ii) any licensed insurance company by or on behalf of 
     any State government insurance agency responsible for the 
     supervision of the insurance company.
       ``(E) Confidentiality of reported information.--
       ``(i) In general.--Notwithstanding any other provision of 
     law, the Board shall not be compelled to disclose any 
     nonpublic information required to be reported under this 
     paragraph, or any information supplied to the Board by any 
     domestic or foreign regulatory agency, that relates to the 
     financial or operational condition of any wholesale financial 
     holding company or any subsidiary of such company.
       ``(ii) Compliance with requests for information.--No 
     provision of this subparagraph shall be construed as 
     authorizing the Board to withhold information from the 
     Congress, or preventing the Board from complying with a 
     request for information from any other Federal department or 
     agency for purposes within the scope of such department's or 
     agency's jurisdiction, or from complying with any order of a 
     court of competent jurisdiction in an action brought by the 
     United States or the Board.
       ``(iii) Coordination with other law.--For purposes of 
     section 552 of title 5, United States Code, this subparagraph 
     shall be considered to be a statute described in subsection 
     (b)(3)(B) of such section.
       ``(iv) Designation of confidential information.--In 
     prescribing regulations to carry out the requirements of this 
     subsection, the Board shall designate information described 
     in or obtained pursuant to this paragraph as confidential 
     information.
       ``(F) Costs.--The cost of any examination conducted by the 
     Board under this section may be assessed against, and made 
     payable by, the wholesale financial holding company.
       ``(4) Capital adequacy guidelines.--
       ``(A) Capital adequacy provisions.--Subject to the 
     requirements of, and solely in accordance with, the terms of 
     this paragraph, the Board may adopt capital adequacy rules or 
     guidelines for wholesale financial holding companies.
       ``(B) Method of calculation.--In developing rules or 
     guidelines under this paragraph, the following provisions 
     shall apply:
       ``(i) Focus on double leverage.--The Board shall focus on 
     the use by wholesale financial holding companies of debt and 
     other liabilities to fund capital investments in 
     subsidiaries.
       ``(ii) No unweighted capital ratio.--The Board shall not, 
     by regulation, guideline, order, or otherwise, impose under 
     this section a capital ratio that is not based on appropriate 
     risk-weighting considerations.
       ``(iii) No capital requirement on regulated entities.--The 
     Board shall not, by regulation, guideline, order or 
     otherwise, prescribe or impose any capital or capital 
     adequacy rules, standards, guidelines, or requirements upon 
     any subsidiary that--

       ``(I) is not a depository institution; and
       ``(II) is in compliance with applicable capital 
     requirements of another Federal regulatory authority 
     (including the Securities and Exchange Commission) or State 
     insurance authority.

       ``(iv) Limitation.--The Board shall not, by regulation, 
     guideline, order or otherwise, prescribe or impose any 
     capital or capital adequacy rules, standards, guidelines, or 
     requirements upon any subsidiary that is not a depository 
     institution and that is registered as an investment adviser 
     under the Investment Advisers Act of 1940, except that this 
     clause shall not be construed as preventing the Board from 
     imposing capital or capital adequacy rules, guidelines, 
     standards, or requirements with respect to activities of a 
     registered investment adviser other than investment advisory 
     activities or activities incidental to investment advisory 
     activities.
       ``(v) Limitations on indirect action.--In developing, 
     establishing, or assessing holding company capital or capital 
     adequacy rules, guidelines, standards, or requirements for 
     purposes of this paragraph, the Board shall 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.

       ``(vi) Appropriate exclusions.--The Board shall take full 
     account of--

       ``(I) the capital requirements made applicable to any 
     subsidiary that is not a depository institution by another 
     Federal regulatory authority or State insurance authority; 
     and
       ``(II) industry norms for capitalization of a company's 
     unregulated subsidiaries and activities.

       ``(vii) Internal risk management models.--The Board may 
     incorporate internal risk management models of wholesale 
     financial holding companies into its capital adequacy 
     guidelines or rules and may take account of the extent to 
     which resources of a subsidiary depository institution may be 
     used to service the debt or other liabilities of the 
     wholesale financial holding company.
       ``(c) Nonfinancial Activities and Investments.--
       ``(1) Grandfathered activities.--
       ``(A) In general.--Notwithstanding section 4(a), a company 
     that becomes a wholesale financial holding company may 
     continue to engage, directly or indirectly, in any activity 
     and may retain ownership and control of shares of a company 
     engaged in any activity if--
       ``(i) on the date of the enactment of the Financial 
     Services Act of 1999, such wholesale financial holding 
     company was lawfully engaged in that nonfinancial activity, 
     held the shares of such company, or had entered into a 
     contract to acquire shares of any company engaged in such 
     activity; and
       ``(ii) the company engaged in such activity continues to 
     engage only in the same activities that such company 
     conducted on the date of the enactment of the Financial 
     Services Act of 1999, and other activities permissible under 
     this Act.
       ``(B) No expansion of grandfathered commercial activities 
     through merger or consolidation.--A wholesale financial 
     holding company that engages in activities or holds shares 
     pursuant to this paragraph, or a subsidiary of such wholesale 
     financial holding company, may not acquire, in any merger, 
     consolidation, or other type of business combination, assets 
     of any other company which is engaged in any activity which 
     the Board has not determined to be financial in nature or 
     incidental to activities that are financial in nature under 
     section 6(c).
       ``(C) Limitation to single exemption.--No company that 
     engages in any activity or controls any shares under 
     subsection (f) of section 6 may engage in any activity or own 
     any shares pursuant to this paragraph.
       ``(2) Commodities.--
       ``(A) In general.--Notwithstanding section 4(a), a 
     wholesale financial holding company which was predominately 
     engaged as of January 1, 1997, in financial activities in the 
     United States (or any successor to any such company) may 
     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 January 1, 
     1997, if such wholesale financial holding company, or any 
     subsidiary of such holding company, was engaged directly, 
     indirectly, or through any such company in any of such 
     activities as of January 1, 1997, in the United States.

[[Page 16857]]

       ``(B) Limitation.--The attributed aggregate consolidated 
     assets of a wholesale financial holding company held under 
     the authority granted under this paragraph and not otherwise 
     permitted to be held by all wholesale financial holding 
     companies under this section may not exceed 5 percent of the 
     total consolidated assets of the wholesale financial holding 
     company, except that the Board may increase such percentage 
     of total consolidated assets by such amounts and under such 
     circumstances as the Board considers appropriate, consistent 
     with the purposes of this Act.
       ``(3) Cross marketing restrictions.--A wholesale financial 
     holding company shall not permit--
       ``(A) any company whose shares it owns or controls pursuant 
     to paragraph (1) or (2) to offer or market any product or 
     service of an affiliated wholesale financial institution; or
       ``(B) any affiliated wholesale financial institution to 
     offer or market any product or service of any company whose 
     shares are owned or controlled by such wholesale financial 
     holding company pursuant to such paragraphs.
       ``(d) Qualification of Foreign Bank as Wholesale Financial 
     Holding Company.--
       ``(1) In general.--Any foreign bank, or any company that 
     owns or controls a foreign bank, that operates a branch, 
     agency, or commercial lending company in the United States, 
     including a foreign bank or company that owns or controls a 
     wholesale financial institution, may request a determination 
     from the Board that such bank or company be treated as a 
     wholesale financial holding company other than for purposes 
     of subsection (c), subject to such conditions as the Board 
     considers appropriate, giving due regard to the principle of 
     national treatment and equality of competitive opportunity 
     and the requirements imposed on domestic banks and companies.
       ``(2) Conditions for treatment as a wholesale financial 
     holding company.--A foreign bank and a company that owns or 
     controls a foreign bank may not be treated as a wholesale 
     financial holding company unless the bank and company meet 
     and continue to meet the following criteria:
       ``(A) No insured deposits.--No deposits held directly by a 
     foreign bank or through an affiliate (other than an 
     institution described in subparagraph (D) or (F) of section 
     2(c)(2)) are insured under the Federal Deposit Insurance Act.
       ``(B) Capital standards.--The foreign bank meets risk-based 
     capital standards comparable to the capital standards 
     required for a wholesale financial institution, giving due 
     regard to the principle of national treatment and equality of 
     competitive opportunity.
       ``(C) Transaction with affiliates.--Transactions between a 
     branch, agency, or commercial lending company subsidiary of 
     the foreign bank in the United States, and any securities 
     affiliate or company in which the foreign bank (or any 
     company that owns or controls such foreign bank) has 
     invested, directly or indirectly, and which engages in any 
     activity pursuant to subsection (c) or (g) of section 6, 
     comply with the provisions of sections 23A and 23B of the 
     Federal Reserve Act in the same manner and to the same extent 
     as such transactions would be required to comply with such 
     sections if the bank were a member bank.
       ``(3) Treatment as a wholesale financial institution.--Any 
     foreign bank which is, or is affiliated with a company which 
     is, treated as a wholesale financial holding company under 
     this subsection shall be treated as a wholesale financial 
     institution for purposes of subsections (c)(1)(C) and (c)(3) 
     of section 9B of the Federal Reserve Act, and any such 
     foreign bank or company shall be subject to paragraphs (3), 
     (4), and (5) of section 9B(d) of the Federal Reserve Act, 
     except that the Board may adopt such modifications, 
     conditions, or exemptions as the Board deems appropriate, 
     giving due regard to the principle of national treatment and 
     equality of competitive opportunity.
       ``(4) Supervision of foreign bank which maintains no 
     banking presence other than control of a wholesale financial 
     institution.--A foreign bank that owns or controls a 
     wholesale financial institution but does not operate a 
     branch, agency, or commercial lending company in the United 
     States (and any company that owns or controls such foreign 
     bank) may request a determination from the Board that such 
     bank or company be treated as a wholesale financial holding 
     company, except that such bank or company shall be subject to 
     the restrictions of paragraphs (2)(A) and (3) of this 
     subsection.
       ``(5) No effect on other provisions.--This section shall 
     not be construed as limiting the authority of the Board under 
     the International Banking Act of 1978 with respect to the 
     regulation, supervision, or examination of foreign banks and 
     their offices and affiliates in the United States.
       ``(6) Applicability of community reinvestment act of 
     1977.--The branches in the United States of a foreign bank 
     that is, or is affiliated with a company that is, treated as 
     a wholesale financial holding company shall be subject to 
     section 9B(b)(11) of the Federal Reserve Act as if the 
     foreign bank were a wholesale financial institution under 
     such section. The Board and the Comptroller of the Currency 
     shall apply the provisions of sections 803(2), 804, and 
     807(1) of the Community Reinvestment Act of 1977 to branches 
     of foreign banks which receive only such deposits as are 
     permissible for receipt by a corporation organized under 
     section 25A of the Federal Reserve Act, in the same manner 
     and to the same extent such sections apply to such a 
     corporation.''.

     SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

       (a) Federal Reserve Act.--The last sentence of the eighth 
     undesignated paragraph of section 9 of the Federal Reserve 
     Act (12 U.S.C. 326) is amended to read as follows: ``The 
     Board of Governors of the Federal Reserve System, at its 
     discretion, may furnish reports of examination or other 
     confidential supervisory information concerning State member 
     banks or any other entities examined under any other 
     authority of the Board to any Federal or State authorities 
     with supervisory or regulatory authority over the examined 
     entity, to officers, directors, or receivers 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) of the (12 U.S.C. 3401(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; or''; 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. 133. CONFORMING AMENDMENTS.

       (a) Bank Holding Company Act of 1956.--
       (1) Definitions.--Section 2 of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1841) is amended by inserting after 
     subsection (p) (as added by section 103(b)(1)) the following 
     new subsections:
       ``(q) Wholesale Financial Institution.--The term `wholesale 
     financial institution' means a wholesale financial 
     institution subject to section 9B of the Federal Reserve Act.
       ``(r) Commission.--The term `Commission' means the 
     Securities and Exchange Commission.
       ``(s) Depository Institution.--The term `depository 
     institution'--
       ``(1) has the meaning given to such term in section 3 of 
     the Federal Deposit Insurance Act; and
       ``(2) includes a wholesale financial institution.''.
       (2) Definition of bank includes wholesale financial 
     institution.--Section 2(c)(1) of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the 
     end the following new subparagraph:
       ``(C) A wholesale financial institution.''.
       (3) Incorporated definitions.--Section 2(n) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841(n)) is amended by 
     inserting `` `insured bank','' after `` `in danger of 
     default',''.
       (4) Exception to deposit insurance requirement.--Section 
     3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 
     1842(e)) is amended by adding at the end the following: 
     ``This subsection shall not apply to a wholesale financial 
     institution.''.
       (b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) 
     is amended to read as follows:
       ``(A) any State member insured bank (except a District 
     bank) and any wholesale financial institution subject to 
     section 9B of the Federal Reserve Act;''.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

     SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.

       (a) National Wholesale Financial Institutions.--
       (1) In general.--Chapter 1 of title LXII of the Revised 
     Statutes of the United States (12 U.S.C. 21 et seq.) is 
     amended by inserting after section 5136A (as added by section 
     121(a) of this title) the following new section:

     ``SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.

