[Congressional Record (Bound Edition), Volume 157 (2011), Part 12]
[Senate]
[Pages 16984-16991]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. ENZI (for himself, Mr. Durbin, Mr. Alexander, Mr. Johnson 
        of South Dakota, Mr. Boozman, Mr. Reed, Mr. Blunt, Mr. 
        Whitehouse, Mr. Corker, and Mr. Pryor):
  S. 1832. A bill to restore States' sovereign rights to enforce State 
and local sales and use tax laws, and for other purposes; to the 
Committee on Finance.
  Mr. ENZI. Mr. President, I ask unanimous consent that the text of the 
bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1832

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Marketplace Fairness Act''.

     SEC. 2. SENSE OF CONGRESS.

       It is the sense of Congress that States should have the 
     ability to enforce their existing sales and use tax laws and 
     to treat similar sales transactions equally, without regard 
     to the manner in which the sale is transacted,   and the 
     right to collect - or decide not to collect - taxes that are 
     already owed under State law.

     SEC. 3. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE 
                   TAXES.

       (a) Streamlined Sales and Use Tax Agreement.--Each Member 
     State under the Streamlined Sales and Use Tax Agreement is 
     authorized to require all sellers not qualifying for a small 
     seller exception to collect and remit sales and use taxes 
     with respect to remote sales sourced to that Member State 
     pursuant to the provisions of the Streamlined Sales and Use 
     Tax Agreement. Such authority shall commence beginning no 
     earlier than the first day of the calendar quarter that is at 
     least 90 days after the date of the enactment of this Act.
       (b) Alternative.--
       (1) In general.--A State that is not a Member State under 
     the Streamlined Sales and Use Tax Agreement is authorized to 
     require all sellers not qualifying for the small seller 
     exception to collect and remit sales and use taxes with 
     respect to remote sales sourced to that State, but only if 
     the State adopts and implements minimum simplification 
     requirements. Such authority shall commence beginning no 
     earlier than the first day of the calendar quarter that is at 
     least 6 months after the date that the State enacts 
     legislation to implement each of the following minimum 
     simplification requirements:
       (A) Provide--
       (i) a single State-level agency to administer all sales and 
     use tax laws, including the collection and administration of 
     all State and applicable locality sales and use taxes for all 
     sales sourced to the State made by remote sellers,
       (ii) a single audit for all State and local taxing 
     jurisdictions within that State, and
       (iii) a single sales and use tax return to be used by 
     remote sellers and single and consolidated providers and to 
     be filed with the State-level agency.
       (B) Provide a uniform sales and use tax base among the 
     State and the local taxing jurisdictions within the State.
       (C) Require remote sellers and single and consolidated 
     providers to collect sales and use taxes pursuant to the 
     applicable destination rate, which is the sum of the 
     applicable State rate and any applicable rate for the local 
     jurisdiction into which the sale is made.
       (D) Provide--
       (i) adequate software and services to remote sellers and 
     single and consolidated providers that identifies the 
     applicable destination rate, including the State and local 
     sales tax rate (if any), to be applied on sales sourced to 
     the State, and
       (ii) certification procedures for both single providers and 
     consolidated providers to make software and services 
     available to remote sellers, and hold such providers harmless 
     for any errors or omissions as a result of relying on 
     information provided by the State.
       (E) Hold remote sellers using a single or consolidated 
     provider harmless for any errors and omissions by that 
     provider.
       (F) Relieve remote sellers from liability to the State or 
     locality for collection of the incorrect amount of sales or 
     use tax, including any penalties or interest, if collection 
     of the improper amount is the result of relying on 
     information provided by the State.
       (G) Provide remote sellers and single and consolidated 
     providers with 30 days notice of a rate change by any 
     locality in the State.
       (2) Treatment of local rate changes.--For purposes of this 
     subsection, local rate changes may only be effective on the 
     first day of a calendar quarter. Failure to provide notice 
     under paragraph (1)(G) shall require the State and locality 
     to hold the remote seller or single or consolidated provider 
     harmless for collecting tax at the immediately preceding 
     effective rate during the 30-day period. Each State must 
     provide updated rate information as part of the software and 
     services required by paragraph (1)(D)
       (c) Small Seller Exception.--A State shall be authorized to 
     require a remote seller, or a single or consolidated provider 
     acting on behalf of a remote seller, to collect sales or use 
     tax under this Act if the remote seller has gross annual 
     receipts in total remote sales in the United States in the 
     preceding calendar year exceeding $500,000.   For purposes of 
     determining whether the threshold in this subsection is met, 
     the sales of all persons related within the meaning of 
     subsections (b) and (c) of section 267 or section 707(b)(1) 
     of the Internal Revenue Code of 1986 shall be aggregated.

     SEC. 4. TERMINATION OF AUTHORITY.

       The authority granted by this Act shall terminate on the 
     date that the highest court of competent jurisdiction makes a 
     final determination that the State no longer meets the 
     requirements of this Act, and the determination of such court 
     is no longer subject to appeal.

     SEC. 5. LIMITATIONS.

       (a) In General.--Nothing in this Act shall be construed 
     as--
       (1) subjecting a seller or any other person to franchise, 
     income, occupation, or any other type of taxes, other than 
     sales and use taxes,
       (2) affecting the application of such taxes, or
       (3) enlarging or reducing State authority to impose such 
     taxes.
       (b) No Effect on Nexus.--No obligation imposed by virtue of 
     the authority granted by this Act shall be considered in 
     determining whether a seller or any other person has a nexus 
     with any State for any tax purpose other than sales and use 
     taxes.
       (c) Licensing and Regulatory Requirements.--Other than the 
     limitation set forth in subsection (a), and section 3, 
     nothing in this Act shall be construed as permitting or 
     prohibiting a State from--
       (1) licensing or regulating any person,
       (2) requiring any person to qualify to transact intrastate 
     business,
       (3) subjecting any person to State taxes not related to the 
     sale of goods or services, or
       (4) exercising authority over matters of interstate 
     commerce.

[[Page 16985]]

       (d) No New Taxes.--Nothing in this Act shall be construed 
     as encouraging a State to impose sales and use taxes on any 
     goods or services not subject to taxation prior to the date 
     of the enactment of this Act.
       (e) Intrastate Sales.--The provisions of this Act shall 
     only apply to remote sales and shall not apply to intrastate 
     sales or intrastate sourcing rules. States granted authority 
     under section 3(a) shall comply with the intrastate 
     provisions of the Streamlined Sales and Use Tax Agreement.

     SEC. 6. DEFINITIONS AND SPECIAL RULES.

