[House Report 105-164]
[From the U.S. Government Publishing Office]



105th Congress                                            Rept. 105-164
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     Part 3
_______________________________________________________________________


 
                     FINANCIAL SERVICES ACT OF 1997

_______________________________________________________________________


November 3, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                         [To accompany H.R. 10]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 10) to enhance competition in the financial services 
industry by providing a prudential framework for the 
affiliation of banks, securities firms, and other financial 
service providers, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.


                                CONTENTS
                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    88
Background and Need for Legislation..............................    97
Hearings.........................................................   104
Committee Consideration..........................................   106
Rollcall Votes...................................................   106
Committee Oversight Findings.....................................   110
Committee on Government Reform and Oversight.....................   110
New Budget Authority and Tax Expenditures........................   110
Committee Cost Estimate..........................................   110
Congressional Budget Office Estimate.............................   110
Federal Mandates Statement.......................................   110
Advisory Committee Statement.....................................   110
Constitutional Authority Statement...............................   110
Applicability to Legislative Branch..............................   111
Section-by-Section Analysis of the Legislation...................   111
Changes in Existing Law Made by the Bill, As Reported............   170
Additional and Minority Views....................................   401

    The amendment is 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 ``Financial Services 
Act of 1997''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

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

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Certain State affiliation laws preempted.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding 
companies.
Sec. 113. Authority of State insurance regulator and Securities and 
Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and 
enforcement authority of the Board.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability 
for obligations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal Reserve Act.

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

              Chapter 1--Investment Bank Holding Companies

Sec. 131. Investment bank holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.

              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

  Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and 
                                Mergers

Sec. 141. Amendments to the Bank Holding Company Act of 1956.
Sec. 142. Amendments to the Federal Deposit Insurance Act to vest in 
the attorney general sole responsibility for antitrust review of 
depository institution mergers.
Sec. 143. Information filed by depository institutions; interagency 
data sharing.
Sec. 144. Applicability of antitrust laws.
Sec. 145. Clarification of status of subsidiaries and affiliates.
Sec. 146. Effective date.

Subtitle F--Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

Sec. 151. Applying the principles of national treatment and equality of 
competitive opportunity to foreign banks that are financial holding 
companies.
Sec. 152. Applying the principles of national treatment and equality of 
competitive opportunity to foreign banks and foreign financial 
institutions that are wholesale financial institutions.

                  Subtitle G--Effective Date of Title

Sec. 171. Effective date.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Grievance process.
Sec. 205. Information sharing.
Sec. 206. Banking products, derivative instrument, and qualified 
investor defined.
Sec. 207. Government securities defined.
Sec. 208. Effective date.

             Subtitle B--Bank Investment Company Activities

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

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

Sec. 231. Supervision of investment bank holding companies by the 
securities and exchange commission.

                           Subtitle D--Study

Sec. 241. Study of methods to inform investors and consumers of 
uninsured products.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. New bank agency activities only through acquisition of 
existing licensed agents.
Sec. 306. Title insurance activities of national banks and their 
affiliates.
Sec. 307. Expedited and equalized dispute resolution for financial 
regulators.
Sec. 308. Consumer protection regulations.
Sec. 309. Certain State affiliation laws preempted for insurance 
companies and affiliates.

             Subtitle B--Redomestication of Mutual Insurers

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

   Subtitle C--National Association of Registered Agents and Brokers

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

TITLE IV--MERGER OF BANK AND THRIFT CHARTERS, REGULATORS, AND INSURANCE 
                                 FUNDS

Sec. 401. Short title; definitions.

  Subtitle A--Facilitating Conversion of Savings Associations to Banks

Sec. 411. Conversion to State or national banks.
Sec. 412. Mutual national banks and Federal mutual bank holding 
companies authorized.
Sec. 413. Grandfathered activities of savings associations.
Sec. 414. Branches of former savings associations.
Sec. 415. Programs for promoting housing finance.
Sec. 416. Savings and loan holding companies.
Sec. 417. Treatment of references in adjustable rate mortgages.
Sec. 418. Cost of funds indexes.

Subtitle B--Ending Separate Federal Regulation of Savings Associations 
                 and Savings and Loan Holding Companies

Sec. 421. State savings associations treated as State banks under 
Federal banking law.
Sec. 422. Home Owners' Loan Act repealed.
Sec. 423. Conforming amendment reflecting elimination of the Federal 
thrift charter and the separate system of thrift regulation.
Sec. 424. Conforming amendments to the Federal Home Loan Bank Act.
Sec. 425. Amendments to title 11, United States Code.

                   Subtitle C--Combining OTS and OCC

Sec. 431. Prohibition of merger or consolidation repealed.
Sec. 432. Secretary of the Treasury required to formulate plans for 
combining Office of Thrift Supervision with Office of the Comptroller 
of the Currency.
Sec. 433. Office of Thrift Supervision and position of Director of the 
Office of Thrift Supervision abolished.
Sec. 434. Reconfiguration of Board of Directors of FDIC as a result of 
removal of Director of the Office of Thrift Supervision.
Sec. 435. Continuation provisions.

   Subtitle D--Technical and Conforming Amendments to the Depository 
                          Institution Statutes

Sec. 441. Amendments to the Federal Deposit Insurance Act.
Sec. 442. Amendment to the Bank Holding Company Act of 1956.
Sec. 443. Amendments to the Federal Reserve Act.
Sec. 444. Amendments to Alternative Mortgage Transaction Parity Act of 
1982.
Sec. 445. Amendments to the Bank Protection Act of 1968.
Sec. 446. Amendments to the Community Reinvestment Act of 1977.
Sec. 447. Amendments to the Depository Institutions Deregulation and 
Monetary Control Act of 1980.
Sec. 448. Amendments to the Depository Institution Management 
Interlocks Act.
Sec. 449. Amendment to the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996.
Sec. 450. Amendment to the Emergency Home Finance Act of 1970.
Sec. 451. Amendments to the Expedited Funds Availability Act.
Sec. 452. Amendments to the Federal Credit Union Act.
Sec. 453. Amendments to the Federal Financial Institutions Examination 
Council Act of 1978.
Sec. 454. Amendments to the Financial Institutions Reform, Recovery, 
and Enforcement Act of 1989.
Sec. 455. Amendments to the Home Mortgage Disclosure Act of 1975.
Sec. 456. Amendments to the Housing and Community Development Act of 
1992.
Sec. 457. Amendment to the International Banking Act of 1978.
Sec. 458. Amendments to the National Housing Act.
Sec. 459. Amendment to Public Law 93-495.
Sec. 460. Amendment to the Real Estate Settlement Procedures Act of 
1974.
Sec. 461. Amendment to the Revised Statutes of the United States.
Sec. 462. Amendments to the Riegle Community Development and Regulatory 
Improvement Act of 1994.
Sec. 463. Amendments to the Right to Financial Privacy Act of 1978.
Sec. 464. Amendments to the Truth in Savings Act.
Sec. 465. Effective date.

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

                        Subtitle A--Affiliations

SEC. 101. GLASS-STEAGALL ACT REFORMED.

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

SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING COMPANIES 
                    WHICH ARE NOT FINANCIAL HOLDING COMPANIES.

  (a) In General.--Section 4(c)(8) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
          ``(8) shares of any company the activities of which had been 
        determined by the Board by regulation under this paragraph as 
        of the day before the date of the enactment of the Financial 
        Services Act of 1997, to be so closely related to banking as to 
        be a proper incident thereto (subject to such terms and 
        conditions contained in such regulation, unless modified by the 
        Board);''.
  (b) Conforming Changes to Other Statutes.--
          (1) Amendment to the bank holding company act amendments of 
        1970.--Section 105 of the Bank Holding Company Act Amendments 
        of 1970 (12 U.S.C. 1850) is amended by striking ``, to engage 
        directly or indirectly in a nonbanking activity pursuant to 
        section 4 of such Act,''.
          (2) Amendment to the bank service company act.--Section 4(f) 
        of the Bank Service Company Act (12 U.S.C. 1864(f)) is amended 
        by striking the period and adding at the end the following: 
        ``as of the day before the date of enactment of the Financial 
        Services Act of 1997.''.

SEC. 103. FINANCIAL HOLDING COMPANIES.

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

``SEC. 6. FINANCIAL HOLDING COMPANIES.