       ``(a) Authorization of the Comptroller Required.--A 
     national bank may apply to the Comptroller on such forms and 
     in accordance with such regulations as the Comptroller may 
     prescribe, for permission to operate as a national wholesale 
     financial institution.
       ``(b) Regulation.--A national wholesale financial 
     institution may exercise, in accordance with such 
     institution's articles of incorporation and regulations 
     issued by the Comptroller, all the powers and privileges of a 
     national bank formed in accordance with section 5133 of the 
     Revised Statutes of the United States, subject to section 9B 
     of the Federal Reserve Act and the limitations and 
     restrictions contained therein.
       ``(c) Community Reinvestment Act of 1977.--A national 
     wholesale financial institution shall be subject to the 
     Community Reinvestment Act of 1977.
       (2) Clerical amendment.--The table of sections for chapter 
     1 of title LXII of the Revised Statutes of the United States 
     is

[[Page 16858]]

     amended by inserting after the item relating to section 5136A 
     (as added by section 121(d) of this title) the following new 
     item:

``5136B. National wholesale financial institutions.''.
       (b) Wholesale Financial Institutions.--The Federal Reserve 
     Act (12 U.S.C. 221 et seq.) is amended by inserting after 
     section 9A the following new section:

     ``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

       ``(a) Application for Membership as Wholesale Financial 
     Institution.--
       ``(1) Application required.--
       ``(A) In general.--Any bank may apply to the Board of 
     Governors of the Federal Reserve System to become a State 
     wholesale financial institution, or to the Comptroller of the 
     Currency to become a national wholesale financial 
     institution, and, as a wholesale financial institution, to 
     subscribe to the stock of the Federal Reserve bank organized 
     within the district where the applying bank is located.
       ``(B) Treatment as member bank.--Any application under 
     subparagraph (A) shall be treated as an application under, 
     and shall be subject to the provisions of, section 9.
       ``(2) Insurance termination.--No bank the deposits of which 
     are insured under the Federal Deposit Insurance Act may 
     become a wholesale financial institution unless it has met 
     all requirements under that Act for voluntary termination of 
     deposit insurance.
       ``(b) General Requirements Applicable to Wholesale 
     Financial Institutions.--
       ``(1) Federal reserve act.--Except as otherwise provided in 
     this section, wholesale financial institutions shall be 
     member banks and shall be subject to the provisions of this 
     Act that apply to member banks to the same extent and in the 
     same manner as State member insured banks or national banks, 
     except that a wholesale financial institution may terminate 
     membership under this Act only with the prior written 
     approval of the Board and on terms and conditions that the 
     Board determines are appropriate to carry out the purposes of 
     this Act.
       ``(2) Prompt corrective action.--A wholesale financial 
     institution shall be deemed to be an insured depository 
     institution for purposes of section 38 of the Federal Deposit 
     Insurance Act except that--
       ``(A) the relevant capital levels and capital measures for 
     each capital category shall be the levels specified by the 
     Board for wholesale financial institutions;
       ``(B) subject to subparagraph (A), all references to the 
     appropriate Federal banking agency or to the Corporation in 
     that section shall be deemed to be references to the 
     Comptroller of the Currency, in the case of a national 
     wholesale financial institution, and to the Board, in the 
     case of all other wholesale financial institutions; and
       ``(C) in the case of wholesale financial institutions, the 
     purpose of prompt corrective action shall be to protect 
     taxpayers and the financial system from the risks associated 
     with the operation and activities of wholesale financial 
     institutions.
       ``(3) Enforcement authority.--Section 3(u), subsections (j) 
     and (k) of section 7, subsections (b) through (n), (s), (u), 
     and (v) of section 8, and section 19 of the Federal Deposit 
     Insurance Act shall apply to a wholesale financial 
     institution in the same manner and to the same extent as such 
     provisions apply to State member insured banks or national 
     banks, as the case may be, and any reference in such sections 
     to an insured depository institution shall be deemed to 
     include a reference to a wholesale financial institution.
       ``(4) Certain other statutes applicable.--A wholesale 
     financial institution shall be deemed to be a banking 
     institution, and the Board shall be the appropriate Federal 
     banking agency for such bank and all such bank's affiliates, 
     for purposes of the International Lending Supervision Act.
       ``(5) Bank merger act.--A wholesale financial institution 
     shall be subject to sections 18(c) and 44 of the Federal 
     Deposit Insurance Act in the same manner and to the same 
     extent the wholesale financial institution would be subject 
     to such sections if the institution were a State member 
     insured bank or a national bank.
       ``(6) Branching.--Notwithstanding any other provision of 
     law, a wholesale financial institution may establish and 
     operate a branch at any location on such terms and conditions 
     as established by, and with the approval of--
       ``(A) the Board, in the case of a State-chartered wholesale 
     financial institution; and
       ``(B) the Comptroller of the Currency, in the case of a 
     national bank wholesale financial institution.
       ``(7) Activities of out-of-state branches of wholesale 
     financial institutions.--A State-chartered wholesale 
     financial institution shall be deemed to be a State bank and 
     an insured State bank for purposes of paragraphs (1), (2), 
     and (3) of section 24(j) of the Federal Deposit Insurance 
     Act.
       ``(8) Discrimination regarding interest rates.--Section 27 
     of the Federal Deposit Insurance Act shall apply to State-
     chartered wholesale financial institutions in the same manner 
     and to the same extent as such provisions apply to State 
     member insured banks and any reference in such section to a 
     State-chartered insured depository institution shall be 
     deemed to include a reference to a State-chartered wholesale 
     financial institution.
       ``(9) Preemption of state laws requiring deposit insurance 
     for wholesale financial institutions.--The appropriate State 
     banking authority may grant a charter to a wholesale 
     financial institution notwithstanding any State constitution 
     or statute requiring that the institution obtain insurance of 
     its deposits and any such State constitution or statute is 
     hereby preempted solely for purposes of this paragraph.
       ``(10) Parity for wholesale financial institutions.--A 
     State bank that is a wholesale financial institution under 
     this section shall have all of the rights, powers, 
     privileges, and immunities (including those derived from 
     status as a federally chartered institution) of and as if it 
     were a national bank, subject to such terms and conditions as 
     established by the Board.
       ``(11) Community reinvestment act of 1977.--A State 
     wholesale financial institution shall be subject to the 
     Community Reinvestment Act of 1977.
       ``(c) Specific Requirements Applicable to Wholesale 
     Financial Institutions.--
       ``(1) Limitations on deposits.--
       ``(A) Minimum amount.--
       ``(i) In general.--No wholesale financial institution may 
     receive initial deposits of $100,000 or less, other than on 
     an incidental and occasional basis.
       ``(ii) Limitation on deposits of less than $100,000.--No 
     wholesale financial institution may receive initial deposits 
     of $100,000 or less if such deposits constitute more than 5 
     percent of the institution's total deposits.
       ``(B) No deposit insurance.--Except as otherwise provided 
     in section 8A(f) of the Federal Deposit Insurance Act, no 
     deposits held by a wholesale financial institution shall be 
     insured deposits under the Federal Deposit Insurance Act.
       ``(C) Advertising and disclosure.--The Board and the 
     Comptroller of the Currency shall prescribe jointly 
     regulations pertaining to advertising and disclosure by 
     wholesale financial institutions to ensure that each 
     depositor is notified that deposits at the wholesale 
     financial institution are not federally insured or otherwise 
     guaranteed by the United States Government.
       ``(2) Minimum capital levels applicable to wholesale 
     financial institutions.--The Board shall, by regulation, 
     adopt capital requirements for wholesale financial 
     institutions--
       ``(A) to account for the status of wholesale financial 
     institutions as institutions that accept deposits that are 
     not insured under the Federal Deposit Insurance Act; and
       ``(B) to provide for the safe and sound operation of the 
     wholesale financial institution without undue risk to 
     creditors or other persons, including Federal Reserve banks, 
     engaged in transactions with the bank.
       ``(3) Additional requirements applicable to wholesale 
     financial institutions.--In addition to any requirement 
     otherwise applicable to State member insured banks or 
     applicable, under this section, to wholesale financial 
     institutions, the Board may impose, by regulation or order, 
     upon wholesale financial institutions--
       ``(A) limitations on transactions, direct or indirect, with 
     affiliates to prevent--
       ``(i) the transfer of risk to the deposit insurance funds; 
     or
       ``(ii) an affiliate from gaining access to, or the benefits 
     of, credit from a Federal Reserve bank, including overdrafts 
     at a Federal Reserve bank;
       ``(B) special clearing balance requirements; and
       ``(C) any additional requirements that the Board determines 
     to be appropriate or necessary to--
       ``(i) promote the safety and soundness of the wholesale 
     financial institution or any insured depository institution 
     affiliate of the wholesale financial institution;
       ``(ii) prevent the transfer of risk to the deposit 
     insurance funds; or
       ``(iii) protect creditors and other persons, including 
     Federal Reserve banks, engaged in transactions with the 
     wholesale financial institution.
       ``(4) Exemptions for wholesale financial institutions.--The 
     Board may, by regulation or order, exempt any wholesale 
     financial institution from any provision applicable to a 
     member bank that is not a wholesale financial institution, if 
     the Board finds that such exemption is consistent with--
       ``(A) the promotion of the safety and soundness of the 
     wholesale financial institution or any insured depository 
     institution affiliate of the wholesale financial institution;
       ``(B) the protection of the deposit insurance funds; and
       ``(C) the protection of creditors and other persons, 
     including Federal Reserve banks, engaged in transactions with 
     the wholesale financial institution.
       ``(5) Limitation on transactions between a wholesale 
     financial institution and an insured bank.--For purposes of 
     section 23A(d)(1) of the Federal Reserve Act, a wholesale 
     financial institution that is affiliated with an insured bank 
     shall not be a bank.
       ``(6) No effect on other provisions.--This section shall 
     not be construed as limiting the Board's authority over 
     member banks or the authority of the Comptroller of the 
     Currency over national banks under any other

[[Page 16859]]

     provision of law, or to create any obligation for any Federal 
     Reserve bank to make, increase, renew, or extend any advance 
     or discount under this Act to any member bank or other 
     depository institution.
       ``(d) Capital and Managerial Requirements.--
       ``(1) In general.--A wholesale financial institution shall 
     be well capitalized and well managed.
       ``(2) Notice to company.--The Board shall promptly provide 
     notice to a company that controls a wholesale financial 
     institution whenever such wholesale financial institution is 
     not well capitalized or well managed.
       ``(3) Agreement to restore institution.--Not later than 45 
     days after the date of receipt of a notice under paragraph 
     (2) (or such additional period not to exceed 90 days as the 
     Board may permit), the company shall execute an agreement 
     acceptable to the Board to restore the wholesale financial 
     institution to compliance with all of the requirements of 
     paragraph (1).
       ``(4) Limitations until institution restored.--Until the 
     wholesale financial institution is restored to compliance 
     with all of the requirements of paragraph (1), the Board may 
     impose such limitations on the conduct or activities of the 
     company or any affiliate of the company as the Board 
     determines to be appropriate under the circumstances.
       ``(5) Failure to restore.--If the company does not execute 
     and implement an agreement in accordance with paragraph (3), 
     comply with any limitation imposed under paragraph (4), 
     restore the wholesale financial institution to well 
     capitalized status not later than 180 days after the date of 
     receipt by the company of the notice described in paragraph 
     (2), or restore the wholesale financial institution to well 
     managed status within such period as the Board may permit, 
     the company shall, under such terms and conditions as may be 
     imposed by the Board subject to such extension of time as may 
     be granted in the discretion of the Board, divest control of 
     its subsidiary depository institutions.
       ``(6) Well managed defined.--For purposes of this 
     subsection, the term `well managed' has the same meaning as 
     in section 2 of the Bank Holding Company Act of 1956.
       ``(e) Resolution of Wholesale Financial Institutions.--
       ``(1) Conservatorship or receivership.--
       ``(A) Appointment.--The Board may appoint a conservator or 
     receiver to take possession and control of a wholesale 
     financial institution to the same extent and in the same 
     manner as the Comptroller of the Currency may appoint a 
     conservator or receiver for a national bank.
       ``(B) Powers.--The conservator or receiver for a wholesale 
     financial institution shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as a 
     conservator or receiver for a national bank.
       ``(2) Board authority.--The Board shall have the same 
     authority with respect to any conservator or receiver 
     appointed under paragraph (1), and the wholesale financial 
     institution for which it has been appointed, as the 
     Comptroller of the Currency has with respect to a conservator 
     or receiver for a national bank and the national bank for 
     which the conservator or receiver has been appointed.
       ``(3) Bankruptcy proceedings.--The Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution) or the Board may direct the conservator or 
     receiver of a wholesale financial institution to file a 
     petition pursuant to title 11, United States Code, in which 
     case, title 11, United States Code, shall apply to the 
     wholesale financial institution in lieu of otherwise 
     applicable Federal or State insolvency law.
       ``(f) Board Backup Authority.--
       ``(1) Notice to the comptroller.--Before taking any action 
     under section 8 of the Federal Deposit Insurance Act 
     involving a wholesale financial institution that is chartered 
     as a national bank, the Board shall notify the Comptroller 
     and recommend that the Comptroller take appropriate action. 
     If the Comptroller fails to take the recommended action or to 
     provide an acceptable plan for addressing the concerns of the 
     Board before the close of the 30-day period beginning on the 
     date of receipt of the formal recommendation from the Board, 
     the Board may take such action.
       ``(2) Exigent circumstances.--Notwithstanding paragraph 
     (1), the Board may exercise its authority without regard to 
     the time period set forth in paragraph (1) where the Board 
     finds that exigent circumstances exist and the Board notifies 
     the Comptroller of the Board's action and of the exigent 
     circumstances.
       ``(g) Exclusive Jurisdiction.--Subsections (c) and (e) of 
     section 43 of the Federal Deposit Insurance Act shall not 
     apply to any wholesale financial institution.''.
       (c) Voluntary Termination of Insured Status by Certain 
     Institutions.--
       (1) Section 8 designations.--Section 8(a) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
       (A) by striking paragraph (1); and
       (B) by redesignating paragraphs (2) through (10) as 
     paragraphs (1) through (9), respectively.
       (2) Voluntary termination of insured status.--The Federal 
     Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
     inserting after section 8 the following new section:

     ``SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED 
                   DEPOSITORY INSTITUTION.

