[House Report 104-421]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-421
_______________________________________________________________________


 
            FARM CREDIT SYSTEM REGULATORY RELIEF ACT OF 1995

                                _______


  December 18 (legislative day, December 15), 1995.--Committed to the 
 Committee of the Whole House on the State of the Union and ordered to 
                               be printed

                                _______


Mr. Roberts, from the Committee on Agriculture, submitted the following

                              R E P O R T

                        [To accompany H.R. 2029]

  The Committee on Agriculture, to whom was referred the bill 
(H.R. 2029) to amend the Farm Credit Act of 1971 to provide 
regulatory relief, having considered the same, report favorably 
thereon with amendments and recommend that the bill as amended 
do pass.
  The amendments are as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Farm Credit System 
Regulatory Relief Act of 1995''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. References.
Sec. 3. Regulatory review.
Sec. 4. Examination of Farm Credit System institutions.
Sec. 5. Farm Credit Insurance Fund operations.
Sec. 6. Powers with respect to troubled insured System banks.
Sec. 7. Farm Credit System Insurance Corporation board of directors.
Sec. 8. Conservatorship and receiverships.
Sec. 9. Oversight and regulatory actions by the Farm Credit System 
Insurance Corporation.
Sec. 10. Formation of administrative service entities.
Sec. 11. Requirements for loans sold into the secondary market.
Sec. 12. Removal of antiquated and unnecessary paperwork requirements.
Sec. 13. Removal of government certification requirement for certain 
private sector financing.
Sec. 14. Reform of regulatory limitations on the dividend, member 
business, and voting practices of eligible farmer-owned cooperatives.
Sec. 15. Extension of interest rate reduction program for 5 years.

SEC. 2. REFERENCES.

  Except as otherwise expressly provided, wherever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Farm Credit Act of 1971.

SEC. 3. REGULATORY REVIEW.

  (a) Findings.--The Congress finds that--
          (1) the Farm Credit Administration, in its role as an arms-
        length, safety and soundness regulator, has made considerable 
        progress in reducing the regulatory burden on Farm Credit 
        System institutions;
          (2) the efforts of the Farm Credit Administration in this 
        regard have resulted in cost savings for Farm Credit System 
        institutions; and
          (3) such cost savings ultimately benefit the Nation's 
        farmers, ranchers, agricultural cooperatives, and rural 
        residents.
  (b) Requirement for Continued Review.--The Farm Credit Administration 
shall continue its comprehensive review of regulations governing the 
Farm Credit System in order to further identify and eliminate, 
consistent with safety and soundness, all regulations that are 
unnecessary, unduly burdensome or costly, or not based on statute.

SEC. 4. EXAMINATION OF FARM CREDIT SYSTEM INSTITUTIONS.

  Section 5.19(a) (12 U.S.C. 2254(a)) is amended by striking ``each 
year'' in the first sentence and inserting ``every 18 months''.

SEC. 5. FARM CREDIT INSURANCE FUND OPERATIONS.

  (a) Adjustment of Premiums.--
          (1) In general.--Section 5.55(a) (12 U.S.C. 2277a-4(a)) is 
        amended--
                  (A) in paragraph (1), by striking ``Until the 
                aggregate of amounts in the Farm Credit Insurance Fund 
                exceeds the secure base amount, the annual premium due 
                from any insured System bank for any calendar year 
                shall'' and inserting ``If, at the end of any calendar 
                year, the aggregate of the amounts in the Farm Credit 
                Insurance Fund does not exceed the secure base amount, 
                the annual premium due from any insured System bank for 
                that calendar year shall, subject to paragraph (2),''; 
                and
                  (B) by redesignating paragraph (2) as paragraph (3) 
                and inserting after paragraph (1) the following:
          ``(2) Reduced premiums.--The Corporation, in its sole 
        discretion, may reduce, by a percentage uniformly applied to 
        all insured System banks, the annual premium due from each 
        insured System bank during any calendar year, as determined 
        under paragraph (1).''.
          (2) Conforming amendments.--
                  (A) Section 5.55(b).--Section 5.55(b) (12 U.S.C. 
                2277a-4(b)) is amended--
                          (i) by striking ``Insurance Fund'' each place 
                        such term appears and inserting ``Farm Credit 
                        Insurance Fund'';
                          (ii) by striking ``for the following calendar 
                        year''; and
                          (iii) by striking ``subsection (a)'' and 
                        inserting ``subsection (a)(1)''.
                  (B) Section 5.56(a).--Section 5.56(a) (12 U.S.C. 
                2277a-5(a)) is amended in each of paragraphs (2) and 
                (3) by striking ``section 5.55(a)(2)'' and inserting 
                ``section 5.55(a)(3)''.
                  (C) Section 1.12(b).--Section 1.12(b) (12 U.S.C. 
                2020(b)) is amended--
                          (i) in paragraph (1), by inserting ``(as 
                        defined in section 5.55(a)(3))'' after 
                        ``government-guaranteed loans''; and
                          (ii) in paragraph (3), by inserting ``(as so 
                        defined)'' after ``government-guaranteed 
                        loans'' each place such term appears.
  (b) Technical Amendment.--Section 5.55(d) (12 U.S.C. 2277a-4(d)) is 
amended--
          (1) in the matter preceding paragraph (1)--
                  (A) by striking ``and (c)'' and inserting ``, (c), 
                and (e)''; and
                  (B) by striking ``a Farm Credit Bank'' and inserting 
                ``an insured System bank''; and
          (2) by striking ``Farm Credit Bank'' each subsequent place 
        such term appears and inserting ``insured System bank''.
  (c) Allocation to Insured System Banks and Other System Institutions 
of Excess Amounts in the Farm Credit Insurance Fund.--Section 5.55 (12 
U.S.C. 2277a-4) is amended by adding at the end the following:
  ``(e) Allocation to System Institutions of Excess Reserves.--
          ``(1) Establishment of allocated insurance reserves 
        accounts.--There is hereby established within the Farm Credit 
        Insurance Fund--
                  ``(A) for each insured System bank; and
                  ``(B) subject to paragraph (5)(C), for all holders, 
                in the aggregate, of Financial Assistance Corporation 
                stock,
        an Allocated Insurance Reserves Account. Amounts in any 
        Allocated Insurance Reserves Account shall be considered to be 
        part of the Farm Credit Insurance Fund.
          ``(2) Annual allocations.--If, at the end of any calendar 
        year, the aggregate of the amounts in the Farm Credit Insurance 
        Fund exceeds the average secure base amount for the calendar 
        year (as calculated on an average daily balance basis), the 
        Corporation shall allocate to the Allocated Insurance Reserves 
        Accounts such excess amount less the amount that the 
        Corporation, in its sole discretion, determines to be the sum 
        of the estimated operating expenses and estimated insurance 
        obligations of the Corporation for the immediately succeeding 
        calendar year.
          ``(3) Allocation formula.--From the total amount required to 
        be allocated at the end of a calendar year pursuant to 
        paragraph (2)--
                  ``(A) 10 percent of such total amount shall be 
                credited to the Allocated Insurance Reserves Account 
                established under paragraph (1)(B), subject to 
                paragraph (5)(C); and
                  ``(B) there shall be credited to the Allocated 
                Insurance Reserves Account of each insured System bank 
                an amount that bears the same ratio to such total 
                amount (less any reduction under subparagraph (A)) as 
                the average principal outstanding for the 3-year period 
                ending with the end of such calendar year on loans made 
                by the bank that are in accrual status bears to the 
                average principal outstanding for such 3-year period on 
                loans made by all insured System banks that are in 
                accrual status (excluding, in each case, the guaranteed 
                portions of government-guaranteed loans described in 
                subsection (a)(1)(C)).
          ``(4) Use of funds in allocated insurance reserves 
        accounts.--To the extent that the sum of the operating expenses 
        of the Corporation and the insurance obligations of the 
        Corporation for a calendar year exceeds the estimated sum 
        described in paragraph (2) for the calendar year, the 
        Corporation shall cover such expenses and obligations by 
        reducing each Allocated Insurance Reserves Account by the same 
        proportion and expending the amounts so obtained, before 
        expending other monies in the Fund.
          ``(5) Other disposition of account funds.--
                  ``(A) In general.--Beginning in calendar year 2003, 
                if the aggregate of the amounts in the Farm Credit 
                Insurance Fund exceeds the secure base amount, the 
                Corporation may--
                          ``(i) subject to subparagraph (D), pay to 
                        each insured System bank, in a manner 
                        determined by the Corporation, an amount equal 
                        to the lesser of--
                                  ``(I) 20 percent of the balance in 
                                the bank's Allocated Insurance Reserves 
                                Account as of the preceding December 
                                31; or
                                  ``(II) 20 percent of the balance in 
                                the bank's Allocated Insurance Reserves 
                                Account on the date of payment; and
                          ``(ii) subject to subparagraphs (C) and (E), 
                        pay to each System bank and association holding 
                        Financial Assistance Corporation stock its 
                        proportionate share, determined by dividing the 
                        number of shares of Financial Assistance 
                        Corporation stock held by such institution by 
                        the total number of shares of Financial 
                        Assistance Corporation stock outstanding, of 
                        the lesser of--
                                  ``(I) 20 percent of the balance in 
                                the Allocated Insurance Reserves 
                                Account established under paragraph 
                                (1)(B) as of the preceding December 31; 
                                or
                                  ``(II) 20 percent of the balance in 
                                the Allocated Insurance Reserves 
                                Account established under paragraph 
                                (1)(B) on the date of the payment.
                  ``(B) Authority to eliminate or reduce payments.--The 
                Corporation may eliminate or reduce payments under 
                subparagraph (A) if the Corporation determines, in its 
                sole discretion, that such payments, or other 
                circumstances that might require use of the Farm Credit 
                Insurance Fund, could cause the amount in the Farm 
                Credit Insurance Fund during that calendar year to be 
                less than the secure base amount.
                  ``(C) Reimbursement for financial assistance 
                corporation stock.--
                          ``(i) Sufficient funding.--Notwithstanding 
                        paragraph (3)(A), upon provision by the 
                        Corporation for the accumulation in the account 
                        established under paragraph (1)(B) of funds in 
                        an amount equal to $56 million, the Corporation 
                        shall not allocate any further funds to such 
                        account except to replenish such account in the 
                        event that funds are diminished below such 
                        amount by the Corporation pursuant to paragraph 
                        (4).
                          ``(ii) Wind down and termination.--
                                  ``(I) Final disbursements.--Upon 
                                disbursement of a total of $53 million 
                                from such Allocated Insurance Reserves 
                                Account, the Corporation shall disburse 
                                the remaining amounts in such account, 
                                as determined under paragraph 
                                (5)(A)(ii), without regard to the 
                                percentage limitation in subclauses (I) 
                                and (II) thereof.
                                  ``(II) Termination of account.--Upon 
                                disbursement of a total of $56 million 
                                from such Allocated Insurance Reserves 
                                Account established under paragraph 
                                (1)(B), the Corporation shall close the 
                                Allocated Insurance Reserves Account 
                                established under paragraph (1)(B) and 
                                transfer any remaining funds in such 
                                Account to the remaining Allocated 
                                Insurance Reserves Accounts in 
                                accordance with the formula in 
                                paragraph (3)(B) for the calendar year 
                                in which the transfer occurs.
                  ``(D) Distribution of payments received.--Within 60 
                days after receipt of a payment made under subparagraph 
                (5)(A)(i), each insured System bank, in consultation 
                with its affiliated associations, and taking into 
                account the direct or indirect payment of insurance 
                premiums by such associations, shall develop and 
                implement an equitable plan to distribute payments 
                received pursuant to subparagraph (5)(A)(i) among the 
                bank and its associations.
                  ``(E) Exception for previously reimbursed 
                associations.--For purposes of subparagraph (5)(A)(ii), 
                in any Farm Credit District in which the funding bank 
                has reimbursed one or more of its affiliated 
                associations for the previously unreimbursed portion of 
                the Financial Assistance stock held by such 
                associations, the funding bank shall be deemed to be 
                the holder of the shares of Financial Assistance 
                Corporation stock for which it has provided such 
                reimbursement.''.