  ``(a) Financial Holding Company Defined.--For purposes of this 
section, the term `financial holding company' means a bank holding 
company which meets the requirements of subsection (b).
  ``(b) Eligibility Requirements for Financial Holding Companies.--
          ``(1) In general.--No bank holding company may engage in any 
        activity or directly or indirectly acquire or retain shares of 
        any company under this section unless the bank holding company 
        meets the following requirements:
                  ``(A) All of the subsidiary depository institutions 
                of the bank holding company are well capitalized.
                  ``(B) All of the subsidiary depository institutions 
                of the bank holding company are well managed.
                  ``(C) All of the subsidiary depository institutions 
                of the bank holding company have achieved a rating of 
                `satisfactory record of meeting community credit 
                needs', or better, at the most recent examination of 
                each such institution under the Community Reinvestment 
                Act of 1977.
                  ``(D) The company has filed with the Board a 
                declaration that the company elects to be a financial 
                holding company and certifying that the company meets 
                the requirements of subparagraphs (A) through (C).
          ``(2) Foreign banks and companies.--For purposes of paragraph 
        (1), the Board shall establish and apply comparable capital 
        standards to a foreign bank that operates a branch or agency or 
        owns or controls a bank or commercial lendingcompany in the 
United States, and any company that owns or controls such foreign bank, 
giving due regard to the principle of national treatment and equality 
of competitive opportunity.
          ``(3) Limited exclusions from community needs requirements 
        for newly acquired depository institutions.--
                  ``(A) In general.--If the requirements of 
                subparagraph (B) are met, any depository institution 
                acquired by a bank holding company during the 24-month 
                period preceding the submission of a declaration under 
                paragraph (1)(D) and any depository institution 
                acquired after the submission of such declaration may 
                be excluded for purposes of paragraph (1)(C) until the 
                later of--
                          ``(i) the end of the 24-month period 
                        beginning on the date the acquisition of the 
                        depository institution by such company is 
                        consummated; or
                          ``(ii) the date of completion of the 1st 
                        examination of such depository institution 
                        under the Community Reinvestment Act of 1977 
                        which is conducted after the date of the 
                        acquisition of the depository institution.
                  ``(B) Requirements.--The requirements of this 
                subparagraph are met with respect to any bank holding 
                company referred to in subparagraph (A) if--
                          ``(i) the bank holding company has submitted 
                        an affirmative plan to the appropriate Federal 
                        banking agency to take such action as may be 
                        necessary in order for such institution to 
                        achieve a rating of `satisfactory record of 
                        meeting community credit needs', or better, at 
                        the next examination of the institution under 
                        the Community Reinvestment Act of 1977; and
                          ``(ii) the plan has been approved by such 
                        agency.
  ``(c) Engaging in Activities Financial in Nature.--
          ``(1) In general.--Notwithstanding section 4(a), a financial 
        holding company and a Board supervised investment bank holding 
        company may engage in any activity and acquire and retain the 
        shares of any company the activities of which the Board has 
        determined (by regulation or order) to be financial in nature 
        or incidental to such financial activities.
          ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Board shall take into account--
                  ``(A) the purposes of this Act and the Financial 
                Services Act of 1997;
                  ``(B) changes or reasonably expected changes in the 
                marketplace in which bank holding companies compete;
                  ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                  ``(D) whether such activity is necessary or 
                appropriate to allow a bank holding company and the 
                affiliates of a bank holding company to--
                          ``(i) compete effectively with any company 
                        seeking to provide financial services in the 
                        United States;
                          ``(ii) use any available or emerging 
                        technological means, including any application 
                        necessary to protect the security or efficacy 
                        of systems for the transmission of data or 
                        financial transactions, in providing financial 
                        services; and
                          ``(iii) offer customers any available or 
                        emerging technological means for using 
                        financial services.
          ``(3) Activities that are financial in nature.--The following 
        activities shall be considered to be financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding money or securities.
                  ``(B) Insuring, guaranteeing, or indemnifying against 
                loss, harm, damage, illness, disability, or death, or 
                providing and issuing annuities, and acting as 
                principal, agent, or broker for purposes of the 
                foregoing.
                  ``(C) Providing financial, investment, or economic 
                advisory services, including advising an investment 
                company (as defined in section 3 of the Investment 
                Company Act of 1940).
                  ``(D) Issuing or selling instruments representing 
                interests in pools of assets permissible for a bank to 
                hold directly.
                  ``(E) Underwriting, dealing in, or making a market in 
                securities.
                  ``(F) Engaging in any activity that the Board has 
                determined, by order or regulation that is in effect on 
                the date of enactment of the Financial Services Act of 
                1997, to be so closely related to banking or managing 
                or controlling banks as to be a proper incident thereto 
                (subject to the same terms and conditions contained in 
                such order or regulation, unless modified by the 
                Board).
                  ``(G) Engaging, in the United States, in any activity 
                that--
                          ``(i) a bank holding company may engage in 
                        outside the United States; and
                          ``(ii) the Board has determined, under 
                        regulations issued pursuant to section 4(c)(13) 
                        of this Act (as in effect on the day before the 
                        date of enactment of the Financial Services Act 
                        of 1997) to be usual in connection with the 
                        transaction of banking or other financial 
                        operations abroad.
                  ``(H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the bank holding company controls) or 
                otherwise, shares, assets, or ownership interests 
                (including without limitation debt or equity 
                securities, partnership interests, trust certificates 
                or other instruments representing ownership) of a 
                company or other entity, whether or not constituting 
                control of such company or entity, engaged in any 
                activity not authorized pursuant to this section if--
                          ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or subsidiary of a 
                        depository institution;
                          ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by a securities 
                        affiliate or an affiliate thereof as part of a 
                        bona fide underwriting or merchant banking 
                        activity, including investment activities 
                        engaged in for the purpose of appreciation and 
                        ultimate resale or disposition of the 
                        investment;
                          ``(iii) such shares, assets, or ownership 
                        interests, are held only for such a period of 
                        time as will permit the sale or disposition 
                        thereof on a reasonable basis consistent with 
                        the nature of the activities described in 
                        clause (ii); and
                          ``(iv) during the period such shares, assets, 
                        or ownership interests are held, the bank 
                        holding company does not actively participate 
                        in the day to day management or operation of 
                        such company or entity, except insofar as 
                        necessary to achieve the objectives of clause 
                        (ii).
                  ``(I) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution or subsidiary of a depository 
                institution, that the bank holding company controls) or 
                otherwise, shares, assets, or ownership interests 
                (including without limitation debt or equity 
                securities, partnership interests, trust certificates 
                or other instruments representing ownership) of a 
                company or other entity, whether or not constituting 
                control of such company or entity, engaged in any 
                activity not authorized pursuant to this section if--
                          ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or a subsidiary of a 
                        depository institution;
                          ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by an insurance 
                        company that is predominantly engaged in 
                        underwriting life, accident and health, or 
                        property and casualty insurance (other than 
                        credit-related insurance);
                          ``(iii) such shares, assets, or ownership 
                        interests represent an investment made in the 
                        ordinary course of business of such insurance 
                        company in accordance with relevant State law 
                        governing such investments; and
                          ``(iv) during the period such shares, assets, 
                        or ownership interests are held, the bank 
                        holding company does not directly or indirectly 
                        participate in the day-to-day management or 
                        operation of the company or entity except 
                        insofar as necessary to achieve the objectives 
                        of clauses (ii) and (iii).
          ``(4) Actions required.--The Board shall, by regulation or 
        order, define, consistent with the purposes of this Act, the 
        following activities as, and the extent to which such 
        activities are, financial in nature or incidental to activities 
        which are financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding financial assets other than 
                money or securities.
                  ``(B) Providing any device or other instrumentality 
                for transferring money or other financial assets;
                  ``(C) Arranging, effecting, or facilitating financial 
                transactions for the account of third parties.
          ``(5) Post consummation notification.--
                  ``(A) In general.--A financial holding company and a 
                Board supervised investment bank holding company that 
                acquires any company, or commences any activity, 
                pursuant to this subsection shall provide written 
                notice to the Board describing the activity commenced 
                or conducted by the company acquired no later than 30 
                calendar days after commencing the activity or 
                consummating the acquisition.
                  ``(B) Approval not required for certain financial 
                activities.--Except as provided in section 4(j) with 
                regard to the acquisition of a savings association, a 
                financial holding company and a Board supervised 
                investment bank holding company may commence any 
                activity, or acquire any company, pursuant to paragraph 
                (3) or any regulation prescribed or order issued under 
                paragraph (4), without prior approval of the Board.
  ``(d) Provisions Applicable to Financial Holding Companies That Fail 
To Meet Requirements.--
          ``(1) In general.--If the Board finds that a financial 
        holding company is not in compliance with the requirements of 
        subparagraph (A), (B), or (C) of subsection (b)(1), the Board 
        shall give notice of such finding to the company.
          ``(2) Agreement to correct conditions required.--Within 45 
        days of receipt by a financial holding company of a notice 
        given under paragraph (1) (or such additional period as the 
        Board may permit), the company shall execute an agreement 
        acceptable to the Board to comply with the requirements 
        applicable to a financial holding company.
          ``(3) Board may impose limitations.--Until the conditions 
        described in a notice to a financial holding company under 
        paragraph (1) are corrected, the Board may impose such 
        limitations on the conduct or activities of the company or any 
        affiliate of the company as the Board determines to be 
        appropriate under the circumstances.
          ``(4) Failure to correct.--If, after receiving a notice under 
        paragraph (1), a financial holding company does not--
                  ``(A) execute and implement an agreement in 
                accordance with paragraph (2);
                  ``(B) comply with any limitations imposed under 
                paragraph (3);
                  ``(C) in the case of a notice of failure to comply 
                with subsection (b)(1)(A), restore each depository 
                institution subsidiary to well capitalized status 
                before the end of the 180-day period beginning on the 
                date such notice is received by the company (or such 
                other period permitted by the Board); or
                  ``(D) in the case of a notice of failure to comply 
                with subparagraph (B) or (C) of subsection (b)(1), 
                restore compliance with any such subparagraph by the 
                date the next examination of the depository institution 
                subsidiary is completed or by the end of such other 
                period as the Board determines to be appropriate,
        the Board may require such company, under such terms and 
        conditions as may be imposed by the Board and subject to such 
        extension of time as may be granted in the Board's discretion, 
        to divest control of any depository institution subsidiary or, 
        at the election of the financial holding company, instead to 
        cease to engage in any activity conducted by such company or 
        its subsidiaries pursuant to this section.
          ``(5) Consultation.--In taking any action under this 
        subsection, the Board shall consult with all relevant Federal 
        and State regulatory agencies.
  ``(e) Safeguards for Bank Subsidiaries.--A financial holding company 
shall assure that--
          ``(1) the procedures of the holding company for identifying 
        and managing financial and operational risks within the 
        company, and the subsidiaries of such company, adequately 
        protect the subsidiaries of such company which are insured 
        depository institutions from such risks;
          ``(2) the holding company has reasonable policies and 
        procedures to preserve the separate corporate identity and 
        limited liability of such company and the subsidiaries of such 
        company, for the protection of the company's subsidiary insured 
        depository institutions; and
          ``(3) the holding company complies with this section.
  ``(f) Nonfinancial Activities.--
          ``(1) In general.--Notwithstanding section 4(a), a financial 
        holding company may engage in activities which are not (or have 
        not been determined to be) financial in nature or incidental to 
        activities which are financial in nature, or acquire and retain 
        ownership and control of the shares of a company engaged in 
        such activities, if--
                  ``(A) the aggregate annual gross revenues derived 
                from all such activities and all such companies does 
                not exceed the lesser of--
                          ``(i) 5 percent of the consolidated annual 
                        gross revenues of the financial holding 
                        company; or
                          ``(ii) $500,000,000;
                  ``(B) the consolidated total assets of any company 
                the shares of which are acquired by the financial 
                holding company pursuant to this paragraph are less 
                than $750,000,000 at the time the shares are acquired 
                by the holding company; and
                  ``(C) the holding company provides notice to the 
                Board within 30 days of commencing the activity or 
                acquiring the ownership or control.
          ``(2) Inclusion of grandfathered activities.--For purposes of 
        determining the limits contained in paragraph (1)(A), the gross 
        revenues derived from all activities conducted, and companies 
        the shares of which are held, under subsection (g) shall be 
        considered to be derived or held under this subsection.
          ``(3) Foreign banks.--In lieu of the limitation contained in 
        paragraph (1)(A) in the case of a foreign bank or a company 
        that owns or controls a foreign bank which engages in any 
        activity or acquires or retains ownership or control of shares 
        of any company pursuant to paragraph (1), the aggregate annual 
        gross revenues derived from all such activities and all such 
        companies in the United States shall not exceed the lesser of--
                  ``(A) 5 percent of the consolidated annual gross 
                revenues of the foreign bank or company in the United 
                States derived from any branch, agency, commercial 
                lending company, or depository institution controlled 
                by the foreign bank or company and any subsidiary 
                engaged in the United States in activities permissible 
                under section 4 or 6; or
                  ``(B) $500,000,000.
          ``(4) Indexing revenue test.--After December 31, 1998, the 
        Board shall annually adjust the dollar amount contained in 
        paragraphs (1)(A) and (3) by the annual percentage increase in 
        the Consumer Price Index for Urban Wage Earners and Clerical 
        Workers published by the Bureau of Labor Statistics.
          ``(5) Nonapplicability of other exemption.--Any foreign bank 
        or company that owns or controls a foreign bank which engages 
        in any activity or acquires or retains ownership or control of 
        shares of any company pursuant to this subsection shall not be 
        eligible for any exception described in section 2(h).
  ``(g) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
          ``(1) In general.--Notwithstanding subsection (f)(1) and 
        section 4(a), a company that is not a bank holding company or a 
        foreign bank (as defined in section 1(b)(7) of the 
        International Banking Act of 1978) and becomes a financial 
        holding company after the date of the enactment of the 
        Financial Services Act of 1997 may continue to engage in any 
        activity and retain direct or indirect ownership or control of 
        shares of a company engaged in any activity if--
                  ``(A) the holding company lawfully was engaged in the 
                activity or held the shares of such company on 
                September 30, 1997;
                  ``(B) the holding company is predominantly engaged in 
                financial activities as defined in paragraph (2); and
                  ``(C) the company engaged in such activity continues 
                to engage only in the same activities that such company 
                conducted on September 30, 1997, and other activities 
                permissible under this Act.
          ``(2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in financial 
        activities if, as of the day before the company becomes a 
        financial holding company, the annual gross revenues derived by 
        the holding company and all subsidiaries of the holding 
        company, on a consolidated basis, from engaging in activities 
        that are financial in nature or are incidental to activities 
        that are financial in nature under subsection (c) represent at 
        least 85 percent of the consolidated annual gross revenues of 
        the company.
          ``(3) No expansion of grandfathered commercial activities 
        through merger or consolidation.--A financial holding company 
        that engages in activities or holds shares pursuant to this 
        subsection, or a subsidiary of such financial holding company, 
        may not acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which is 
        engaged in any activity which the Board has not determined to 
        be financial in nature or incidental to activities that are 
        financial in nature under subsection (c).
          ``(4) Cross marketing restrictions applicable to commercial 
        activities.--A depository institution controlled by a financial 
        holding company shall not--
                  ``(A) offer or market, directly or through any 
                arrangement, any product or service of a company whose 
                activities are conducted or whose shares are owned or 
                controlled by the financial holding company pursuant to 
                this subsection, subsection (f), or subparagraph (H) or 
                (I) of subsection (c)(3); or
                  ``(B) permit any of its products or services to be 
                offered or marketed, directly or through any 
                arrangement, by or through any company described in 
                subparagraph (A).
          ``(5) Transactions with nonfinancial affiliates.--An insured 
        depository institution controlled by a financial holding 
        company may not engage in a covered transaction (as defined by 
        section 23A(b)(7) of the Federal Reserve Act) with any 
        affiliate controlled by the company pursuant to this subsection 
        or subparagraph (H) or (I) of subsection (c)(3).
  ``(h) Developing Activities.--A financial holding company and a Board 
supervised investment bank holding company may engage, or directly or 
indirectly or acquire shares of any company engaged, in any activity 
that the Board has not determined to be financial in nature or 
incidental to financial activities under subsection (c) if--
          ``(1) the holding company reasonably concludes that the 
        activity is financial in nature or incidental to financial 
        activities;
          ``(2) the gross revenues from all activities conducted under 
        this subsection represent less than 5 percent of the 
        consolidated gross revenues of the holding company;
          ``(3) the aggregate total assets of all companies the shares 
        of which are held under this subsection do not exceed 5 percent 
        of the holding company's consolidated total assets;
          ``(4) the total capital invested in activities conducted 
        under this subsection represents less than 5 percent of the 
        consolidated total capital of the holding company;
          ``(5) the Board has not previously determined that the 
        activity is not financial in nature or incidental to financial 
        activities under subsection (c); and
          ``(6) the holding company provides written notification to 
        the Board describing the activity commenced or conducted by the 
        company acquired no later than 10 business days after 
        commencing the activity or consummating the acquisition.''.

SEC. 104. CERTAIN STATE AFFILIATION LAWS PREEMPTED.

  (a) In General.--Section 7 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1846) is amended by adding at the end the following new 
subsection:
  ``(c) Preemption of Certain State Restrictions.--
          ``(1) Affiliations.--No State may by law, regulation, order, 
        interpretation, or otherwise, prevent or restrict an insured 
        depository institution or a wholesale financial institution 
        from being affiliated with an entity (including an entity 
        engaged in insurance activities) as authorized by this Act or 
        section 17(i) of the Securities Exchange Act of 1934.
          ``(2) Certain activities conducted in conjunction with 
        affiliates.--No State may by law, regulation, order, 
        interpretation, or otherwise, prevent a national bank or a 
        wholesale financial institution from engaging, or significantly 
        interfere with the ability of such national bank or wholesale 
        financial institution to engage, directly or indirectly, or in 
        conjunction with an affiliate referred to in paragraph (1), in 
        any activity as authorized under section 6 or 10 of this Act or 
        section 17(i) of the Securities Exchange Act of 1934.''.
  (b) Technical and Conforming Amendment.--Section 7(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1846(a)) is amended by striking 
``No provision'' and inserting ``Except as provided in subsection (c), 
no provision''.

SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

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

SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

  (a) In General.--Section 109(d) of the Riegle-Neal Interstate Banking 
and Branching Efficiency Act of 1994 (12 U.S.C. 1835a(d)) is amended--
          (1) by inserting ``, the Financial Services Act of 1997,'' 
        after ``pursuant to this title''; and
          (2) by inserting ``or such Act'' after ``made by this 
        title''.
  (b) Technical and Conforming Amendment.--Section 109(e)(4) of the 
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (12 
U.S.C. 1835a(e)(4)) is amended by inserting ``and any branch of a bank 
controlled by an out-of-State bank holding company (as defined in 
section 2(o)(7) of the Bank Holding Company Act of 1956)'' before the 
period.

SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

  Section 42(d)(4)(A) of the Federal Deposit Insurance Act (12 U.S.C. 
1831r-1(d)(4)(A)) is amended by inserting ``and any bank controlled by 
an out-of-State bank holding company (as defined in section 2(o)(7) of 
the Bank Holding Company Act of 1956)'' before the period.

SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

  Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(f)) is amended--
          (1) in paragraph (2)(A)(ii)--
                  (A) by striking ``and'' at the end of subclause (IX);
                  (B) by inserting ``and'' after the semicolon at the 
                end of subclause (X); and
                  (C) by inserting after subclause (X) the following 
                new subclause:
                                  ``(XI) assets that are derived from, 
                                or are incidental to, activities in 
                                which institutions described in section 
                                2(c)(2)(F) are permitted to engage,'';
          (2) in paragraph (2), by striking subparagraph (B) and 
        inserting the following new subparagraphs:
                  ``(B) any bank subsidiary of such company engages in 
                any activity in which the bank was not lawfully engaged 
                as of March 5, 1987, unless the bank is well managed 
                and well capitalized;
                  ``(C) any bank subsidiary of such company both--
                          ``(i) accepts demand deposits or deposits 
                        that the depositor may withdraw by check or 
                        similar means for payment to third parties; and
                          ``(ii) engages in the business of making 
                        commercial loans (and, for purposes of this 
                        clause, loans made in the ordinary course of a 
                        credit card operation shall not be treated as 
                        commercial loans); or
                  ``(D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any bank 
                subsidiary of such company permits any overdraft 
                (including any intraday overdraft), or incurs any such 
                overdraft in such bank's account at a Federal reserve 
                bank, on behalf of an affiliate, other than an 
                overdraft described in paragraph (3).''; and
          (3) by striking paragraphs (3) and (4) and inserting the 
        following new paragraphs:
          ``(3) Permissible overdrafts described.--For purposes of 
        paragraph (2)(D), an overdraft is described in this paragraph 
        if--
                  ``(A) such overdraft results from an inadvertent 
                computer or accounting error that is beyond the control 
                of both the bank and the affiliate; or
                  ``(B) such overdraft--
                          ``(i) is permitted or incurred on behalf of 
                        an affiliate which is monitored by, reports to, 
                        and is recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                          ``(ii) is fully secured, as required by the 
                        Board, by bonds, notes, or other obligations 
                        which are direct obligations of the United 
                        States or on which the principal and interest 
                        are fully guaranteed by the United States or by 
                        securities and obligations eligible for 
                        settlement on the Federal Reserve book entry 
                        system.
          ``(4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such exemption shall cease to apply to such 
        company and such company shall divest control of each bank it 
        controls before the end of the 180-day period beginning on the 
        date that the company receives notice from the Board that the 
        company has failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the company has--
                  ``(A) corrected the condition or ceased the activity 
                that caused the company to fail to continue to qualify 
                for the exemption; and
                  ``(B) implemented procedures that are reasonably 
                adapted to avoid the reoccurrence of such condition or 
                activity.''.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.

  Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(c)) is amended to read as follows:
  ``(c) Reports and Examinations.--
          ``(1) Reports.--
                  ``(A) In general.--The Board from time to time may 
                require any bank holding company and any subsidiary of 
                such company to submit reports under oath to keep the 
                Board informed as to--
                          ``(i) its financial condition, systems for 
                        monitoring and controlling financial and 
                        operating risks, and transactions with 
                        depository institution subsidiaries of the 
                        holding company; and
                          ``(ii) compliance by the company or 
                        subsidiary with applicable provisions of this 
                        Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that a bank 
                        holding company or any subsidiary of such 
                        company has provided or been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                          ``(ii) Availability.--A bank holding company 
                        or a subsidiary of such company shall provide 
                        to the Board, at the request of the Board, a 
                        report referred to in clause (i).
                          ``(iii) Required use of publicly reported 
                        information.--The Board shall, to the fullest 
                        extent possible, accept in fulfillment of any 
                        reporting or recordkeeping requirements under 
                        this Act information that is otherwise required 
                        to be reported publicly and externally audited 
                        financial statements.
                          ``(iv) Reports filed with other agencies.--In 
                        the event the Board requires a report from a 
                        functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company of a kind that is not required by 
                        another Federal or State regulator or 
                        appropriate self-regulatory organization, the 
                        Board shall request that the appropriate 
                        regulator or self-regulatory organization 
                        obtain such report. If the report is not made 
                        available to the Board, and the report is 
                        necessary to assess a material risk to the bank 
                        holding company or its subsidiary depository 
                        institution or compliance with this Act, the 
                        Board may require such subsidiary to provide 
                        such a report to the Board.
                  ``(C) Definition.--For purposes of this subsection, 
                the term `functionally regulated nondepository 
                institution' means--
                          ``(i) a broker or dealer registered under the 
                        Securities Exchange Act of 1934;
                          ``(ii) an investment adviser registered under 
                        the Investment Advisers Act of 1940, with 
                        respect to the investment advisory activities 
                        of such investment adviser and activities 
                        incidental to such investment advisory 
                        activities;
                          ``(iii) an insurance company subject to 
                        supervision by a State insurance commission, 
                        agency, or similar authority; and
                          ``(iv) an entity subject to regulation by the 
                        Commodity Futures Trading Commission, with 
                        respect to the commodities activities of such 
                        entity and activities incidental to such 
                        commodities activities.
          ``(2) Examinations.--
                  ``(A) Examination authority.--
                          ``(i) In general.--The Board may make 
                        examinations of each bank holding company and 
                        each subsidiary of a bank holding company.
                          ``(ii) Functionally regulated nondepository 
                        institution subsidiaries.--Notwithstanding 
                        clause (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company only if--
                                  ``(I) the Board has reasonable cause 
                                to believe that such subsidiary is 
                                engaged in activities that pose a 
                                material risk to an affiliated 
                                depository institution, or
                                  ``(II) based on reports and other 
                                available information, the Board has 
                                reasonable cause to believe that a 
                                subsidiary is not in compliance with 
                                this Act or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the Board 
                                cannot make such determination through 
                                examination of the affiliated 
                                depository institution or bank holding 
                                company.
                  ``(B) Limitations on examination authority for bank 
                holding companies and subsidiaries.--Subject to 
                subparagraph (A)(ii), the Board may make examinations 
                under subparagraph (A)(i) of each bank holding company 
                and each subsidiary of such holding company in order 
                to--
                          ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        holding company and such subsidiaries;
                          ``(ii) inform the Board of--
                                  ``(I) the financial and operational 
                                risks within the holding company system 
                                that may pose a threat to the safety 
                                and soundness of any subsidiary 
                                depository institution of such holding 
                                company; and
                                  ``(II) the systems for monitoring and 
                                controlling such risks; and
                          ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        subsidiary depository institution and its 
                        affiliates.
                  ``(C) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a bank holding company 
                to--
                          ``(i) the bank holding company; and
                          ``(ii) any subsidiary of the holding company 
                        that, because of--
                                  ``(I) the size, condition, or 
                                activities of the subsidiary;
                                  ``(II) the nature or size of 
                                transactions between such subsidiary 
                                and any depository institution which is 
                                also a subsidiary of such holding 
                                company; or
                                  ``(III) the centralization of 
                                functions within the holding company 
                                system,
                        could have a materially adverse effect on the 
                        safety and soundness of any depository 
                        institution affiliate of the holding company.
                  ``(D) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use, for the 
                purposes of this paragraph, the reports of examinations 
                of depository institutions made by the appropriate 
                Federal and State depository institution supervisory 
                authority.
                  ``(E) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examination made 
                of--
                          ``(i) any registered broker or dealer or 
                        registered investment adviser by or on behalf 
                        of the Securities and Exchange Commission;
                          ``(ii) any licensed insurance company by or 
                        on behalf of any state regulatory authority 
                        responsible for the supervision of insurance 
                        companies; and
                          ``(iii) any other subsidiary that the Board 
                        finds to be comprehensively supervised by a 
                        Federal or State authority.
          ``(3) Capital.--
                  ``(A) In general.--The Board shall not, by 
                regulation, guideline, order or otherwise, prescribe or 
                impose any capital or capital adequacy rules, 
                guidelines, standards, or requirements on any 
                subsidiary of a financial holding company that is not a 
                depository institution and--
                          ``(i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the Securities 
                        and Exchange Commission) or State insurance 
                        authority; or
                          ``(ii) is registered as an investment adviser 
                        under the Investment Advisers Act of 1940.
                  ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed as preventing the Board from imposing 
                capital or capital adequacy rules, guidelines, 
                standards, or requirements with respect to activities 
                of a registered investment adviser other than 
                investment advisory activities or activities incidental 
                to investment advisory activities.
          ``(4) Transfer of board authority to appropriate federal 
        banking agency.--
                  ``(A) In general.--In the case of any bank holding 
                company which is not significantly engaged in 
                nonbanking activities, the Board, in consultationwith 
the appropriate Federal banking agency, may designate the appropriate 
Federal banking agency of the lead insured depository institution 
subsidiary of such holding company as the appropriate Federal banking 
agency for the bank holding company.
                  ``(B) Authority transferred.--An agency designated by 
                the Board under subparagraph (A) shall have the same 
                authority as the Board under this Act to--
                          ``(i) examine and require reports from the 
                        bank holding company and any affiliate of such 
                        company (other than a depository institution) 
                        under section 5;
                          ``(ii) approve or disapprove applications or 
                        transactions under section 3;
                          ``(iii) take actions and impose penalties 
                        under subsections (e) and (f) of section 5 and 
                        section 8; and
                          ``(iv) take actions regarding the holding 
                        company, any affiliate of the holding company 
                        (other than a depository institution), or any 
                        institution-affiliated party of such company or 
                        affiliate under the Federal Deposit Insurance 
                        Act and any other statute which the Board may 
                        designate.
                  ``(C) Agency orders.--Section 9 (of this Act) and 
                section 105 of the Bank Holding Company Act Amendments 
                of 1970 shall apply to orders issued by an agency 
                designated under subparagraph (A) in the same manner 
                such sections apply to orders issued by the Board.
          ``(5) Functional regulation of securities and insurance 
        activities.--The Board shall defer to--
                  ``(A) the Securities and Exchange Commission with 
                regard to all interpretations of, and the enforcement 
                of, applicable Federal securities laws relating to the 
                activities, conduct, and operations of registered 
                brokers, dealers, investment advisers, and investment 
                companies; and
                  ``(B) the relevant State insurance authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws relating to the 
                activities, conduct, and operations of insurance 
                companies and insurance agents.''.

SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL HOLDING 
                    COMPANIES.

  (a) Prevention of Duplicative Filings.--Section 5(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding 
the following new sentence at the end: ``A declaration filed in 
accordance with section 6(b)(1)(D) shall satisfy the requirements of 
this subsection with regard to the registration of a bank holding 
company but not any requirement to file an application to acquire a 
bank pursuant to section 3.''.
  (b) Divestiture Procedures.--Section 5(e)(1) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1844(e)(1)) is amended--
          (1) by striking ``Financial Institutions Supervisory Act of 
        1966, order'' and inserting ``Financial Institutions 
        Supervisory Act of 1966, at the election of the bank holding 
        company--
          ``(A) order''; and
          (2) by striking ``shareholders of the bank holding company. 
        Such distribution'' and inserting ``shareholders of the bank 
        holding company; or
          ``(B) order the bank holding company, after due notice and 
        opportunity for hearing, and after consultation with the bank's 
        primary supervisor, which shall be the Comptroller of the 
        Currency in the case of a national bank, and the Federal 
        Deposit Insurance Corporation and the appropriate State 
        supervisor in the case of an insured nonmember bank, to 
        terminate (within 120 days or such longer period as the Board 
        may direct) the ownership or control of any such bank by such 
        company.
``The distribution referred to in subparagraph (A)''.

SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND 
                    EXCHANGE COMMISSION.

  Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) is 
amended by adding at the end the following new subsection:
  ``(g) Authority of State Insurance Regulator and the Securities and 
Exchange Commission.--
          ``(1) In general.--Notwithstanding any other provision of 
        law, any regulation, order, or other action of the Board which 
        requires a bank holding company to provide funds or other 
        assets to a subsidiary insured depository institution shall not 
        be effective nor enforceable if--
                  ``(A) such funds or assets are to be provided by--
                          ``(i) a bank holding company that is an 
                        insurance company or is a broker or dealer 
                        registered under the Securities Exchange Act of 
                        1934; or
                          ``(ii) an affiliate of the depository 
                        institution which is an insurance company or a 
                        broker or dealer registered under such Act; and
                  ``(B) the State insurance authority for the insurance 
                company or the Securities and Exchange Commission for 
                the registered broker or dealer, as the case may be, 
                determines in writing sent to the holding company and 
                the Board that the holding company shall not provide 
                such funds or assets because such action would have a 
                material adverse effect on the financial condition of 
                the insurance company or the broker or dealer, as the 
                case may be.
          ``(2) Notice to state insurance authority or sec required.--
        If the Board requires a bank holding company, or an affiliate 
        of a bank holding company, which is an insurance company or a 
        broker or dealer described in paragraph (1)(A) to provide funds 
        or assets to an insured depository institution subsidiary of 
        the holding company pursuant to any regulation, order, or other 
        action of the Board referred to in paragraph (1), the Board 
        shall promptly notify the State insurance authority for the 
        insurance company or the Securities and Exchange Commission, as 
        the case may be, of such requirement.
          ``(3) Divestiture in lieu of other action.--If the Board 
        receives a notice described in paragraph (1)(B) from a State 
        insurance authority or the Securities and Exchange Commission 
        with regard to a bank holding company or affiliate referred to 
        in such paragraph, the Board may order the bank holding company 
        to divest the insured depository institution within 180 days of 
        receiving notice or such longer period as the Board determines 
        consistent with the safe and sound operation of the insured 
        depository institution.
          ``(4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by the Board 
        under paragraph (3) to a bank holding company and ending on the 
        date the divestiture is completed, the Board may impose any 
        conditions or restrictions on the holding company's ownership 
        or operation of the insured depository institution, including 
        restricting or prohibiting transactions between the insured 
        depository institution and any affiliate of the institution, as 
        are appropriate under the circumstances.''.