       ``(a) In General.--Except as provided in subsection (b), an 
     insured State bank or a national bank may voluntarily 
     terminate such bank's status as an insured depository 
     institution in accordance with regulations of the Corporation 
     if--
       ``(1) the bank provides written notice of the bank's intent 
     to terminate such insured status--
       ``(A) to the Corporation and the Board of Governors of the 
     Federal Reserve System, in the case of an insured State bank, 
     or to the Corporation and the Comptroller of the Currency, in 
     the case of an insured national bank authorized to operate as 
     a wholesale financial institution, not less than 6 months 
     before the effective date of such termination; and
       ``(B) to all depositors at such bank, not less than 6 
     months before the effective date of the termination of such 
     status; and
       ``(2) either--
       ``(A) the deposit insurance fund of which such bank is a 
     member equals or exceeds the fund's designated reserve ratio 
     as of the date the bank provides a written notice under 
     paragraph (1) and the Corporation determines that the fund 
     will equal or exceed the applicable designated reserve ratio 
     for the 2 semiannual assessment periods immediately following 
     such date; or
       ``(B) the Corporation and the Board of Governors of the 
     Federal Reserve System, in the case of an insured State bank, 
     or the Corporation and the Comptroller of the Currency, in 
     the case of an insured national bank authorized to operate as 
     a wholesale financial institution, has approved the 
     termination of the bank's insured status and the bank pays an 
     exit fee in accordance with subsection (e).
       ``(b) Exception.--Subsection (a) shall not apply with 
     respect to--
       ``(1) an insured savings association; or
       ``(2) an insured branch that is required to be insured 
     under subsection (a) or (b) of section 6 of the International 
     Banking Act of 1978.
       ``(c) Eligibility for Insurance Terminated.--Any bank that 
     voluntarily elects to terminate the bank's insured status 
     under subsection (a) shall not be eligible for insurance on 
     any deposits or any assistance authorized under this Act 
     after the period specified in subsection (f)(1).
       ``(d) Institution Must Become Wholesale Financial 
     Institution or Terminate Deposit-Taking Activities.--Any 
     depository institution which voluntarily terminates such 
     institution's status as an insured depository institution 
     under this section may not, upon termination of insurance, 
     accept any deposits unless the institution is a wholesale 
     financial institution subject to section 9B of the Federal 
     Reserve Act.
       ``(e) Exit Fees.--
       ``(1) In general.--Any bank that voluntarily terminates 
     such bank's status as an insured depository institution under 
     this section shall pay an exit fee in an amount that the 
     Corporation determines is sufficient to account for the 
     institution's pro rata share of the amount (if any) which 
     would be required to restore the relevant deposit insurance 
     fund to the fund's designated reserve ratio as of the date 
     the bank provides a written notice under subsection (a)(1).
       ``(2) Procedures.--The Corporation shall prescribe, by 
     regulation, procedures for assessing any exit fee under this 
     subsection.
       ``(f) Temporary Insurance of Deposits Insured as of 
     Termination.--
       ``(1) Transition period.--The insured deposits of each 
     depositor in a State bank or a national bank on the effective 
     date of the voluntary termination of the bank's insured 
     status, less all subsequent withdrawals from any deposits of 
     such depositor, shall continue to be insured for a period of 
     not less than 6 months and not more than 2 years, as 
     determined by the Corporation. During such period, no 
     additions to any such deposits, and no new deposits in the 
     depository institution made after the effective date of such 
     termination shall be insured by the Corporation.
       ``(2) Temporary assessments; obligations and duties.--
     During the period specified in paragraph (1) with respect to 
     any bank, the bank shall continue to pay assessments under 
     section 7 as if the bank were an insured depository 
     institution. The bank shall, in all other respects, be 
     subject to the authority of the Corporation and the duties 
     and obligations of an insured depository institution under 
     this Act during such period, and in the event that the bank 
     is closed due to an inability to meet the demands of the 
     bank's depositors during such period, the Corporation shall 
     have the same powers and rights with respect to such bank as 
     in the case of an insured depository institution.
       ``(g) Advertisements.--
       ``(1) In general.--A bank that voluntarily terminates the 
     bank's insured status under this section shall not advertise 
     or hold itself out as having insured deposits, except that 
     the bank may advertise the temporary insurance of deposits 
     under subsection (f) if, in connection with any such 
     advertisement, the

[[Page 16860]]

     advertisement also states with equal prominence that 
     additions to deposits and new deposits made after the 
     effective date of the termination are not insured.
       ``(2) Certificates of deposit, obligations, and 
     securities.--Any certificate of deposit or other obligation 
     or security issued by a State bank or a national bank after 
     the effective date of the voluntary termination of the bank's 
     insured status under this section shall be accompanied by a 
     conspicuous, prominently displayed notice that such 
     certificate of deposit or other obligation or security is not 
     insured under this Act.
       ``(h) Notice Requirements.--
       ``(1) Notice to the corporation.--The notice required under 
     subsection (a)(1)(A) shall be in such form as the Corporation 
     may require.
       ``(2) Notice to depositors.--The notice required under 
     subsection (a)(1)(B) shall be--
       ``(A) sent to each depositor's last address of record with 
     the bank; and
       ``(B) in such manner and form as the Corporation finds to 
     be necessary and appropriate for the protection of 
     depositors.''.
       (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
     Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by 
     inserting ``, or any wholesale financial institution subject 
     to section 9B of this Act'' after ``such Act''.
       (d) Technical and Conforming Amendments to the Bankruptcy 
     Code.--
       (1) Bankruptcy code debtors.--Section 109(b)(2) of title 
     11, United States Code, is amended by striking ``; or'' and 
     inserting the following: ``, except that--
       ``(A) a wholesale financial institution established under 
     section 5136B of the Revised Statutes of the United States or 
     section 9B of the Federal Reserve Act may be a debtor if a 
     petition is filed at the direction of the Comptroller of the 
     Currency (in the case of a wholesale financial institution 
     established under section 5136B of the Revised Statutes of 
     the United States) or the Board of Governors of the Federal 
     Reserve System (in the case of any wholesale financial 
     institution); and
       ``(B) a corporation organized under section 25A of the 
     Federal Reserve Act may be a debtor if a petition is filed at 
     the direction of the Board of Governors of the Federal 
     Reserve System; or''.
       (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
     States Code, is amended to read as follows:
       ``(d) Only a railroad and a person that may be a debtor 
     under chapter 7 of this title, except that a stockbroker, a 
     wholesale financial institution established under section 
     5136B of the Revised Statutes of the United States or section 
     9B of the Federal Reserve Act, a corporation organized under 
     section 25A of the Federal Reserve Act, or a commodity 
     broker, may be a debtor under chapter 11 of this title.''.
       (3) Definition of financial institution.--Section 101(22) 
     of title 11, United States Code, is amended to read as 
     follows:
       ``(22) `financial institution' means a person that is a 
     commercial or savings bank, industrial savings bank, savings 
     and loan association, trust company, wholesale financial 
     institution established under section 5136B of the Revised 
     Statutes of the United States or section 9B of the Federal 
     Reserve Act, or corporation organized under section 25A of 
     the Federal Reserve Act and, when any such person is acting 
     as agent or custodian for a customer in connection with a 
     securities contract, as defined in section 741 of this title, 
     such customer,''.
       (4) Subchapter v of chapter 7.--
       (A) In general.--Section 103 of title 11, United States 
     Code, is amended--
       (i) by redesignating subsections (e) through (i) as 
     subsections (f) through (j), respectively; and
       (ii) by inserting after subsection (d) the following:
       ``(e) Subchapter V of chapter 7 of this title applies only 
     in a case under such chapter concerning the liquidation of a 
     wholesale financial institution established under section 
     5136B of the Revised Statutes of the United States or section 
     9B of the Federal Reserve Act, or a corporation organized 
     under section 25A of the Federal Reserve Act.''.
       (B) Wholesale bank liquidation.--Chapter 7 of title 11, 
     United States Code, is amended by adding at the end the 
     following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

     ``Sec. 781. Definitions for subchapter

       ``In this subchapter--
       ``(1) the term `Board' means the Board of Governors of the 
     Federal Reserve System;
       ``(2) the term `depository institution' has the same 
     meaning as in section 3 of the Federal Deposit Insurance Act, 
     and includes any wholesale bank;
       ``(3) the term `national wholesale financial institution' 
     means a wholesale financial institution established under 
     section 5136B of the Revised Statutes of the United States; 
     and
       ``(4) the term `wholesale bank' means a national wholesale 
     financial institution, a wholesale financial institution 
     established under section 9B of the Federal Reserve Act, or a 
     corporation organized under section 25A of the Federal 
     Reserve Act.

     ``Sec. 782. Selection of trustee

       ``(a) Notwithstanding any other provision of this title, 
     the conservator or receiver who files the petition shall be 
     the trustee under this chapter, unless the Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution for which it appointed the conservator or 
     receiver) or the Board (in the case of any wholesale bank for 
     which it appointed the conservator or receiver) designates an 
     alternative trustee. The Comptroller of the Currency or the 
     Board (as applicable) may designate a successor trustee, if 
     required.
       ``(b) Whenever the Comptroller of the Currency or the Board 
     appoints or designates a trustee, chapter 3 and sections 704 
     and 705 of this title shall apply to the Comptroller or the 
     Board, as applicable, in the same way and to the same extent 
     that they apply to a United States trustee.

     ``Sec. 783. Additional powers of trustee

       ``(a) The trustee under this subchapter has power to 
     distribute property not of the estate, including 
     distributions to customers that are mandated by subchapters 
     III and Iv of this chapter.
       ``(b) The trustee under this subchapter may, after notice 
     and a hearing--
       ``(1) sell the wholesale bank to a depository institution 
     or consortium of depository institutions (which consortium 
     may agree on the allocation of the wholesale bank among the 
     consortium);
       ``(2) merge the wholesale bank with a depository 
     institution;
       ``(3) transfer contracts to the same extent as could a 
     receiver for a depository institution under paragraphs (9) 
     and (10) of section 11(e) of the Federal Deposit Insurance 
     Act;
       ``(4) transfer assets or liabilities to a depository 
     institution;
       ``(5) transfer assets and liabilities to a bridge bank as 
     provided in paragraphs (1), (3)(A), (5), (6), and (9) through 
     (13), and subparagraphs (A) through (H) and (K) of paragraph 
     (4) of section 11(n) of the Federal Deposit Insurance Act, 
     except that--
       ``(A) the bridge bank shall be treated as a wholesale bank 
     for the purpose of this subsection; and
       ``(B) any references in any such provision of law to the 
     Federal Deposit Insurance Corporation shall be construed to 
     be references to the appointing agency and that references to 
     deposit insurance shall be omitted.
       ``(c) Any reference in this section to transfers of 
     liabilities includes a ratable transfer of liabilities within 
     a priority class.

     ``Sec. 784. Right to be heard

       ``The Comptroller of the Currency (in the case of a 
     national wholesale financial institution), the Board (in the 
     case of any wholesale bank), or a Federal Reserve bank (in 
     the case of a wholesale bank that is a member of that bank) 
     may raise and may appear and be heard on any issue in a case 
     under this subchapter.
       (C) Conforming amendment.--The table of sections for 
     chapter 7 of title 11, United States Code, is amended by 
     adding at the end the following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
       (e) Resolution of Edge Corporations.--The sixteenth 
     undesignated paragraph of section 25A of the Federal Reserve 
     Act (12 U.S.C. 624) is amended to read as follows:
       ``(16) Appointment of receiver or conservator.--
       ``(A) In general.--The Board may appoint a conservator or 
     receiver for a corporation organized under the provisions of 
     this section to the same extent and in the same manner as the 
     Comptroller of the Currency may appoint a conservator or 
     receiver for a national bank, and the conservator or receiver 
     for such corporation shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as a 
     conservator or receiver for a national bank.
       ``(B) Equivalent authority.--The Board shall have the same 
     authority with respect to any conservator or receiver 
     appointed for a corporation organized under the provisions of 
     this section under this paragraph and any such corporation as 
     the Comptroller of the Currency has with respect to a 
     conservator or receiver of a national bank and the national 
     bank for which a conservator or receiver has been appointed.
       ``(C) Title 11 petitions.--The Board may direct the 
     conservator or receiver of a corporation organized under the 
     provisions of this section to file a petition pursuant to 
     title 11, United States Code, in which case, title 11, United 
     States Code, shall apply to the corporation in lieu of 
     otherwise applicable Federal or State insolvency law.''.