SEC. 6. POWERS WITH RESPECT TO TROUBLED INSURED SYSTEM BANKS.

  (a) Least-Cost Resolution.--Section 5.61(a)(3) (12 U.S.C. 2277a-
10(a)(3)) is amended--
          (1) by redesignating subparagraph (B) as subparagraph (F); 
        and
          (2) by striking subparagraph (A) and inserting the following:
                  ``(A) Least-cost resolution.--Assistance may not be 
                provided to an insured System bank under this 
                subsection unless the total amount of such assistance 
                is the least costly to the Farm Credit Insurance Fund 
                of all possible alternatives available to the 
                Corporation, including liquidation of the bank 
                (including paying the insured obligations issued on 
                behalf of the bank). Before making a least-cost 
                determination under this subparagraph, the Corporation 
                shall accord such other insured System banks as the 
                Corporation determines appropriate the opportunity to 
                submit information relating to such determination.
                  ``(B) Procedural rules.--In determining the least 
                costly alternative under subparagraph (A), the 
                Corporation shall--
                          ``(i) evaluate alternatives on a present-
                        value basis, using a reasonable discount rate;
                          ``(ii) document that evaluation and the 
                        assumptions on which the evaluation is based; 
                        and
                          ``(iii) retain the documentation for not less 
                        than 5 years.
                  ``(C) Time of determination.--
                          ``(i) Cost of assistance.--For purposes of 
                        this subsection, the determination of the costs 
                        of providing any assistance under any provision 
                        of this section with respect to any insured 
                        System bank shall be made as of the date on 
                        which the Corporation makes the determination 
                        to provide such assistance to the institution 
                        under this section.
                          ``(ii) Cost of liquidation.--For purposes of 
                        this subsection, the determination of the costs 
                        of liquidation of any insured System bank shall 
                        be made as of the earliest of--
                                  ``(I) the date on which a conservator 
                                is appointed for the bank;
                                  ``(II) the date on which a receiver 
                                is appointed for the bank; or
                                  ``(III) the date on which the 
                                Corporation makes any determination to 
                                provide any assistance under this 
                                section with respect to the bank.
                  ``(D) Evaluation of management.--Before providing any 
                assistance under paragraph (1), the Corporation shall 
                evaluate the adequacy of the managerial resources of 
                the bank. The continued service of any director or 
                senior ranking officer who serves in a policymaking 
                role for the assisted bank, as determined by the 
                Corporation, shall be subject to approval by the 
                Corporation as a condition of such assistance.
                  ``(E) Discretionary determination.--Any determination 
                that the Corporation makes under this paragraph shall 
                be in the sole discretion of the Corporation.''.
  (b) Conforming Amendments.--Section 5.61(a) (12 U.S.C. 2277a-10(a)) 
is amended--
          (1) in paragraph (1), by striking ``In general'' and 
        inserting ``Stand-alone assistance''; and
          (2) in paragraph (2)--
                  (A) by striking ``Enumerated powers'' and inserting 
                ``Facilitation of mergers or consolidation''; and
                  (B) in subparagraph (A), by striking ``Facilitation 
                of mergers or consolidation'' and inserting ``In 
                general''.

SEC. 7. FARM CREDIT SYSTEM INSURANCE CORPORATION BOARD OF DIRECTORS.

  Section 201 of the Farm Credit Banks and Associations Safety and 
Soundness Act of 1992 (106 Stat. 4104-4105) is repealed.

SEC. 8. CONSERVATORSHIP AND RECEIVERSHIPS.

  (a) Inclusion Among General Corporate Powers.--Section 5.58(9) (12 
U.S.C. 2277a-7(9)) is amended to read as follows:
          ``(9) Conservator or receiver.--The Corporation may act as 
        conservator or receiver.''.
  (b) Conforming Amendments.--Section 5.51 (12 U.S.C. 2277a) is amended 
by striking paragraph (5) and redesignating paragraph (6) as paragraph 
(5).

SEC. 9. OVERSIGHT AND REGULATORY ACTIONS BY THE FARM CREDIT SYSTEM 
                    INSURANCE CORPORATION.

  Part E of title V of the Farm Credit Act of 1971 (12 U.S.C. 2277-
2277a-14) is amended by inserting after section 5.61 the following:

``SEC. 5.61A. AUTHORITY TO REGULATE GOLDEN PARACHUTE AND 
                    INDEMNIFICATION PAYMENTS.

  ``(a) In General.--The Corporation may prohibit or limit, by 
regulation or order, any golden parachute payment or indemnification 
payment by a Farm Credit System institution (including the Federal 
Agricultural Mortgage Corporation and any conservator or receiver for 
the Federal Agricultural Mortgage Corporation) in troubled condition 
(as defined in regulations issued by the Corporation).
  ``(b) Factors To Be Taken Into Account.--The Corporation shall 
prescribe, by regulation, the factors to be considered by the 
Corporation in taking any action under subsection (a), which may 
include the following:
          ``(1) Whether there is a reasonable basis to believe that the 
        institution-related party has committed any fraudulent act or 
        omission, breach of trust or fiduciary duty, or insider abuse 
        with regard to the Farm Credit System institution involved that 
        has had a material effect on the financial condition of the 
        institution.
          ``(2) Whether there is a reasonable basis to believe that the 
        institution-related party is substantially responsible for the 
        insolvency of the Farm Credit System institution, the 
        appointment of a conservator or receiver for the institution, 
        or the institution's troubled condition (as defined in 
        regulations prescribed by the Corporation).
          ``(3) Whether there is a reasonable basis to believe that the 
        institution-related party has materially violated any 
        applicable law or regulation that has had a material effect on 
        the financial condition of the institution.
          ``(4) Whether there is a reasonable basis to believe that the 
        institution-related party has violated or conspired to 
        violate--
                  ``(A) section 215, 657, 1006, 1014, or 1344 of title 
                18, United States Code; or
                  ``(B) section 1341 or 1343 of title 18, United States 
                Code, affecting a Farm Credit System institution.
          ``(5) Whether the institution-related party was in a position 
        of managerial or fiduciary responsibility.
          ``(6) The length of time that the party was related with the 
        Farm Credit System institution and the degree to which--
                  ``(A) the payment reasonably reflects compensation 
                earned over the period of employment; and
                  ``(B) the compensation involved represents a 
                reasonable payment for services rendered.
  ``(c) Certain Payments Prohibited.--No Farm Credit System institution 
may prepay the salary or any liability or legal expense of any 
institution-related party if such payment--
          ``(1) is made in contemplation of the insolvency of such 
        institution or after the commission of an act of insolvency; 
        and
          ``(2) is made with a view to, or has the result of--
                  ``(A) preventing the proper application of the assets 
                of the institution to creditors; or
                  ``(B) preferring one creditor over another.
  ``(d) Golden Parachute Payment Defined.--As used in this section:
          ``(1) In general.--The term `golden parachute payment' means 
        any payment (or any agreement to make any payment) in the 
        nature of compensation by any Farm Credit System institution 
        for the benefit of any institution-related party under an 
        obligation of the institution that--
                  ``(A) is contingent on the termination of the party's 
                relationship with the institution; and
                  ``(B) is received on or after the date on which--
                          ``(i) the institution is insolvent;
                          ``(ii) any conservator or receiver is 
                        appointed for the institution;
                          ``(iii) the Farm Credit Administration has 
                        assigned the institution a composite CAMEL 
                        rating of 4 or 5 under the Farm Credit 
                        Administration Rating System, or an equivalent 
                        rating; or
                          ``(iv) the Corporation otherwise determines 
                        that the institution is in a troubled condition 
                        (as defined in regulations issued by the 
                        Corporation).
          ``(2) Certain payments in contemplation of an event.--Any 
        payment that would be a golden parachute payment but for the 
        fact that the payment was made before the date referred to in 
        paragraph (1)(B) shall be treated as a golden parachute payment 
        if the payment was made in contemplation of the occurrence of 
        an event described in any clause of such paragraph.
          ``(3) Certain payments not included.--The term `golden 
        parachute payment' shall not include--
                  ``(A) any payment made under a retirement plan that 
                is qualified (or is intended to be qualified) under 
                section 401 of the Internal Revenue Code of 1986 or 
                other nondiscriminatory benefit plan;
                  ``(B) any payment made under a bona fide deferred 
                compensation plan or arrangement that the Corporation 
                determines, by regulation or order, to be permissible; 
                or
                  ``(C) any payment made by reason of the death or 
                disability of an institution-related party.
  ``(e) Other Definitions.--As used in this section:
          ``(1) Indemnification payment.--The term `indemnification 
        payment' means any payment (or any agreement to make any 
        payment) by any Farm Credit System institution for the benefit 
        of any person who is or was an institution-related party, to 
        pay or reimburse the person for any liability or legal expense 
        with regard to any administrative proceeding or civil action 
        instituted by the Farm Credit Administration that results in a 
        final order under which the person--
                  ``(A) is assessed a civil money penalty; or
                  ``(B) is removed or prohibited from participating in 
                the conduct of the affairs of the institution.
          ``(2) Liability or legal expense.--The term `liability or 
        legal expense' means--
                  ``(A) any legal or other professional expense 
                incurred in connection with any claim, proceeding, or 
                action;
                  ``(B) the amount of, and any cost incurred in 
                connection with, any settlement of any claim, 
                proceeding, or action; and
                  ``(C) the amount of, and any cost incurred in 
                connection with, any judgment or penalty imposed with 
                respect to any claim, proceeding, or action.
          ``(3) Payment.--The term `payment' means--
                  ``(A) any direct or indirect transfer of any funds or 
                any asset; and
                  ``(B) any segregation of any funds or assets for the 
                purpose of making, or under an agreement to make, any 
                payment after the date on which such funds or assets 
                are segregated, without regard to whether the 
                obligation to make such payment is contingent on--
                          ``(i) the determination, after such date, of 
                        the liability for the payment of such amount; 
                        or
                          ``(ii) the liquidation, after such date, of 
                        the amount of such payment.
          ``(4) Institution-related party.--The term `institution-
        related party' means--
                  ``(A) any director, officer, employee, or agent for a 
                Farm Credit System institution;
                  ``(B) any stockholder (other than another Farm Credit 
                System institution), consultant, joint venture partner, 
                or any other person determined by the Farm Credit 
                Administration to be a participant in the conduct of 
                the affairs of a Farm Credit System institution;
                  ``(C) any independent contractor (including any 
                attorney, appraiser, or accountant) who knowingly or 
                recklessly participates in any violation of any law or 
                regulation, any breach of fiduciary duty, or any unsafe 
                or unsound practice that caused or is likely to cause 
                more than a minimal financial loss to, or a significant 
                adverse effect on, the Farm Credit System institution; 
                or
                  ``(D) any receiver or conservator of a Farm Credit 
                System institution.
  ``(f) Special Rule.--No provision of this section may be construed as 
prohibiting any Farm Credit System institution from purchasing any 
commercial insurance policy or fidelity bond, except that such 
insurance policy or bond shall not cover any legal or liability expense 
of the institution that is described in subsection (e)(1).
  ``(g) Special Rule Regarding the Farm Credit Administration.--No 
provision of this section may be construed as limiting the powers, 
functions, or responsibilities of the Farm Credit Administration.''.