SEC. 114. PRUDENTIAL SAFEGUARDS.

  Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) is 
amended by inserting after subsection (g) (as added by section 113 of 
this subtitle) the following new subsection:
  ``(h) Prudential Safeguards.--
          ``(1) In general.--The Board may, by regulation or order, 
        impose restrictions or requirements on relationships or 
        transactions between a depository institution subsidiary of a 
        bank holding company and any affiliate of such depository 
        institution (other than a subsidiary of such institution) which 
        the Board finds is consistent with the public interest, the 
        purposes of this Act, the Financial Services Act of 1997, the 
        Federal Reserve Act, and other Federal law applicable to 
        depository institution subsidiaries of bank holding companies 
        and the standards in paragraph (2).
          ``(2) Standards.--The Board may exercise authority under 
        paragraph (1) if the Board finds that such action will have any 
        of the following effects:
                  ``(A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                  ``(B) Enhance the financial stability of bank holding 
                companies.
                  ``(C) Avoid conflicts of interest or other abuses.
                  ``(D) Enhance the privacy of customers of depository 
                institutions.
                  ``(E) Promote the application of national treatment 
                and equality of competitive opportunity between nonbank 
                affiliates owned or controlled by domestic bank holding 
                companies and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
          ``(3) Review.--The Board shall regularly--
                  ``(A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                  ``(B) modify or eliminate any restriction or 
                requirement the Board finds is no longer required for 
                such purposes.''.

SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

  (a) Exclusive Commission Authority.--
          (1) In general.--The Commission shall be the sole Federal 
        agency with authority to inspect and examine any registered 
        investment company that is not a bank holding company.
          (2) Prohibition on banking agencies.--A Federal banking 
        agency may not inspect or examine any registered investment 
        company that is not a bank holding company.
  (b) Examination Results and Other Information.--The Commission shall 
provide to any Federal banking agency, upon request, the results of any 
examination, reports, records, or other information with respect to any 
registered investment company to the extent necessary for the agency to 
carry out its statutory responsibilities.
  (c) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Bank holding company.--The term ``bank holding company'' 
        has the meaning given to such term in section 2 of the Bank 
        Holding Company Act of 1956.
          (2) Commission.--The term ``Commission'' means the Securities 
        and Exchange Commission.
          (3) Federal banking agency.--The term ``Federal banking 
        agency'' has the meaning given to such term in section 3(z) of 
        the Federal Deposit Insurance Act.
          (4) Registered investment company.--The term ``registered 
        investment company'' means an investment company which is 
        registered with the Commission under the Investment Company Act 
        of 1940.

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

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

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

  ``(a) Limitation on Direct Action.--
          ``(1) In general.--The Board may not prescribe regulations, 
        issue or seek entry of orders, impose restraints, restrictions, 
        guidelines, requirements, safeguards, or standards, or 
        otherwise take any action under or pursuant to any provision of 
        this Act or section 8 of the Federal Deposit Insurance Act 
        against or with respect to a regulated subsidiary of a bank 
        holding company unless the action is necessary to prevent or 
        redress an unsafe or unsound practice or breach of fiduciary 
        duty by such subsidiary that poses a material risk to--
                  ``(A) the financial safety, soundness, or stability 
                of an affiliated depository institution; or
                  ``(B) the domestic or international payment system.
          ``(2) Criteria for board action.--The Board shall not take 
        action otherwise permitted under paragraph (1) unless the Board 
        finds that it is not reasonably possible to effectively protect 
        against the material risk at issue through action directed at 
        or against the affiliated depository institution or against 
        depository institutions generally.
  ``(b) Limitation on Indirect Action.--The Board may not prescribe 
regulations, issue or seek entry of orders, impose restraints, 
restrictions, guidelines, requirements, safeguards, or standards, or 
otherwise take any action under or pursuant to any provision of this 
Act or section 8 of the Federal Deposit Insurance Act against or with 
respect to a financial holding company or an investment bank holding 
company where the purpose or effect of doing so would be to take action 
indirectly against or with respect to a regulated subsidiary that may 
not be taken directly against or with respect to such subsidiary in 
accordance with subsection (a).
  ``(c) Actions Specifically Authorized.--Notwithstanding subsection 
(a), the Board may take action under this Act or section 8 of the 
Federal Deposit Insurance Act to enforce compliance by a regulated 
subsidiary with Federal law that the Board has specific jurisdiction to 
enforce against such subsidiary.
  ``(d) Regulated Subsidiary Defined.--For purposes of this section, 
the term `regulated subsidiary' means any company that is not a bank 
holding company and is--
          ``(1) a broker or dealer registered under the Securities 
        Exchange Act of 1934;
          ``(2) an investment adviser registered under the Investment 
        Advisers Act of 1940, with respect to the investment advisory 
        activities of such investment adviser and activities incidental 
        to such investment advisory activities;
          ``(3) an investment company registered under the Investment 
        Company Act of 1940;
          ``(4) an insurance company or an insurance agency subject to 
        supervision by a State insurance commission, agency, or similar 
        authority; or
          ``(5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the commodities 
        activities of such entity and activities incidental to such 
        commodities activities.''.

               Subtitle C--Subsidiaries of National Banks

SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL BANKS.

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

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

  ``(a) Subsidiaries of National Banks Authorized To Engage in 
Financial Activities.--
          ``(1) Exclusive authority.--No provision of section 5136 or 
        any other provision of this title LXII of the Revised Statutes 
        shall be construed as authorizing a subsidiary of a national 
        bank to engage in, or own any share of any company engaged in, 
        any activity that--
                  ``(A) is not permissible for a national bank to 
                engage in directly; or
                  ``(B) is conducted under terms or conditions other 
                than those that would govern the conduct of such 
                activity by a national bank,
        unless a national bank is specifically authorized by the 
        express terms of a Federal statute and not by implication or 
        interpretation to acquire shares of or control such subsidiary, 
        such as by paragraph (2) of this subsection and section 25A of 
        the Federal Reserve Act.
          ``(2) Specific authorization to conduct insurance agency 
        activities.--A national bank may control a company engaged in 
        general insurance agency activities if--
                  ``(A) the national bank is well capitalized and well 
                managed, and has achieved a rating of satisfactory or 
                better at the most recent examination of the bank under 
                the Community Reinvestment Act of 1977;
                  ``(B) all depository institution affiliates of the 
                national bank are well capitalized and well managed, 
                and have achieved a rating of satisfactory or better at 
                the most recent examination of each such depository 
                institution under the Community Reinvestment Act of 
                1977; and
                  ``(C) the bank has received the approval of the 
                Comptroller of the Currency.
          ``(3) Definitions.--
                  ``(A) Company; control; subsidiary.--The terms 
                `company', `control', and `subsidiary' have the 
                meanings given to such terms in section 2 of the Bank 
                Holding Company Act of 1956.
                  ``(B) Well capitalized.--The term `well capitalized' 
                has the same meaning as in section 38 of the Federal 
                Deposit Insurance Act and, for purposes of this 
                section, the Comptroller shall have exclusive 
                jurisdiction to determine whether a national bank is 
                well capitalized.
                  ``(C) Well managed.--The term `well managed' means--
                          ``(i) in the case of a bank that has been 
                        examined, unless otherwise determined in 
                        writing by the Comptroller--
                                  ``(I) the achievement of a composite 
                                rating of 1 or 2 under the Uniform 
                                Financial Institutions Rating System 
                                (or an equivalent rating under an 
                                equivalent rating system) in connection 
                                with the most recent examination or 
                                subsequent review of the bank; and
                                  ``(II) at least a rating of 2 for 
                                management, if that rating is given; or
                          ``(ii) in the case of any national bank that 
                        has not been examined, the existence and use of 
                        managerial resources that the Comptroller 
                        determines are satisfactory.
  ``(b) Limited Exclusions From Community Needs Requirements for Newly 
Acquired Depository Institutions.--Any depository institution which 
becomesaffiliated with a national bank during the 24-month period 
preceding the submission of an application to acquire a subsidiary 
under subsection (a)(2), and any depository institution which becomes 
so affiliated after the approval of such application, may be excluded 
for purposes of subsection (a)(2)(B) during the 24-month period 
beginning on the date of such acquisition if--
          ``(1) the depository institution has submitted an affirmative 
        plan to the appropriate Federal banking agency (as defined in 
        section 3 of the Federal Deposit Insurance Act) to take such 
        action as may be necessary in order for such institution to 
        achieve a `satisfactory record of meeting community credit 
        needs', or better, at the next examination of the institution 
        under the Community Reinvestment Act of 1977; and
          ``(2) the plan has been approved by the appropriate Federal 
        banking agency.''.
  (b) Limitation on Certain Activities in Subsidiaries.--Section 
21(a)(1) of the Banking Act of 1933 (12 U.S.C. 378(a)(1)) is amended by 
inserting ``, or to be a subsidiary of any person, firm, corporation, 
association, business trust, or similar organization engaged (unless 
such subsidiary was engaged in such securities activities as of 
September 15, 1997),'' after ``to engage at the same time''.
  (c) Technical and Conforming Amendments.--
          (1) Antitying.--Section 106(a) of the Bank Holding Company 
        Act Amendments of 1970 is amended by adding at the end the 
        following new sentence: ``For purposes of this section, a 
        subsidiary of a national bank which engages in activities as an 
        agent pursuant to section 5136A(a)(2) shall be deemed to be a 
        subsidiary of a bank holding company, and not a subsidiary of a 
        bank.''.
          (2) Section 23b.--Section 23B(a) of the Federal Reserve Act 
        (12 U.S.C. 371c-1(a)) is amended by adding at the end the 
        following new paragraph:
          ``(4) Insurance subsidiary of national bank.--For purposes of 
        this section, a subsidiary of a national bank which engages in 
        activities as an agent pursuant to section 5136A(a)(2) shall be 
        deemed to be an affiliate of the national bank and not a 
        subsidiary of the bank.''
  (d) Clerical Amendment.--The table of sections for chapter one of 
title LXII of the Revised Statutes of the United States is amended--
           (1) by redesignating the item relating to section 5136A as 
        section 5136C; and
           (2) by inserting after the item relating to section 5136 the 
        following new item:

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

SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION LIABILITY 
                    FOR OBLIGATIONS OF AFFILIATES.

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

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

  ``(a) In General.--No institution-affiliated party of an insured 
depository institution or institution-affiliated party of a subsidiary 
or affiliate of an insured depository institution shall fraudulently 
represent that the institution is or will be liable for any obligation 
of a subsidiary or other affiliate of the institution.
  ``(b) Criminal Penalty.--Whoever violates subsection (a) shall be 
fined under this title, imprisoned for not more than 1 year, or both.
  ``(c) Institution-Affiliated Party Defined.--For purposes of this 
section, the term `institution-affiliated party' with respect to a 
subsidiary or affiliate has the same meaning as in section 3 except 
references to an insured depository institution shall be deemed to be 
references to a subsidiary or affiliate of an insured depository 
institution.
  ``(d) Other Definitions.--For purposes of this section, the terms 
`affiliate', `insured depository institution', and `subsidiary' have 
same meanings as in section 3 of the Federal Deposit Insurance Act.''.
  (b) Clerical Amendment.--The table of sections for chapter 47 of 
title 18, United States Code, is amended by inserting after the item 
relating to section 1007 the following new item:

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

SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.

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

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

              CHAPTER 1--INVESTMENT BANK HOLDING COMPANIES

SEC. 131. INVESTMENT BANK HOLDING COMPANIES ESTABLISHED.

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

``SEC. 10. INVESTMENT BANK HOLDING COMPANIES.