       In this Act:
       (1) Consolidated provider.--The term ``consolidated 
     provider'' means any person certified by a State who has the 
     rights and responsibilities for sales and use tax 
     administration, collection, remittance, and audits for 
     transactions serviced or processed for the sale of goods or 
     services made by remote sellers on an aggregated basis.
       (2) Locality; local.--The terms ``locality'' and ``local'' 
     refer to any political subdivision of a State.
       (3) Member state.--The term ``Member State''--
       (A) means a Member State as that term is used under the 
     Streamlined Sales and Use Tax Agreement as in effect on the 
     date of the enactment of this Act, and
       (B) does not include any associate member under the 
     Streamlined Sales and Use Tax Agreement.
       (4) Person.--The term ``person'' means an individual, 
     trust, estate, fiduciary, partnership, corporation, limited 
     liability company, or other legal entity, and a State or 
     local government.
       (5) Remote sale.--The term ``remote sale'' means a sale of 
     goods or services attributed to a State with respect to which 
     a seller does not have adequate physical presence to 
     establish nexus under Quill Corp. v. North Dakota, 504 U.S. 
     298 (1992).
       (6) Remote seller.--The term ``remote seller'' means a 
     person that makes remote sales.
       (7) Single provider.--The term ``single provider'' means 
     any person certified by a State who has the rights and 
     responsibilities for sales and use tax administration, 
     collection, remittance, and audits for transactions serviced 
     or processed for the sale of goods or services made by remote 
     sellers.
       (8) Sourced.--For purposes of a State granted authority 
     under section 3(b), the location to which a remote sale is 
     sourced refers to the location where the item sold is 
     received by the purchaser, based on the location indicated by 
     instructions for delivery that the purchaser furnishes to the 
     seller. When no delivery location is specified, the remote 
     sale is sourced to the customer's address that is either 
     known to the seller or, if not known, obtained by the seller 
     during the consummation of the transaction, including the 
     address of the customer's payment instrument if no other 
     address is available. If an address is unknown and a billing 
     address cannot be obtained, the remote sale is sourced to the 
     address of the seller from which the remote sale was made. A 
     State granted authority under section 3(a) shall comply with 
     the sourcing provisions of the Streamlined Sales and Use Tax 
     Agreement.
       (9) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, Guam, American Samoa, the United States Virgin Islands, 
     the Commonwealth of the Northern Mariana Islands, and any 
     other territory or possession of the United States.
       (10) Streamlined sales and use tax agreement.--The term 
     ``Streamlined Sales and Use Tax Agreement'' means the multi-
     State agreement with that title adopted on November 12, 2002, 
     as in effect on the date of the enactment of this Act and as 
     further amended from time to time.

     SEC. 7. SEVERABILITY.

       If any provision of this Act or the application of such 
     provision to any person or circumstance is held to be 
     unconstitutional, the remainder of this Act and the 
     application of the provisions of such to any person or 
     circumstance shall not be affected thereby.
                                 ______
                                 
      By Mrs. HAGAN (for herself, Mr. Corker, Mr. Schumer, and Mr. 
        Crapo):
  S. 1835. A bill to establish standards for covered bond programs and 
a covered bond regulatory oversight program; and for other purposes; to 
the Committee on Banking, Housing, and Urban Affairs.
  Mrs. HAGAN. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1835

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``United States Covered Bond 
     Act''.

     SEC. 2. DEFINITIONS.

       For purposes of this Act, the following definitions shall 
     apply:
       (1) Ancillary asset.--The term ``ancillary asset'' means--
       (A) any interest rate or currency swap associated with 1 or 
     more eligible assets, substitute assets, or other assets in a 
     cover pool;
       (B) any credit enhancement or liquidity arrangement 
     associated with 1 or more eligible assets, substitute assets, 
     or other assets in a cover pool;
       (C) any guarantee, letter-of-credit right, or other 
     secondary obligation that supports any payment or performance 
     of 1 or more eligible assets, substitute assets, or other 
     assets in a cover pool; and
       (D) any proceeds of, or other property incident to, 1 or 
     more eligible assets, substitute assets, or other assets in a 
     cover pool.
       (2) Corporation.--The term ``Corporation'' means the 
     Federal Deposit Insurance Corporation.
       (3) Cover pool.--The term ``cover pool'' means a dynamic 
     pool of assets that is comprised of--
       (A) in the case of any eligible issuer described in 
     subparagraph (A), (B), (C), (D), or (E) of paragraph (9)--
       (i) 1 or more eligible assets from a single eligible asset 
     class; and
       (ii) 1 or more substitute assets or ancillary assets; and
       (B) in the case of any eligible issuer described in 
     paragraph (9)(F)--
       (i) the covered bonds issued by each sponsoring eligible 
     issuer; and
       (ii) 1 or more substitute assets or ancillary assets.
       (4) Covered bond.--The term ``covered bond'' means any 
     recourse debt obligation of an eligible issuer that--
       (A) has an original term to maturity of not less than 1 
     year;
       (B) is secured by a perfected security interest in or other 
     perfected lien on a cover pool that is owned directly or 
     indirectly by the issuer of the obligation;
       (C) is issued under a covered bond program that has been 
     approved by the applicable covered bond regulator;
       (D) is identified in a register of covered bonds that is 
     maintained by the Secretary; and
       (E) is not a deposit (as defined in section 3(l) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813(l))).
       (5) Covered bond program.--The term ``covered bond 
     program'' means any program of an eligible issuer under 
     which, on the security of a single cover pool, 1 or more 
     series of covered bonds may be issued.
       (6) Covered bond regulator.--The term ``covered bond 
     regulator'' means--
       (A) for any eligible issuer that is subject to the 
     jurisdiction of an appropriate Federal banking agency (as 
     defined in section 3(q) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1813(q))), the appropriate Federal banking agency;
       (B) for any eligible issuer that is described in paragraph 
     (9)(F), that is not subject to the jurisdiction of an 
     appropriate Federal banking agency, and that is sponsored by 
     only 1 eligible issuer, the covered bond regulator for the 
     sponsor;
       (C) for any eligible issuer that is described in paragraph 
     (9)(F), that is not subject to the jurisdiction of an 
     appropriate Federal banking agency, and that is sponsored by 
     more than 1 eligible issuer, the covered bond regulator for 
     the sponsor whose covered bonds constitute the largest share 
     of the cover pool of the issuer; and
       (D) for any other eligible issuer that is not subject to 
     the jurisdiction of an appropriate Federal banking agency, 
     the Board of Governors of the Federal Reserve System.
       (7) Eligible asset.--The term ``eligible asset'' means--
       (A) in the case of the residential mortgage asset class--
       (i) any first-lien mortgage loan that is secured by 1-to-4 
     family residential property;
       (ii) any mortgage loan that is insured under the National 
     Housing Act (12 U.S.C. 1701 et seq.); and
       (iii) any loan that is guaranteed, insured, or made under 
     chapter 37 of title 38, United States Code;
       (B) in the case of the commercial mortgage asset class, any 
     commercial mortgage loan (including any multifamily mortgage 
     loan);
       (C) in the case of the public sector asset class--
       (i) any security issued by a State, municipality, or other 
     governmental authority;
       (ii) any loan made to a State, municipality, or other 
     governmental authority; and
       (iii) any loan, security, or other obligation that is 
     insured or guaranteed, in full or substantially in full, by 
     the full faith and credit of the United States Government 
     (whether or not such loan, security, or other obligation is 
     also part of another eligible asset class);
       (D) in the case of the auto asset class, any auto loan or 
     lease;
       (E) in the case of the student loan asset class, any 
     student loan (whether guaranteed or nonguaranteed);
       (F) in the case of the credit or charge card asset class, 
     any extension of credit to a person under an open-end credit 
     plan;
       (G) in the case of the small business asset class, any loan 
     that is made or guaranteed under a program of the Small 
     Business Administration; and
       (H) in the case of any other eligible asset class, any 
     asset designated by the Secretary,

[[Page 16986]]