SEC. 10. FORMATION OF ADMINISTRATIVE SERVICE ENTITIES.

  Part E of title IV (12 U.S.C. 2211-2214) is amended by adding at the 
end the following:

``SEC. 4.28A. DEFINITION OF BANK.

  ``As used in this part, the term `bank' includes each association 
operating under title II.''.

SEC. 11. REQUIREMENTS FOR LOANS SOLD INTO THE SECONDARY MARKET.

  (a) Borrower Stock.--Section 4.3A (12 U.S.C. 2154a) is amended--
          (1) by redesignating subsections (f) and (g) as subsections 
        (g) and (h), respectively; and
          (2) by inserting after subsection (e) the following:
  ``(f) Loans Designated for Sale or Sold Into the Secondary Market.--
Notwithstanding any other provision of this section:
          ``(1) General rule.--Subject to paragraph (2), the bylaws 
        adopted by any bank or association under subsection (b) may 
        provide--
                  ``(A) for any loan made on or after the date of the 
                enactment of this subsection that is designated, at the 
                time the loan is made, for sale into a secondary market 
                under title VIII or otherwise, that no voting stock or 
                participation certificate purchase requirement shall 
                apply to the borrower of the loan; and
                  ``(B) for any loan made before the date of the 
                enactment of this subsection that is sold into a 
                secondary market under title VIII or otherwise, that 
                all outstanding voting stock or participation 
                certificates held by the borrower with respect to the 
                loan shall, subject to subsection (d)(1), be retired.
          ``(2) Exception.--If a loan designated for sale as described 
        in paragraph (1)(A) is not sold into a secondary market within 
        180 days after the designation, the voting stock or 
        participation certificate purchase requirement that would 
        otherwise apply to the loan in the absence of bylaw provisions 
        adopted under paragraph (1)(A) shall be effective, except that 
        the bylaws may provide that if such a loan is thereafter sold 
        into a secondary market, all outstanding voting stock or 
        participation certificates held by the borrower with respect to 
        such loan shall, subject to subsection (d)(1), be retired.''.
  (b) Borrower Rights.--
          (1) In general.--Section 4.14A(a)(5) (12 U.S.C. 2202a(a)(5)) 
        is amended to read as follows:
          ``(5) Loan.--
                  ``(A) In general.--The term `loan' means a loan made 
                to a farmer, rancher, or producer or harvester of 
                aquatic products, for any agricultural or aquatic 
                purpose and other credit needs of the borrower, 
                including financing for basic processing and marketing 
                directly related to the borrower's operations and those 
                of other eligible farmers, ranchers, and producers or 
                harvesters of aquatic products.
                  ``(B) Exclusion of loans designated for sale into a 
                secondary market.--The term `loan' does not include a 
                loan made on or after the date of enactment of this 
                subparagraph that, at the time the loan is made, is 
                designated for sale into a secondary market under title 
                VIII or otherwise, except as provided in subparagraph 
                (C).
                  ``(C) Special rule.--If a loan designated for sale 
                into a secondary market is not sold into a secondary 
                market within 180 days after such designation, the 
                provisions of sections 4.14, 4.14A, 4.14B, 4.14C, 
                4.14D, and 4.36 that would apply to the loan in the 
                absence of subparagraph (B) shall apply to the loan 
                until the loan is so sold.''.
          (2) Conforming amendment.--Section 8.9(b) (12 U.S.C. 2279aa-
        9(b)) is amended by inserting ``(as defined in section 
        4.14A(a)(5))'' after ``At the time of application for a loan''.

SEC. 12. REMOVAL OF ANTIQUATED AND UNNECESSARY PAPERWORK REQUIREMENTS.

  (a) Disclosure on Adjustable Rate Loans.--Section 4.13(a)(4) (12 
U.S.C. 2199(a)(4)) is amended by inserting ``, except that any 
regulation of the Farm Credit Administration implementing this 
paragraph shall include a provision permitting notice to a borrower of 
a change in the interest rate applicable to the borrower's loan to be 
made within a reasonable time after the effective date of the change'' 
before the semicolon.
  (b) Compensation of Association Personnel.--Section 1.5(13) (12 
U.S.C. 2013(13)) is amended by striking ``and the appointment and 
compensation of the chief executive officer thereof,''.
  (c) Joint Management Agreements.--Section 5.17(a)(2)(A) (12 U.S.C. 
2252(a)(2)(A)) is amended in the 1st sentence by striking ``or 
management agreements''.
  (d) Removal of Certain Borrower Reporting Requirements.--Section 
1.10(a) (12 U.S.C. 2018(a)) is amended by striking paragraph (5).
  (e) Use of Private Mortgage Insurance.--
          (1) In general.--Section 1.10(a)(1) (12 U.S.C. 2018(a)(1)) is 
        amended by adding at the end the following:
                  ``(D) Private mortgage insurance.--Loans on which 
                private mortgage insurance is obtained may exceed 85 
                percent of the appraised value of the real estate 
                security to the extent that the loan amount in excess 
                of such 85 percent is covered by the insurance.''.
          (2) Conforming amendment.--Section 1.10(a)(1)(A) (12 U.S.C. 
        2018(a)(1)(A)) is amended by striking ``paragraphs (2) and 
        (3)'' and inserting ``subparagraphs (C) and (D)''.
  (f) Dissemination of Quarterly Reports.--Section 5.17(a)(8) (12 
U.S.C. 2252(a)(8)) is amended by inserting ``the requirements of the 
Farm Credit Administration governing the dissemination to stockholders 
of quarterly reports of System institutions may not be more burdensome 
or costly than the requirements applicable to national banks, and'' 
after ``except that''.

SEC. 13. REMOVAL OF GOVERNMENT CERTIFICATION REQUIREMENT FOR CERTAIN 
                    PRIVATE SECTOR FINANCING.

  Section 3.8(b)(1)(A) (12 U.S.C. 2129(b)(1)(A)) is amended--
          (1) by striking ``have been certified by the Administrator of 
        the Rural Electrification Administration to be eligible for 
        such'' and inserting ``are eligible under the Rural 
        Electrification Act of 1936 for''; and
          (2) by striking ``loan guarantee, and'' and inserting ``loan 
        guarantee from such agencies (or their successors), and''.

SEC. 14. REFORM OF REGULATORY LIMITATIONS ON THE DIVIDEND, MEMBER 
                    BUSINESS, AND VOTING PRACTICES OF ELIGIBLE FARMER-
                    OWNED COOPERATIVES.

  (a) In General.--Section 3.8(a) (12 U.S.C. 2129(a)) is amended by 
adding at the end the following: ``Any such association that has 
received a loan from a bank for cooperatives shall, without regard to 
the requirements of the preceding sentence, continue to be so eligible 
for so long as more than 50 percent (or such higher percentage as is 
established by the bank board) of the voting control of the association 
is held by farmers, producers or harvesters of aquatic products, or 
eligible cooperative associations.''.
  (b) Conforming Amendment.--Section 3.8(b)(1)(D) (12 U.S.C. 
2129(b)(1)(D)) is amended by inserting ``, or under the last 
sentence,'' after ``(4)''.

SEC. 15. EXTENSION OF INTEREST RATE REDUCTION PROGRAM FOR 5 YEARS.

  Section 1320 of the Food Security Act of 1985 (7 U.S.C. 1999 note) is 
amended by striking ``1995'' and inserting ``2000''.

  Amend the title so as to read:

    A bill to amend the Farm Credit Act of 1971 to provide 
regulatory relief, and for other purposes.

                           Brief Explanation

    The Farm Credit System (FCS or System) is a government-
sponsored enterprise established by Congress to provide credit 
to agriculture. When the System was created its intent was to 
fill a credit need that was not being adequately served by 
existing institutions. By creating this entity Congress hoped 
to provide a sustainable supply of credit for agriculture. In 
1987 the System was facing severe financial stress. In the 
previous two years they had lost over $4.6 billion and many of 
their borrowers were in technical insolvency due to a variety 
of factors, including diminishing land values. The capital 
level of the System was being depleted quickly and there was 
need for legislation to assist the System to maintain solvency. 
In response, Congress passed the Agricultural Credit Act of 
1987 (1987 Act). The 1987 Act established the Farm Credit 
System Insurance Corporation (FCSIC) to assess premiums from 
Farm Credit Banks and it also raised the required capital level 
of System institutions. However, the ,87 Act also placed 
certain paperwork requirements on the System that are no longer 
necessary.
    The Farm Credit System Regulatory Relief Act of 1995 (H.R. 
2029) is intended to provide regulatory relief to the System. 
This legislation is also intended to provide for an orderly 
decrease of premiums being assessed against farm credit banks 
and for the disbursement of money above the secure base amount 
of the insurance fund that has accrued from excess interest.
    The Farm Credit Administration (FCA) estimates that H.R. 
2029 will save between $18 to $20 million over five years. This 
savings derives from the elimination of the requirement to 
establish a separate board of directors for FCSIC. This 
additional board of directors would cost $2 million a year. 
Currently, the FCA board serves as the FCSIC board with an FCA 
board member acting as chairman. This arrangement saves money 
and provides for the safety and soundness of the System. 
Savings in this legislation also derive from extending the 
examination schedule from 12 months to every 18 months. This 
change is estimated to also save $2 million a year. According 
to the FCA, ``were H.R. 2029 enacted with the extended 
examination schedule and the repeal of an independent FCSIC 
Board, a cost savings of $18 to $20 million could be realized 
over the next 5 years.''
    This legislation recognizes that the FCA is an effective 
arms-length regulator that has not placed an undue regulatory 
burden on the System. The intent of H.R. 2029 is to repeal 
unnecessary regulations that the FCA has not yet repealed 
because they have a basis in statute.

                            Purpose and Need

    The Farm Credit Regulatory Relief Act of 1995 is designed 
to eliminate unnecessary regulatory burden on the System, 
provide for an orderly decrease of premiums on the System after 
reaching their secure base amount, and provide for the rebate 
of interest accruing on the secure base amount, which they are 
estimated to reach in the first quarter of 1997. The effect of 
rebating excess amounts accruing on the secure base will be 
lower interest rates for farmer and rancher borrowers in the 
System. System borrowers will also benefit by repealing 
regulations that do not protect the safety and soundness of 
System institutions. The FCA, and the taxpayers it protects, 
will also benefit from this legislation through additional 
flexibility provided to the regulator of the System. The FCA 
will be able to react to any problems that could arise within 
the System using improved authority to review management of 
troubled institutions and to regulate golden parachute payments 
to management of troubled institutions.

                      Section-by-Section Analysis

Section 1

    Short title and table of contents, ``The Farm Credit System 
Regulatory Relief Act of 1995.''

Section 2

    All references are to the Farm Credit Act of 1971 unless 
otherwise noted.

Section 3

    Section 3 contains Congressional findings and a requirement 
for Farm Credit Administration to continue its review to reduce 
regulatory burdens.

Section 4

    Section 4 amends 5.19(a) by changing the mandatory 
examination of System institutions, except Federal Land Bank 
Associations, from every year to every 18 months unless the FCA 
determines more frequent examinations are necessary.