               Subtitle E--Preservation of FTC Authority

     SEC. 141. 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 or 
     section 6, the Board shall also notify the Federal Trade 
     Commission of such approval'' before the period at the end of 
     the first sentence.

[[Page 16861]]



     SEC. 142. INTERAGENCY DATA SHARING.

       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, 4, or 6 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.

     SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES AND 
                   AFFILIATES.

       (a) Clarification of Federal Trade Commission 
     Jurisdiction.--Any person which 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 the Federal Trade 
     Commission Act or any other law enforced by the Federal Trade 
     Commission.
       (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 6 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 6 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''.

     SEC. 144. ANNUAL GAO REPORT.

       (a) In General.--By the end of the 1-year period beginning 
     on the date of the enactment of this Act and annually 
     thereafter, the Comptroller General of the United States 
     shall submit a report to the Congress on market concentration 
     in the financial services industry and its impact on 
     consumers.
       (b) Analysis.--Each report submitted under subsection (a) 
     shall contain an analysis of--
       (1) the positive and negative effects of affiliations 
     between various types of financial companies, and of 
     acquisitions pursuant to this Act and the amendments made by 
     this Act to other provisions of law, including any positive 
     or negative effects on consumers, area markets, and 
     submarkets thereof or on registered securities brokers and 
     dealers which have been purchased by depository institutions 
     or depository institution holding companies;
       (2) the changes in business practices and the effects of 
     any such changes on the availability of venture capital, 
     consumer credit, and other financial services or products and 
     the availability of capital and credit for small businesses; 
     and
       (3) the acquisition patterns among depository institutions, 
     depository institution holding companies, securities firms, 
     and insurance companies including acquisitions among the 
     largest 20 percent of firms and acquisitions within regions 
     or other limited geographical areas.
       (c) Sunset.--This section shall not apply after the end of 
     the 5-year period beginning on the date of the enactment of 
     this Act.

                     Subtitle F--National Treatment

     SEC. 151. 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 6(b)(1)(D) or receives a 
     determination under section 10(d)(1) 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 which the Board has determined to be permissible for 
     financial holding companies under section 6 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 which the 
     Board has determined to be permissible for financial holding 
     companies under section 6 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 or received 
     a determination under section 10(d)(1) by the end of the 2-
     year period beginning on the date of the enactment of the 
     Financial Services Act of 1999, the Board, giving due regard 
     to the principle of national treatment and equality of 
     competitive opportunity, may impose such restrictions and 
     requirements on the conduct of such activities by such 
     foreign bank or company as are comparable to those imposed on 
     a 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 Financial Services 
     Act.''.

     SEC. 152. FOREIGN BANKS AND FOREIGN FINANCIAL INSTITUTIONS 
                   THAT ARE WHOLESALE FINANCIAL INSTITUTIONS.

       Section 8A of the Federal Deposit Insurance Act (as added 
     by section 136(c)(2) of this Act) is amended by adding at the 
     end the following new subsection:
       ``(i) Voluntary Termination of Deposit Insurance.--The 
     provisions on voluntary termination of insurance in this 
     section shall apply to an insured branch of a foreign bank 
     (including a Federal branch) in the same manner and to the 
     same extent as they apply to an insured State bank or a 
     national bank.''.

     SEC. 153. REPRESENTATIVE OFFICES.

       (a) Definition of ``Representative Office''.--Section 
     1(b)(15) of the International Banking Act of 1978 (12 U.S.C. 
     3101(15)) is amended by striking ``State agency, or 
     subsidiary of a foreign bank'' and inserting ``or State 
     agency''.
       (b) Examinations.--Section 10(c) of the International 
     Banking Act of 1978 (12 U.S.C. 3107(c)) is amended by adding 
     at the end the following: ``The Board may also make 
     examinations of any affiliate of a foreign bank conducting 
     business in any State if the Board deems it necessary to 
     determine and enforce compliance with this Act, the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or 
     other applicable Federal banking law.''.

     SEC. 154. RECIPROCITY.

       (a) National Treatment Reports.--
       (1) Report required in the event of certain acquisitions.--
       (A) In general.--Whenever a person from a foreign country 
     announces its intention to acquire or acquires a bank, a 
     securities underwriter, broker, or dealer, an investment 
     adviser, or insurance company that ranks within the top 50 
     firms in that line of business in the United States, the 
     Secretary of Commerce, in the case of an insurance company, 
     or the Secretary of the Treasury, in the case of a bank, a 
     securities underwriter, broker, or dealer, or an investment 
     adviser, shall, within the earlier of 6 months of such 
     announcement or such acquisition and in consultation with 
     other appropriate Federal and State agencies, prepare and 
     submit to the Congress a report on whether a United States 
     person would be able, de facto or de jure, to acquire an 
     equivalent sized firm in the country in which such person 
     from a foreign country is located.
       (B) Analysis and recommendations.--If a report submitted 
     under subparagraph (A) states that the equivalent treatment 
     referred to in such subparagraph, de facto and de jure, is 
     not provided in the country which is the subject of the 
     report, the Secretary of Commerce or the Secretary of the 
     Treasury, as the case may be and in consultation with other 
     appropriate Federal and State agencies, shall include in the 
     report analysis and recommendations as to how that country's 
     laws and regulations would need to be changed so that 
     reciprocal treatment would exist.
       (2) Report required before financial services negotiations 
     commence.--The Secretary of Commerce, with respect to 
     insurance companies, and the Secretary of the Treasury, with 
     respect to banks, securities underwriters, brokers, dealers, 
     and investment advisers, shall, not less than 6 months before 
     the commencement of the financial services negotiations of 
     the World Trade Organization and in consultation with other 
     appropriate Federal and State agencies, prepare and submit to 
     the Congress a report containing--
       (A) an assessment of the 30 largest financial services 
     markets with regard to whether reciprocal access is available 
     in such markets to United States financial services 
     providers; and
       (B) with respect to any such financial services markets in 
     which reciprocal access is not available to United States 
     financial services providers, an analysis and recommendations 
     as to what legislative, regulatory, or enforcement changes 
     would be required to ensure full reciprocity for such 
     providers.
       (3) Person of a foreign country defined.--For purposes of 
     this subsection, the term ``person of a foreign country'' 
     means a person, or a person which directly or indirectly owns 
     or controls that person, that is a resident of that country, 
     is organized under the laws of that country, or has its 
     principal place of business in that country.
       (b) Provisions Applicable to Submissions.--

[[Page 16862]]

       (1) Notice.--Before preparing any report required under 
     subsection (a), the Secretary of Commerce or the Secretary of 
     the Treasury, as the case may be, shall publish notice that a 
     report is in preparation and seek comment from United States 
     persons.
       (2) Privileged submissions.--Upon the request of the 
     submitting person, any comments or related communications 
     received by the Secretary of Commerce or the Secretary of the 
     Treasury, as the case may be, with regard to the report 
     shall, for the purposes of section 552 of title 5, of the 
     United States Code, be treated as commercial information 
     obtained from a person that is privileged or confidential, 
     regardless of the medium in which the information is 
     obtained. This confidential information shall be the property 
     of the Secretary and shall be privileged from disclosure to 
     any other person. However, this privilege shall not be 
     construed as preventing access to that confidential 
     information by the Congress.
       (3) Prohibition of unauthorized disclosures.--No person in 
     possession of confidential information, provided under this 
     section may disclose that information, in whole or in part, 
     except for disclosure made in published statistical material 
     that does not disclose, either directly or when used in 
     conjunction with publicly available information, the 
     confidential information of any person.

        Subtitle G--Federal Home Loan Bank System Modernization

     SEC. 161. SHORT TITLE.

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

     SEC. 162. DEFINITIONS.

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

     SEC. 163. 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.--On and after 
     January 1, 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. 164. 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 business, agricultural, rural 
     development, or low-income community development lending.'';
       (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, rural 
     development, or low-income community development, 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', `rural development', 
     and `low-income community development' shall have the 
     meanings given those terms by rule or regulation of the 
     Finance Board.''.
       (b) Clerical Amendment.--The section heading for section 10 
     of the Federal Home Loan Bank Act (12 U.S.C. 1430) is amended 
     to read as follows:

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

       (c) Conforming Amendments Relating to Members Which Are Not 
     Qualified Thrift Lenders--The first of the 2 subsections 
     designated as subsection (e) of section 10 of the Federal 
     Home Loan Bank Act (12 U.S.C. 1430(e)(1)) is amended--
       (1) in the last sentence of paragraph (1), by inserting 
     ``or, in the case of any community financial institution, for 
     the purposes described in subsection (a)(2)'' before the 
     period; and
       (2) in paragraph (5)(C), by inserting ``except that, in 
     determining the actual thrift investment percentage of any 
     community financial institution for purposes of this 
     subsection, the total investment of such member in loans for 
     small business, agriculture, rural development, or low-income 
     community development, or securities representing a whole 
     interest in such loans, shall be treated as a qualified 
     thrift investment (as defined in such section 10(m))'' before 
     the period.

     SEC. 165. 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''; and
       (2) by adding at the end the following new paragraph:
       ``(3) 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. 166. MANAGEMENT OF BANKS.

       (a) Board of Directors.--Section 7(d) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1427(d)) is amended--
       (1) by striking ``(d) The term'' and inserting the 
     following:
       ``(d) Terms of Office.--The term''; and
       (2) by striking ``shall be two years''.
       (b) Compensation.--Section 7(i) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) is amended by striking ``, 
     subject to the approval of the board''.
       (c) Repeal of Sections 22A and 27.--The Federal Home Loan 
     Bank Act (12 U.S.C. 1421 et seq.) is amended by striking 
     sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
       (d) Section 12.--Section 12 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1432) is amended--
       (1) in subsection (a)--
       (A) by striking ``, but, except'' and all that follows 
     through ``ten years'';
       (B) by striking ``subject to the approval of the Board'' 
     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 (12 U.S.C. 1422b(a)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) To issue and serve a notice of charges upon a Federal 
     home loan bank or upon any executive officer or director of a 
     Federal home loan bank if, in the determination of the 
     Finance Board, the bank, executive officer, or director is 
     engaging or has engaged in, or the Finance Board has 
     reasonable cause to believe that the bank, executive officer, 
     or director is about to engage in, any

[[Page 16863]]

     conduct that violates any provision of this Act or any law, 
     order, rule, or regulation or any condition imposed in 
     writing by the Finance Board in connection with the granting 
     of any application or other request by the bank, or any 
     written agreement entered into by the bank with the agency, 
     in accordance with the procedures provided in section 1371(c) 
     of the Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992. Such authority includes the same 
     authority to take affirmative action to correct conditions 
     resulting from violations or practices or to limit activities 
     of a bank or any executive officer or director of a bank as 
     appropriate Federal banking agencies have to take with 
     respect to insured depository institutions under paragraphs 
     (6) and (7) of section 8(b) of the Federal Deposit Insurance 
     Act, and to have all other powers, rights, and duties to 
     enforce this Act with respect to the Federal home loan banks 
     and their executive officers and directors as the Office of 
     Federal Housing Enterprise Oversight has to enforce the 
     Federal Housing Enterprises Financial Safety and Soundness 
     Act of 1992, the Federal National Mortgage Association 
     Charter Act, or the Federal Home Loan Mortgage Corporation 
     Act with respect to the Federal housing enterprises under the 
     Federal Housing Enterprises Financial Safety and Soundness 
     Act of 1992.
       ``(6) To address any insufficiencies in capital levels 
     resulting from the application of section 5(f) of the Home 
     Owners' Loan Act.
       ``(7) To sue and be sued, by and through its own 
     attorneys.''.
       (2) Technical amendment.--Section 111 of Public Law 93-495 
     (12 U.S.C. 250) is amended by 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;
       (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''; and
       (C) in subsection (j)(1)--
       (i) by striking ``to subsidize the interest rate on 
     advances'' and inserting ``to provide subsidies, including 
     subsidized interest rates on advances'';
       (ii) by striking ``Pursuant'' and inserting the following:
       ``(A) Establishment.--Pursuant''; and
       (iii) by adding at the end the following new subparagraph:
       ``(B) Nondelegation of approval authority.--Subject to such 
     regulations as the Finance Board may prescribe, the board of 
     directors of each Federal home loan bank may approve or 
     disapprove requests from members for Affordable Housing 
     Program subsidies, and may not delegate such authority.''.
       (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. 167. RESOLUTION FUNDING CORPORATION.