     by rule and in consultation with the covered bond regulators, 
     as an eligible asset for purposes of such class.
       (8) Eligible asset class.--The term ``eligible asset 
     class'' means--
       (A) a residential mortgage asset class;
       (B) a commercial mortgage asset class;
       (C) a public sector asset class;
       (D) an auto asset class;
       (E) a student loan asset class;
       (F) a credit or charge card asset class;
       (G) a small business asset class; and
       (H) any other eligible asset class designated by the 
     Secretary, by rule and in consultation with the covered bond 
     regulators.
       (9) Eligible issuer.--The term ``eligible issuer'' means--
       (A) any insured depository institution and any subsidiary 
     of such institution;
       (B) any bank holding company, any savings and loan holding 
     company, and any subsidiary of any of such companies;
       (C) any broker or dealer that is registered under section 
     15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) and 
     is a member of the Securities Investor Protection 
     Corporation, and any subsidiary of such broker or dealer;
       (D) any insurer that is supervised by a State insurance 
     regulator, and any subsidiary of such insurer;
       (E) any nonbank financial company (as defined in section 
     102(a)(4) of the Dodd-Frank Wall Street Reform and Consumer 
     Protection Act (12 U.S.C. 5311(a)(4))) that is supervised by 
     the Board of Governors of the Federal Reserve System under 
     section 113 of the Dodd-Frank Wall Street Reform and Consumer 
     Protection Act (12 U.S.C. 5323), including any intermediate 
     holding company supervised as a nonbank financial company, 
     and any subsidiary of such a nonbank financial company; and
       (F) any issuer that is sponsored by 1 or more eligible 
     issuers for the sole purpose of issuing covered bonds on a 
     pooled basis.
       (10) Oversight program.--The term ``oversight program'' 
     means the covered bond regulatory oversight program 
     established under section 3(a).
       (11) Secretary.--The term ``Secretary'' means the Secretary 
     of the Department of the Treasury.
       (12) Substitute asset.--The term ``substitute asset'' 
     means--
       (A) cash;
       (B) any direct obligation of the United States Government, 
     and any security or other obligation whose full principal and 
     interest are insured or guaranteed by the full faith and 
     credit of the United States Government;
       (C) any direct obligation of a United States Government 
     corporation or Government-sponsored enterprise of the highest 
     credit quality, and any other security or other obligation of 
     the highest credit quality whose full principal and interest 
     are insured or guaranteed by such corporation or enterprise, 
     except that the outstanding principal amount of these 
     obligations in any cover pool may not exceed an amount equal 
     to 20 percent of the outstanding principal amount of all 
     assets in the cover pool without the approval of the 
     applicable covered bond regulator;
       (D) any other substitute asset designated by the Secretary, 
     by rule and in consultation with the covered bond regulators; 
     and
       (E) any deposit account or securities account into which 
     only an asset described in subparagraph (A), (B), (C), or (D) 
     may be deposited or credited.

     SEC. 3. REGULATORY OVERSIGHT OF COVERED BOND PROGRAMS 
                   ESTABLISHED.

       (a) Establishment.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary shall, by rule and 
     in consultation with the covered bond regulators, establish a 
     covered bond regulatory oversight program that provides for--
       (A) covered bond programs to be evaluated according to 
     reasonable and objective standards in order to be approved 
     under paragraph (2), including any additional eligibility 
     standards for eligible assets and any other criteria 
     determined appropriate by the Secretary to further the 
     purposes of this Act;
       (B) covered bond programs to be maintained in a manner that 
     is consistent with this Act and safe and sound asset-
     liability management and other financial practices; and
       (C) any estate created under section 4 to be administered 
     in a manner that is consistent with maximizing the value and 
     the proceeds of the related cover pool in a resolution under 
     this Act.
       (2) Approval of each covered bond program.--
       (A) In general.--A covered bond shall be subject to this 
     Act only if the covered bond is issued by an eligible issuer 
     under a covered bond program that is approved by the 
     applicable covered bond regulator.
       (B) Approval process.--Each covered bond regulator shall 
     apply the standards established by the Secretary under the 
     oversight program to evaluate a covered bond program that has 
     been submitted by an eligible issuer for approval. Each 
     covered bond regulator also shall take into account relevant 
     supervisory factors, including safety and soundness 
     considerations, in evaluating a covered bond program that has 
     been submitted for approval. Each covered bond regulator, 
     promptly after approving a covered bond program, shall 
     provide the Secretary with the name of the covered bond 
     program, the name of the eligible issuer, and all other 
     information reasonably requested by the Secretary in order to 
     update the registry under paragraph (3)(A). Each eligible 
     issuer, promptly after issuing a covered bond under an 
     approved covered bond program, shall provide the Secretary 
     with all information reasonably requested by the Secretary in 
     order to update the registry under paragraph (3)(B).
       (C) Existing covered bond programs.--A covered bond 
     regulator may approve a covered bond program that is in 
     existence on the date of the enactment of this Act. Upon such 
     approval, each covered bond under the covered bond program 
     shall be subject to this Act, regardless of when the covered 
     bond was issued.
       (D) Multiple covered bond programs permitted.--An eligible 
     issuer may have more than 1 covered bond program.
       (E) Cease and desist authority.--The applicable covered 
     bond regulator may direct an eligible issuer to cease issuing 
     covered bonds under an approved covered bond program if the 
     covered bond program is not maintained in a manner that is 
     consistent with this Act and the oversight program and if, 
     after notice that is reasonable under the circumstances, the 
     issuer does not remedy all deficiencies identified by the 
     applicable covered bond regulator.
       (F) Cap on the amount of outstanding covered bonds.--
       (i) In general.--With respect to each eligible issuer that 
     submits a covered bond program for approval, the applicable 
     covered bond regulator shall set, consistent with safety and 
     soundness considerations and the financial condition of the 
     eligible issuer, the maximum amount, as a percentage of the 
     eligible issuer's total assets, of outstanding covered bonds 
     that the eligible issuer may issue.
       (ii) Review of cap.--The applicable covered bond regulator 
     may, not more frequently than quarterly, review the 
     percentage set under clause (i) and, if safety and soundness 
     considerations or the financial condition of the eligible 
     issuer has changed, increase or decrease such percentage. Any 
     decrease made pursuant to this clause shall have no effect on 
     existing covered bonds issued by the eligible issuer.
       (3) Registry.--Under the oversight program, the Secretary 
     shall maintain a registry that is published on a Web site 
     available to the public and that, for each covered bond 
     program approved by a covered bond regulator, contains--
       (A) the name of the covered bond program, the name of the 
     eligible issuer, and all other information that the Secretary 
     considers necessary to adequately identify the covered bond 
     program and the eligible issuer; and
       (B) all information that the Secretary considers necessary 
     to adequately identify all outstanding covered bonds issued 
     under the covered bond program (including the reports 
     described in paragraphs (3) and (4) of subsection (b)).
       (4) Fees.--Each covered bond regulator may levy, on the 
     issuers of covered bonds under the primary supervision of 
     such covered bond regulator, reasonably apportioned fees that 
     such covered bond regulator considers necessary, in the 
     aggregate, to defray the costs of such covered bond regulator 
     carrying out the provisions of this Act. Such funds shall not 
     be construed to be Government funds or appropriated monies 
     and shall not be subject to apportionment for purposes of 
     chapter 15 of title 31, United States Code, or any other 
     provision of law.
       (b) Minimum Over-Collateralization Requirements.--
       (1) Requirements established.--The Secretary, by rule and 
     in consultation with the covered bond regulators, shall 
     establish minimum over-collateralization requirements for 
     covered bonds backed by each of the eligible asset classes. 
     The minimum over-collateralization requirements shall be 
     designed to ensure that sufficient eligible assets and 
     substitute assets are maintained in the cover pool to satisfy 
     all principal and interest payments on the covered bonds when 
     due through maturity and shall be based on the credit, 
     collection, and interest rate risks (excluding the liquidity 
     risks) associated with the eligible asset class.
       (2) Asset coverage test.--The eligible assets and the 
     substitute assets in any cover pool shall be required, in the 
     aggregate, to meet at all times the applicable minimum over-
     collateralization requirements.
       (3) Monthly reporting.--On a monthly basis, each issuer of 
     covered bonds shall submit a report on whether the cover pool 
     that secures the covered bonds meets the applicable minimum 
     over-collateralization requirements to--
       (A) the Secretary;
       (B) the applicable covered bond regulator;
       (C) the applicable indenture trustee;
       (D) the applicable covered bondholders; and
       (E) the applicable independent asset monitor.
       (4) Independent asset monitor.--
       (A) Appointment.--Each issuer of covered bonds shall 
     appoint the indenture trustee for