Section 5

    Subsection (a) amends 5.55(a), including conforming 
changes. By giving the FCSIC the authority to reduce premiums 
by a percentage, determined solely by FCSIC, uniformly applied 
to all insured System banks.
    Subsection (b) makes a technical change to 5.55(d) 
necessitated by the changes made by subsection (a).
    Subsection (c) amends 5.55 by adding a new subsection (e), 
which creates an Allocated Insurance Reserves Account (Account) 
for each insured System bank and for holders of Financial 
Assistance Corporation (FAC) stock:
    New paragraph (e)(1) establishes the Accounts, and provides 
that amounts in any Account shall be considered to be part of 
the Fund.
    New paragraph (e)(2) provides that if, at the end of any 
calendar year, the aggregate amounts in the Fund exceed the 
secure base amount, FCSIC shall allocate any excess amount to 
all Accounts, less any amounts necessary for estimated 
operating expenses and insurance obligations, as determined by 
FCSIC.
    New paragraph (e)(3) provides the allocation formula for 
the total excess amount determined under (e)(2) which is 10% to 
be allocated to the FAC stock Account (until the limit in 
(5)(C) is reached); and the remainder to be allocated pro rata 
among the Accounts of each insured System bank on the ratio of 
each bank's 3-year average principal outstanding of loans in 
accrual status to all insured System bank's 3-year average 
principal outstanding of loans in accrual status.
    New paragraph (e)(4) provides that, to the extent that 
actual operating expenses and insurance obligations exceed the 
estimate in (e)(2), FCSIC shall cover such expenses by first 
reducing proportionally amounts in the Accounts.
    New paragraph (e)(5), in subparagraph (A), provides that, 
beginning with calendar year 2003, if the aggregate amounts in 
the Fund exceed the secure base amount, FCSIC may pay: (i) to 
each insured System bank the lesser of: 20 percent of the 
bank's account on the date of payment; and (ii) to each System 
bank and association that is a holder of FAC stock, a 
proportionate share of the lesser of: 20 percent of the FAC 
stock Account as of December 31 of the preceding year, or 20 
percent of the balance in the FAC stock Account on the date of 
payment.
    New paragraph (e)(5), in subparagraph (B), provides that 
FCSIC may reduce or eliminate payments under subparagraph (A) 
if FCSIC determines such a reduction or elimination is 
necessary to prevent the Fund from falling below the secure 
base amount. New paragraph (e)(5), in subparagraph (C), 
provides that after FCSIC determines that the FAC stock Account 
is sufficient to reach $56 million, FCSIC shall not allocate 
any further excess amounts to such Account. This subparagraph 
also provides that, upon the disbursement of a total of $53 
million from the FAC stock Account, FCSIC shall disburse the 
remaining $3 million and close the FAC stock Account.
    New paragraph (e)(5), in subparagraph (D), provides that 
each insured System bank receiving an Account disbursement must 
develop and implement an equitable plan for distributing such 
payments among the bank and its associations within 60 days of 
receiving such disbursement. New paragraph (e)(5), in 
subparagraph (E), provides an exception to the requirements of 
subparagraph (D) for Farm Credit districts in which banks have 
already reimbursed their affiliated associations for previously 
unreimbursed FAC stock.

Section 6

    Subsection (a) amends 5.61(a)(3): to provide different 
authorities with respect to troubled insured System banks; by 
requiring FCSIC to implement the least-costly assistance 
available to a troubled institution (including liquidation); 
and by deleting the prohibition of liquidating banks operating 
in areas where FCSIC determines that continued operation is 
essential to provide adequate agricultural credit in the areas.
    New subparagraph (A) provides that assistance cannot be 
provided to a System bank unless it is the least costly to the 
Fund of all possible alternatives. Before making the least cost 
determination the Corporation shall allow other institutions 
the opportunity to comment and submit information.
    New subparagraph (B) sets forth the criteria for 
determining the least costly alternative. Evaluation of 
alternative must be based on a present value basis using a 
reasonable discount rate; evaluations (including any 
assumptions) must be documented; and such documentation must be 
retained for at least 5 years.
    New subparagraph (C) provides that: (i) the determination 
of the cost of assistance under this subsection shall be made 
as of the date on which FCSIC makes the determination to 
provide assistance; and (ii) the determination of the cost of 
liquidation shall be made as of the earlier of the date on 
which a conservator or receiver is appointed or the date under 
(i).
    New subparagraph (D) provides that, before providing 
assistance, FCSIC shall evaluate the adequacy of the managerial 
resources of the bank, including approval of the continued 
services of any director or senior ranking officer.
    New subparagraph (E) provides that determination under this 
paragraph shall be solely by FCSIC.
    Subsection (b) makes conforming amendments.

Section 7

    Section 7 repeals 201 of the Farm Credit Banks and 
Association Safety and Soundness Act of 1992, which requires 
the establishment of a separate board of directors for FCSIC.

Section 8

    Subsection (a) amends 5.58(9) by clarifying that, as part 
of its general corporate powers, FCSIC can act as a conservator 
as well as a receiver.
    Subsection (b) makes a conforming amendment by deleting an 
unnecessary definition of ``receiver'' in 5.51(5).

Section 9

    Section 9 amends Part E of title V by adding a new section 
5.61A, which provides authority to regulate golden parachute 
and indemnification payments.
    New subsection (a) provides that FCSIC has authority to 
prohibit or limit golden parachutes or indemnifications, 
including the Federal Agricultural Mortgage Corporation (Farmer 
Mac). New subsection (b) sets forth the criteria to be taken 
into account by FCSIC when taking action under subsection (a), 
which may include: whether an institution related party has 
committed acts of fraud, breach of trust or fiduciary duty, or 
insider abuse that has had a detrimental effect on the 
financial condition of the institution; whether there is a 
reasonable basis to believe that the institution related party 
has violated law or regulations; whether the institution 
related party was in a position of managerial or fiduciary 
responsibility; and the length of time the party was related 
with the institution and the reasonableness of the 
compensation.
    New subsection (c) prohibits certain payments (prepaid 
salaries, and liability or legal expenses) of an institution 
related party if the payment is made in contemplation of 
insolvency or such payment has the result of preventing proper 
application of the institution's assets or preferring one 
creditor over another.
    New subsection (d), in paragraph (1), defines ``golden 
parachute'' to mean any payment (or agreement to make payment) 
in the nature of compensation that is: (A) contingent on 
termination; and (B) received after the date that: the 
institution is insolvent, a conservator or receiver is 
appointed, FCA has assigned it a CAMEL rating of 4 or 5, or 
FCSIC determines that the institution is otherwise in troubled 
condition.
    New subsection (d), in paragraph (2), provides that a 
payment made before the date of one of the events specified in 
paragraph (1) may be considered as a golden parachute payment 
if the payment was made in contemplation of the event.
    New subsection (d), in paragraph (3), specifies that a 
golden parachute payment does not include a payment under a 
retirement plan, that is qualified under 401 of the Internal 
Revenue Code, a payment made under a bona fide deferred 
compensation plan that FCSIC determines to be allowable, or any 
payment made because of death of disability.
    New subsection (e) defines ``indemnification payment,'' 
``legal or liability expense,'' ``payment,'' and ``institution-
related party.''
    New subsection (f) provides that nothing in this subsection 
shall prohibit any institution from purchasing commercial 
insurance (excluding insurance or bonds for civil money 
penalties or removal from office).
    New subsection (g) provides that nothing in this section 
shall be construed as limiting the powers, functions, or 
responsibilities of FCA.

Section 10

    Section 10 would give Farm Credit System associations the 
flexibility to form administrative service entities under 
section 4.25 of the Farm Credit Act, either individually or in 
combination with one or more other System institutions. It 
would also enable two or more associations from different Farm 
Credit districts to jointly form a service entity. In addition, 
Section 10 would enable associations to become shareholders in 
a service entity previously formed by one or more System banks. 
Approval of an association's funding bank would not be required 
in order for the association to form a service entity under 
this authority. The Committee is mindful of the fact that 
section 4.25 of the Farm Credit Act prohibits a service formed 
under that section from extending credit or providing insurance 
services to System borrowers. This statutory prohibition would 
also apply to service entities formed by associations under 
this new authority.

Section 11

    Subsection (a) amends 4.3A by redesignating subsections (f) 
and (g) as (g) and (h), and by adding a new subsection (f) 
containing provisions for loans sold into a secondary market: 
New paragraph (f)(1) provides that, with respect to loans 
designated for sale into a secondary market under title VIII or 
otherwise after the date of enactment, no voting stock or 
participation certificate requirements shall apply, and with 
respect to loans made before the date of enactment which have 
been sold into a secondary market, all outstanding voting stock 
or participation certificates held by borrowers shall be 
retired.
    New paragraph (f)(2) provides, however, that if a loan 
designated for sale into a secondary market is not sold within 
180 days, voting stock and participation certificate 
requirements shall apply.
    Subsection (b) amends 4.14(a)(5) to clarify that the term 
``loan'' does not include a loan that is designated to be sold 
into a secondary market within 180 days under title VIII or 
otherwise on or after the date of enactment.

Section 12

    Subsection (a) amends the disclosure provisions regarding 
interest rates in 4.13(a)(4) by adding a provision which 
specifies that any FCA regulation implementing such provision 
shall allow for notice to a borrower to be made within a 
reasonable time after an interest rate change.
    Subsection (b) amends 1.5(13) by striking the authority for 
a Farm Credit Bank to approve the appointment and compensation 
of the chief executive officer of such bank's affiliated 
associations.
    Subsection (c) amends 5.17(a)(2)(A) by striking the FCA's 
authority to approve joint management agreements.
    Subsection (d) amends 1.0(a) by striking paragraph (5), 
which requires a financial statement from each borrower at 
least every three years.
    Subsection (e) amends 1.10(a)(1) by adding a new paragraph 
(D), which allows real estate loans on which private mortgage 
insurance is obtained to exceed 85 percent of the appraised 
value, to the extent that the insurance covers the loan above 
85 percent.
    Subsection (f) amends 5.17(a)(8) to clarify that FCA's 
regulatory power with respect to the dissemination of quarterly 
reports to share holders cannot be more onerous than similar 
requirements for national banks.

Section 13

    Section 13 amends the borrower eligibility criteria in 
3.8(b)(1)(A) by deleting the requirement that a borrower be 
certified as eligible by the Administrator of the Rural 
Electrification Administration while continuing the requirement 
that a borrower be eligible under the Rural Electrification Act 
of 1936.

Section 14

    Subsection (a) amends the cooperative borrower eligibility 
provisions in 3.8(a) by adding a provision that specifies that 
a previous cooperative borrower specified in (a)(4) shall 
continue to be an eligible borrower as long as at least 50 
percent of the voting control is held by farmers, producers, 
harvesters of aquatic products, or eligible cooperative 
associations.
    Subsection (b) makes a conforming change to 3.8(b)(1)(D).

Section 15

    Section 15 extends the interest rate reduction program for 
guaranteed loans authorized by section 351 of the Consolidated 
Farm and Rural Development Act by extending 1320 of the Food 
Security Act of 1985 through December 31, 2000.

                        Committee Consideration

                              I. Hearings

    The Subcommittee on Resource Conservation, Research, and 
Forestry held a hearing on H.R. 2029 on July 27, 1995 and 
received testimony from the Chairwoman of the Farm Credit 
Administration, Marsha Martin.

                     II. Subcommittee Consideration

    The Subcommittee on Resource Conservation, Research, and 
Forestry held a business meeting, pursuant to notice, to 
consider H.R. 2029, ``the Farm Credit Regulatory Relief Act of 
1995''. The legislation was reported with one amendment offered 
by Mr. Gunderson to section (e)(5)(A) striking, ``shall'' and 
inserting instead, ``may''. The amendment was agreed to by 
voice vote and the bill was ordered reported by voice vote.