       (a) In General.--Section 21B(f)(2)(C) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read 
     as follows:
       ``(C) Payments by federal home loan banks.--
       ``(i) In general.--To the extent that the amounts available 
     pursuant to subparagraphs (A) and (B) are insufficient to 
     cover the amount of interest payments, each Federal home loan 
     bank shall pay to the Funding Corporation in each calendar 
     year, 20.75 percent of the net earnings of that bank (after 
     deducting expenses relating to section 10(j) and operating 
     expenses).
       ``(ii) Annual determination.--The Board annually shall 
     determine the extent to which the value of the aggregate 
     amounts paid by the Federal home loan banks exceeds or falls 
     short of the value of an annuity of $300,000,000 per year 
     that commences on the issuance date and ends on the final 
     scheduled maturity date of the obligations, and shall select 
     appropriate present value factors for making such 
     determinations.
       ``(iii) Payment term alterations.--The Board shall extend 
     or shorten the term of the payment obligations of a Federal 
     home loan bank under this subparagraph as necessary to ensure 
     that the value of all payments made by the banks is 
     equivalent to the value of an annuity referred to in clause 
     (ii).
       ``(iv) Term beyond maturity.--If the Board extends the term 
     of payments beyond the final scheduled maturity date for the 
     obligations, each Federal home loan bank shall continue to 
     pay 20.75 percent of its net earnings (after deducting 
     expenses relating to section 10(j) and operating expenses) to 
     the Treasury of the United States until the value of all such 
     payments by the Federal home loan banks is equivalent to the 
     value of an annuity referred to in clause (ii). In the final 
     year in which the Federal home loan banks are required to 
     make any payment to the Treasury under this subparagraph, if 
     the dollar amount represented by 20.75 percent of the net 
     earnings of the Federal home loan banks exceeds the remaining 
     obligation of the banks to the Treasury, the Finance Board 
     shall reduce the percentage pro rata to a level sufficient to 
     pay the remaining obligation.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on January 1, 1999. 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. 168. 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 Financial Services 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 aggregate on-balance sheet 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 shall be multiplied by 1.5, the 
     paid-in value of the outstanding Class C stock and the amount 
     of retained earnings shall be multiplied by 2.0, and such 
     higher amounts shall be deemed to be capital for purposes of 
     meeting the 5 percent minimum leverage ratio.
       ``(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 one 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;
       ``(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; and
       ``(iii) Class C stock, which shall be nonredeemable;
       ``(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

[[Page 16864]]

     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 (as determined in accordance with generally accepted 
     accounting principles)--
       ``(i) the amounts paid for the Class C stock and any other 
     nonredeemable stock approved by the Finance Board;
       ``(ii) the amounts paid for the Class B stock, in an amount 
     not to exceed 1 percent of the total assets of the bank; and
       ``(iii) the retained earnings of the bank; and
       ``(B) total capital of a Federal home loan bank shall 
     include--
       ``(i) permanent capital;
       ``(ii) the amounts paid for the Class A stock, Class B 
     stock (excluding any amount treated as permanent capital 
     under subparagraph (5)(A)(ii)), or any other class of 
     redeemable stock approved by the Finance Board;
       ``(iii) consistent with generally accepted accounting 
     principles, and subject to the regulation of the Finance 
     Board, a general allowance 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 
     provisions 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 one 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 
     Financial Services 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, Class C, or any other class of 
     nonredeemable stock, 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--
       ``(i) any stock issued by that bank shall be available only 
     to, held only by, and tradable only among members of that 
     bank and between that bank and its members; and
       ``(ii) a bank has no obligation to repurchase its 
     outstanding Class C stock but may do so, provided it is 
     consistent with Finance Board regulations and is at a price 
     that is mutually agreeable to the bank and the member; 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 by providing written notice to the 
     bank of its intent to do so. 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

[[Page 16865]]

       ``(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 State or Federal 
     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.
       ``(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 C stock of a 
     Federal home loan bank, and any other classes of 
     nonredeemable stock approved by the Finance Board (to the 
     extent provided in the terms thereof), shall own the retained 
     earnings, surplus, undivided profits, and equity reserves, if 
     any, of the bank.
       ``(2) No nonredeemable classes of stock.--If a Federal home 
     loan bank has no outstanding Class C or other such 
     nonredeemable stock, then the holders of any other classes of 
     stock of the bank then outstanding shall have ownership in, 
     and a private property right in, the retained earnings, 
     surplus, undivided profits, and equity reserves, if any, of 
     the bank.
       ``(3) 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.
       ``(4) 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.''.

                       Subtitle H--ATM Fee Reform

     SEC. 171. SHORT TITLE.

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

     SEC. 172. 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; and
       ``(ii) On the screen.--The notice required under clauses 
     (i) and (ii) of subparagraph (A) with respect to any fee 
     described in such subparagraph shall appear on the screen of 
     the automated teller machine, or on a paper notice issued 
     from such machine, after the transaction is initiated and 
     before the consumer is irrevocably committed to completing 
     the transaction.
       ``(C) Prohibition on fees not properly disclosed and 
     explicitly assumed by consumer.--No fee may be imposed by any 
     automated teller machine operator in connection with any 
     electronic fund transfer initiated by a consumer for which a 
     notice is required under subparagraph (A), unless--
       ``(i) the consumer receives such notice in accordance with 
     subparagraph (B); and
       ``(ii) the consumer elects to continue in the manner 
     necessary to effect the transaction after receiving such 
     notice.
       ``(D) Definitions.--For purposes of this paragraph, the 
     following definitions shall apply:
       ``(i) Electronic fund transfer.--The term `electronic fund 
     transfer' includes a transaction which involves a balance 
     inquiry initiated by a consumer in the same manner as an 
     electronic fund transfer, whether or not the consumer 
     initiates a transfer of funds in the course of the 
     transaction.
       ``(ii) Automated teller machine operator.--The term 
     `automated teller machine operator' means any person who--

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

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

     SEC. 173. 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)(ii)) if the consumer initiates a 
     transfer from an automated teller machine which is not 
     operated by the person issuing the card or other means of 
     access; and
       ``(B) any national, regional, or local network utilized to 
     effect the transaction.''.

     SEC. 174. 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 which 
     will be imposed upon the consummation of the transaction by--
       (A) any automated teller machine operator (as defined in 
     section 904(d)(3)(D)(ii) of the Electronic Fund Transfer Act) 
     involved in the transaction;
       (B) the financial institution holding the account of the 
     consumer;
       (C) any national, regional, or local network utilized to 
     effect the transaction; and
       (D) any other party involved in the transfer; and
       (2) the consumer to elect to consummate the transaction 
     after receiving the notice described in paragraph (1).
       (b) Factors To Be Considered.--In conducting the study 
     required under subsection

[[Page 16866]]

     (a) with regard to the notice requirement described in such 
     subsection, the Comptroller General shall consider the 
     following factors:
       (1) The availability of appropriate technology.
       (2) Implementation and operating costs.
       (3) The competitive impact any such notice requirement 
     would have on various sizes and types of institutions, if 
     implemented.
       (4) The period of time which would be reasonable for 
     implementing any such notice requirement.
       (5) The extent to which consumers would benefit from any 
     such notice requirement.
       (6) Any other factor the Comptroller General determines to 
     be appropriate in analyzing the feasibility of imposing any 
     such notice requirement.
       (c) Report to 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, 
     how such requirement should be implemented.

     SEC. 175. 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 I--Direct Activities of Banks

     SEC. 181. 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 one 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 J--Deposit Insurance Funds

     SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF FUNDS.

       (a) Study Required.--The Board of Directors of the Federal 
     Deposit Insurance Corporation shall conduct a study of the 
     following issues with regard to the Bank Insurance Fund and 
     the Savings Association Insurance Fund:
       (1) Safety and soundness.--The safety and soundness of the 
     funds and the adequacy of the reserve requirements applicable 
     to the funds in light of--
       (A) the size of the insured depository institutions which 
     are resulting from mergers and consolidations since the 
     effective date of the Riegle-Neal Interstate Banking and 
     Branching Efficiency Act of 1994; and
       (B) the affiliation of insured depository institutions with 
     other financial institutions pursuant to this Act and the 
     amendments made by this Act.
       (2) Concentration levels.--The concentration levels of the 
     funds, taking into account the number of members of each fund 
     and the geographic distribution of such members, and the 
     extent to which either fund is exposed to higher risks due to 
     a regional concentration of members or an insufficient 
     membership base relative to the size of member institutions.
       (3) Merger issues.--Issues relating to the planned merger 
     of the funds, including the cost of merging the funds and the 
     manner in which such costs will be distributed among the 
     members of the respective funds.
       (b) Report Required.--
       (1) In general.--Before the end of the 9-month period 
     beginning on the date of the enactment of this Act, the Board 
     of Directors of the Federal Deposit Insurance Corporation 
     shall submit a report to the Congress on the study conducted 
     pursuant to subsection (a).
       (2) Contents of report.--The report shall include--
       (A) detailed findings of the Board of Directors with regard 
     to the issues described in subsection (a);
       (B) a description of the plans developed by the Board of 
     Directors for merging the Bank Insurance Fund and the Savings 
     Association Insurance Fund, including an estimate of the 
     amount of the cost of such merger which would be borne by 
     Savings Association Insurance Fund members; and
       (C) such recommendations for legislative and administrative 
     action as the Board of Directors determines to be necessary 
     or appropriate to preserve the safety and soundness of the 
     deposit insurance funds, reduce the risks to such funds, 
     provide for an efficient merger of such funds, and for other 
     purposes.
       (c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Insured depository institution.--The term ``insured 
     depository institution'' has the same meaning as in section 
     3(c) of the Federal Deposit Insurance Act.
       (2) BIF and SAIF members.--The terms ``Bank Insurance Fund 
     member'' and ``Savings Association Insurance Fund member'' 
     have the same meanings as in section 7(l) of the Federal 
     Deposit Insurance Act.

     SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.

       (a) SAIF Special Reserves.--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 Reserves.--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).''.

                  Subtitle K--Miscellaneous Provisions

     SEC. 191. TERMINATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.

       (a) In General.--None of the proposed regulations described 
     in subsection (b) may be published in final form and, to the 
     extent any such regulation has become effective before the 
     date of the enactment of this Act, such regulation shall 
     cease to be effective as of such date.
       (b) Proposed Regulations Described.--The proposed 
     regulations referred to in subsection (a) are as follows:
       (1) The regulation proposed by the Comptroller of the 
     Currency to amend part 21 of title 12 of the Code of Federal 
     Regulations, as published in the Federal Register on December 
     7, 1998.
       (2) The regulation proposed by the Director of the Office 
     of Thrift Supervision to amend part 563 of title 12 of the 
     Code of Federal Regulations, as published in the Federal 
     Register on December 7, 1998.
       (3) The regulation proposed by the Board of Governors of 
     the Federal Reserve System to amend parts 208, 211, and 225 
     of title 12 of the Code of Federal Regulations, as published 
     in the Federal Register on December 7, 1998.
       (4) The regulation proposed by the Federal Deposit 
     Insurance Corporation to amend part 326 of title 12 of the 
     Code of Federal Regulations, as published in the Federal 
     Register on December 7, 1998.

     SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC FUND 
                   TRANSFERS.

       (a) Study.--The Secretary of the Treasury shall conduct a 
     feasibility study to determine--
       (1) whether all electronic payments issued by Federal 
     agencies could be routed through the Regional Finance Centers 
     of the Department of the Treasury for verification and 
     reconciliation;
       (2) whether all electronic payments made by the Federal 
     Government could be subjected to the same level of 
     reconciliation as United States Treasury checks, including 
     matching each payment issued with each corresponding deposit 
     at financial institutions;
       (3) whether the appropriate computer security controls are 
     in place in order to ensure the integrity of electronic 
     payments;
       (4) the estimated costs of implementing, if so recommended, 
     the processes and controls described in paragraphs (1), (2), 
     and (3); and
       (5) a possible timetable for implementing those processes 
     if so recommended.
       (b) Report to Congress.--Not later than October 1, 2000, 
     the Secretary of the Treasury shall submit a report to 
     Congress containing the results of the study required by 
     subsection (a).
       (c) Definition.--For purposes of this section, the term 
     ``electronic payment'' means any transfer of funds, other 
     than a transaction originated by check, draft, or similar 
     paper instrument, which is initiated through an electronic 
     terminal, telephonic instrument, or computer or magnetic 
     tapes so as to order, instruct, or authorize a debit or 
     credit to a financial account.

     SEC. 193. 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

[[Page 16867]]

     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 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. 194. STUDY OF COST OF ALL FEDERAL BANKING REGULATIONS.

       (a) In General.--In accordance with the finding in the 
     Board of Governors of the Federal Reserve System Staff Study 
     Numbered 171 (April, 1998) that ``Further research covering 
     more and different types of regulations and regulatory 
     requirements is clearly needed to make informed decisions 
     about regulations'', the Board of Governors of the Federal 
     Reserve System, in consultation with the other Federal 
     banking agencies (as defined in section 3 of the Federal 
     Deposit Insurance Act) shall conduct a comprehensive study of 
     the total annual costs and benefits of all Federal financial 
     regulations and regulatory requirements applicable to banks.
       (b) Report Required.--Before the end of the 2-year period 
     beginning on the date of the enactment of this Act, the Board 
     of Governors of the Federal Reserve System shall submit a 
     comprehensive report to the Congress containing the findings 
     and conclusions of the Board in connection with the study 
     required under subsection (a) and such recommendations for 
     legislative and administrative action as the Board may 
     determine to be appropriate.