[[Page 16987]]

     the covered bonds, or another unaffiliated entity, as an 
     independent asset monitor for the applicable cover pool.
       (B) Duties.--An independent asset monitor appointed under 
     subparagraph (A) shall, on an annual or other more frequent 
     periodic basis determined by the Secretary under the 
     oversight program--
       (i) verify whether the cover pool meets the applicable 
     minimum over-collateralization requirements; and
       (ii) report to the Secretary, the applicable covered bond 
     regulator, the applicable indenture trustee, and the 
     applicable covered bondholders on whether the cover pool 
     meets the applicable minimum over-collateralization 
     requirements.
       (C) Removal and replacement.--The independent asset monitor 
     appointed under subparagraph (A) may be removed and 
     replaced--
       (i) by a covered bond regulator in any case in which such 
     action is in the best interest of the covered bond investors; 
     and
       (ii) by covered bond holders who own a majority of the 
     outstanding principal amount of the covered bonds secured by 
     the applicable cover pool, at any time.
       (5) No loss of status.--Covered bonds shall remain subject 
     to this Act regardless of whether the applicable cover pool 
     ceases to meet the applicable minimum over-collateralization 
     requirements.
       (6) Failure to meet requirements.--
       (A) In general.--If a cover pool fails to meet the 
     applicable minimum over-collateralization requirements, and 
     if the failure is not cured within the time specified in the 
     related transaction documents, the failure shall be an 
     uncured default for purposes of section 4(a).
       (B) Notice required.--An issuer of covered bonds shall 
     promptly give the Secretary and the applicable covered bond 
     regulator written notice if the cover pool securing the 
     covered bonds fails to meet the applicable minimum over-
     collateralization requirements, if the failure is cured 
     within the time specified in the related transaction 
     documents, or if the failure is not so cured.
       (c) Requirements for Eligible Assets.--
       (1) Requirements.--
       (A) Loans.--A loan shall not qualify as an eligible asset 
     for so long as the loan is delinquent for more than 60 
     consecutive days.
       (B) Securities.--A security shall not qualify as an 
     eligible asset for so long as the security does not meet any 
     credit-quality requirement under this Act.
       (C) Origination.--An asset shall not qualify as an eligible 
     asset if the asset was not originated in compliance with any 
     rule or supervisory guidance of a Federal agency applicable 
     to the asset at the time of origination.
       (D) No double pledge.--An asset shall not qualify as an 
     eligible asset for so long as the asset is subject to a prior 
     perfected security interest or other prior perfected lien 
     that has been granted in an unrelated transaction. Nothing in 
     this Act shall affect such a prior perfected security 
     interest or other prior perfected lien, and the rights of 
     such lien holders.
       (2) Failure to meet requirements.--Subject to paragraph 
     (1)(D), if an asset in a cover pool does not satisfy any 
     applicable requirement described in paragraph (1) or any 
     other applicable standard or criterion described in this Act, 
     the oversight program, or the related transaction documents, 
     the asset shall not qualify as an eligible asset for purposes 
     of the asset coverage test described in subsection (b)(2). A 
     disqualified asset shall remain in the cover pool unless and 
     until removed by the issuer in compliance with the provisions 
     of this Act, the oversight program, and the related 
     transaction documents. No disqualified asset may be removed 
     from the cover pool after an estate has been created for the 
     related covered bond program under section 4(b)(1) or 
     4(c)(2), except in connection with the management of the 
     cover pool under section 4(d)(1)(E).
       (d) Other Requirements.--
       (1) Books and records of issuer.--Each issuer of covered 
     bonds shall clearly mark its books and records to identify 
     the assets that comprise the cover pool securing the covered 
     bonds.
       (2) Schedule of eligible assets and substitute assets.--
     Each issuer of covered bonds shall deliver to the applicable 
     indenture trustee and the applicable independent asset 
     monitor, on at least a monthly basis, a schedule that 
     identifies all eligible assets and substitute assets in the 
     cover pool securing the covered bonds.
       (3) Single eligible asset class.--No cover pool described 
     in section 2(3)(A) may include eligible assets from more than 
     1 eligible asset class. No cover pool described in section 
     2(3)(B) may include covered bonds backed by more than 1 
     eligible asset class.

     SEC. 4. RESOLUTION UPON DEFAULT OR INSOLVENCY.

       (a) Uncured Default Defined.--For purposes of this section, 
     the term ``uncured default'' means a default on a covered 
     bond that has not been cured within the time, if any, 
     specified in the related transaction documents.
       (b) Default on Covered Bonds Prior to Conservatorship, 
     Receivership, Liquidation, or Bankruptcy.--
       (1) Creation of separate estate.--If an uncured default 
     occurs on a covered bond before the issuer of the covered 
     bond enters conservatorship, receivership, liquidation, or 
     bankruptcy, an estate shall be immediately and automatically 
     created by operation of law and shall exist and be 
     administered separate and apart from the issuer or any 
     subsequent conservatorship, receivership, liquidating agency, 
     or estate in bankruptcy for the issuer or any other assets of 
     the issuer. A separate estate shall be created for each 
     affected covered bond program.
       (2) Assets and liabilities of estate.--Any estate created 
     under paragraph (1) shall be comprised of the cover pool 
     (including over-collateralization in the cover pool) that 
     secures the covered bond. The cover pool shall be immediately 
     and automatically released to and held by the estate free and 
     clear of any right, title, interest, or claim of the issuer 
     or any conservator, receiver, liquidating agent, or trustee 
     in bankruptcy for the issuer or any other assets of the 
     issuer. The estate shall be fully liable on the covered bond 
     and all other covered bonds and related obligations of the 
     issuer (including obligations under related derivative 
     transactions) that are secured by a perfected security 
     interest in or other perfected lien on the cover pool when 
     the estate is created. The estate shall not be liable on any 
     obligation of the issuer that is not secured by a perfected 
     security interest in or other perfected lien on the cover 
     pool when the estate is created. No conservator, receiver, 
     liquidating agent, or trustee in bankruptcy for the issuer 
     may charge or assess the estate for any claim of the 
     conservator, receiver, liquidating agent, or trustee in 
     bankruptcy or the conservatorship, receivership, liquidating 
     agency, or estate in bankruptcy and may not obtain or perfect 
     a security interest in or other lien on the cover pool to 
     secure such a claim.
       (3) Retention of claims.--Any holder of a covered bond or 
     related obligation for which an estate has become liable 
     under paragraph (2) shall retain a claim against the issuer 
     for any deficiency with respect to the covered bond or 
     related obligation. If the issuer enters conservatorship, 
     receivership, liquidation, or bankruptcy, any contingent 
     claim for such a deficiency shall be allowed as a provable 
     claim in the conservatorship, receivership, liquidating 
     agency, or bankruptcy case. The contingent claim shall be 
     estimated by the conservator, receiver, liquidating agent, or 
     bankruptcy court for purposes of allowing the claim as a 
     provable claim if awaiting the fixing of the contingent claim 
     would unduly delay the resolution of the conservatorship, 
     receivership, liquidating agency, or bankruptcy case.
       (4) Residual interest.--
       (A) Issuance of residual interest.--Upon the creation of an 
     estate under paragraph (1), a residual interest in the estate 
     shall be immediately and automatically issued by operation of 
     law to the issuer.
       (B) Nature of residual interest.--The residual interest 
     under subparagraph (A) shall--
       (i) be an exempted security as described in section 5;
       (ii) represent the right to any surplus from the cover pool 
     after the covered bonds and all other liabilities of the 
     estate have been fully and irrevocably paid; and
       (iii) be evidenced by a certificate executed by the trustee 
     of the estate.
       (5) Obligations of issuer.--
       (A) In general.--After the creation of an estate under 
     paragraph (1), the issuer shall--
       (i) transfer to or at the direction of the trustee for the 
     estate all property of the estate that is in the possession 
     or under the control of the issuer, including all tangible or 
     electronic books, records, files, and other documents or 
     materials relating to the assets and liabilities of the 
     estate; and
       (ii) at the election of the trustee or a servicer or 
     administrator for the estate, continue servicing the 
     applicable cover pool for 120 days after the creation of the 
     estate in return for a fair-market-value fee, as determined 
     by the trustee in consultation with the applicable covered 
     bond regulator, that shall be payable from the estate as an 
     administrative expense.
       (B) Obligations absolute.--Neither the issuer, whether 
     acting as debtor in possession or in any other capacity, nor 
     any conservator, receiver, liquidating agent, or trustee in 
     bankruptcy for the issuer or any other assets of the issuer 
     may disaffirm, repudiate, or reject the obligation to turn 
     over property or to continue servicing the cover pool as 
     provided in subparagraph (A).
       (c) Default on Covered Bonds Upon Conservatorship, 
     Receivership, Liquidation, or Bankruptcy.--
       (1) Corporation conservatorship or receivership.--
       (A) In general.--If the Corporation is appointed as 
     conservator or receiver for an issuer of covered bonds before 
     an uncured default results in the creation of an estate under 
     subsection (b), the Corporation as conservator or receiver 
     shall have an exclusive right, during the 1-year period 
     beginning on the date of the appointment, to transfer any 
     cover pool owned by the issuer in its entirety, together with 
     all covered bonds and related obligations that are secured by 
     a perfected security interest in or other perfected lien on 
     the cover pool, to another eligible