                   III. Full Committee Consideration

    The full committee met pursuant to notice to consider H.R. 
2029. Mr. Allard, chairman of the Subcommittee on Resource 
Conservation, Research, and Forestry was recognized for comment 
on the bill.
    Mr. Allard requested unanimous consent to offer a 
substitute bill to be considered as original text. The bill was 
adopted by voice vote and ordered to be reported to the House 
with the recommendation that the bill, as adopted, do pass.

                        Administration Position

    The Administration had no position on this legislation. The 
Farm Credit Administration supports the passage of H.R. 2029.

                                Farm Credit Administration,
                                       McLean, VA, August 11, 1995.
Hon. Pat Roberts,
Chairman, House Committee on Agriculture, House of Representatives, 
        1301 Longworth, Washington, DC.
    Dear Mr. Chairman: Thank you for providing the Farm Credit 
Administration (FCA) with the opportunity to communicate our 
support for H.R. 2029, a bill to amend the Farm Credit Act of 
1971. It was a pleasure for me to testify before Chairman 
Allard and Members of the Subcommittee on Resource 
Conservation, Research, and Forestry on his legislation.
    You have asked that FCA provide an estimate of the cost of 
enacting H.R. 2029. After careful review, it has been 
determined that significant savings could be realized were this 
bill to be adopted by Congress. Estimated savings of as much as 
$4 million annually could be achieved under two provisions of 
H.R. 2029, the 18-month examination schedule extension and 
retention of the current three member Farm Credit System 
Insurance Corporation (FCSIC) Board.
    The Agency estimates that adoption of an 18 month 
examination schedule for many of our institutions, in lieu of 
the current 12 month examination schedule, could save as much 
as $2 million annually. This change would further streamline 
FCA without compromising the safety and soundness of the 
institutions it regulates.
    If the statutory requirement for establishment of an 
independent FCSIC Board is repealed, as proposed by H.R. 2029, 
additional costs can be avoided. The implementation of an 
independent, full time three member Board of Directors would 
increase FCSIC administrative costs by approximately $2.0 
million annually. Under H.R. 2029, FCSIC would continue to 
benefit from access to FCA professional and administrative 
resources under the same operating procedures that have been in 
place since 1990.
    Were H.R. 2029 enacted with the extended examination 
schedule and the repeal of an independent FCSIC Board, a cost 
savings of $18 to $20 million could be realized over the next 
five years.
    Should you have additional questions regarding H.R. 2029, 
please let me know.
            Sincerely,
                                           Marsha Martin, Chairman.

    At the time of the filing of this report, the Committee had 
not received a report from the U.S. Department of Agriculture 
concerning H.R. 2029, as amended, to amend the Farm Credit Act 
of 1971 to provide regulatory relief.

          Budget Act Compliance (Section 308 and Section 403)

    The provisions of clause 2(l)(3)(B) of rule XI of the Rules 
of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, or new credit 
authority, or increased or decreased revenues or tax 
expenditures) are not considered applicable. The estimate and 
comparison required to be prepared by the Director of the 
Congressional Budget Office under clause 2(l)(3)(C) of rule XI 
of the Rules of the House of Representatives and section 403 of 
the Congressional Budget Act of 1974 were not received by the 
Committee prior to the filing of this report.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that 
enactment of H.R. 2029, as amended, will have no inflationary 
impact on the national economy.

                          Oversight Statement

    No summary of oversight findings and recommendations made 
by the Committee on Government Reform and Oversight under 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives was available to the Committee with reference 
to the subject matter specifically addressed by H.R. 2029, as 
amended.
    No specific oversight activities other than the hearings 
detailed in this report were conducted by the Committee within 
the definition of clause 2(b)(1) of rule X of the Rules of the 
House of Representatives.

         Changes in Existing Law Made by the Bill, as Reported

    This legislation changes existing law by amending the Farm 
Credit Act of 1971 to eliminate certain regulatory burdens on 
the Farm Credit System and to address rebates in funds from the 
Farm Credit System Insurance Corporation. This legislation also 
amends the Food Security Act of 1985.
  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

                        FARM CREDIT ACT OF 1971

          * * * * * * *

                       TITLE I--FARM CREDIT BANKS

          * * * * * * *

SEC. 1.5. GENERAL CORPORATE POWERS.

  Each Farm Credit Bank shall be a body corporate and, subject 
to regulation by the Farm Credit Administration, shall have 
power to--
          (1) * * *
          * * * * * * *
          (13) approve the salary scale of the officers and 
        employees of the associations in its district, [and the 
        appointment and compensation of the chief executive 
        officer thereof,] and supervise the exercise by such 
        associations of the functions vested in or delegated to 
        them;
          * * * * * * *

SEC. 1.10. SECURITY; TERMS.

  (a) Real Estate Loans.--
          (1) Maximum level of loans.--
                  (A) In general.--Real estate mortgage loans 
                originated by a Farm Credit Bank, or in which a 
                Farm Credit Bank participates in with a lender 
                that is not a System institution, shall not 
                exceed 85 percent of the appraised value of the 
                real estate security, except as provided for in 
                [paragraphs (2) and (3)] subparagraphs (C) and 
                (D).
          * * * * * * *
                  (D) Private mortgage insurance.--Loans on 
                which private mortgage insurance is obtained 
                may exceed 85 percent of the appraised value of 
                the real estate security to the extent that the 
                loan amount in excess of such 85 percent is 
                covered by the insurance.
          * * * * * * *
          [(5) Financial statement.--Each Farm Credit Bank 
        shall require a financial statement from each borrower 
        at least once every 3 years, or during such shorter 
        period of time as may be required under regulations of 
        the Farm Credit Administration.]
          * * * * * * *

SEC. 1.12. RELATED SERVICES.

  (a) * * *
  (b) Authority to Pass Along Cost of Insurance Premiums.--Each 
Farm Credit Bank may assess each production credit association, 
other association making direct loans under the authority 
provided under section 7.6, and other financing institution 
described in section 1.7(b)(1)(B) in the district in which the 
bank is located to cover the costs of making premium payments 
under part E of title V. The assessment of any such association 
or other financing institution for any calendar year shall be 
computed on the same basis as is used to compute the premium 
payment and shall not exceed the sum of--
          (1) the annual average principal outstanding for such 
        year on loans made by the association, or on loans made 
        by the other financing institution and funded by or 
        discounted with the Farm Credit Bank, that are in 
        accrual status, excluding the guaranteed portions of 
        government-guaranteed loans (as defined in section 
        5.55(a)(3)) provided for in paragraph (3), multiplied 
        by 0.0015;
          * * * * * * *
          (3)(A) the annual average principal outstanding for 
        such year on the guaranteed portions of Federal 
        government-guaranteed loans (as so defined) made by the 
        association, or by the other financing institution and 
        funded by or discounted with the Farm Credit Bank, that 
        are in accrual status, multiplied by 0.00015; and
          (B) the annual average principal outstanding for such 
        year on the guaranteed portions of State government-
        guaranteed loans (as so defined) made by the 
        association, or by the other financing institution and 
        funded by or discounted with the Farm Credit Bank, that 
        are in accrual status, multiplied by 0.0003.
          * * * * * * *

                   TITLE III--BANKS FOR COOPERATIVES

                     Part A--Banks for Cooperatives

          * * * * * * *
  Sec. 3.8. Eligibility.--(a) Any association of farmers, 
producers or harvesters of aquatic products, or any federation 
of such associations, which is operated on a cooperative basis, 
and has the powers for processing, preparing for market, 
handling, or marketing farm or aquatic products; or for 
purchasing, testing, grading, processing, distributing, or 
furnishing farm or aquatic supplies or furnishing farm or 
aquatic business services or services to eligible cooperatives 
and conforms to either of the two following requirements:
          (1) * * *
          * * * * * * *
shall be eligible to borrow from a bank for cooperatives. Any 
such association that has received a loan from a bank for 
cooperatives shall, without regard to the requirements of the 
preceding sentence, continue to be so eligible for so long as 
more than 50 percent (or such higher percentage as is 
established by the bank board) of the voting control of the 
association is held by farmers, producers or harvesters of 
aquatic products, or eligible cooperative associations.
  (b) Notwithstanding any other provision of this section:
          (1) The following entities shall also be eligible to 
        borrow from a bank for cooperatives:
                  (A) Cooperatives and other entities that have 
                received a loan, loan commitment, or loan 
                guarantee from the Rural Electrification 
                Administration, or a loan or loan commitment 
                from the Rural Telephone Bank, or that [have 
                been certified by the Administrator of the 
                Rural Electrification Administration to be 
                eligible for such] are eligible under the Rural 
                Electrification Act of 1936 for a loan, loan 
                commitment, or [loan guarantee, and] loan 
                guarantee from such agencies (or their 
                successors), and subsidiaries of such 
                cooperatives or other entities.
          * * * * * * *
                  (D) Any creditworthy private entity that 
                satisfies the requirements for a service 
                cooperative under paragraphs (1), (2), and (4), 
                or under the last sentence, of subsection (a) 
                and subsidiaries of the entity, if the entity 
                is organized to benefit agriculture in 
                furtherance of the welfare of its farmer-
                members and is operated on a not-for-profit 
                basis.
          * * * * * * *

TITLE IV--PROVISIONS APPLICABLE TO TWO OR MORE CLASSES OF INSTITUTIONS 
                             OF THE SYSTEM

                            Part A--Funding

          * * * * * * *

SEC. 4.3A.  CAPITALIZATION OF SYSTEM INSTITUTIONS.

  (a) * * *
          * * * * * * *
  (f) Loans Designated for Sale or Sold Into the Secondary 
Market.--Notwithstanding any other provision of this section:
          (1) General rule.--Subject to paragraph (2), the 
        bylaws adopted by any bank or association under 
        subsection (b) may provide--
                  (A) for any loan made on or after the date of 
                the enactment of this subsection that is 
                designated, at the time the loan is made, for 
                sale into a secondary market under title VIII 
                or otherwise, that no voting stock or 
                participation certificate purchase requirement 
                shall apply to the borrower of the loan; and
                  (B) for any loan made before the date of the 
                enactment of this subsection that is sold into 
                a secondary market under title VIII or 
                otherwise, that all outstanding voting stock or 
                participation certificates held by the borrower 
                with respect to the loan shall, subject to 
                subsection (d)(1), be retired.
          (2) Exception.--If a loan designated for sale as 
        described in paragraph (1)(A) is not sold into a 
        secondary market within 180 days after the designation, 
        the voting stock or participation certificate purchase 
        requirement that would otherwise apply to the loan in 
        the absence of bylaw provisions adopted under paragraph 
        (1)(A) shall be effective, except that the bylaws may 
        provide that if such a loan is thereafter sold into a 
        secondary market, all outstanding voting stock or 
        participation certificates held by the borrower with 
        respect to such loan shall, subject to subsection 
        (d)(1), be retired.
  [(f)] (g) Construction.--This section shall not be construed 
to affect the provisions of this Act that confer on System 
institutions a lien on borrower stock or other equities and the 
privilege to retire or cancel such stock or other equities for 
application against the indebtedness on a defaulted or 
restructured loan.
  [(g)] (h) Controlling Authority.--To the extent that any 
provision of this section is inconsistent with any other 
provision of this Act (other than section 4.9A), the provision 
of this section shall control.
          * * * * * * *

            Part C--Rights of Borrowers; Loan Restructuring

SEC. 4.13. DISCLOSURE.

  (a) In General.--In accordance with regulations of the Farm 
Credit Administration, qualified lenders shall provide to 
borrowers, for all loans that are not subject to the Truth in 
Lending Act (15 U.S.C. 1601 et seq.), meaningful and timely 
disclosure not later than the time of the loan closing, of--
          (1) * * *
          * * * * * * *
          (4) any change in the interest rate applicable to the 
        borrower's loan, except that any regulation of the Farm 
        Credit Administration implementing this paragraph shall 
        include a provision permitting notice to a borrower of 
        a change in the interest rate applicable to the 
        borrower's loan to be made within a reasonable time 
        after the effective date of the change;
          * * * * * * *

SEC. 4.14A. RESTRUCTURING DISTRESSED LOANS.