     SEC. 195. 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.--Within 1 year of 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. 196. REGULATION OF UNINSURED STATE MEMBER BANKS.

       Section 9 of the Federal Reserve Act (12 U.S.C. 321 et 
     seq.) is amended by adding at the end the following new 
     paragraph:
       ``(24) Enforcement authority over uninsured state member 
     banks.--Section 3(u) of the Federal Deposit Insurance Act, 
     subsections (j) and (k) of section 7 of such Act, and 
     subsections (b) through (n), (s), (u), and (v) of section 8 
     of such Act shall apply to an uninsured State member bank in 
     the same manner and to the same extent such provisions apply 
     to an insured State member bank and any reference in any such 
     provision to `insured depository institution' shall be deemed 
     to be a reference to `uninsured State member bank' for 
     purposes of this paragraph.''.

     SEC. 197. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.

       Section 18 of the Federal Deposit Insurance Act (21 U.S.C. 
     1828) is amended by adding at the end the following new 
     subsection:
       ``(t) Limitation on Claims.--
       ``(1) In general.--Notwithstanding any other provision of 
     law other than paragraph (2), no person shall have any claim 
     for monetary damages or return of assets or other property 
     against any Federal banking agency (including in its capacity 
     as conservator or receiver) relating to the transfer of 
     money, assets, or other property to increase the capital of 
     an insured depository institution by any depository 
     institution holding company or controlling shareholder for 
     such depository institution, or any affiliate or subsidiary 
     of such depository institution, 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 depository institution is undercapitalized, 
     significantly undercapitalized, or critically 
     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) Exception.--No provision of this subsection shall be 
     construed as limiting--
       ``(A) the right of an insured depository institution, a 
     depository institution holding company, or any other agency 
     or person to seek direct review of an order or directive 
     issued by a Federal banking agency under this Act, the Bank 
     Holding Company Act of 1956, the National Bank Receivership 
     Act, the Bank Conservation Act, or the Home Owners' Loan Act;
       ``(B) the rights of any party to a contract pursuant to 
     section 11(e) of this Act; or
       ``(C) the rights of any party to a contract with a 
     depository institution holding company or a subsidiary of a 
     depository institution holding company (other than an insured 
     depository institution).''.

     SEC. 198. 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:
       ``(f) Applicable Rate and Other Charge Limitations.--
       ``(1) In general.--Except as provided for in paragraph (3), 
     upon the establishment of a branch of any insured depository 
     institution in a host 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 in 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 lows of the home State of the 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 an insured depository institution under the 
     constitution, statutory, or other laws of the host State, 
     without reference to this section.
       ``(2) Preemption.--The limitations established under 
     paragraph (1) shall apply only in any State that has a 
     constitutional provision that sets a maximum lawful rate of 
     interest on any contract at not more than 5 percent per annum 
     above the Federal Reserve Discount Rate or 90-day commercial 
     paper in effect in the Federal Reserve Bank in the Federal 
     Reserve District in which the State is located.
       ``(3) Rule of construction.--No provision of this 
     subsection shall be construed as superseding section 501 of 
     the Depository Institutions Deregulation and Monetary Control 
     Act of 1980.''.

     SEC. 198A. 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 (12 U.S.C. 611 et seq.); or
       ``(B) with the approval of the Board and the relevant 
     licensing authority (the Comptroller in the case of a Federal 
     branch or the appropriate State supervisor in the case of a 
     State branch), upgrade an agency, or a branch of the type 
     referred to in 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. 198B. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS.

       (a) Findings.--The Congress finds as follows:

[[Page 16868]]

       (1) Women's stature in society has risen considerably, as 
     they are now able to vote, own property, and pursue 
     independent careers, and are granted equal protection under 
     the law.
       (2) Women are at least as fiscally responsible as men, and 
     more than half of all women have sole responsibility for 
     balancing the family checkbook and paying the bills.
       (3) Estate planners, trust officers, investment advisers, 
     and other financial planners and advisers still encourage the 
     unjust and outdated practice of leaving assets in trust for 
     the category of wives and daughters, along with senile 
     parents, minors, and mentally incompetent children.
       (4) Estate planners, trust officers, investment advisers, 
     and other financial planners and advisers still use sales 
     themes and tactics detrimental to women by stereotyping women 
     as uncomfortable handling money and needing protection from 
     their own possible errors of judgment and ``fortune 
     hunters''.
       (b) Sense of the Congress.--It is the sense of the Congress 
     that estate planners, trust officers, investment advisers, 
     and other financial planners and advisers should--
       (1) eliminate examples in their training materials which 
     portray women as incapable and foolish; and
       (2) develop 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.

                  Subtitle L--Effective Date of Title

     SEC. 199. EFFECTIVE DATE.

       Except with regard to any subtitle or other provision of 
     this title for which a specific effective date is provided, 
     this title and the amendments made by this title shall take 
     effect at the end of the 180-day period beginning on 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 which 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 or fiduciary capacity in its trust department, or 
     another department where the trust or fiduciary activity is 
     regularly examined by bank examiners under the same standards 
     and in the same way as such activities are examined in the 
     trust department, 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 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 a registered transfer agent (including as a 
     registrar of stocks), 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--

       ``(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's compensation for such plan or program 
     consists chiefly of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(II) Dividend reinvestment plans.--The bank effects 
     transactions, as a registered transfer agent (including as a 
     registrar of stocks), 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;
       ``(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; and
       ``(cc) the bank's compensation for such plan or program 
     consists chiefly of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(III) Issuer plans.--The bank effects transactions, as a 
     registered transfer agent (including as a registrar of 
     stocks), in the securities of an issuer as part of that 
     issuer's plan 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;
       ``(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; and
       ``(cc) the bank's compensation for such plan or program 
     consists chiefly of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(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 a bank's delivery of written or electronic plan 
     materials to employees of the issuer, shareholders of the 
     issuer, or members of affinity groups of the issuer, so long 
     as such materials are--

       ``(aa) comparable in scope or nature to that permitted by 
     the Commission as of the date of the enactment of the 
     Financial Services Act of 1999; or
       ``(bb) otherwise permitted by the Commission.
       ``(v) Sweep accounts.--The bank effects transactions as 
     part of a program for the investment or reinvestment of 
     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 (as defined in 
     section 2 of the Bank Holding Company Act of 1956) of the 
     bank other than--

       ``(I) a registered broker or dealer; or
       ``(II) an affiliate that is engaged in merchant banking, as 
     described in section

[[Page 16869]]

     6(c)(3)(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 Financial Services Act of 1999, 
     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) effects transactions exclusively with qualified 
     investors.

       ``(viii) Safekeeping and custody activities.--

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

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

       ``(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) Excepted banking products.--The bank effects 
     transactions in excepted banking products, as defined in 
     section 206 of the Financial Services Act of 1999.
       ``(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) Broker dealer execution.--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.
       ``(F) Exception for entities subject to section 15(e).--The 
     term `broker' does not include a bank that--
       ``(i) was, immediately prior to the enactment of the 
     Financial Services Act of 1999, subject to section 15(e) of 
     this title; 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) Excepted banking products.--The bank buys or sells 
     excepted banking products, as defined in section 206 of the 
     Financial Services Act of 1999.
       ``(v) Derivative instruments.--The bank issues, buys, or 
     sells any derivative instrument to which the bank is a 
     party--

       ``(I) to or from a qualified investor, except that if the 
     instrument provides for the delivery of one or more 
     securities (other than a derivative instrument or government 
     security), the transaction shall be effected with or through 
     a registered broker or dealer; or
       ``(II) to or from other persons, except that if the 
     derivative instrument provides for the delivery of one or 
     more securities (other than a derivative instrument or 
     government security), or is a security (other than a 
     government security), the transaction shall be effected with 
     or through a registered broker or dealer; or
       ``(III) to or from any person if the instrument is neither 
     a security nor provides for the delivery of one or more 
     securities (other than a derivative instrument).''.

     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 this 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. Each appropriate Federal banking agency 
     shall make any such information available to the Commission 
     upon request.
       ``(2) 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.--

[[Page 16870]]

       ``(1) 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.
       ``(2) Criteria for rulemaking.--The Commission shall not 
     impose a requirement under paragraph (1) 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 or appropriate 
     in the public interest and for the protection of investors, 
     consistent with the requirements of section 3(f).
       ``(3) Considerations.--In making a determination under 
     paragraph (2), 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.
       ``(4) Consultation.--In promulgating rules under this 
     subsection, the Commission shall consult with and consider 
     the views of the Board of Governors of the Federal Reserve 
     System regarding 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.
       ``(5) New hybrid product.--For purposes of this subsection, 
     the term `new hybrid product' means a product that--
       ``(A) was not subjected to regulation by the Commission as 
     a security prior to the date of the enactment of this 
     subsection; and
       ``(B) is not an excepted banking product, as such term is 
     defined in section 206 of the Financial Services Act of 
     1999.''.

     SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT.

       (a) Definition of Excepted 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 
     ``excepted 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) a derivative instrument that involves or relates to--
       (A) currencies, except options on currencies that trade on 
     a national securities exchange;
       (B) interest rates, except interest rate derivative 
     instruments that--
       (i) are based on a security or a group or index of 
     securities (other than government securities or a group or 
     index of government securities);
       (ii) provide for the delivery of one or more securities 
     (other than government securities); or
       (iii) trade on a national securities exchange; or
       (C) commodities, other rates, indices, or other assets, 
     except derivative instruments that--
       (i) are securities or that are based on a group or index of 
     securities (other than government securities or a group or 
     index of government securities);
       (ii) provide for the delivery of one or more securities 
     (other than government securities); or
       (iii) trade on a national securities exchange.
       (b) Classification Limited.--Classification of a particular 
     product as an excepted 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.
       (c) Incorporated Definitions.--For purposes of this 
     section--
       (1) the terms ``bank'', ``qualified investor'', and 
     ``securities laws'' have the same meanings given in section 
     3(a) of the Securities Exchange Act of 1934, as amended by 
     this Act; and
       (2) the term ``government securities'' has the meaning 
     given in section 3(a)(42) of such Act (as amended by this 
     Act), and, for purposes of this section, commercial paper, 
     bankers acceptances, and commercial bills shall be treated in 
     the same manner as government securities.

     SEC. 207. ADDITIONAL DEFINITIONS.

       Section 3(a) of the Securities Exchange Act of 1934 is 
     amended by adding at the end the following new paragraphs:
       ``(54) Derivative instrument.--
       ``(A) Definition.--The term `derivative instrument' 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 an excepted banking 
     product, as defined in paragraphs (1) through (5) of section 
     206(a) of the Financial Services Act of 1999.
       ``(B) Classification limited.--Classification of a 
     particular contract as a derivative instrument pursuant to 
     this paragraph shall not be construed as finding or implying 
     that such instrument is or is not a security for any purpose 
     under the securities laws, or is or is not an account, 
     agreement, contract, or transaction for any purpose under the 
     Commodity Exchange Act.
       ``(55) Qualified investor.--
       ``(A) Definition.--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 
     $10,000,000 in investments;
       ``(xii) any natural person who owns and invests on a 
     discretionary basis, not less than $10,000,000 in 
     investments;
       ``(xiii) any government or political subdivision, agency, 
     or instrumentality of a government who owns and invests on a 
     discretionary basis not less than $50,000,000 in investments; 
     or
       ``(xiv) any multinational or supranational entity or any 
     agency or instrumentality thereof.
       ``(B) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person, 
     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 270-day 
     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.).

[[Page 16871]]



             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 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 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).''.
       (c) Fiduciary Duty of Custodian.--Section 36(a) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-35(a)) is 
     amended--
       (1) in paragraph (1), by striking ``or'' at the end;
       (2) in paragraph (2), by striking the period at the end and 
     inserting ``; or''; and
       (3) by inserting after paragraph (2) the following:
       ``(3) as custodian.''.

     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 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''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect at the end of the 1-year period beginning 
     on the date of the enactment of this subtitle.

     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 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 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 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 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

[[Page 16872]]

     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 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 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 with respect to the investment advisory 
     activities--
       ``(A) 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, of such bank or bank 
     holding company.
       ``(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.
       ``(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, bank, or department or division under any other 
     provision of law.
       ``(c) Definition.--For purposes of this section, the term 
     `appropriate Federal banking agency' shall have the same 
     meaning 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. INVESTMENT ADVISERS PROHIBITED FROM HAVING 
                   CONTROLLING INTEREST IN REGISTERED INVESTMENT 
                   COMPANY.