[[Page 16988]]

     issuer that meets all conditions and requirements specified 
     in the related transaction documents. The Corporation as 
     conservator or receiver may not remove any asset from the 
     cover pool, except to the extent otherwise agreed by a 
     transferee that has assumed the covered bond program pursuant 
     to subparagraph (C).
       (B) Obligations during 1-year period.--During the 1-year 
     period described in subparagraph (A), the Corporation as 
     conservator or receiver shall fully and timely satisfy all 
     monetary and nonmonetary obligations of the issuer under all 
     covered bonds and the related transaction documents and shall 
     fully and timely cure all defaults by the issuer (other than 
     its conservatorship or receivership) under the applicable 
     covered bond program, in each case, until the earlier of--
       (i) the transfer of the applicable covered bond program to 
     another eligible issuer as provided in subparagraph (A); or
       (ii) the delivery to the Secretary, the applicable covered 
     bond regulator, the applicable indenture trustee, and the 
     applicable covered bondholders of a written notice from the 
     Corporation as conservator or receiver electing to cease 
     further performance under the applicable covered bond 
     program.
       (C) Assumption by transferee.--If the Corporation as 
     conservator or receiver transfers a covered bond program to 
     another eligible issuer within the 1-year period as provided 
     in subparagraph (A), the transferee shall take ownership of 
     the applicable cover pool and shall become fully liable on 
     all covered bonds and related obligations of the issuer that 
     are secured by a perfected security interest in or other 
     perfected lien on the cover pool.
       (2) Other circumstances.--An estate shall be immediately 
     and automatically created by operation of law and shall exist 
     and be administered separate and apart from an issuer of 
     covered bonds and any conservatorship, receivership, 
     liquidating agency, or estate in bankruptcy for the issuer or 
     any other assets of the issuer, if--
       (A) a conservator, receiver, liquidating agent, or trustee 
     in bankruptcy, other than the Corporation, is appointed for 
     the issuer before an uncured default results in the creation 
     of an estate under subsection (b); or
       (B) in the case of the appointment of the Corporation as 
     conservator or receiver as described in paragraph (1)(A), the 
     Corporation as conservator or receiver--
       (i) does not complete the transfer of the applicable 
     covered bond program to another eligible issuer within the 1-
     year period as provided in paragraph (1)(A);
       (ii) delivers to the Secretary, the applicable covered bond 
     regulator, the applicable indenture trustee, and the 
     applicable covered bondholders a written notice electing to 
     cease further performance under the applicable covered bond 
     program; or
       (iii) fails to fully and timely satisfy all monetary and 
     nonmonetary obligations of the issuer under the covered bonds 
     and the related transaction documents or to fully and timely 
     cure all defaults by the issuer (other than its 
     conservatorship or receivership) under the applicable covered 
     bond program.

     A separate estate shall be created for each affected covered 
     bond program.
       (3) Assets and liabilities of estate.--Any estate created 
     under paragraph (2) shall be comprised of the cover pool 
     (including over-collateralization in the cover pool) that 
     secures the covered bonds. The cover pool shall be 
     immediately and automatically released to and held by the 
     estate free and clear of any right, title, interest, or claim 
     of the issuer or any conservator, receiver, liquidating 
     agent, or trustee in bankruptcy for the issuer or any other 
     assets of the issuer. The estate shall be fully liable on the 
     covered bonds and all other covered bonds and related 
     obligations of the issuer (including obligations under 
     related derivative transactions) that are secured by a 
     perfected security interest in or other perfected lien on the 
     cover pool when the estate is created. The estate shall not 
     be liable on any obligation of the issuer that is not secured 
     by a perfected security interest in or other perfected lien 
     on the cover pool when the estate is created. No conservator, 
     receiver, liquidating agent, or trustee in bankruptcy for the 
     issuer may charge or assess the estate for any claim of the 
     conservator, receiver, liquidating agent, or trustee in 
     bankruptcy or the conservatorship, receivership, liquidating 
     agency, or estate in bankruptcy and may not obtain or perfect 
     a security interest in or other lien on the cover pool to 
     secure such a claim.
       (4) Contingent claim.--Any contingent claim against an 
     issuer for a deficiency with respect to a covered bond or 
     related obligation for which an estate has become liable 
     under paragraph (3) shall be allowed as a provable claim in 
     the conservatorship, receivership, liquidating agency, or 
     bankruptcy case for the issuer. The contingent claim shall be 
     estimated by the conservator, receiver, liquidating agent, or 
     bankruptcy court for purposes of allowing the claim as a 
     provable claim if awaiting the fixing of the contingent claim 
     would unduly delay the resolution of the conservatorship, 
     receivership, liquidating agency, or bankruptcy case.
       (5) Residual interest.--
       (A) Issuance of residual interest.--Upon the creation of an 
     estate under paragraph (2), and regardless of whether any 
     contingent claim described in paragraph (4) becomes fixed or 
     is estimated, a residual interest in the estate shall be 
     immediately and automatically issued by operation of law to 
     the conservator, receiver, liquidating agent, or trustee in 
     bankruptcy for the issuer.
       (B) Nature of residual interest.--The residual interest 
     under subparagraph (A) shall--
       (i) be an exempted security as described in section 5;
       (ii) represent the right to any surplus from the cover pool 
     after the covered bonds and all other liabilities of the 
     estate have been fully and irrevocably paid; and
       (iii) be evidenced by a certificate executed by the trustee 
     of the estate.
       (6) Obligations of issuer.--
       (A) In general.--After the creation of an estate under 
     paragraph (2), the issuer and its conservator, receiver, 
     liquidating agent, or trustee in bankruptcy shall--
       (i) transfer to or at the direction of the trustee for the 
     estate all property of the estate that is in the possession 
     or under the control of the issuer or its conservator, 
     receiver, liquidating agent, or trustee in bankruptcy, 
     including all tangible or electronic books, records, files, 
     and other documents or materials relating to the assets and 
     liabilities of the estate; and
       (ii) at the election of the trustee or a servicer or 
     administrator for the estate, continue servicing the 
     applicable cover pool for 120 days after the creation of the 
     estate in return for a fair-market-value fee, as determined 
     by the trustee in consultation with the applicable covered 
     bond regulator, that shall be payable from the estate as an 
     administrative expense.
       (B) Obligations absolute.--Neither the issuer, whether 
     acting as debtor in possession or in any other capacity, nor 
     any conservator, receiver, liquidating agent, or trustee in 
     bankruptcy for the issuer or any other assets of the issuer 
     may disaffirm, repudiate, or reject the obligation to turn 
     over property or to continue servicing the cover pool as 
     provided in subparagraph (A).
       (d) Administration and Resolution of Estates.--
       (1) Trustee, servicer, and administrator.--
       (A) In general.--Upon the creation of any estate under 
     subsection (b)(1) or (c)(2), the applicable covered bond 
     regulator shall--
       (i) appoint the trustee for the estate;
       (ii) appoint 1 or more servicers or administrators for the 
     cover pool held by the estate; and
       (iii) give the Secretary, the applicable indenture trustee, 
     the applicable covered bondholders, and the owner of the 
     residual interest written notice of the creation of the 
     estate.
       (B) Terms and conditions of appointment.--All terms and 
     conditions of any appointment under paragraph (1), including 
     the terms and conditions relating to compensation, shall 
     conform to the requirements of this Act and the oversight 
     program and otherwise shall be determined by the applicable 
     covered bond regulator.
       (C) Qualification.--The applicable covered bond regulator 
     may require the trustee or any servicer or administrator for 
     an estate to post in favor of the United States, for the 
     benefit of the estate, a bond that is conditioned on the 
     faithful performance of the duties of the trustee or the 
     servicer or administrator. The covered bond regulator shall 
     determine the amount of any bond required under this 
     subparagraph and the sufficiency of the surety on the bond. A 
     proceeding on a bond required under this subparagraph may not 
     be commenced after two years after the date on which the 
     trustee or the servicer or administrator was discharged.
       (D) Powers and duties of trustee.--The trustee for an 
     estate is the representative of the estate and, subject to 
     the provisions of this Act, has capacity to sue and be sued. 
     The trustee shall--
       (i) administer the estate in compliance with this Act, the 
     oversight program, and the related transaction documents;
       (ii) be accountable for all property of the estate that is 
     received by the trustee;
       (iii) make a final report and file a final account of the 
     administration of the estate with the applicable covered bond 
     regulator; and
       (iv) after the estate has been fully administered, close 
     the estate.
       (E) Powers and duties of servicer or administrator.--Any 
     servicer or administrator for an estate--
       (i) shall--