  (a) Definitions.--As used in this part:
          (1) * * *
          * * * * * * *
          [(5) Loan.--The term ``loan'' means a loan made to a 
        farmer, rancher, or producer or harvester of aquatic 
        products, for any agricultural or aquatic purpose and 
        other credit needs of the borrower, including financing 
        for basic processing and marketing directly related to 
        the borrower's operations and those of other eligible 
        farmers, ranchers, and producers or harvesters of 
        aquatic products.]
          (5) Loan.--
                  (A) In general.--The term ``loan'' means a 
                loan made to a farmer, rancher, or producer or 
                harvester of aquatic products, for any 
                agricultural or aquatic purpose and other 
                credit needs of the borrower, including 
                financing for basic processing and marketing 
                directly related to the borrower's operations 
                and those of other eligible farmers, ranchers, 
                and producers or harvesters of aquatic 
                products.
                  (B) Exclusion of loans designated for sale 
                into a secondary market.--The term ``loan'' 
                does not include a loan made on or after the 
                date of enactment of this subparagraph that, at 
                the time the loan is made, is designated for 
                sale into a secondary market under title VIII 
                or otherwise, except as provided in 
                subparagraph (C).
                  (C) Special rule.--If a loan designated for 
                sale into a secondary market is not sold into a 
                secondary market within 180 days after such 
                designation, the provisions of sections 4.14, 
                4.14A, 4.14B, 4.14C, 4.14D, and 4.36 that would 
                apply to the loan in the absence of 
                subparagraph (B) shall apply to the loan until 
                the loan is so sold.
          * * * * * * *

                     Part E--Service Organizations

          * * * * * * *

SEC. 4.28A. DEFINITION OF BANK.

  As used in this part, the term ``bank'' includes each 
association operating under title II.

            TITLE V--FARM CREDIT ADMINISTRATION ORGANIZATION

            Part B--Farm Credit Administration Organization

          * * * * * * *
  Sec. 5.17. Enumerated Powers.--(a) The Farm Credit 
Administration shall have the following powers, functions, and 
responsibilities in connection with the institutions of the 
Farm Credit System and the administration of this Act:
          (1) * * *
          (2)(A) Where necessary or appropriate to carry out 
        the policy and objectives of this Act, issue and 
        approve amendments to Federal charters of institutions 
        of the System; approve change in names of banks 
        operating under this Act; approve the merger of 
        districts when agreed to by the district bank boards 
        involved and by a majority vote of the voting 
        stockholders and contributors to the guaranty funds of 
        each bank for each of such districts, voting in the 
        same manner as is provided in section 7.0 of this Act; 
        approve mergers and any related activities as provided 
        for in title VII; and approve the consolidation or 
        division of the territories of institutions when agreed 
        to by a majority vote of the voting stockholders or 
        contributors to the guaranty fund of each of the 
        institutions involved; and approve consolidations of 
        boards of directors [or management agreements] when 
        agreed to by a majority vote of the voting stockholders 
        or contributors to the guaranty fund of each of the 
        institutions involved. In issuing charters and 
        certificates of territory for district-wide mergers of 
        associations where stockholders of one or more 
        associations did not approve the merger, the charter of 
        the new or merged association shall not include the 
        territory of the disagreeing association or 
        associations; charters issued during calendar year 1985 
        for district-wide new or merged associations which 
        included the territory of a disagreeing association 
        shall be revoked and reissued to exclude such 
        territory, unless subsequently agreed to by the board 
        of directors of such association or associations. The 
        Farm Credit Administration Board shall ensure that 
        disapproving associations (A) shall not be charged any 
        assessment under this Act at a rate higher than that 
        charged other like associations in the district, and 
        (B) shall be provided with financial services and 
        assistance on the same basis as other like associations 
        in the district (including, but not limited to, access 
        to credit and rates of interest on loans and discounts) 
        by a district Farm Credit bank to the association and 
        its member-borrowers. The Farm Credit Administration 
        Board, after consultation with the respective boards of 
        directors of the affected banks, may require two or 
        more banks operating under the same or different titles 
        to merge if the Board determines that one of such banks 
        has failed to meet its outstanding obligations.
          * * * * * * *
          (8) Regulate the preparation by System institutions 
        and the dissemination to stockholders and investors of 
        information on the financial condition and operations 
        of such institutions, except that the requirements of 
        the Farm Credit Administration governing the 
        dissemination to stockholders of quarterly reports of 
        System institutions may not be more burdensome or 
        costly than the requirements applicable to national 
        banks, and the Farm Credit Administration may not 
        require any System institution to disclose in any 
        report to stockholders information concerning the 
        condition or classification of a loan--
                  (A) * * *
          * * * * * * *
  Sec. 5.19. Examinations.--(a) Except for Federal land bank 
associations, each institution of the System shall be examined 
by Farm Credit Administration examiners at such times as the 
Board may determine, but in no event less than once [each year] 
every 18 months. Each Federal land bank association shall be 
examined by Farm Credit Administration examiners at such times 
as the Farm Credit Administration Board may determine, except 
that each such association shall be examined at least once 
every three years. Such examinations may include, if 
appropriate, but are not limited to, an analysis of credit and 
collateral quality and capitalization of the institution, and 
appraisals of the effectiveness of the institution's management 
and application of policies governing the carrying out of this 
Act and regulations of the Farm Credit Administration and 
servicing all eligible borrowers. Examination of banks shall 
include an analysis of the compensation paid to the chief 
executive officer and the salary scales of the employees of the 
bank. At the direction of the Board, Farm Credit Administration 
examiners also shall make examinations of the condition of any 
organization, other than federally regulated financial 
institutions, to, for, or with which any institution of the 
System contemplates making a loan or discounting paper. For the 
purposes of this Act, examiners of the Farm Credit 
Administration shall be subject to the same requirements, 
responsibilities, and penalties as are applicable to examiners 
under the National Bank Act, the Federal Reserve Act, and 
Federal Deposit Insurance Act, and other provisions of law and 
shall have the same powers and privileges as are vested in such 
examiners by law.
          * * * * * * *

            PART E--FARM CREDIT SYSTEM INSURANCE CORPORATION

SEC. 5.51. DEFINITIONS.

  As used in this part:
          (1) * * *
          * * * * * * *
          [(5) Receiver.--The term ``receiver'' means a 
        receiver or conservator appointed by the Farm Credit 
        Administration for a System institution.]
          [(6)] (5) State.--The term ``State'' means any of the 
        50 States, the District of Columbia, any Territory of 
        the United States, Puerto Rico, Guam, American Samoa, 
        the Trust Territory of the Pacific Islands, or the 
        Virgin Islands.
          * * * * * * *

SEC. 5.55. PREMIUMS.

  (a) Amount in Fund Not Exceeding Secure Base Amount.--
          (1) In general.--[Until the aggregate of amounts in 
        the Farm Credit Insurance Fund exceeds the secure base 
        amount, the annual premium due from any insured System 
        bank for any calendar year shall] If, at the end of any 
        calendar year, the aggregate of the amounts in the Farm 
        Credit Insurance Fund does not exceed the secure base 
        amount, the annual premium due from any insured System 
        bank for that calendar year shall, subject to paragraph 
        (2), be equal to the sum of--
                  (A) * * *
          * * * * * * *
          (2) Reduced premiums.--The Corporation, in its sole 
        discretion, may reduce, by a percentage uniformly 
        applied to all insured System banks, the annual premium 
        due from each insured System bank during any calendar 
        year, as determined under paragraph (1).
          [(2)] (3) Definition of government-guaranteed 
        loans.--As used in this section and section 1.12(b), 
        the term ``government-guaranteed loans'' means loans or 
        credits, or portions of loans or credits, that are 
        guaranteed--
                  (A) by the full faith and credit of the 
                United States Government or any State 
                government;
                  (B) by an agency or other entity of the 
                United States Government whose obligations are 
                explicitly guaranteed by the United States 
                Government; or
                  (C) by an agency or other entity of a State 
                government whose obligations are explicitly 
                guaranteed by such State government.
  (b) Amount in Fund Exceeding Secure Base Amount.--At any time 
the aggregate of amounts in the Farm Credit Insurance Fund 
exceeds the secure base amount, the Corporation shall reduce 
the annual premium due from each insured System bank [for the 
following calendar year], as determined under subsection 
(a)(1), by a percentage determined by the Corporation so that 
the aggregate of the premiums payable by all System banks is 
sufficient to ensure that the aggregate of amounts in the Farm 
Credit Insurance Fund after such premiums are paid is not less 
than the secure base amount at such time.
          * * * * * * *
  (d) Determination of Principal Outstanding.--For the purpose 
of subsections (a) [and (c)], (c), and (e), the principal 
outstanding on all loans made by [a Farm Credit Bank] an 
insured System bank shall be determined based on all loans 
made--
          (1) by any production credit association, or any 
        other association making direct loans under authority 
        provided under section 7.6, that is able to make such 
        loans because such association is receiving, or has 
        received, funds provided through the [Farm Credit Bank] 
        insured System bank;
          (2) by any bank, company, institution, corporation, 
        union, or association described in section 1.7(b)(1)(B) 
        that is able to make such loans because such entity is 
        receiving, or has received, funds provided through the 
        [Farm Credit Bank] insured System bank; and
          (3) by such [Farm Credit Bank] insured System bank 
        (other than loans made to any party described in 
        paragraph (1) or (2)).
  (e) Allocation to System Institutions of Excess Reserves.--
          (1) Establishment of allocated insurance reserves 
        accounts.--There is hereby established within the Farm 
        Credit Insurance Fund--
                  (A) for each insured System bank; and
                  (B) subject to paragraph (5)(C), for all 
                holders, in the aggregate, of Financial 
                Assistance Corporation stock,
        an Allocated Insurance Reserves Account. Amounts in any 
        Allocated Insurance Reserves Account shall be 
        considered to be part of the Farm Credit Insurance 
        Fund.
          (2) Annual allocations.--If, at the end of any 
        calendar year, the aggregate of the amounts in the Farm 
        Credit Insurance Fund exceeds the average secure base 
        amount for the calendar year (as calculated on an 
        average daily balance basis), the Corporation shall 
        allocate to the Allocated Insurance Reserves Accounts 
        such excess amount less the amount that the 
        Corporation, in its sole discretion, determines to be 
        the sum of the estimated operating expenses and 
        estimated insurance obligations of the Corporation for 
        the immediately succeeding calendar year.
          (3) Allocation formula.--From the total amount 
        required to be allocated at the end of a calendar year 
        pursuant to paragraph (2)--
                  (A) 10 percent of such total amount shall be 
                credited to the Allocated Insurance Reserves 
                Account established under paragraph (1)(B), 
                subject to paragraph (5)(C); and
                  (B) there shall be credited to the Allocated 
                Insurance Reserves Account of each insured 
                System bank an amount that bears the same ratio 
                to such total amount (less any reduction under 
                subparagraph (A)) as the average principal 
                outstanding for the 3-year period ending with 
                the end of such calendar year on loans made by 
                the bank that are in accrual status bears to 
                the average principal outstanding for such 3-
                year period on loans made by all insured System 
                banks that are in accrual status (excluding, in 
                each case, the guaranteed portions of 
                government-guaranteed loans described in 
                subsection (a)(1)(C)).
          (4) Use of funds in allocated insurance reserves 
        accounts.--To the extent that the sum of the operating 
        expenses of the Corporation and the insurance 
        obligations of the Corporation for a calendar year 
        exceeds the estimated sum described in paragraph (2) 
        for the calendar year, the Corporation shall cover such 
        expenses and obligations by reducing each Allocated 
        Insurance Reserves Account by the same proportion and 
        expending the amounts so obtained, before expending 
        other monies in the Fund.
          (5) Other disposition of account funds.--
                  (A) In general.--Beginning in calendar year 
                2003, if the aggregate of the amounts in the 
                Farm Credit Insurance Fund exceeds the secure 
                base amount, the Corporation may--
                          (i) subject to subparagraph (D), pay 
                        to each insured System bank, in a 
                        manner determined by the Corporation, 
                        an amount equal to the lesser of--
                                  (I) 20 percent of the balance 
                                in the bank's Allocated 
                                Insurance Reserves Account as 
                                of the preceding December 31; 
                                or
                                  (II) 20 percent of the 
                                balance in the bank's Allocated 
                                Insurance Reserves Account on 
                                the date of payment; and
                          (ii) subject to subparagraphs (C) and 
                        (E), pay to each System bank and 
                        association holding Financial 
                        Assistance Corporation stock its 
                        proportionate share, determined by 
                        dividing the number of shares of 
                        Financial Assistance Corporation stock 
                        held by such institution by the total 
                        number of shares of Financial 
                        Assistance Corporation stock 
                        outstanding, of the lesser of--
                                  (I) 20 percent of the balance 
                                in the Allocated Insurance 
                                Reserves Account established 
                                under paragraph (1)(B) as of 
                                the preceding December 31; or
                                  (II) 20 percent of the 
                                balance in the Allocated 
                                Insurance Reserves Account 
                                established under paragraph 
                                (1)(B) on the date of the 
                                payment.
                  (B) Authority to eliminate or reduce 
                payments.--The Corporation may eliminate or 
                reduce payments under subparagraph (A) if the 
                Corporation determines, in its sole discretion, 
                that such payments, or other circumstances that 
                might require use of the Farm Credit Insurance 
                Fund, could cause the amount in the Farm Credit 
                Insurance Fund during that calendar year to be 
                less than the secure base amount.
                  (C) Reimbursement for financial assistance 
                corporation stock.--
                          (i) Sufficient funding.--
                        Notwithstanding paragraph (3)(A), upon 
                        provision by the Corporation for the 
                        accumulation in the account established 
                        under paragraph (1)(B) of funds in an 
                        amount equal to $56 million, the 
                        Corporation shall not allocate any 
                        further funds to such account except to 
                        replenish such account in the event 
                        that funds are diminished below such 
                        amount by the Corporation pursuant to 
                        paragraph (4).
                          (ii) Wind down and termination.--
                                  (I) Final disbursements.--
                                Upon disbursement of a total of 
                                $53 million from such Allocated 
                                Insurance Reserves Account, the 
                                Corporation shall disburse the 
                                remaining amounts in such 
                                account, as determined under 
                                paragraph (5)(A)(ii), without 
                                regard to the percentage 
                                limitation in subclauses (I) 
                                and (II) thereof.
                                  (II) Termination of 
                                account.--Upon disbursement of 
                                a total of $56 million from 
                                such Allocated Insurance 
                                Reserves Account established 
                                under paragraph (1)(B), the 
                                Corporation shall close the 
                                Allocated Insurance Reserves 
                                Account established under 
                                paragraph (1)(B) and transfer 
                                any remaining funds in such 
                                Account to the remaining 
                                Allocated Insurance Reserves 
                                Accounts in accordance with the 
                                formula in paragraph (3)(B) for 
                                the calendar year in which the 
                                transfer occurs.
                  (D) Distribution of payments received.--
                Within 60 days after receipt of a payment made 
                under subparagraph (5)(A)(i), each insured 
                System bank, in consultation with its 
                affiliated associations, and taking into 
                account the direct or indirect payment of 
                insurance premiums by such associations, shall 
                develop and implement an equitable plan to 
                distribute payments received pursuant to 
                subparagraph (5)(A)(i) among the bank and its 
                associations.
                  (E) Exception for previously reimbursed 
                associations.--For purposes of subparagraph 
                (5)(A)(ii), in any Farm Credit District in 
                which the funding bank has reimbursed one or 
                more of its affiliated associations for the 
                previously unreimbursed portion of the 
                Financial Assistance stock held by such 
                associations, the funding bank shall be deemed 
                to be the holder of the shares of Financial 
                Assistance Corporation stock for which it has 
                provided such reimbursement.