       Section 15 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-15) is amended by adding at the end the following new 
     subsection:
       ``(g) Controlling Interest in Investment Company 
     Prohibited.--
       ``(1) In general.--If an investment adviser to a registered 
     investment company, or an affiliated person of that 
     investment adviser, holds a controlling interest in that 
     registered investment company in a trustee or fiduciary 
     capacity, such person shall--
       ``(A) if it holds the shares in a trustee or fiduciary 
     capacity with respect to any employee benefit plan subject to 
     the Employee Retirement Income Security Act of 1974, transfer 
     the power to vote the shares of the investment company 
     through to another person acting in a fiduciary capacity with 
     respect to the plan who is not an affiliated person of that 
     investment adviser or any affiliated person thereof; or
       ``(B) if it holds the shares in a trustee or fiduciary 
     capacity with respect to any person or entity other than an 
     employee benefit plan subject to the Employee Retirement 
     Income Security Act of 1974--
       ``(i) transfer the power to vote the shares of the 
     investment company through to--

       ``(I) the beneficial owners of the shares;
       ``(II) another person acting in a fiduciary capacity who is 
     not an affiliated person of that investment adviser or any 
     affiliated person thereof; or
       ``(III) any person authorized to receive statements and 
     information with respect to the trust who is not an 
     affiliated person of that investment adviser or any 
     affiliated person thereof;

       ``(ii) vote the shares of the investment company held by it 
     in the same proportion as shares held by all other 
     shareholders of the investment company; or
       ``(iii) vote the shares of the investment company as 
     otherwise permitted under such rules, regulations, or orders 
     as the Commission may prescribe or issue consistent with the 
     protection of investors.
       ``(2) Exemption.--Paragraph (1) shall not apply to any 
     investment adviser to a registered investment company, or any 
     affiliated person of that investment adviser, that holds 
     shares of the investment company in a trustee or fiduciary 
     capacity if that registered investment company consists 
     solely of assets held in such capacities.
       ``(3) Safe harbor.--No investment adviser to a registered 
     investment company or any affiliated person of such 
     investment adviser shall be deemed to have acted unlawfully 
     or to have breached a fiduciary duty under State or Federal 
     law solely by reason of acting in accordance with clause (i), 
     (ii), or (iii) of paragraph (1)(B).''.

     SEC. 223. 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. 224. 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. 225. 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. 226. CHURCH PLAN EXCLUSION.

       Section 3(c)(14) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-3(c)(14)) is amended--
       (1) by redesignating clauses (i) and (ii) of subparagraph 
     (B) as subclauses (I) and (II), respectively;
       (2) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively;
       (3) by inserting ``(A)'' after ``(14)''; and
       (4) by adding at the end the following new subparagraph:

[[Page 16873]]

       ``(B) If a registered investment company would be excluded 
     from the definition of investment company under this 
     subsection but for the fact that some of the company's assets 
     do not satisfy the condition of subparagraph (A)(ii) of this 
     paragraph, then any investment adviser to the company or 
     affiliated person of such investment adviser shall not be 
     subject to the requirements of section 15(g)(1)(B) with 
     respect to shares of the investment company.''.

     SEC. 227. EFFECTIVE DATE.

       This subtitle shall take effect 90 days 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 
     subsection:
       ``(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 a wholesale financial institution, 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--

       ``(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) Holding company capital.--
       ``(A) Authority.--If the Commission finds that it is 
     necessary to adequately supervise investment bank holding 
     companies and their broker or dealer affiliates consistent 
     with the purposes of this subsection, the Commission may 
     adopt capital adequacy rules for supervised investment bank 
     holding companies.
       ``(B) Method of calculation.--In developing rules under 
     this paragraph:
       ``(i) Double leverage.--The Commission shall consider the 
     use by the supervised investment bank holding company of debt 
     and other liabilities to fund capital investments in 
     affiliates.
       ``(ii) No unweighted capital ratio.--The Commission shall 
     not impose under this section a capital ratio that is not 
     based on appropriate risk-weighting considerations.
       ``(iii) No capital requirement on regulated entities.--The 
     Commission shall not, by rule, regulation, guideline, order 
     or otherwise, impose any capital adequacy provision on a 
     nonbanking affiliate (other than a broker or dealer) that is 
     in compliance with applicable capital requirements of another 
     Federal regulatory authority or State insurance authority.

[[Page 16874]]

       ``(iv) Appropriate exclusions.--The Commission shall take 
     full account of the applicable capital requirements of 
     another Federal regulatory authority or State insurance 
     regulator.
       ``(C) Internal risk management models.--The Commission may 
     incorporate internal risk management models into its capital 
     adequacy rules for supervised investment bank holding 
     companies.
       ``(5) 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.
       ``(6) 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', `savings association', and 
     `wholesale financial institution' have the same meanings 
     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 given in 
     section 3 of the Federal Deposit Insurance Act.
       ``(E) The term `foreign bank' has the same meaning 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--Disclosure of Customer Costs of Acquiring Financial 
                                Products

     SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE.

       (a) Revised Regulations Required.--Within 1 year after the 
     date of the enactment of this Act, each Federal financial 
     regulatory authority shall prescribe rules, or revisions to 
     its rules, to improve the accuracy, simplicity, and 
     completeness, and to make more consistent, the disclosure of 
     information by persons subject to the jurisdiction of such 
     regulatory authority concerning any commissions, fees, or 
     other costs incurred by customers in the acquisition of 
     financial products.
       (b) Consultation.--In prescribing rules and revisions under 
     subsection (a), the Federal financial regulatory authorities 
     shall consult with each other and with appropriate State 
     financial regulatory authorities.
       (c) Consideration of Existing Disclosures.--In prescribing 
     rules and revisions under subsection (a), the Federal 
     financial regulatory authorities shall consider the 
     sufficiency and appropriateness of then existing laws and 
     rules applicable to persons subject to their jurisdiction, 
     and may prescribe exemptions from the rules and revisions 
     required by subsection (a) to the extent appropriate in light 
     of the objective of this section to increase the consistency 
     of disclosure practices.
       (d) Enforcement.--Any rule prescribed by a Federal 
     financial regulatory authority pursuant to this section 
     shall, for purposes of enforcement, be treated as a rule 
     prescribed by such regulatory authority pursuant to the 
     statute establishing such regulatory authority's jurisdiction 
     over the persons to whom such rule applies.
       (e) Definition.--As used in this section, the term 
     ``Federal financial regulatory authority'' means the Board of 
     Governors of the Federal Reserve System, the Securities and 
     Exchange Commission, the Comptroller of the Currency, the 
     Federal Deposit Insurance Corporation, the Commodity Futures 
     Trading Commission, and any self-regulatory organization 
     under the supervision of any of the foregoing.

              Subtitle E--Banks and Bank Holding Companies

     SEC. 251. 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 in section 3 of the Federal Deposit 
     Insurance Act.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

     SEC. 301. STATE REGULATION OF THE BUSINESS OF INSURANCE.

       The Act entitled ``An Act to express the intent of the 
     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.

     SEC. 302. 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 section 104.

     SEC. 303. 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. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

       (a) In General.--Except as provided in section 305, 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

[[Page 16875]]

     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.

     SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND 
                   THEIR AFFILIATES.

       (a) General Prohibition.--No national bank, and no 
     subsidiary of a 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 agency, a national bank 
     and a subsidiary of 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.I22  (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. 306. 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 as to whether any product is or is not 
     insurance, as defined in section 304(c) of this Act, or 
     whether a State statute, regulation, order, or interpretation 
     regarding any insurance sales or solicitation activity is 
     properly treated as preempted under Federal law, either 
     regulator may seek expedited judicial review of such 
     determination by the United States Court of Appeals for the 
     circuit in which the State is located or in the United States 
     Court of Appeals for the District of Columbia Circuit by 
     filing a petition for review in such court.
       (b) Expedited Review.--The United States Court of Appeals 
     in which a petition for review 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. 307. CONSUMER PROTECTION REGULATIONS.

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

     ``SEC. 47. CONSUMER PROTECTION REGULATIONS.

       ``(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 
     Financial Services Act of 1999, consumer protection 
     regulations (which the agencies jointly determine to be 
     appropriate) that--
       ``(A) apply to retail sales practices, solicitations, 
     advertising, or offers of any insurance product by any 
     insured depository institution or wholesale financial 
     institution or any person who 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 consumers to whom 
     such sales, solicitations, advertising, or offers are 
     directed as the agency determines to be appropriate.
       ``(2) Applicability to subsidiaries.--The regulations 
     prescribed pursuant to paragraph (1) shall extend such 
     protections to any subsidiaries of an insured depository 
     institution, as deemed appropriate by the 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 anticoercion rules applicable 
     to the sale of insurance products which prohibit an insured 
     depository institution from engaging in any practice that 
     would lead a consumer 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 insured depository 
     institution.

[[Page 16876]]

       ``(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 its affiliates or subsidiaries; 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) Adjustments for alternative methods of purchase.--In 
     prescribing the requirements under subparagraphs (A) and (D), 
     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.
       ``(D) Consumer acknowledgment.--A requirement that an 
     insured depository institution shall require any person 
     selling an insurance product at any office of, or on behalf 
     of, the institution to obtain, at the time 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 insured depository institution, or any 
     subsidiary as appropriate, which 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 other 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--
       ``(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:
       ``(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 which permit any person 
     accepting deposits from the public in an area where such 
     transactions are routinely conducted in an insured depository 
     institution to refer a customer who seeks to purchase any 
     insurance product to a qualified person who sells such 
     product, only if the person making the referral receives no 
     more than a one-time nominal fee of a fixed dollar amount for 
     each referral that does not depend on whether the referral 
     results in a transaction.
       ``(C) Qualification and licensing requirements.--Standards 
     prohibiting any insured depository institution from 
     permitting any person to sell or offer for sale any insurance 
     product in any part of any office of the institution, or on 
     behalf of the institution, unless such person is 
     appropriately qualified and licensed.
       ``(e) 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 insurance product which is 
     sold or offered for sale, as principal, agent, or broker, by 
     any insured depository institution or wholesale financial 
     institution or any person who is engaged in such activities 
     at an office of the institution or on behalf of the 
     institution.
       ``(3) Sense of the congress.--It is the sense of the 
     Congress that, by the end of the 30-month period beginning on 
     the date of the enactment of this Act, the States should 
     enact prohibitions against discrimination with respect to 
     insurance products that are at least as strict as the 
     prohibitions contained in paragraph (1).
       ``(4) 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 commissioner or other State authority 
     under any State law.
       ``(2) Coordination with state law.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     regulations prescribed by a Federal banking agency under this 
     section shall not apply to retail sales, solicitations, 
     advertising, or offers of any insurance product by any 
     insured depository institution or wholesale financial 
     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.--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 Federal 
     Deposit Insurance Corporation determine jointly that the 
     protection afforded by such provision for consumers 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, 
     such provision of the regulations prescribed under this 
     section shall supersede the comparable provision of such 
     State statute, regulation, order, or interpretation.
       ``(h) Insurance Product Defined.--For purposes of this 
     section, the term `insurance product' includes an annuity 
     contract the income of which is subject to tax treatment 
     under section 72 of the Internal Revenue Code of 1986.''.

     SEC. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR 
                   INSURANCE COMPANIES AND AFFILIATES.

       Except as provided in section 104(a)(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 an insured depository institution;
       (2) limit the amount of an insurer's assets that may be 
     invested in the voting securities of an insured 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

[[Page 16877]]

       (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. 309. 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 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 an insured depository institution, 
     wholesale financial institution, or financial holding 
     company.
       (c) Consultation.--Before making any determination relating 
     to the initial affiliation of, or the continuing affiliation 
     of, an insured depository institution, wholesale financial 
     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 an insured depository 
     institution, wholesale financial 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; insured depository 
     institution.--The terms ``appropriate Federal banking 
     agency'' and ``insured depository institution'' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.
       (2) Board; financial holding company; and wholesale 
     financial institution.--The terms ``Board'', ``financial 
     holding company'', and ``wholesale financial institution'' 
     have the same meanings as in section 2 of the Bank Holding 
     Company Act of 1956.

     SEC. 310. 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

[[Page 16878]]

     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.--For a period of 6 months after completion of an 
     initial public offering, 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) Contractual 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;
       (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 immediately 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 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, American Samoa, Guam, Puerto 
     Rico, or the United States Virgin 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 terms 
     ``redomestication'' and ``transfer'' mean 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, American 
     Samoa, Guam, Puerto Rico, or the United States Virgin 
     Islands.
       (13) State law.--The term ``State law'' means the statutes 
     of any State, the District of Columbia, American Samoa, Guam, 
     Puerto Rico, or the United States Virgin 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.

[[Page 16879]]



   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 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 National Association of Insurance 
     Commissioners' determination under this section and such 
     court shall apply the standards set forth in section 706 of 
     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 National Association of Insurance 
     Commissioners (hereafter in this subtitle referred to as 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 insured 
     depository institutions or wholesale financial 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

[[Page 16880]]

     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 seven members 
     appointed by the NAIC.
       (2) Requirement.--At least four of the members of the Board 
     shall 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 seven members of the Board of 
     the Association, the initial Board shall consist of the seven 
     State insurance regulators of the seven 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 seven 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) thirty 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.
       (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) for 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.--

[[Page 16881]]

       (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 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 
     National Association of Insurance Commissioners.
       (2) Procedures for obtaining national association of 
     insurance commissioners 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

[[Page 16882]]

     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, American Samoa, Guam, Puerto Rico, and 
     the United States Virgin 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 meaning given to such term 
     in section 13102 of title 49, United States Code.

                      Subtitle E--Confidentiality

     SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL INFORMATION.