  ``(a) Companies That Control Wholesale Financial Institutions.--
          ``(1) In general.--Any company shall be supervised in 
        accordance with this section if the company--
                  ``(A) either--
                          ``(i) is substantially engaged in the 
                        securities business, as provided in paragraph 
                        (2); or
                          ``(ii) was, as of the date of the enactment 
                        of the Financial Services Act of 1997, a bank 
                        holding company;
                  ``(B) controls 1 or more wholesale financial 
                institutions;
                  ``(C) does not control--
                          ``(i) a bank other than a wholesale financial 
                        institution;
                          ``(ii) an insured bank other than an 
                        institution permitted under subparagraph (D), 
                        (F), or (G) of section 2(c)(2); or
                          ``(iii) a savings association; and
                  ``(D) is not a foreign bank (as defined in section 
                1(b)(7) of the International Banking Act of 1978).
          ``(2) Substantially engaged in securities business.--A 
        company shall be treated as being substantially engaged in the 
        securities business for purposes of this section if--
                  ``(A) the company controls 1 or more registered 
                securities brokers or dealers; and
                  ``(B) either--
                          ``(i) the annual total consolidated net 
                        revenues derived by the company and its 
                        subsidiaries from effecting transactions in or 
                        buying and selling securities as a broker or 
                        dealer represent at least 35 percent of the 
                        annual total consolidated net revenues of the 
                        company; or
                          ``(ii) the registered brokers or dealers 
                        controlled by the company have in the aggregate 
                        total consolidated equity capital and 
                        qualifying subordinated debt (based on an 
                        average for the 4 preceding calendar quarters) 
                        of more than $750,000,000 and such total equity 
                        capital and qualifying subordinated debt does 
                        not fall below $500,000,000 (based on an 
                        average for the 4 preceding calendar quarters).
          ``(3) Savings association transition period.--Notwithstanding 
        paragraph (1)(C)(iii), the Board may permit a company that 
        controls a savings association and that otherwise meets the 
        requirements of paragraph (1) to become supervised under 
        paragraph (1), if the company divests control of any such 
        savings association within such period not to exceed 5 years 
        after becoming supervised under paragraph (1) as permitted by 
        the Board.
  ``(b) Companies Supervised by Securities and Exchange Commission.--
          ``(1) In general.--Except as provided in paragraph (3), any 
        company that is described in subsection (a)(1) shall be subject 
        to supervision by the Commission under section 17(i) of the 
        Securities Exchange Act of 1934 and not by the Board and shall, 
        for purposes of this Act, be treated as an SEC supervised 
        investment bank holding company, if the company--
                  ``(A) is substantially engaged in the securities 
                business, as provided in subsection (a)(2); and
                  ``(B) controls 1 or more wholesale financial 
                institutions that in the aggregate have--
                          ``(i) consolidated risk-weighted assets that 
                        on an annual basis are less than 
                        $15,000,000,000; and
                          ``(ii) annual gross revenues that represent 
                        less than 25 percent of the consolidated annual 
                        gross revenues of the company.
          ``(2) Dollar amount.--
                  ``(A) Risk-weighted assets.--For purposes of 
                paragraph (1)(A), the consolidated risk-weighted assets 
                of a wholesale financial institution shall--
                          ``(i) be based on the average consolidated 
                        risk-weighted assets of the institution for the 
                        four previous calendar quarters; and
                          ``(ii) include risk-weighted claims on 
                        affiliates only to the extent such claims, in 
                        the aggregate, exceed the aggregate risk--
                        weighted claims of affiliates on the wholesale 
                        financial institution.
                  ``(B) Treatment of subsidiaries.--For purposes of 
                subparagraph (A)(ii), the term ``affiliates'' shall not 
                include any subsidiary of the wholesale financial 
                institution.
                  ``(C) Indexed growth.--The dollar amount contained in 
                paragraph (1)(A) shall be adjusted annually after 
                December 31, 1998, by the annual percentage increase in 
                the Consumer Price Index for Urban Wage Earners and 
                Clerical Workers published by the Bureau of Labor 
                Statistics.
          ``(3) Election.--
                  ``(A) Filing.--An SEC supervised investment bank 
                holding company may elect to be supervised by the Board 
                and not the Commission by filing with the Board the 
                notice of withdrawal described in section 17(i)(3)(B) 
                of the Securities Exchange Act of 1934.
                  ``(B) Effective date of transfer of authority.--If a 
                company files an election under subparagraph (A), the 
                Board shall, subject to any conditions, restrictions or 
                limitations as the Board deems necessary or appropriate 
                after consultation with the Commission, assume full 
                supervisory authority and responsibility for the 
                company under this Act immediately upon the 
                effectiveness of the company's notice of withdrawal 
                under section 17(i) of the Securities Exchange Act of 
                1934.
                  ``(C) Retention of jurisdiction.--The filing of a 
                notice under subparagraph (A) or under section 17(i) of 
                the Securities Exchange Act of 1934 shall not affect 
                the jurisdiction and authority of the Commission to 
                take any action authorized by this section or the 
                Federal securities laws against any person with respect 
                to any action (or failure to act) that occurs before 
                the transfer of supervisory authority to the Board.
          ``(4) Revocation of election.--
                  ``(A) Filing.--
                          ``(i) In general.--An investment bank holding 
                        company that--
                                  ``(I) has filed an election under 
                                paragraph (3)(A):
                                  ``(II) meets the requirements of 
                                paragraph (1); and
                                  ``(III) is substantially engaged in 
                                the securities business, as provided in 
                                subsection (a)(2),
                        may revoke its election to be supervised by the 
                        Board and thereby become supervised by the 
                        Commission by filing with the Board and the 
                        Commission a notice of revocation in such form 
                        as the Board may prescribe.
                          ``(ii) Conditions.--Any revocation filed 
                        under clause (i) shall be subject to any 
                        conditions, restrictions or limitations as the 
                        Board finds to be necessary or appropriate 
                        after consultation with the Commission.
                  ``(B) Effective date of transfer of authority.--If 
                the investment bank holding company files a notice 
                under subparagraph (A), the Board shall discontinue 
                supervision of the investment bank holding company on 
                the later of--
                          ``(i) the end of the 45-day period beginning 
                        on the date of receipt by the Board and the 
                        Commission of the notice of revocation; or
                          ``(ii) such shorter or longer period as the 
                        Board shall determine, after consultation with 
                        the Commission, is necessary or appropriate to 
                        prevent evasion of the purposes of this Act.
                  ``(C) Retention of jurisdiction.--The filing of a 
                notice under subparagraph (A) shall not affect the 
                jurisdiction and authority of the Board to take any 
                action authorized by this section against any person 
                with respect to any action (or failure to act) that 
                occurs before the transfer of supervisory authority to 
                the Commission.
                  ``(D) Limitation on revocations.--Without the consent 
                of the Board and the Commission, an investment bank 
                holding company may file a revocation of election under 
                subparagraph (A) only once during any 5-year period.
          ``(5) Limited treatment as bank holding companies.--
        Notwithstanding section 2(a), an SEC supervised investment bank 
        holding company shall not be a bank holding company except for 
        purposes of--
                  ``(A) section 2(g), section 3, section 5(f), section 
                7, section 8, and section 11 of this Act;
                  ``(B) section 3, section 7(j) and subsections (b) 
                through (n), (s), (u) and (v) of section 8 of the 
                Federal Deposit Insurance Act; and
                  ``(C) section 106 of the 1970 Amendments to the Bank 
                Holding Company Act.
  ``(c) Companies Supervised by the Board.--
          ``(1) Board supervision.--Any company described in subsection 
        (a)(1) that is not supervised by the Commission under section 
        17(i) of the Securities Exchange Act of 1934 shall be 
        supervised by the Board and shall, for purposes of this Act, be 
        a Board supervised investment bank holding company.
          ``(2) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital requirements of 
        Board supervised investment bank holding companies.
          ``(3) Reports.--
                  ``(A) In general.--The Board from time to time may 
                require any Board supervised investment bank holding 
                company and any subsidiary of such company to submit 
                reports under oath to keep the Board informed as to--
                          ``(i) the company's or subsidiary's 
                        activities, financial condition, policies, 
                        systems for monitoring and controlling 
                        financial and operational risks, and 
                        transactions with depository institution 
                        subsidiaries of the holding company; and
                          ``(ii) the extent to which the company or 
                        subsidiary has complied with the provisions of 
                        this Act and regulations prescribed and orders 
                        issued under this Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that the 
                        investment bank holding company or any 
                        subsidiary of such company has provided or been 
                        required to provide to other Federal and State 
                        supervisors or to appropriate self-regulatory 
                        organizations.
                          ``(ii) Availability.--An investment bank 
                        holding company or a subsidiary of such company 
                        shall provide to the Board, at the request of 
                        the Board, a report referred to in clause (i).
                  ``(C) Exemptions from reporting requirements.--
                          ``(i) In general.--The Board may, by 
                        regulation or order, exempt any company or 
                        class of companies, under such terms and 
                        conditions and for such periods as the Board 
                        shall provide in such regulation or order, from 
                        the provisions of this paragraph and any 
                        regulation prescribed under this paragraph.
                          ``(ii) Criteria for consideration.--In making 
                        any determination under clause (i) with regard 
                        to any exemption under such clause, the Board 
                        shall consider, among such other factors as the 
                        Board may determine to be appropriate, the 
                        following factors:
                                  ``(I) Whether information of the type 
                                required under this paragraph is 
                                available from a supervisory agency (as 
                                defined in section 1101(7) of the Right 
                                to Financial Privacy Act of 1978) or a 
                                foreign regulatory authority of a 
                                similar type.
                                  ``(II) The primary business of the 
                                company.
                                  ``(III) The nature and extent of the 
                                domestic and foreign regulation of the 
                                activities of the company.
          ``(4) Examinations.--
                  ``(A) Limited use of examination authority.--The 
                Board may make examinations of each Board supervised 
                investment bank holding company and each subsidiary of 
                such company in order to--
                          ``(i) inform the Board regarding the nature 
                        of the operations and financial condition of 
                        the investment bank holding company and its 
                        subsidiaries;
                          ``(ii) inform the Board regarding--
                                  ``(I) the financial and operational 
                                risks within the investment bank 
                                holding company system that may affect 
                                any depository institution owned by 
                                such holding company; and
                                  ``(II) the systems of the holding 
                                company and its subsidiaries for 
                                monitoring and controlling those risks; 
                                and
                          ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        depository institution controlled by the 
                        investment bank holding company and any of the 
                        company's other subsidiaries.
                  ``(B) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of an investment bank 
                holding company under this paragraph to--
                          ``(i) the holding company; and
                          ``(ii) any subsidiary (other than an insured 
                        depository institution subsidiary) of the 
                        holding company that, because of the size, 
                        condition, or activities of the subsidiary, the 
                        nature or size of transactions between such 
                        subsidiary and any affiliated depository 
                        institution, or the centralization of functions 
                        within the holding company system, could have a 
                        materially adverse effect on the safety and 
                        soundness of any depository institution 
                        affiliate of the holding company.
                  ``(C) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use the reports 
                of examination of depository institutions made by the 
                Comptroller of the Currency, the Federal Deposit 
                Insurance Corporation, the Director of the Office of 
                Thrift Supervision or the appropriate State depository 
                institution supervisory authority for the purposes of 
                this section.
                  ``(D) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and by instead reviewing the reports of examination 
                made of--
                          ``(i) any registered broker or dealer or any 
                        registered investment adviser by or on behalf 
                        of the Commission; and
                          ``(ii) any licensed insurance company by or 
                        on behalf of any State government insurance 
                        agency responsible for the supervision of the 
                        insurance company.
                  ``(E) Confidentiality of reported information.--
                          ``(i) In general.--Notwithstanding any other 
                        provision of law, the Board shall not be 
                        compelled to disclose any nonpublic information 
                        required to be reported under this paragraph, 
                        or any information supplied to the Board by any 
                        domestic or foreign regulatory agency, that 
                        relates to the financial or operational 
                        condition of any investment bank holding 
                        company or any subsidiary of such company.
                          ``(ii) Compliance with requests for 
                        information.--No provision of this subparagraph 
                        shall be construed as authorizing the Board to 
                        withhold information from the Congress, or 
                        preventing the Board from complying with a 
                        request for information from any other Federal 
                        department or agency for purposes within the 
                        scope of such department's or agency's 
                        jurisdiction, or from complying with any order 
                        of a court of competent jurisdiction in an 
                        action brought by the United States or the 
                        Board.
                          ``(iii) Coordination with other law.--For 
                        purposes of section 552 of title 5, United 
                        States Code, this subparagraph shall be 
                        considered to be a statute described in 
                        subsection (b)(3)(B) of such section.
                          ``(iv) Designation of confidential 
                        information.--In prescribing regulations to 
                        carry out the requirements of this subsection, 
                        the Board shall designate information described 
                        in or obtained pursuant to this paragraph as 
                        confidential information.
                  ``(F) Costs.--The cost of any examination conducted 
                by the Board under this section may be assessed 
                against, and made payable by, the investment bank 
                holding company.
          ``(5) Capital adequacy guidelines.--
                  ``(A) Capital adequacy provisions.--Subject to the 
                requirements of, and solely in accordance with, the 
                terms of this paragraph, the Board may adopt capital 
                adequacy rules or guidelines for Board supervised 
                investment bank holding companies.
                  ``(B) Method of calculation.--In developing rules or 
                guidelines under this paragraph, the following 
                provisions shall apply:
                          ``(i) Focus on double leverage.--The Board 
                        shall focus on the use by investment bank 
                        holding companies of debt and other liabilities 
                        to fund capital investments in subsidiaries.
                          ``(ii) No unweighted capital ratio.--The 
                        Board shall not, by regulation, guideline, 
                        order, or otherwise, impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                          ``(iii) No capital requirement on regulated 
                        entities.--The Board shall not, by regulation, 
                        guideline, order or otherwise, prescribe or 
                        impose any capital or capital adequacy rules, 
                        standards, guidelines, or requirements upon any 
                        subsidiary that--
                                  ``(I) is not a depository 
                                institution; and
                                  ``(II) is in compliance with 
                                applicable capital requirements of 
                                another Federal regulatory authority 
                                (including the Securities and Exchange 
                                Commission) or State insurance 
                                authority.
                          ``(iv) Limitation.--The Board shall not, by 
                        regulation, guideline, order or otherwise, 
                        prescribe or impose any capital or capital 
                        adequacy rules, standards, guidelines, or 
                        requirements upon any subsidiary that is not a 
                        depository institution and that is registered 