SEC. 5.56. CERTIFICATION OF PREMIUMS.

  (a) Filing Certified Statement.--Annually, on a date to be 
determined in the sole discretion of the Board of Directors, 
each insured System bank that became insured before the 
beginning of the year shall file with the Corporation a 
certified statement showing--
          (1) * * *
          (2) the annual average principal outstanding on the 
        guaranteed portion of Federal Government-guaranteed 
        loans (as defined in section [5.55(a)(2)] 5.55(a)(3)) 
        that are in accrual status;
          (3) the annual average principal outstanding on State 
        government-guaranteed loans (as defined in section 
        [5.55(a)(2)] 5.55(a)(3)) that are in accrual status;
          * * * * * * *

SEC. 5.58. GENERAL CORPORATE POWERS.

  On the date of the enactment of this part, the Corporation 
shall become a body corporate and as such shall have the 
following powers:
          (1) * * *
          * * * * * * *
          [(9) Receiver.--The Corporation may act as receiver.]
          (9) Conservator or receiver.--The Corporation may act 
        as conservator or receiver.
          * * * * * * *

SEC. 5.61.  POWERS OF CORPORATION WITH RESPECT TO TROUBLED INSURED 
                    SYSTEM BANKS.

  (a) Authority to Provide Assistance.--
          (1) [In general] Stand-alone assistance.--The 
        Corporation, in its sole discretion and on such terms 
        and conditions as the Board of Directors may prescribe, 
        may make loans to, purchase the assets or securities 
        of, assume the liabilities of, or make contributions 
        to, any insured System bank if such action is taken--
                  (A) * * *
          (2) [Enumerated powers] Facilitation of mergers or 
        consolidation.--
                  (A) [Facilitation of mergers or 
                consolidation] In general.--To facilitate a 
                merger or consolidation of a qualifying insured 
                System bank, the sale of assets of such insured 
                System bank to another insured System bank, the 
                assumption of such insured System bank's 
                liabilities by such other insured System bank, 
                or the acquisition of the stock of such insured 
                System bank by such other insured System bank, 
                the Corporation, in its sole discretion and on 
                such terms and conditions as the Board of 
                Directors may prescribe, may--
                          (i) * * *
          * * * * * * *
          (3) Limitation.--
                  [(A) Cost of liquidation.--Assistance shall 
                not be provided to an insured System bank under 
                this subsection if the amount of such 
                assistance exceeds an amount determined by the 
                Corporation to be the cost of liquidating the 
                bank (including paying the insured obligations 
                issued on behalf of the bank). This 
                subparagraph shall not apply to the provision 
                of assistance to a bank if the Corporation 
                determines that the continued operation of the 
                bank is essential to provide adequate 
                agricultural credit services in the area of 
                operations of the bank.]
                  (A) Least-cost resolution.--Assistance may 
                not be provided to an insured System bank under 
                this subsection unless the total amount of such 
                assistance is the least costly to the Farm 
                Credit Insurance Fund of all possible 
                alternatives available to the Corporation, 
                including liquidation of the bank (including 
                paying the insured obligations issued on behalf 
                of the bank). Before making a least-cost 
                determination under this subparagraph, the 
                Corporation shall accord such other insured 
                System banks as the Corporation determines 
                appropriate the opportunity to submit 
                information relating to such determination.
                  (B) Procedural rules.--In determining the 
                least costly alternative under subparagraph 
                (A), the Corporation shall--
                          (i) evaluate alternatives on a 
                        present-value basis, using a reasonable 
                        discount rate;
                          (ii) document that evaluation and the 
                        assumptions on which the evaluation is 
                        based; and
                          (iii) retain the documentation for 
                        not less than 5 years.
                  (C) Time of determination.--
                          (i) Cost of assistance.--For purposes 
                        of this subsection, the determination 
                        of the costs of providing any 
                        assistance under any provision of this 
                        section with respect to any insured 
                        System bank shall be made as of the 
                        date on which the Corporation makes the 
                        determination to provide such 
                        assistance to the institution under 
                        this section.
                          (ii) Cost of liquidation.--For 
                        purposes of this subsection, the 
                        determination of the costs of 
                        liquidation of any insured System bank 
                        shall be made as of the earliest of--
                                  (I) the date on which a 
                                conservator is appointed for 
                                the bank;
                                  (II) the date on which a 
                                receiver is appointed for the 
                                bank; or
                                  (III) the date on which the 
                                Corporation makes any 
                                determination to provide any 
                                assistance under this section 
                                with respect to the bank.
                  (D) Evaluation of management.--Before 
                providing any assistance under paragraph (1), 
                the Corporation shall evaluate the adequacy of 
                the managerial resources of the bank. The 
                continued service of any director or senior 
                ranking officer who serves in a policymaking 
                role for the assisted bank, as determined by 
                the Corporation, shall be subject to approval 
                by the Corporation as a condition of such 
                assistance.
                  (E) Discretionary determination.--Any 
                determination that the Corporation makes under 
                this paragraph shall be in the sole discretion 
                of the Corporation.
                  [(B)] (F) Purchase of stock.--The Corporation 
                may not use its authority under this subsection 
                to purchase any stock of an insured System 
                bank. The preceding sentence shall not be 
                construed to limit the ability of the 
                Corporation to enter into and enforce covenants 
                and agreements that it determines to be 
                necessary to protect the financial interests of 
                the Corporation.
          * * * * * * *

SEC. 5.61A. AUTHORITY TO REGULATE GOLDEN PARACHUTE AND INDEMNIFICATION 
                    PAYMENTS.