       (a) In General.--A company which underwrites or sells 
     annuities contracts or contracts insuring, guaranteeing, or 
     indemnifying against loss, harm, damage, illness, disability, 
     or death (other than credit-related insurance) and any 
     subsidiary or affiliate thereof shall maintain a practice of 
     protecting the confidentiality of individually identifiable 
     customer health and medical and genetic information and may 
     disclose such information only--
       (1) with the consent, or at the direction, of the customer;
       (2) for insurance underwriting and reinsuring policies, 
     account administration, reporting, investigating, or 
     preventing fraud or material misrepresentation, processing 
     premium payments, processing insurance claims, administering 
     insurance benefits (including utilization review activities), 
     providing information to the customer's physician or other 
     health care provider, participating in research projects, 
     enabling the purchase, transfer, merger, or sale of any 
     insurance-related business, or as otherwise required or 
     specifically permitted by Federal or State law; or
       (3) in connection with--
       (A) 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 or account number, or by other payment 
     means;
       (B) the transfer of receivables, accounts, or interest 
     therein;
       (C) the audit of the debit, credit, or other payment 
     information;
       (D) compliance with Federal, State, or local law;
       (E) compliance with a properly authorized civil, criminal, 
     or regulatory investigation by Federal, State, or local 
     authorities as governed by the requirements of this section; 
     or
       (F) fraud protection, risk control, resolving customer 
     disputes or inquiries, communicating with the person to whom 
     the information relates, or reporting to consumer reporting 
     agencies.
       (b) State Actions for Violations.--In addition to such 
     other remedies as are provided under State law, if the chief 
     law enforcement officer of a State, State insurance 
     regulator, or an official or agency designated by a State, 
     has reason to believe that any person has violated or is 
     violating this title, the State may bring an action to enjoin 
     such violation in any appropriate United States district 
     court or in any other court of competent jurisdiction.
       (c) Effective Date; Sunset.--

[[Page 16883]]

       (1) Effective date.--Except as provided in paragraph (2), 
     subsection (a) shall take effect on February 1, 2000.
       (2) Sunset.--Subsection (a) shall not take effect if, or 
     shall cease to be effective on and after the date on which, 
     legislation is enacted that satisfies the requirements in 
     section 264(c)(1) of the Health Insurance Portability and 
     Accountability Act of 1996 (Public Law 104-191; 110 Stat. 
     2033).
       (d) Consultation.--While subsection (a) is in effect, State 
     insurance regulatory authorities, through the National 
     Association of Insurance Commissioners, shall consult with 
     the Secretary of Health and Human Services in connection with 
     the administration of such subsection.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

     SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND LOAN HOLDING 
                   COMPANIES.

       (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) Termination of expanded powers for new unitary 
     holding company.--
       ``(A) In general.--Subject to subparagraph (B) and 
     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 March 4, 1999, unless the company 
     is engaged, directly or indirectly (including through a 
     subsidiary other than a savings association), only in 
     activities that are permitted--
       ``(i) under paragraph (1)(C) or (2); or
       ``(ii) for financial holding companies under section 6(c) 
     of the Bank Holding Company Act of 1956.
       ``(B) Existing unitary holding companies and the successors 
     to such companies.--Subparagraph (A) shall not apply, and 
     paragraph (3) shall continue to apply, to a company (or any 
     subsidiary of such company) that--
       ``(i) either--

       ``(I) acquired one or more savings associations described 
     in paragraph (3) pursuant to applications at least one of 
     which was filed on or before March 4, 1999; or
       ``(II) subject to subparagraph (C), became a savings and 
     loan holding company by acquiring control of the company 
     described in subclause (I); and

       ``(ii) continues to control the savings association 
     referred to in clause (i)(II) or the successor to any such 
     savings association.
       ``(C) Notice process for nonfinancial activities by a 
     successor unitary holding company.--
       ``(i) Notice required.--Subparagraph (B) shall not apply to 
     any company described in subparagraph (B)(i)(II) which 
     engages, directly or indirectly, in any activity other than 
     activities described in clauses (i) and (ii) of subparagraph 
     (A), unless--

       ``(I) in addition to an application to the Director under 
     this section to become a savings and loan holding company, 
     the company submits a notice to the Board of Governors of the 
     Federal Reserve System of such nonfinancial activities in the 
     same manner as a notice of nonbanking activities is filed 
     with the Board under section 4(j) of the Bank Holding Company 
     Act of 1956; and
       ``(II) before the end of the applicable period under such 
     section 4(j), the Board either approves or does not 
     disapprove of the continuation of such activities by such 
     company, directly or indirectly, after becoming a savings and 
     loan holding company.

       ``(ii) Procedure.--Section 4(j) of the Bank Holding Company 
     Act of 1956, including the standards for review, shall apply 
     to any notice filed with the Board under this subparagraph in 
     the same manner as it applies to notices filed under such 
     section.''.
       (b) Technical and Conforming Amendment.--Section 10(c)(3) 
     of the Home Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is 
     amended by striking ``Notwithstanding'' and inserting 
     ``Except as provided in paragraph (9) and notwithstanding''.
       (c) Conforming Amendment.--Section 10(o)(5) of the Home 
     Owners' Loan Act (12 U.S.C. 1467a(o)(5)) is amended--
       (1) in subparagraph (E), by striking ``, except 
     subparagraph (B)''; and
       (2) by adding at the end the following new subparagraph:
       ``(F) In the case of a mutual holding company which is a 
     savings and loan holding company described in subsection 
     (c)(3), engaging in the activities permitted for financial 
     holding companies under section 6(c) of the Bank Holding 
     Company Act of 1956.''.

     SEC. 402. 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 Financial Services Act of 1999 may 
     retain the term `Federal' in the name of such institution if 
     such depository institution remains an insured depository 
     institution.
       ``(2) Definitions.--For purposes of this subsection, the 
     terms `depository institution', `insured depository 
     institution', `national bank', and `State bank' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.''.

                            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).
       (b) Opt Out.--
       (1) In general.--A financial institution may not disclose 
     nonpublic personal information to nonaffiliated third parties 
     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 parties;
       (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 parties; 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 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 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
       (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;

[[Page 16884]]

       (3) to protect the confidentiality or security of its 
     records pertaining to the consumer, the service or product, 
     or the transaction therein, or to protect against or prevent 
     actual or potential fraud, unauthorized transactions, claims, 
     or other liability, for required institutional risk control, 
     or for resolving customer disputes or inquiries, or to 
     persons holding a beneficial interest relating to the 
     consumer, or to persons acting in a fiduciary 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, a State insurance 
     authority, or the Federal Trade Commission), self-regulatory 
     organizations, or for an investigation on a matter related to 
     public safety;
       (6) to a consumer reporting agency in accordance with the 
     Fair Credit Reporting Act, or in accordance with 
     interpretations of such Act by the Board of Governors of the 
     Federal Reserve System or the Federal Trade Commission, 
     including interpretations published as commentary (16 CFR 
     601-622);
       (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
       (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 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.--A financial institution shall 
     clearly and conspicuously disclose to each consumer, at the 
     time of establishing the customer relationship with the 
     consumer and not less than annually, in writing or in 
     electronic form (or other form permitted by the regulations 
     prescribed under section 504), its policies and practices 
     with respect to protecting the nonpublic personal information 
     of consumers in accordance with the rules prescribed under 
     section 504.
       (b) Information to be Included.--The disclosure required by 
     subsection (a) shall include--
       (1) the policy 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 practices and policies 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.--The Federal banking agencies, 
     the National Credit Union Association, the Secretary of the 
     Treasury, and the Securities and Exchange Commission, shall 
     jointly prescribe, after consultation with the Federal Trade 
     Commission, and 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. Such regulations 
     shall be prescribed in accordance with applicable 
     requirements of the title 5, United States Code, and shall be 
     issued in final form within 6 months after the date of 
     enactment of this Act.
       (b) Authority to Grant Exceptions.--The regulations 
     prescribed under subsection (a) may include such additional 
     exceptions to subsections (a) and (b) of section 502 as are 
     deemed consistent with the purposes of this subtitle.

     SEC. 505. ENFORCEMENT.

       (a) In General.--This subtitle and the rules prescribed 
     thereunder shall be enforced by the Federal functional 
     regulators, the State insurance authorities, and the Federal 
     Trade Commission with respect to financial institutions 
     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, 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, 
     bank holding companies and their nonbank subsidiaries or 
     affiliates (except broker-dealers, affiliates 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, by the Board of Directors of 
     the Federal Deposit Insurance Corporation; and
       (D) savings association the deposits of which are insured 
     by the Federal Deposit Insurance Corporation, and any 
     subsidiaries of such a savings association, by the Director 
     of the Office of Thrift Supervision.
       (2) Under the Federal Credit Union Act, by the 
     Administrator of the National Credit Union Administration 
     with respect to any Federal or state chartered credit union, 
     and any subsidiaries of such an entity.
       (3) Under the Farm Credit Act of 1971, by the Farm Credit 
     Administration with respect to the Federal Agricultural 
     Mortgage Corporation, any Federal land bank, Federal land 
     bank association, Federal intermediate credit bank, or 
     production credit association.
       (4) Under the Securities Exchange Act of 1934, by the 
     Securities and Exchange Commission with respect to any 
     broker-dealer.
       (5) Under the Investment Company Act of 1940, by the 
     Securities and Exchange Commission with respect to investment 
     companies.
       (6) 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.
       (7) Under Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992 (12 U. S. C. 4501 et seq.), by the 
     Office of Federal Housing Enterprise Oversight with respect 
     to the Federal National Mortgage Association and the Federal 
     Home Loan Mortgage Corporation.
       (8) Under the Federal Home Loan Bank Act, by the Federal 
     Housing Finance Board with respect to Federal home loan 
     banks.
       (9) Under State insurance law, in the case of any person 
     engaged in providing insurance, by the State insurance 
     authority of the State in which the person is domiciled, 
     subject to section 104 of this Act.
       (10) Under the Federal Trade Commission Act, by the Federal 
     Trade Commission for any other financial institution that is 
     not subject to the jurisdiction of any agency or authority 
     under paragraphs (1) through (9) 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 subsection (a) of section 39 of the 
     Federal Deposit Insurance Act are implemented pursuant to 
     such section.
       (2) Exception.--The agencies and authorities described in 
     paragraphs (4), (5), (6), (9), and (10) of subsection (a) 
     shall implement the standards prescribed under section 501(b) 
     by rule with respect to the financial institutions subject to 
     their respective jurisdictions under subsection (a).
       (c) 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 meaning given to them in section 1(b) of the 
     International Banking Act of 1978.

     SEC. 506. FAIR CREDIT REPORTING ACT AMENDMENT.

       (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 in lieu 
     thereof 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), or to the 
     holding companies and affiliates of such persons.
       ``(2) The Administrator 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).

[[Page 16885]]



     SEC. 507. RELATION TO OTHER PROVISIONS.

       This subtitle shall not apply to any information to which 
     subtitle D of title III applies.

     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.--Before the end of the 6-month period beginning 
     on the date of the enactment of this Act, 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 meanings given to such terms 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;
       (F) the Farm Credit Administration; and
       (G) the Securities and Exchange Commission.
       (3) Financial institution.--The term ``financial 
     institution'' means any institution the business of which is 
     engaging in financial activities or activities that are 
     incidental to financial activities, as described in section 
     6(c) of the Bank Holding Company Act of 1956.
       (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 
     the 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 shall 
     include any list, description, or other grouping of consumers 
     (and publicly available information pertaining to them) that 
     is derived using any personally identifiable information 
     other than publicly available information.
       (5) Nonaffiliated third parties.--The term ``nonaffiliated 
     third parties'' 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 any payments between the 
     parties are based on business or profit generated.

     SEC. 510. EFFECTIVE DATE.

       This subtitle shall take effect 6 months after the date on 
     which the rules under section 503 are promulgated, except--
       (1) to the extent that a later date is specified in such 
     rules; and
       (2) that section 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 16886]]

       (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.--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 title VIII, the 
     Fair Debt Collection Practices Act, to enforce compliance 
     with such title.
       (b) Notice of Actions.--The Federal Trade Commission 
     shall--
       (1) notify the Securities and Exchange Commission whenever 
     the Federal Trade Commission initiates an investigation with 
     respect to a financial institution subject to regulation by 
     the Securities and Exchange Commission;
       (2) notify the Federal banking agency (as defined in 
     section 3(z) of the Federal Deposit Insurance Act) whenever 
     the Commission initiates an investigation with respect to a 
     financial institution subject to regulation by such Federal 
     banking agency; and
       (3) notify the appropriate State insurance regulator 
     whenever the Commission initiates an investigation with 
     respect to a financial institution subject to regulation by 
     such regulator.

     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 Commission, 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) 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 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)).
       (C) Securities institutions.--For purposes of subparagraph 
     (B)--
       (i) the terms ``broker'' and ``dealer'' have the meanings 
     provided in section 3 of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c);
       (ii) the term ``investment adviser'' has the meaning 
     provided 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 meaning 
     provided in section 3 of the Investment Company Act of 1940 
     (15 U.S.C. 80a-3).
       (D) 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.

  The motion was agreed to.
  The Senate bill was ordered to be read a third time, was read the 
third time, and passed.
  The title of the Senate bill was amended so as to read: ``An Act to 
enhance competition in the financial services industry by providing a 
prudential framework for the affiliation of banks, securities firms, 
and other financial service providers, and for other purposes.''.
  A motion to reconsider was laid on the table.

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