       (I) collect, realize on (by liquidation or other means), 
     and otherwise manage the cover pool held by the estate in 
     compliance with this Act, the oversight program, and the 
     related transaction documents and in a manner consistent with 
     maximizing the value and the proceeds of the cover pool;
       (II) deposit or invest all proceeds and funds received in 
     compliance with this Act, the oversight program, and the 
     related transaction documents and in a manner consistent with 
     maximizing the net return to the estate, taking into account 
     the safety of the deposit or investment; and
       (III) apply, or direct the trustee for the estate to apply, 
     all proceeds and funds received

[[Page 16989]]

     and the net return on any deposit or investment to make 
     distributions in compliance with paragraphs (3) and (4);

       (ii) may borrow funds or otherwise obtain credit, for the 
     benefit of the estate, in compliance with paragraph (2) on a 
     secured or unsecured basis and on a priority, pari passu, or 
     subordinated basis;
       (iii) shall, at the times and in the manner required by the 
     applicable covered bond regulator, submit to the covered bond 
     regulator, the Secretary, the applicable indenture trustee, 
     the applicable covered bondholders, the owner of the residual 
     interest, and any other person designated by the covered bond 
     regulator, reports that describe the activities of the 
     servicer or administrator on behalf of the estate, the 
     performance of the cover pool held by the estate, and 
     distributions made by the estate; and
       (iv) shall assist the trustee in preparing the final report 
     and the final account of the administration of the estate.
       (F) Supervision of trustee, servicer, and administrator.--
     The applicable covered bond regulator shall supervise the 
     trustee and any servicer or administrator for an estate. The 
     covered bond regulator shall require that all reports 
     submitted under subparagraph (E)(iii) do not contain any 
     untrue statement of a material fact and do not omit to state 
     a material fact necessary in order to make the statements 
     made, in light of the circumstances under which they are 
     made, not misleading.
       (G) Removal and replacement of trustee, servicer, and 
     administrator.--If the covered bond regulator determines that 
     it is in the best interests of an estate, the covered bond 
     regulator may remove or replace the trustee or any servicer 
     or administrator for the estate. The removal of the trustee 
     or any servicer or administrator does not abate any pending 
     action or proceeding involving the estate, and any successor 
     or other trustee, servicer, or administrator shall be 
     substituted as a party in the action or proceeding.
       (H) Professionals.--The trustee or any servicer or 
     administrator for an estate may employ 1 or more attorneys, 
     accountants, appraisers, auctioneers, or other professional 
     persons to represent or assist the trustee or the servicer or 
     administrator in carrying out its duties. The employment of 
     any professional person and all terms and conditions of 
     employment, including the terms and conditions relating to 
     compensation, shall conform to the requirements of this Act 
     and the oversight program and otherwise shall be subject to 
     the approval of the applicable covered bond regulator.
       (I) Approved fees and expenses.--Unless otherwise provided 
     in the applicable terms and conditions of appointment or 
     employment, all approved fees and expenses of the trustee, 
     any servicer or administrator, or any professional person 
     employed by the trustee or any servicer or administrator 
     shall be payable from the estate as administrative expenses.
       (J) Actions by or on behalf of estate.--The trustee or any 
     servicer or administrator for an estate may commence or 
     continue judicial, administrative, or other actions, in the 
     name of the estate or in its own name on behalf of the 
     estate, for the purpose of collecting, realizing on, or 
     otherwise managing the cover pool held by the estate or 
     exercising its other powers or duties on behalf of the 
     estate.
       (K) Actions against estate.--No court may issue an 
     attachment or execution on any property of an estate. Except 
     at the request of the applicable covered bond regulator or as 
     otherwise provided in this subparagraph or subparagraph (J), 
     no court may take any action to restrain or affect the 
     resolution of an estate under this Act. No person (including 
     the applicable indenture trustee and any applicable covered 
     bondholder) may commence or continue any judicial, 
     administrative, or other action against the estate, the 
     trustee, or any servicer or administrator or take any other 
     act to affect the estate, the trustee, or any servicer or 
     administrator that is not expressly permitted by this Act, 
     the oversight program, and the related transaction documents, 
     except for a judicial or administrative action to compel the 
     release of funds that--
       (i) are available to the estate;
       (ii) are permitted to be distributed under this Act and the 
     oversight program; and
       (iii) are permitted and required to be distributed under 
     the related transaction documents and any contracts executed 
     by or on behalf of the estate.
       (L) Sovereign immunity.--Except in connection with a 
     guarantee provided under paragraph (4) or any other contract 
     executed by the applicable covered bond regulator under this 
     section 4, the Secretary and the covered bond regulator shall 
     be entitled to sovereign immunity in carrying out the 
     provisions of this Act.
       (2) Borrowings and credit.--
       (A) In general.--Any servicer or administrator for an 
     estate created under subsection (b)(1) or (c)(2) may borrow 
     funds or otherwise obtain credit, on behalf of and for the 
     benefit of the estate, from any person in compliance with 
     this paragraph (2) solely for the purpose of providing 
     liquidity in the case of timing mismatches among the assets 
     and the liabilities of the estate. Except with respect to an 
     underwriter, section 5 of the Securities Act of 1933, the 
     Trust Indenture Act of 1939, and any State or local law 
     requiring registration for an offer or sale of a security or 
     registration or licensing of an issuer of, underwriter of, or 
     broker or dealer in a security does not apply to the offer or 
     sale under this paragraph (2) of a security that is not an 
     equity security.
       (B) Conditions.--A servicer or administrator may borrow 
     funds or otherwise obtain credit under subparagraph (A)--
       (i) on terms affording the lender only claims or liens that 
     are fully subordinated to the claims and interests of the 
     applicable indenture trustee and the applicable covered 
     bondholders and all other claims against and interests in the 
     estate, except for the residual interest, if the servicer or 
     administrator certifies to the applicable covered bond 
     regulator that, in the business judgment of the servicer or 
     administrator, the borrowing or credit is in the best 
     interests of the estate and is expected to maximize the value 
     and the proceeds of the cover pool held by the estate; or
       (ii) on terms affording the lender claims or liens that 
     have priority over or are pari passu with the claims or 
     interests of the applicable indenture trustee or the 
     applicable covered bondholders or other claims against or 
     interests in the estate, if--

       (I) the servicer or administrator certifies to the 
     applicable covered bond regulator that, in the business 
     judgment of the servicer or administrator, the borrowing or 
     credit is in the best interests of the estate and is expected 
     to maximize the value and the proceeds of the cover pool held 
     by the estate; and
       (II) the applicable covered bond regulator authorizes the 
     borrowing or credit.