  (a) In General.--The Corporation may prohibit or limit, by 
regulation or order, any golden parachute payment or 
indemnification payment by a Farm Credit System institution 
(including the Federal Agricultural Mortgage Corporation and 
any conservator or receiver for the Federal Agricultural 
Mortgage Corporation) in troubled condition (as defined in 
regulations issued by the Corporation).
  (b) Factors To Be Taken Into Account.--The Corporation shall 
prescribe, by regulation, the factors to be considered by the 
Corporation in taking any action under subsection (a), which 
may include the following:
          (1) Whether there is a reasonable basis to believe 
        that the institution-related party has committed any 
        fraudulent act or omission, breach of trust or 
        fiduciary duty, or insider abuse with regard to the 
        Farm Credit System institution involved that has had a 
        material effect on the financial condition of the 
        institution.
          (2) Whether there is a reasonable basis to believe 
        that the institution-related party is substantially 
        responsible for the insolvency of the Farm Credit 
        System institution, the appointment of a conservator or 
        receiver for the institution, or the institution's 
        troubled condition (as defined in regulations 
        prescribed by the Corporation).
          (3) Whether there is a reasonable basis to believe 
        that the institution-related party has materially 
        violated any applicable law or regulation that has had 
        a material effect on the financial condition of the 
        institution.
          (4) Whether there is a reasonable basis to believe 
        that the institution-related party has violated or 
        conspired to violate--
                  (A) section 215, 657, 1006, 1014, or 1344 of 
                title 18, United States Code; or
                  (B) section 1341 or 1343 of title 18, United 
                States Code, affecting a Farm Credit System 
                institution.
          (5) Whether the institution-related party was in a 
        position of managerial or fiduciary responsibility.
          (6) The length of time that the party was related 
        with the Farm Credit System institution and the degree 
        to which--
                  (A) the payment reasonably reflects 
                compensation earned over the period of 
                employment; and
                  (B) the compensation involved represents a 
                reasonable payment for services rendered.
  (c) Certain Payments Prohibited.--No Farm Credit System 
institution may prepay the salary or any liability or legal 
expense of any institution-related party if such payment--
          (1) is made in contemplation of the insolvency of 
        such institution or after the commission of an act of 
        insolvency; and
          (2) is made with a view to, or has the result of--
                  (A) preventing the proper application of the 
                assets of the institution to creditors; or
                  (B) preferring one creditor over another.
  (d) Golden Parachute Payment Defined.--As used in this 
section:
          (1) In general.--The term ``golden parachute 
        payment'' means any payment (or any agreement to make 
        any payment) in the nature of compensation by any Farm 
        Credit System institution for the benefit of any 
        institution-related party under an obligation of the 
        institution that--
                  (A) is contingent on the termination of the 
                party's relationship with the institution; and
                  (B) is received on or after the date on 
                which--
                          (i) the institution is insolvent;
                          (ii) any conservator or receiver is 
                        appointed for the institution;
                          (iii) the Farm Credit Administration 
                        has assigned the institution a 
                        composite CAMEL rating of 4 or 5 under 
                        the Farm Credit Administration Rating 
                        System, or an equivalent rating; or
                          (iv) the Corporation otherwise 
                        determines that the institution is in a 
                        troubled condition (as defined in 
                        regulations issued by the Corporation).
          (2) Certain payments in contemplation of an event.--
        Any payment that would be a golden parachute payment 
        but for the fact that the payment was made before the 
        date referred to in paragraph (1)(B) shall be treated 
        as a golden parachute payment if the payment was made 
        in contemplation of the occurrence of an event 
        described in any clause of such paragraph.
          (3) Certain payments not included.--The term ``golden 
        parachute payment'' shall not include--
                  (A) any payment made under a retirement plan 
                that is qualified (or is intended to be 
                qualified) under section 401 of the Internal 
                Revenue Code of 1986 or other nondiscriminatory 
                benefit plan;
                  (B) any payment made under a bona fide 
                deferred compensation plan or arrangement that 
                the Corporation determines, by regulation or 
                order, to be permissible; or
                  (C) any payment made by reason of the death 
                or disability of an institution-related party.
  (e) Other Definitions.--As used in this section:
          (1) Indemnification payment.--The term 
        ``indemnification payment'' means any payment (or any 
        agreement to make any payment) by any Farm Credit 
        System institution for the benefit of any person who is 
        or was an institution-related party, to pay or 
        reimburse the person for any liability or legal expense 
        with regard to any administrative proceeding or civil 
        action instituted by the Farm Credit Administration 
        that results in a final order under which the person--
                  (A) is assessed a civil money penalty; or
                  (B) is removed or prohibited from 
                participating in the conduct of the affairs of 
                the institution.
          (2) Liability or legal expense.--The term ``liability 
        or legal expense'' means--
                  (A) any legal or other professional expense 
                incurred in connection with any claim, 
                proceeding, or action;
                  (B) the amount of, and any cost incurred in 
                connection with, any settlement of any claim, 
                proceeding, or action; and
                  (C) the amount of, and any cost incurred in 
                connection with, any judgment or penalty 
                imposed with respect to any claim, proceeding, 
                or action.
          (3) Payment.--The term ``payment'' means--
                  (A) any direct or indirect transfer of any 
                funds or any asset; and
                  (B) any segregation of any funds or assets 
                for the purpose of making, or under an 
                agreement to make, any payment after the date 
                on which such funds or assets are segregated, 
                without regard to whether the obligation to 
                make such payment is contingent on--
                          (i) the determination, after such 
                        date, of the liability for the payment 
                        of such amount; or
                          (ii) the liquidation, after such 
                        date, of the amount of such payment.
          (4) Institution-related party.--The term 
        ``institution-related party'' means--
                  (A) any director, officer, employee, or agent 
                for a Farm Credit System institution;
                  (B) any stockholder (other than another Farm 
                Credit System institution), consultant, joint 
                venture partner, or any other person determined 
                by the Farm Credit Administration to be a 
                participant in the conduct of the affairs of a 
                Farm Credit System institution;
                  (C) any independent contractor (including any 
                attorney, appraiser, or accountant) who 
                knowingly or recklessly participates in any 
                violation of any law or regulation, any breach 
                of fiduciary duty, or any unsafe or unsound 
                practice that caused or is likely to cause more 
                than a minimal financial loss to, or a 
                significant adverse effect on, the Farm Credit 
                System institution; or
                  (D) any receiver or conservator of a Farm 
                Credit System institution.
  (f) Special Rule.--No provision of this section may be 
construed as prohibiting any Farm Credit System institution 
from purchasing any commercial insurance policy or fidelity 
bond, except that such insurance policy or bond shall not cover 
any legal or liability expense of the institution that is 
described in subsection (e)(1).
  (g) Special Rule Regarding the Farm Credit Administration.--
No provision of this section may be construed as limiting the 
powers, functions, or responsibilities of the Farm Credit 
Administration.
          * * * * * * *

           TITLE VIII--AGRICULTURAL MORTGAGE SECONDARY MARKET

   Subtitle A--Establishment and Activities of Federal Agricultural 
                          Mortgage Corporation

          * * * * * * *

SEC. 8.9.  EXEMPTION FROM RESTRUCTURING AND BORROWERS RIGHTS PROVISIONS 
                    FOR POOLED LOANS.

  (a) * * *
  (b) Borrowers Rights.--At the time of application for a loan 
(as defined in section 4.14A(a)(5)), originators that are Farm 
Credit System institutions shall give written notice to each 
applicant of the terms and conditions of the loan, setting 
forth separately terms and conditions for pooled loans and 
loans that are not pooled. This notice shall include a 
statement, if applicable, that the loan may be pooled and that, 
if pooled, sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 
shall not apply. This notice also shall inform the applicant 
that he or she has the right not to have the loan pooled. 
Within 3 days from the time of commitment, an applicant has the 
right to refuse to allow the loan to be pooled, thereby 
retaining rights under sections 4.14, 4.14A, 4.14B, 4.14C, 
4.14D, and 4.36, if applicable.
          * * * * * * *
                              ----------                              


   SECTION 201 OF THE FARM CREDIT BANKS AND ASSOCIATIONS SAFETY AND 
                         SOUNDNESS ACT OF 1992

[SEC. 201. FARM CREDIT SYSTEM INSURANCE CORPORATION.

  [(a) In General.--Section 5.53 (12 U.S.C. 2277a-2) is amended 
to read as follows:

[``SEC. 5.53. BOARD OF DIRECTORS.

  [``(a) In General.--
          [``(1) Establishment.--The management of the 
        Corporation shall be vested in a Board of Directors 
        (referred to in this section as the `Board'). The Board 
        shall establish policies for the Corporation. The Board 
        shall provide for the performance of all the powers and 
        duties vested in the Corporation.
          [``(2) Appointment.--The Board shall consist of three 
        members, who shall be citizens of the United States and 
        broadly representative of the public interest. Members 
        of the Board shall be appointed by the President, by 
        and with the advice and consent of the Senate. Not more 
        than two members of the Board shall be members of the 
        same political party.
          [``(3) Chairperson.--Of the persons appointed to the 
        Board, one shall be designated by the President to 
        serve as Chairperson of the Board for the duration of 
        the term of the member.
          [``(4) Postemployment prohibition.--A member of the 
        Board shall be ineligible during the time the member is 
        in office and for 2 years thereafter to hold any 
        office, position, or employment in any institution of 
        the Farm Credit System.
  [``(b) Term of Office.--
          [``(1) In general.--The term of office of each member 
        of the Board shall be 6 years, except that the terms of 
        the two members, other than the Chairperson, first 
        appointed under subsection (a) shall expire, one on the 
        expiration of 2 years after the date of appointment, 
        and one on the expiration of 4 years after the date of 
        appointment.
          [``(2) Succession.--Members of the Board shall not be 
        appointed to succeed themselves, except that the 
        members first appointed under subsection (a) for a term 
        of less than 6 years may be reappointed for a full 6-
        year term and members appointed to fill unexpired terms 
        of 3 years or less may be reappointed for a full 6-year 
        term.
          [``(3) Vacancies.--Any vacancy shall be filled for 
        the unexpired term on like appointment. Any member of 
        the Board shall continue to serve as a member after the 
        expiration of the term of the member until a successor 
        has been appointed and qualified.
  [``(c) Organization.--
          [``(1) Oath.--Each member of the Board, within 15 
        days after notice of appointment, shall subscribe to 
        the oath of office.
          [``(2) Quorum.--The Board may transact business if a 
        vacancy exists, if a quorum is present. A quorum shall 
        consist of two members of the Board.
          [``(3) Meeting.--The Board shall hold meetings at 
        such times and places as the Board may fix and 
        determine. The meetings shall be held on the call of 
        the Chairperson or any two Board members.
          [``(4) Rules; records.--The Board shall adopt such 
        rules as the Board considers appropriate for the 
        transaction of business by the Board, and shall keep 
        permanent and accurate records and minutes of the 
        actions and proceedings of the Board.
  [``(d) Compensation.--
          [``(1) In general.--The members of the Board shall 
        devote their full time and attention to the business of 
        the Board.
          [``(2) Chairperson.--The Chairperson of the Board 
        shall receive compensation at the rate prescribed for 
        level III of the Executive Schedule under section 5314 
        of title 5, United States Code.
          [``(3) Other members.--Each of the other members of 
        the Board shall receive compensation at the rate 
        prescribed for level IV of the Executive Schedule under 
        section 5315 of title 5, United States Code.
          [``(4) Expenses.--Each member of the Board shall be 
        reimbursed for necessary travel, subsistence, and other 
        expenses in the discharge of the official duties of the 
        member without regard to other laws with respect to 
        allowance for travel and subsistence of officers and 
        employees of the United States.''.
  [(b) Conforming Amendments.--
          [(1) Chairperson.--Section 5314 of title 5, United 
        States Code, is amended by adding at the end the 
        following new item:
          [``Chairperson, Board of Directors of the Farm Credit 
        System Insurance Corporation.''.
          [(2) Members.--Section 5315 of such title is amended 
        by adding at the end the following new item:
          [``Members, Board of Directors of the Farm Credit 
        System Insurance Corporation.''.
  [(c) Effective Date.--
          [(1) In general.--The amendments made by this section 
        shall become effective on January 1, 1996.
          [(2) Transitional provision.--The Board of Directors 
        of the Farm Credit System Insurance Corporation as 
        established by section 5.53 of the Farm Credit Act of 
        1971 (12 U.S.C. 2277a-2) (as it existed before the 
        amendments made by subsection (a) of this section) 
        shall continue in existence and continue to manage the 
        Farm Credit System Insurance Corporation until at least 
        two members are appointed by the President, by and with 
        the advice and consent of the Senate, to the new Board 
        established by section 5.53 of such Act (as amended by 
        subsection (a) of this section).]
                              ----------                              

             SECTION 1320 OF THE FOOD SECURITY ACT OF 1985
                    interest rate reduction program
  Sec. 1320. Effective only for the period beginning on the 
date of enactment of this Act and ending September 30, [1995] 
2000, the Consolidated Farm and Rural Development Act (7 U.S.C. 
1921 et seq.) is amended by adding after the section added by 
section 1319 the following:
  ``Sec. 351. (a) * * *
          * * * * * * *