       (C) Limited liability.--A servicer or administrator shall 
     not be liable for any error in business judgment when 
     borrowing funds or otherwise obtaining credit under this 
     paragraph (2) unless the servicer or administrator acted in 
     bad faith or in willful disregard of its duties.
       (D) Study on borrowings and credit.--The Comptroller 
     General of the United States shall conduct a study on whether 
     the Federal reserve banks should be authorized to lend funds 
     or otherwise extend credit to an estate under this paragraph 
     (2) and, if so, what conditions and limits should be 
     established to mitigate any risk that the United States 
     Government could absorb credit losses on the cover pool held 
     by the estate. The Comptroller General shall submit a report 
     to the Committee on Banking, Housing, and Urban Affairs of 
     the Senate and the Committee on Financial Services of the 
     House of Representatives on the results of the study not 
     later than 6 months after the date of enactment of this Act.
       (3) Distributions by estate.--All payments or other 
     distributions by an estate shall be made at the times, in the 
     amounts, and in the manner set forth in the covered bonds, 
     the related transaction documents, and any contracts executed 
     by or on behalf of the estate in compliance with this Act and 
     the oversight program. To the extent that the relative 
     priority of the liabilities of the estate are not specified 
     in or otherwise ascertainable from their terms, distributions 
     shall be made on each distribution date under the covered 
     bonds, the related transaction documents, or any contracts 
     executed by or on behalf of the estate--
       (A) first, to pay accrued and unpaid superpriority claims 
     under paragraph (2)(B)(ii);
       (B) second, to pay accrued and unpaid administrative 
     expense claims under paragraph (1)(I), paragraph (2)(B)(ii), 
     section 4(b)(5)(A), or section 4(c)(6)(A);
       (C) third, to pay--
       (i) accrued and unpaid claims under the covered bonds and 
     the related transaction documents according to their terms; 
     and
       (ii) accrued and unpaid pari passu claims under paragraph 
     (2)(B)(ii); and
       (D) fourth, to pay accrued and unpaid subordinated claims 
     under paragraph (2)(B)(i).
       (4) Distributions on residual interest.--After all other 
     claims against and interests in an estate have been fully and 
     irrevocably paid or defeased, the trustee shall or shall 
     cause a servicer or administrator to distribute the remainder 
     of the estate to or at the direction of the owner of the 
     residual interest. No interim distribution on the residual 
     interest may be made before that time, unless the applicable 
     covered bond regulator--
       (A) approves the distribution after determining that all 
     other claims against and interests in the estate will be 
     fully, timely, and irrevocably paid according to their terms; 
     and
       (B) provides an indemnity, for the benefit of the estate, 
     assuring that all other claims against and interests in the 
     estate will be fully, timely, and irrevocably paid according 
     to their terms.
       (5) Closing of estate.--After an estate has been fully 
     administered, the trustee shall close the estate and, except 
     as otherwise directed by the applicable covered bond 
     regulator, shall destroy all records of the estate.
       (6) No loss to taxpayers.--Taxpayers shall bear no losses 
     from the resolution of an estate under this Act. To the 
     extent that the Secretary and the Corporation jointly 
     determine that the Deposit Insurance Fund incurred actual 
     losses that are higher because

[[Page 16990]]

     the covered bond program of an insured depository institution 
     was subject to resolution under this Act rather than as part 
     of the receivership of the institution under the Federal 
     Deposit Insurance Act (12 U.S.C. 1811 et seq.), the 
     Corporation may exercise the powers available under section 
     7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) 
     to recover an amount equal to those losses after consulting 
     with the Secretary.

     SEC. 5. SECURITIES LAW PROVISIONS.

       (a) Securities Laws Treatment of Covered Bonds.--
       (1) Treatment of certain banks and other entities.--
       (A) Securities laws coverage.--A covered bond described in 
     subparagraph (C) is and shall be treated as a security issued 
     or guaranteed by a bank under section 3(a)(2) of the 
     Securities Act of 1933 (15 U.S.C. 77c(a)(2)), section 3(c)(3) 
     of the Investment Company Act of 1940 (15 U.S.C. 80a-
     3(c)(3)), and section 304(a)(4)(A) of the Trust Indenture Act 
     of 1939 (15 U.S.C. 77ddd(a)(4)(A)), as applicable.
       (B) Securities exchange act of 1934 exemption.--No covered 
     bond described in subparagraph (C) shall be treated as an 
     asset-backed security, as that term is defined in section 3 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78c), or a 
     structured finance product, as that term is defined in 
     section 939F of the Dodd-Frank Wall Street Reform and 
     Consumer Protection Act (15 U.S.C. 78o-9).
       (C) Applicability.--A covered bond described in this 
     subparagraph is a covered bond that is--
       (i) issued or guaranteed by a bank; or
       (ii) issued by an eligible issuer described in section 
     2(9)(F) and sponsored solely by 1 or more banks for the sole 
     purpose of issuing covered bonds.
       (D) Regulations.--Each covered bond regulator for 1 or more 
     banks shall adopt, as part of the securities regulations of 
     the covered bond regulator, a separate scheme of 
     registration, disclosure, and reporting obligations and 
     exemptions for offers or sales of covered bonds described in 
     subparagraph (C), which regulations shall--
       (i) provide for uniform and consistent standards for such 
     covered bond issuers, with respect to any such covered bonds, 
     to the extent possible; and
       (ii) be consistent with existing regulations governing 
     offers or sales of nonconvertible debt.
       (2) Treatment of certain associations and cooperative 
     banks.--
       (A) Securities laws coverage.--A covered bond described in 
     subparagraph (C) is and shall be treated as a security issued 
     by an entity under section 3(a)(5)(A) of the Securities Act 
     of 1933 (15 U.S.C. 77c(a)(5)(A)), section 3(c)(3) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)), and 
     section 304(a)(4)(A) of the Trust Indenture Act of 1939 (15 
     U.S.C. 77ddd(a)(4)(A)), as applicable.
       (B) Securities exchange act of 1934 exemption.--No covered 
     bond described in subparagraph (C) shall be treated as an 
     asset-backed security, as that term is defined in section 3 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78c), or a 
     structured finance product, as that term is defined in 
     section 939F of the Dodd-Frank Wall Street Reform and 
     Consumer Protection Act (15 U.S.C. 78o-9).
       (C) Applicability.--A covered bond described in this 
     subparagraph is a covered bond that is--
       (i) issued by an entity described in section 3(a)(5)(A) of 
     the Securities Act of 1933 (15 U.S.C. 77c(a)(5)(A)); or
       (ii) issued by an eligible issuer described in section 
     2(9)(F) and sponsored solely by 1 or more such entities for 
     the sole purpose of issuing covered bonds.
       (D) Regulations.--Each covered bond regulator for 1 or more 
     entities described in section 3(a)(5)(A) of the Securities 
     Act of 1933 (15 U.S.C. 77c(a)(5)(A)) shall adopt, as part of 
     the securities regulations of the covered bond regulator, a 
     separate scheme of registration, disclosure, and reporting 
     obligations and exemptions for offers or sales of covered 
     bonds described in subparagraph (C), which regulations 
     shall--
       (i) provide for uniform and consistent standards for such 
     covered bond issuers, with respect to any such covered bonds, 
     to the extent possible; and
       (ii) shall be consistent with regulations governing offers 
     or sales of nonconvertible debt.
       (3) Construction.--No provision of this Act, including 
     paragraph (1) or (2), may be construed or applied in a manner 
     that impairs or limits any other exemption that is available 
     under applicable securities laws.
       (b) Exemptions for Estates.--Any estate that is or may be 
     created under section 4(b)(1) or 4(c)(2) shall be exempt from 
     all State and Federal securities laws, except that such 
     estate--
       (1) shall be subject to all anti-fraud provisions of such 
     securities laws;
       (2) shall be subject to the reporting requirements 
     established by the applicable covered bond regulator under 
     section 4(d)(1)(E)(iii); and
       (3) shall succeed to any requirement of the issuer to file 
     such periodic information, documents, and reports in respect 
     of the covered bonds, as specified in section 13(a) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) or rules 
     established by an appropriate Federal banking agency.
       (c) Exemptions for Residual Interests.--Any residual 
     interest in an estate that is or may be created under section 
     4(b)(1) or 4(c)(2) shall be exempt from all State and Federal 
     securities laws.

     SEC. 6. MISCELLANEOUS PROVISIONS.

       (a) Domestic Securities.--Section 106(a)(1) of the 
     Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. 
     77r-1(a)(1)) is amended--
       (1) in subparagraph (C), by striking ``or'' at the end;
       (2) in subparagraph (D), by adding ``or'' at the end; and
       (3) by inserting after subparagraph (D) the following:
       ``(E) covered bonds (as defined in section 2 of the United 
     States Covered Bond Act of 2011),''.
       (b) No Conflict.--The provisions of this Act shall apply, 
     notwithstanding any provision of the Federal Deposit 
     Insurance Act (12 U.S.C. 1811 et seq.), title 11, United 
     States Code, title II of the Dodd-Frank Wall Street Reform 
     and Consumer Protection Act (12 U.S.C. 5381 et seq.), or any 
     other provision of Federal law with respect to 
     conservatorship, receivership, liquidation, or bankruptcy. No 
     provision of the Federal Deposit Insurance Act (12 U.S.C. 
     1811 et seq.), title 11, United States Code, title II of the 
     Dodd-Frank Wall Street Reform and Consumer Protection Act (12 
     U.S.C. 5381 et seq.), or any other provision of Federal law 
     with respect to conservatorship, receivership, liquidation, 
     or bankruptcy may be construed or applied in a manner that 
     defeats or interferes with the purpose or operation of this 
     Act.
       (c) Annual Report to Congress.--The covered bond regulators 
     shall, annually--
       (1) submit a joint report to the Congress describing the 
     current state of the covered bond market in the United 
     States; and
       (2) testify on the current state of the covered bond market 
     in the United States before the Committee on Financial 
     Services of the House of Representatives and the Committee on 
     Banking, Housing, and Urban Affairs of the Senate.
                                 ______
                                 
      By Mr. BAUCUS (for himself, Mr. Boozman, and Mr. Pryor):
  S. 1838. A bill to require the Secretary of Veterans Affairs to carry 
out a pilot program on service dog training therapy, and for other 
purposes; to the Committee on Veterans' Affairs.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1838

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

     SECTION 1. DEPARTMENT OF VETERANS AFFAIRS PILOT PROGRAM ON 
                   SERVICE DOG TRAINING.

       (a) Pilot Program Required.--Not later than 120 days after 
     the date of the enactment of this Act, the Secretary of 
     Veterans Affairs shall commence a pilot program to assess the 
     feasibility and advisability of using service dog training 
     activities as components of integrated post-deployment mental 
     health and post-traumatic stress disorder rehabilitation 
     programs at Department of Veterans Affairs medical centers--
       (1) to positively affect veterans with post-deployment 
     mental health conditions or post-traumatic stress disorder 
     symptoms; and
       (2) to produce specially trained service dogs for veterans.
       (b) Duration.--The Secretary shall carry out the pilot 
     program during the three-year period beginning on the date of 
     the commencement of the pilot program.
       (c) Location.--
       (1) In general.--The pilot program shall be carried out at 
     one Department of Veterans Affairs medical center selected by 
     the Secretary for such purpose other than in the Department 
     of Veterans Affairs Palo Alto health care system in Palo 
     Alto, California. In selecting medical centers for the pilot 
     program, the Secretary shall--
       (A) ensure that the medical center selected--
       (i) has an established mental health rehabilitation program 
     that includes a clinical focus on rehabilitation treatment of 
     post-deployment mental health disorder and post-traumatic 
     stress disorder; and
       (ii) has a demonstrated capability and capacity to 
     incorporate service dog training activities into the 
     rehabilitation program; and
       (B) shall review and consider using recommendations 
     published by experienced service dog trainers regulations in 
     the art and science of basic third-party dog training and 
     owner-training dogs with regard to space, equipment, and 
     methodologies.
       (2) Participation of rural veterans.--In selecting a 
     medical center for the pilot program required under 
     subsection (a), the Secretary shall give special 
     consideration to Department of Veterans Affairs medical 
     centers that are located in States that the Secretary 
     considers rural or highly rural.
       (d) Design of Pilot Program.--In carrying out the pilot 
     program, the Secretary shall--

[[Page 16991]]

       (1) administer the program through the Department of 
     Veterans Affairs Patient Care Services Office as a 
     collaborative effort between the Rehabilitation Office and 
     the Office of Mental Health Services;
       (2) ensure that the national pilot program lead of the 
     Patient Care Services Office has sufficient administrative 
     experience to oversee the pilot program site;
       (3) ensure that dogs selected are healthy and age- and 
     temperament-appropriate for use in the pilot program;
       (4) consider dogs residing in animal shelters or foster 
     homes for participation in the program if such dogs meet the 
     service dog candidate selection under this subsection;
       (5) ensure that each dog selected for the pilot program--
       (A) is taught all basic commands and behaviors;
       (B) undergoes public access training; and
       (C) receives training specifically tailored to address the 
     mental health conditions or disabilities of the veteran with 
     whom the dog is paired;
       (6) provide professional support for all training under the 
     pilot program; and
       (7) provide or refer participants to business courses for 
     managing a service dog training business.
       (e) Veteran Participation.--Veterans diagnosed with post-
     traumatic stress disorder or another post-deployment mental 
     health condition may volunteer to participate in the pilot 
     program.
       (f) Hiring Preference.--In hiring service dog training 
     instructors for the pilot program, the Secretary shall give a 
     preference to veterans who have a post-traumatic stress 
     disorder or other mental health condition.
       (g) Collection of Data.--
       (1) In general.--The Secretary shall collect data on the 
     pilot program to determine the effectiveness of the pilot 
     program in positively affecting veterans with post-traumatic 
     stress disorder or other post-deployment mental health 
     condition symptoms and the feasibility and advisability of 
     expanding the pilot program to additional Department of 
     Veterans Affairs medical centers.
       (2) Manner of collection.--Data described in paragraph (1) 
     shall be collected and analyzed using a scientific peer-
     reviewed system, valid and reliable results-based research 
     methodologies, and instruments.
       (h) Reports.--
       (1) Annual reports.--
       (A) In general.--Not later than one year after the date of 
     the commencement of the pilot program and annually thereafter 
     for the duration of the pilot program, the Secretary shall 
     submit to Congress a report on the pilot program.
       (B) Elements.--Each such report required by subparagraph 
     (A) shall include the following:
       (i) The number of veterans participating in the pilot 
     program.
       (ii) A description of the services carried out by the 
     Secretary under the pilot program.
       (iii) The effects that participating in the pilot program 
     has on veterans with post-traumatic stress disorder and post-
     deployment adjustment symptoms.
       (2) Final report.--At the conclusion of the pilot program, 
     the Secretary shall submit to Congress a final report that 
     includes recommendations with respect to the feasibility and 
     advisability of extending or expanding the pilot program.

                          ____________________