                        as an investment adviser under the Investment 
                        Advisers Act of 1940, except that this clause 
                        shall not be construed as preventing the Board 
                        from imposing capital or capital adequacy 
                        rules, guidelines, standards, or requirements 
                        with respect to activities of a registered 
                        investment adviser other than investment 
                        advisory activities or activities incidental to 
                        investment advisory activities.
                          ``(v) Appropriate exclusions.--The Board 
                        shall take full account of--
                                  ``(I) the capital requirements made 
                                applicable to any subsidiary that is 
                                not a depository institution by another 
                                Federal regulatory authority or State 
                                insurance authority; and
                                  ``(II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                          ``(vi) Internal risk management models.--The 
                        Board may incorporate internal risk management 
                        models of investment bank holding companies 
                        into its capital adequacy guidelines or rules 
                        and may take account of the extent to which 
                        resources of a subsidiary depository 
                        institution may be used to service the debt or 
                        other liabilities of the investment bank 
                        holding company.
  ``(d) Nonfinancial Activities and Investments.--
          ``(1) Authority for limited amounts of new activities and 
        investments.--
                  ``(A) In general.--Notwithstanding section 4(a), a 
                Board supervised investment bank holding company may 
                engage in activities which are not (or have not been 
                determined to be) financial in nature or incidental to 
                activities which are financial in nature, or acquire 
                and retain ownership and control of the shares of a 
                company engaged in such activities if--
                          ``(i) the aggregate annual gross revenues 
                        derived from all such activities and of all 
                        such companies does not exceed 5 percent of the 
                        consolidated annual gross revenues of the 
                        investment bank holding company or, in the case 
                        of a foreign bank or any company that owns or 
                        controls a foreign bank, the aggregate annual 
                        gross revenues derived from any such activities 
                        in the United States does not exceed 5 percent 
                        of the consolidated annual gross revenues of 
                        the foreign bank or company in the United 
                        States derived from any branch, agency, 
                        commercial lending company, or depository 
                        institution controlled by the foreign bank or 
                        company and any subsidiary engaged in the 
                        United States in activities permissible under 
                        section 4 or 6 or this subsection;
                          ``(ii) the consolidated total assets of any 
                        company the shares of which are acquired 
                        pursuant to this subsection are less than 
                        $750,000,000 at the time the shares are 
                        acquired by the investment bank holding 
                        company; and
                          ``(iii) such company provides notice to the 
                        Board within 30 days of commencing the activity 
                        or acquiring the ownership or control.
                  ``(B) Inclusion of grandfathered activities.--For 
                purposes of determining compliance with the limits 
                contained in subparagraph (A), the gross revenues 
                derived from all activities conducted and companies the 
                shares of which are held under paragraph (2) shall be 
                considered to be derived or held under this paragraph.
                  ``(C) Report.--No later than 5 years after the date 
                of enactment of the Financial Services Act of 1997, the 
                Board shall submit to the Congress a report regarding 
                the activities conducted and companies held pursuant to 
                this paragraph or section 17(i)(7)(C) of the Securities 
                Exchange Act of 1934 and the effect, if any, that 
                affiliations permitted under those provisions have had 
                on affiliated depository institutions. The report shall 
                include recommendations regarding the appropriateness 
                of retaining, increasing, or decreasing the limits 
                contained in those provisions. In preparing the report, 
                the Board shall consult with and incorporate the views 
                of the Commission.
          ``(2) Grandfathered activities.--
                  ``(A) In general.--Notwithstanding paragraph (1)(A) 
                and section 4(a), a company that becomes an investment 
                bank holding company maycontinue to engage, directly or 
indirectly, in any activity and may retain ownership and control of 
shares of a company engaged in any activity if--
                          ``(i) on the date of the enactment of the 
                        Financial Services Act of 1997, such investment 
                        bank holding company was lawfully engaged in 
                        that nonfinancial activity, held the shares of 
                        such company, or had entered into a contract to 
                        acquire shares of any company engaged in such 
                        activity; and
                          ``(ii) the company engaged in such activity 
                        continues to engage only in the same activities 
                        that such company conducted on the date of the 
                        enactment of the Financial Services Act of 
                        1997, and other activities permissible under 
                        this Act.
                  ``(B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--An 
                investment bank holding company that engages in 
                activities or holds shares pursuant to this paragraph, 
                or a subsidiary of such investment bank holding 
                company, may not acquire, in any merger, consolidation, 
                or other type of business combination, assets of any 
                other company which is engaged in any activity which 
                the Board has not determined to be financial in nature 
                or incidental to activities that are financial in 
                nature under section 6(c).
                  ``(C) Limitation to single exemption.--No company 
                that engages in any activity or controls any shares 
                under subsection (f) or (g) of section 6 may engage in 
                any activity or own any shares pursuant to this 
                paragraph or paragraph (1).
          ``(3) Commodities.--
                  ``(A) In general.--Notwithstanding section 4(a), an 
                investment bank holding company which was predominately 
                engaged as of January 1, 1997, in securities activities 
                in the United States (or any successor to any such 
                company) may engage in, or directly or indirectly own 
                or control shares of a company engaged in, activities 
                related to the trading, sale, or investment in 
                commodities and underlying physical properties that 
                were not permissible for bank holding companies to 
                conduct in the United States as of January 1, 1997, if 
                such investment bank holding company, or any subsidiary 
                of such holding company, was engaged directly, 
                indirectly, or through any such company in any of such 
                activities as of January 1, 1997, in the United States.
                  ``(B) Limitation.--Notwithstanding paragraph 
                (1)(A)(i), the attributed aggregate investment by an 
                investment bank holding company in activities permitted 
                under this paragraph and not otherwise permitted for 
                all bank holding companies under this Act may not 
                exceed 5 percent of the capital of the investment bank 
                holding company, except that the Board may increase 
                such percentage of capital by such amounts and under 
                such circumstances as the Board considers appropriate, 
                consistent with the purposes of this Act.
                  ``(C) Attributed investment amount.--For purposes of 
                subparagraph (B), the amount of the investment by an 
                investment bank holding company which are attributable 
                to activities described in such subparagraph shall be 
                determined pursuant to regulations issued by the Board 
                which attribute capital on the basis of such activities 
                in relation to all activities of the company.
          ``(4) Cross marketing restrictions.--A Board supervised 
        investment bank holding company shall not permit--
                  ``(A) any company whose shares it owns or controls 
                pursuant to paragraph (1), (2), or (3) to offer or 
                market any product or service of an affiliated 
                wholesale financial institution; or
                  ``(B) any affiliated wholesale financial institution 
                to offer or market any product or service of any 
                company whose shares are owned or controlled by such 
                investment bank holding company pursuant to such 
                paragraphs.
  ``(e) Qualification of Foreign Bank as Investment Bank Holding 
Company.--
          ``(1) In general.--Any foreign bank, or any company that owns 
        or controls a foreign bank, that--
                  ``(A) operates a branch, agency, or commercial 
                lending company in the United States, including a 
                foreign bank or company that owns or controls a 
                wholesale financial institution; and
                  ``(B) owns, controls, or is affiliated with a 
                security affiliate that engages in underwriting 
                corporate equity securities,
        may request a determination from the Board that such bank or 
        company be treated as a Board supervised investment bank 
        holding company for purposes of subsection (d).
          ``(2) Conditions for treatment as an investment bank holding 
        company.--A foreign bank and a company that owns or controls a 
        foreign bank may not be treated as an investment bank holding 
        company unless the bank and company meet and continue to meet 
        the following criteria:
                  ``(A) No insured deposits.--No deposits held directly 
                by a foreign bank or through an affiliate are insured 
                under the Federal Deposit Insurance Act.
                  ``(B) Capital standards.--The foreign bank meets 
                risk-based capital standards comparable to the capital 
                standards required for a wholesale financial 
                institution, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.
                  ``(C) Transaction with affiliates.--Transactions 
                between a branch, agency, or commercial lending company 
                subsidiary of the foreign bank in the United States, 
                and any securities affiliate or company in which the 
                foreign bank (or any company that owns or controls such 
                foreign bank) has invested pursuant to subsection (d) 
                comply with the provisions of sections 23A and 23B of 
                the Federal Reserve Act in the same manner and to the 
                same extent as such transactions would be required to 
                comply with such sections if the bank were a member 
                bank.
          ``(3) Treatment as a wholesale financial institution.--Any 
        foreign bank which is, or is affiliated with a company which 
        is, treated as an investment bank holding company under this 
        subsection shall be treated as a wholesale financial 
        institution for purposes of subsection (d)(4) of this section 
        and subsections (c)(1)(C) and (c)(3) of section 9B of the 
        Federal Reserve Act, and any such foreign bank or company shall 
        be subject to paragraphs (3), (4), and (5) of section 9B(d) of 
        the Federal Reserve Act, except that the Board may adopt such 
        modifications, conditions, or exemptions as the Board deems 
        appropriate, giving due regard to the principle of national 
        treatment and equality of competitive opportunity.
          ``(4) Nonapplicability of other exemption.--Any foreign bank 
        or company which is treated as an investment bank holding 
        company under this subsection shall not be eligible for any 
        exception described in section 2(h).
          ``(5) Supervision of foreign bank which maintains no banking 
        presence other than control of a wholesale financial 
        institution.--A foreign bank that owns or controls a wholesale 
        financial institution but does not operate a branch, agency, or 
        commercial lending company in the United States (and any 
        company that owns or controls such foreign bank) may request a 
        determination from the Board that such bank or company be 
        treated as a Board supervised investment bank holding company 
        for purposes of subsection (d), except that such bank or 
        company shall be subject to the restrictions of paragraph (4) 
        of this subsection.
          ``(6) No effect on other provisions.--This section shall not 
        be construed as limiting the authority of the Board under the 
        International Banking Act of 1978 with respect to the 
        regulation, supervision, or examination of foreign banks and 
        their offices and affiliates in the United States.
          ``(7) Applicability of community reinvestment act of 1977.--
        The branches in the United States of a foreign bank that is, or 
        is affiliated with a company that is, treated as a Board 
        supervised investment bank holding company shall be subject to 
        section 9B(b)(11) of the Federal Reserve Act as if the foreign 
        bank were a wholesale financial institution under such section. 
        The Board and the Comptroller of the Currency shall apply the 
        provisions of sections 803(2), 804, and 807(1) of the Community 
        Reinvestment Act of 1977 to branches of foreign banks which 
        receive only such deposits as are permissible for receipt by a 
        corporation organized under section 25A of the Federal Reserve 
        Act, in the same manner and to the same extent such sections 
        apply to such a corporation.
  ``(f) Board Backup Enforcement and Examination Authority.--
          ``(1) Enforcement authority.--
                  ``(A) In general.--The Board may take any action or 
                initiate any investigation or proceeding under this Act 
                or the Federal Deposit Insurance Act involving any SEC 
                supervised investment bank holding company, any 
                subsidiary of such a company, or any institution-
                affiliated party of such a company or subsidiary for 
                the purpose of enforcing compliance with the applicable 
                provisions of this Act, the 1970 Amendments to the Bank 
                HoldingCompany Act of 1956, section 17(i) of the 
Securities Exchange Act of 1934, the Federal Deposit Insurance Act, or 
the Federal Reserve Act.
                  ``(B) Prior consultation and opportunity to 
                correct.--
                          ``(i) Notice of proposed action.--At least 30 
                        days before initiating any action, 
                        investigation, or proceeding under this 
                        subsection (or such shorter period as the Board 
                        and Commission may agree), the Board shall 
                        provide the Commission with notice of the 
                        Board's proposed action, an explanation of the 
                        basis for such proposed action, and a 
                        recommendation for Commission action.
                          ``(ii) Board action.--If, after receipt of 
                        notice under clause (i), the Commission does 
                        not take the actions recommended by the Board 
                        or other actions deemed appropriate by the 
                        Board, the Board may initiate an action, 
                        investigation or proceeding under this 
                        subsection.
                          ``(iii) Exigent circumstances.--The Board may 
                        exercise its authority under paragraph (1)(A) 
                        without regard to the time period set forth in 
                        clause (i) if the Board finds that such action 
                        is necessary or appropriate in light of exigent 
                        circumstances.
          ``(2) Backup examination.--
                  ``(A) In general.--In circumstances where 
                examinations of Board supervised bank holding companies 
                and subsidiaries of such holding companies by the Board 
                are permissible under subparagraphs (A) and (B) of 
                section 5(c)(2), the Board may make examinations of any 
                SEC supervised investment bank holding company and any 
                subsidiary of such company for the purpose of 
                monitoring and enforcing compliance by the company or 
                any subsidiary of such company with the laws described 
                in subparagraph (E).
                  ``(B) Restricted focus.--The Board shall limit the 
                focus and scope of any examination permitted under 
                subparagraph (A) to those transactions, policies, 
                procedures, systems, or records that are reasonably 
                necessary to monitor and enforce compliance by the 
                company or any subsidiary of the company with the laws 
                described in subparagraph (E).
                  ``(C) Deference to other examinations.--To the 
                fullest extent possible, the Board shall address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examinations made 
                of--
                          ``(i) any registered broker or dealer or 
                        registered investment adviser by or on behalf 
                        of the Commission; and
                          ``(ii) any licensed insurance company by or 
                        on behalf of any State government insurance 
                        agency responsible for the supervision of the 
                        insurance company.
                  ``(D) Notification.--To the fullest extent possible, 
                the Board shall notify the Commission before conducting 
                any examination of a SEC supervised investment bank 
                holding company.
                  ``(E) Definition.--For purposes of this subsection, 
                the laws described in this subparagraph are this Act, 
                section 17(i) of the Securities Exchange Act of 1934, 
                and all Federal laws for which the Board has 
                enforcement authority with respect to State member 
                banks or bank holding companies or their subsidiaries.
  ``(g) Information Sharing.--The Board and the Comptroller of the 
Currency (in the case of a national wholesale financial institution) 
shall, upon request by the Commission, provide to the Commission such 
reports, records, or other information, including reports of 
examination or other confidential supervisory information, that the 
Board or the Comptroller has available concerning a wholesale financial 
institution (or any subsidiary of a wholesale financial institution) 
that is controlled by a SEC supervised investment bank holding company 
to assist the Commission in carrying out its responsibilities under 
this Act or the Federal securities laws.
  ``(h) Deference to Commission.--The Board shall defer to the 
Commission with regard to all interpretations of, and the enforcement 
of, applicable Federal securities laws relating to the activities, 
conduct and operations of registered brokers, dealers, investment 
advisers, and investment companies.
  ``(i) Consultation.--The Board shall consult with the Commission 
concerning the exercise of the Board's authority and responsibility 
under section 6(c) to assure, to the fullest extent possible, the 
consistency of interpretation and the maintenance of competitive 
equality.''.
  (b) Uninsured State Banks.--Section 9 of the Federal Reserve Act 
(U.S.C. 321 et seq.) is amended by adding at the end the following new 
paragraph:
          ``(24) Enforcement authority over uninsured state member 
        banks.--Section 3(u) of the Federal Deposit Insurance Act, 
        subsections (j) and (k) of section 7 of such Act, and 
        subsections (b) through (n), (s), (u), and (v) of section 8 of 
        such Act shall apply to an uninsured State member bank in the 
        same manner and to the same extent such provisions apply to an 
        insured State member bank and any reference in any such 
        provision to `insured depository institution' shall be deemed 
        to be a reference to `uninsured State member bank' for purposes 
        of this paragraph.''.

SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

  (a) Federal Reserve Act.--The last sentence of the 8th undesignated 
paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 326) is 
amended to read as follows: ``The Board of Governors of the Federal 
Reserve System, at its discretion, may furnish reports of examination 
or other confidential supervisory information concerning State member 
banks or any other entities examined under any other authority of the 
Board to any Federal or State authorities with supervisory or 
regulatory authority over the examined entity, to officers, directors, 
or receivers of the examined entity, and to any other person that the 
Board determines to be proper.''.
  (b) Commodity Futures Trading Commission.--
          (1) Section 1101(7) of the Right to Financial Privacy Act of 
        1978 (12 U.S.C. 3401(7)) is amended--
                  (A) by redesignating subparagraphs (G) and (H) as 
                subparagraphs (H) and (I), respectively; and
                  (B) by inserting after subparagraph (F) the following 
                new subparagraph:
                  ``(G) the Commodity Futures Trading Commission; or'' 
                and
          (2) Section 1112(e) of the Right to Financial Privacy Act (12 
        U.S.C. 3412(e)) is amended by striking ``and the Securities and 
        Exchange Commission'' and inserting ``, the Securities and 
        Exchange Commission, and the Commodity Futures Trading 
        Commission''.

SEC. 133. CONFORMING AMENDMENTS.

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

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.

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

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

  ``(a) Authorization of the Comptroller Required.--A national bank may 
apply to the Comptroller on such forms and in accordance with such 
regulations asthe Comptroller may prescribe, for permission to operate 
as a national wholesale financial institution.
  ``(b) Regulation.--A national wholesale financial institution may 
exercise, in accordance with such institution's articles of 
incorporation and regulations issued by the Comptroller, all the powers 
and privileges of a national bank formed in accordance with section 
5133 of the Revised Statutes of the United States, subject to section 
9B of the Federal Reserve Act and the limitations and restrictions 
contained therein.
  ``(c) Community Reinvestment Act of 1977.--A national wholesale 
financial institution shall be subject to the Community Reinvestment 
Act of 1977.
  ``(d) Examination Reports.--The Comptroller of the Currency shall, to 
the fullest extent possible, use the report of examinations made by the 
Board of Governors of the Federal Reserve System of a wholesale 
financial institution.''.
          (2) Clerical amendment.--The table of sections for chapter 
        one of title LXII of the Revised Statutes of the United States 
        is amended by inserting after the item relating to section 
        5136A (as added by section 121(d) of this title) the following 
        new item:

``5136B. National wholesale financial institutions.''.

  (b) State Wholesale Financial Institutions.--The Federal Reserve Act 
(12 U.S.C. 221 et seq.) is amended by inserting after section 9A the 
following new section:

``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

  ``(a) Application for Membership as Wholesale Financial 
Institution.--
          ``(1) Application required.--
                  ``(A) In general.--Any bank may apply to the Board of 
                Governors of the Federal Reserve System to become a 
                wholesale financial institution and, as a wholesale 
                financial institution, to subscribe to the stock of the 
                Federal reserve bank organized within the district 
                where the applying bank is located.
                  ``(B) Treatment as member bank.--Any application 
                under subparagraph (A) shall be treated as an 
                application under, and shall be subject to the 
                provisions of, section 9.
          ``(2) Insurance termination.--No bank the deposits of which 
        are insured under the Federal Deposit Insurance Act may become 
        a wholesale financial institution unless it has met all 
        requirements under that Act for voluntary termination of 
        deposit insurance.
  ``(b) General Requirements Applicable to Wholesale Financial 
Institutions.--
          ``(1) Federal reserve act.--Except as otherwise provided in 
        this section, wholesale financial institutions shall be member 
        banks and shall be subject to the provisions of this Act that 
        apply to member banks to the same extent and in the same manner 
        as State member insured banks, except that a wholesale 
        financial institution may terminate membership under this Act 
        only with the prior written approval of the Board and on terms 
        and conditions that the Board determines are appropriate to 
        carry out the purposes of this Act.
          ``(2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal Deposit 
        Insurance Act except that--
                  ``(A) the relevant capital levels and capital 
                measures for each capital category shall be the levels 
                specified by the Board for wholesale financial 
                institutions; and
                  ``(B) all references to the appropriate Federal 
                banking agency or to the Corporation in that section 
                shall be deemed to be references to the Board.
          ``(3) Enforcement authority.--Subsections (j) and (k) of 
        section 7, subsections (b) through (n), (s), and (v) of section 
        8, and section 19 of the Federal Deposit Insurance Act shall 
        apply to a wholesale financial institution in the same manner 
        and to the same extent as such provisions apply to State member 
        insured banks and any reference in such sections to an insured 
        depository institution shall be deemed to include a reference 
        to a wholesale financial institution.
          ``(4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate Federal 
        banking agency for such bank and all such bank's affiliates, 
        for purposes of the International Lending Supervision Act.
          ``(5) Bank merger act.--A wholesale financial institution 
        shall be subject to sections 18(c) and 44 of the Federal 
        Deposit Insurance Act in the same manner and to the same extent 
        the wholesale financial institution would be subject to such 
        sections if the institution were a State member insured bank.
          ``(6) Branching.--Notwithstanding any other provision of law, 
        a wholesale financial institution may establish and operate a 
        branch at any location on such terms and conditions as 
        established by the Board and, in the case of a State-chartered 
        wholesale financial institution, with the approval of the 
        Board, and, in the case of a national bank wholesale financial 
        institution, with the approval of the Comptroller of the 
        Currency.
          ``(7) Activities of out-of-state branches of wholesale 
        financial institutions.--
                  ``(A) General.--A State-chartered wholesale financial 
                institution shall be deemed a State bank and an insured 
                State bank and a national wholesale financial 
                institution shall be deemed a national bank for 
                purposes of paragraphs (1), (2), and (3) of section 
                24(j) of the Federal Deposit Insurance Act.
                  ``(B) Definitions.--The following definitions shall 
                apply solely for purposes of applying paragraph (1):
                          ``(i) Home state.--The term `home State' 
                        means--
                                  ``(I) with respect to a national 
                                wholesale financial institution, the 
                                State in which the main office of the 
                                institution is located; and
                                  ``(II) with respect to a State-
                                chartered wholesale financial 
                                institution, the State by which the 
                                institution is chartered.
                          ``(ii) Host state.--The term `host State' 
                        means a State, other than the home State of the 
                        wholesale financial institution, in which the 
                        institution maintains, or seeks to establish 
                        and maintain, a branch.
                          ``(iii) Out-of-state bank.--The term `out-of-
                        State bank' means, with respect to any State, a 
                        wholesale financial institution whose home 
                        State is another State.
          ``(8) Discrimination regarding interest rates.--Section 27 of 
        the Federal Deposit Insurance Act (12 U.S.C. 1831d) shall apply 
        to State-chartered wholesale financial institutions in the same 
        manner and to the same extent as such provisions apply to State 
        member insured banks and any reference in such section to a 
        State-chartered insured depository institution shall be deemed 
        to include a reference to a State-chartered wholesale financial 
        institution.
          ``(9) Preemption of state laws requiring deposit insurance 
        for wholesale financial institutions.--The appropriate State 
        banking authority may grant a charter to a wholesale financial 
        institution notwithstanding any State constitution or statute 
        requiring that the institution obtain insurance of its deposits 
        and any such State constitution or statute is hereby preempted 
        solely for purposes of this paragraph.
          ``(10) Parity for wholesale financial institutions.--A State 
        bank that is a wholesale financial institution under this 
        section shall have all of the rights, powers, privileges, and 
        immunities (including those derived from status as a federally 
        chartered institution) of and as if it were a national bank, 
        subject to such terms and conditions as established by the 
        Board.
          ``(11) Community reinvestment act of 1977.--A State wholesale 
        financial institution shall be subject to the Community 
        Reinvestment Act of 1977.
  ``(c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
          ``(1) Limitations on deposits.--
                  ``(A) Minimum amount.--
                          ``(i) In general.--No wholesale financial 
                        institution may receive initial deposits of 
                        $100,000 or less, other than on an incidental 
                        and occasional basis.
                          ``(ii) Limitation on deposits of less than 
                        $100,000.--No wholesale financial institution 
                        may receive initial deposits of $100,000 or 
                        less if such deposits constitute more than 5 
                        percent of the institution's total deposits.
                  ``(B) No deposit insurance.--No deposits held by a 
                wholesale financial institution shall be insured 
                deposits under the Federal Deposit Insurance Act.
                  ``(C) Advertising and disclosure.--The Board shall 
                prescribe regulations pertaining to advertising and 
                disclosure by wholesale financial institutions to 
                ensure that each depositor is notified that deposits at 
                the wholesale financial institution are not federally 
                insured or otherwise guaranteed by the United States 
                Government.
          ``(2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by regulation, adopt 
        capital requirements for wholesale financial institutions--
                  ``(A) to account for the status of wholesale 
                financial institutions as institutions that accept 
                deposits that are not insured under the Federal Deposit 
                Insurance Act; and
                  ``(B) to provide for the safe and sound operation of 
                the wholesale financial institution without undue risk 
                to creditors or other persons, including Federal 
                reserve banks, engaged in transactions with the bank.
          ``(3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or order, 
        upon wholesale financial institutions--
                  ``(A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                          ``(i) the transfer of risk to the deposit 
                        insurance funds; or
                          ``(ii) an affiliate from gaining access to, 
                        or the benefits of, credit from a Federal 
                        reserve bank, including overdrafts at a Federal 
                        reserve bank;
                  ``(B) special clearing balance requirements; and
                  ``(C) any additional requirements that the Board 
                determines to be appropriate or necessary to--
                          ``(i) promote the safety and soundness of the 
                        wholesale financial institution or any insured 
                        depository institution affiliate of the 
                        wholesale financial institution;
                          ``(ii) prevent the transfer of risk to the 
                        deposit insurance funds; or
                          ``(iii) protect creditors and other persons, 
                        including Federal reserve banks, engaged in 
                        transactions with the wholesale financial 
                        institution.
          ``(4) Exemptions for wholesale financial institutions.--The 
        Board may, by regulation or order, exempt any wholesale 
        financial institution from any provision applicable to a member 
        bank that is not a wholesale financial institution, if the 
        Board finds that such exemption is not inconsistent with--
                  ``(A) the promotion of the safety and soundness of 
                the wholesale financial institution or any insured 
                depository institution affiliate of the wholesale 
                financial institution;
                  ``(B) the protection of the deposit insurance funds; 
                and
                  ``(C) the protection of creditors and other persons, 
                including Federal reserve banks, engaged in 
                transactions with the wholesale financial institution.
          ``(5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For purposes of 
        section 23A(d)(1) of the Federal Reserve Act, a wholesale 
        financial institution that is affiliated with an insured bank 
        shall not be a bank.
          ``(6) No effect on other provisions.--This section shall not 
        be construed as limiting the Board's authority over member 
        banks under any other provision of law, or to create any 
        obligation for any Federal reserve bank to make, increase, 
        renew, or extend any advance or discount under this Act to any 
        member bank or other depository institution.
  ``(d) Capital and Managerial Requirements.--
          ``(1) In general.--A wholesale financial institution 
        controlled by a company that is subject to section 17(i) of the 
        Securities Exchange Act of 1934 or section 10 of the Bank 
        Holding Company Act of 1956 must be well capitalized and well 
        managed.
          ``(2) Notice to company.--The Board shall promptly provide 
        notice to a company described in paragraph (1) whenever any 
        wholesale financial institution controlled by such company is 
        not well capitalized or well managed.
          ``(3) Agreement to restore institution.--Within 45 days of 
        receipt of a notice under paragraph (2) (or such additional 
        period not to exceed 90 days as the Board may permit), the 
        company shall execute an agreement acceptable to the Board to 
        restore the wholesale financial institution to compliance with 
        all of the requirements of paragraph (1).
          ``(4) Limitations until institution restored.--Until the 
        wholesale financial institution is restored to compliance with 
        all of the requirements of paragraph (1), the Board may impose 
        such limitations on the conduct or activities of the company or 
        any affiliate of the company as the Board determines to be 
        appropriate under the circumstances.
          ``(5) Failure to restore.--If the company does not execute 
        and implement an agreement in accordance with paragraph (3), 
        comply with any limitation imposed under paragraph (4), restore 
        the wholesale financial institution to well capitalized status 
        within 180 days after receipt by the company of the notice 
        described in paragraph (2), or restore the wholesale financial 
        institution to well managed status within such period as the 
        Board may permit, the company shall, under such terms and 
        conditions as may be imposed by the Board and subject to such 
        extension of time as may be granted in the Board's discretion, 
        divest control of its subsidiary depository institutions.
          ``(6) Notice to commission regarding divestitures.--The Board 
        shall notify the Commission if (A) a wholesale financial 
        institutions controlled by a company subject to section 17(i) 
        of the Securities Exchange Act of 1934 is not well capitalized 
        or well managed, or (B) such a company is required to divest 
        control of a subsidiary wholesale financial institution under 
        this subsection.
          ``(7) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                  ``(A) Well managed.--The term `well managed' has the 
                same meaning as in section 2 of the Bank Holding 
                Company Act of 1956.
                  ``(B) Commission.--The term `Commission' means the 
                Securities and Exchange Commission.
  ``(e) Conservatorship Authority.--
          ``(1) In general.--The Board may appoint a conservator to 
        take possession and control of a wholesale financial 
        institution to the same extent and in the same manner as the 
        Comptroller of the Currency may appoint a conservator for a 
        national bank under section 203 of the Bank Conservation Act, 
        and the conservator shall exercise the same powers, functions, 
        and duties, subject to the same limitations, as are provided 
        under such Act for conservators of national banks.
          ``(2) Board authority.--The Board shall have the same 
        authority with respect to any conservator appointed under 
        paragraph (1) and the wholesale financial institution for which 
        such conservator has been appointed as the Comptroller of the 
        Currency has under the Bank Conservation Act with respect to a 
        conservator appointed under such Act and a national bank for 
        which the conservator has been appointed.
  ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of section 43 
of the Federal Deposit Insurance Act shall not apply to any wholesale 
financial institution.''.
  (c) Voluntary Termination of Insured Status by Certain 
Institutions.--
          (1) Section 8 designations.--Section 8(a) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
                  (A) by striking paragraph (1); and
                  (B) by redesignating paragraphs (2) through (10) as 
                paragraphs (1) through (9), respectively.
          (2) Voluntary termination of insured status.--The Federal 
        Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
        inserting after section 8 the following new section:

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

  ``(a) In General.--Except as provided in subsection (b), an insured 
State bank or a national bank may voluntarily terminate such bank's 
status as an insured depository institution in accordance with 
regulations of the Corporation if--
          ``(1) the bank provides written notice of the bank's intent 
        to terminate such insured status--
                  ``(A) to the Corporation and the Board of Governors 
                of the Federal Reserve System not less than 6 months 
                before the effective date of such termination; and
                  ``(B) to all depositors at such bank, not less than 6 
                months before the effective date of the termination of 
                such status; and
          ``(2) either--
                  ``(A) the deposit insurance fund of which such bank 
                is a member equals or exceeds the fund's designated 
                reserve ratio as of the date the bank provides a 
                written notice under paragraph (1) and the Corporation 
                determines that the fund will equal or exceed the 
                applicable designated reserve ratio for the 2 
                semiannual assessment periods immediately following 
                such date; or
                  ``(B) the Corporation and the Board of Governors of 
                the Federal Reserve System approved the termination of 
                the bank's insured status and the bank pays an exit fee 
                in accordance with subsection (e).
  ``(b) Exception.--Subsection (a) shall not apply with respect to--
          ``(1) an insured savings association; or
          ``(2) an insured branch that is required to be insured under 
        subsection (a) or (b) of section 6 of the International Banking 
        Act of 1978.
  ``(c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any deposits or 
any assistance authorized under this Act after the period specified in 
subsection (f)(1).
  ``(d) Institution Must Become Wholesale Financial Institution or 
Terminate Deposit-Taking Activities.--Any depository institution which 
voluntarily terminates such institution's status as an insured 
depository institution under this section may not, upon termination of 
insurance, accept any deposits unless the institution is a wholesale 
financial institution subject to section 9B of the Federal Reserve Act.
  ``(e) Exit Fees.--
          ``(1) In general.--Any bank that voluntarily terminates such 
        bank's status as an insured depository institution under this 
        section shall pay an exit fee in an amount that the Corporation 
        determines is sufficient to account for the institution's pro 
        rata share of the amount (if any) which would be required to 
        restore the relevant deposit insurance fund to the fund's 
        designated reserve ratio as of the date the bank provides a 
        written notice under subsection (a)(1).
          ``(2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under this 
        subsection.
  ``(f) Temporary Insurance of Deposits Insured as of Termination.--
          ``(1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the effective 
        date of the voluntary termination of the bank's insured status, 
        less all subsequent withdrawals from any deposits of such 
        depositor, shall continue to be insured for a period of not 
        less than 6 months and not more than 2 years, as determined by 
        the Corporation. During such period, no additions to any such 
        deposits, and no new deposits in the depository institution 
        made after the effective date of such termination shall be 
        insured by the Corporation.
          ``(2) Temporary assessments; obligations and duties.--During 
        the period specified in paragraph (1) with respect to any bank, 
        the bank shall continue to pay assessments under section 7 as 
        if the bank were an insured depository institution. The bank 
        shall, in all other respects, be subject to the authority of 
        the Corporation and the duties and obligations of an insured 
        depository institution under this Act during such period, and 
        in the event that the bank is closed due to an inability to 
        meet the demands of the bank's depositors during such period, 
        the Corporation shall have the same powers and rights with 
        respect to such bank as in the case of an insured depository 
        institution.
  ``(g) Advertisements.--
          ``(1) In general.--A bank that voluntarily terminates the 
        bank's insured status under this section shall not advertise or 
        hold itself out as having insured deposits, except that the 
        bank may advertise the temporary insurance of deposits under 
        subsection (f) if, in connection with any such advertisement, 
        the advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the effective 
        date of the termination are not insured.
          ``(2) Certificates of deposit, obligations, and securities.--
        Any certificate of deposit or other obligation or security 
        issued by a State bank or a national bank after the effective 
        date of the voluntary termination of the bank's insured status 
        under this section shall be accompanied by a conspicuous, 
        prominently displayed notice that such certificate of deposit 
        or other obligation or security is not insured under this Act.
  ``(h) Notice Requirements.--
          ``(1) Notice to the corporation.--The notice required under 
        subsection (a)(1)(A) shall be in such form as the Corporation 
        may require.
          ``(2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                  ``(A) sent to each depositor's last address of record 
                with the bank; and
                  ``(B) in such manner and form as the Corporation 
                finds to be necessary and appropriate for the 
                protection of depositors.''.
          (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by inserting 
        ``, or any wholesale financial institution subject to section 
        9B of this Act'' after ``such Act''.

  Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and 
                                Mergers

SEC. 141. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.

  (a) Amendments to Section 3 To Require Filing of Application Copies 
With Antitrust Agencies.--Section 3 of the Bank Holding Company Act of 
1956 (12 U.S.C. 1842) is amended--
          (1) in subsection (b) by inserting after paragraph (2) the 
        following new paragraph:
          ``(3) Requirement to file information with antitrust 
        agencies.--Any applicant seeking prior approval of the Board to 
        engage in an acquisition transaction under this section must 
        file simultaneously with the Attorney General and, if the 
        transaction also involves an acquisition under section 4 or 6, 
        the Federal Trade Commission copies of any documents regarding 
        the proposed transaction required by the Board.''; and
          (2) in subsection (c)--
                  (A) by striking paragraph (1); and
                  (B) by redesignating paragraphs (2) through (5) as 
                paragraphs (1) through (4), respectively.
  (b) Amendments to Section 11 To Modify Justice Department 
Notification and Post-Approval Waiting Period for Section 3 
Transactions.--Section 11 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1849) is amended--
          (1) in subsection (b)(1)--
                  (A) by striking ``, if the Board has not received any 
                adverse comment from the Attorney General of the United 
                States relating to competitive factors,'';
                  (B) by striking ``as may be prescribed by the Board 
                with the concurrence of the Attorney General, but in no 
                event less than 15 calendar days after the date of 
                approval.'' and inserting ``as may be prescribed by the 
                appropriate antitrust agency.''; and
                  (C) by striking the 3d to last sentence and the 
                penultimate sentence; and
          (2) by striking subsections (c) and (e) and redesignating 
        subsections (d) and (f) as subsections (c) and (d), 
        respectively.
  (c) Definitions.--Section 2(o) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1841(o)) is amended by adding at the end the following 
new paragraphs:
          ``(8) Antitrust agencies.--The term `antitrust agencies' 
        means the Attorney General and the Federal Trade Commission.
          ``(9) Appropriate antitrust agency.--With respect to a 
        particular transaction, the term `appropriate antitrust agency' 
        means the antitrust agency engaged in reviewing the competitive 
        effects of such transaction.''.

SEC. 142. AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT TO VEST IN 
                    THE ATTORNEY GENERAL SOLE RESPONSIBILITY FOR 
                    ANTITRUST REVIEW OF DEPOSITORY INSTITUTION MERGERS.

  Section 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1828) 
is amended--
          (1) in paragraph (3)(C) by striking ``during a period at 
        least as long as the period allowed for furnishing reports 
        under paragraph (4) of this subsection'';
          (2) by striking paragraph (4) and inserting the following new 
        paragraph:
          ``(4) Factors to be considered.--In determining whether to 
        approve a transaction, the responsible agency shall in every 
        case take into consideration the financial and managerial 
        resources and future prospects of the existing and proposed 
        institutions, and the convenience and needs of the community to 
        be served.'';
          (3) by striking paragraph (5) and inserting the following new 
        paragraph:
          ``(5) Notice to attorney general.--The responsible agency 
        shall immediately notify the Attorney General of any approval 
        by it pursuant to this subsection of a proposed merger 
        transaction. If the responsible agency has found that it must 
        act immediately in order to prevent the probable failure of one 
        of the banks involved, the transaction may be consummated 
        immediately upon approval by the agency. If the responsible 
        agency has notified the other Federal banking agencies referred 
        to in this section of the existence of an emergency requiring 
        expeditious action and has required the submission of views and 
        recommendations within 10 days, the transaction may not be 
        consummated before the 5thcalendar day after the date of 
approval of the responsible agency. In all other cases, the transaction 
may not be consummated before the 30th calendar day after the date of 
approval by the agency, or such shorter period of time as may be 
prescribed by the Attorney General.'';
          (4) by striking paragraph (6) and redesignating paragraphs 
        (7) through (11) as paragraphs (6) through (10), respectively;
          (5) in subparagraph (A) of paragraph (6) (as so redesignated 
        by paragraph (4) of this section)--
                  (A) by striking ``(5)'' and inserting ``(4)''; and
                  (B) by striking ``(6)'' and inserting ``(5)'';
                  (C) by striking ``In any such action, the court shall 
                review de novo the issues presented.'';
          (6) in paragraph (6) (as so redesignated by paragraph (4) of 
        this section)--
                  (A) by striking subparagraphs (B) and (D); and
                  (B) by redesignating subparagraph (C) as subparagraph 
                (B);
          (7) in paragraph (8) (as so redesignated by paragraph (4) of 
        this section)--
                  (A) by inserting ``and'' after the semicolon at the 
                end of subparagraph (A):
                  (B) by striking subparagraph (B); and
                  (C) by redesignating subparagraph (C) as subparagraph 
                (B); and
          (8) by inserting after paragraph (10) (as so redesignated by 
        paragraph (4) of this section) the following new paragraph:
          ``(11) Requirement to file information with attorney 
        general.--Any applicant seeking prior written approval of the 
        responsible Federal banking agency to engage in a merger 
        transaction under this subsection shall file simultaneously 
        with the Attorney General copies of any documents regarding the 
        proposed transaction required by the Federal banking agency.''.

SEC. 143. INFORMATION FILED BY DEPOSITORY INSTITUTIONS; INTERAGENCY 
                    DATA SHARING.

  (a) Format of Notice.--
          (1) In general.--Notice of any proposed transaction for which 
        approval is required under section 3 of the Bank Holding 
        Company Act of 1956 or section 18(c) of the Federal Deposit 
        Insurance Act shall be in a format designated and required by 
        the appropriate Federal banking agency (as defined in section 3 
        of the Federal Deposit Insurance Act) and shall contain a 
        section on the likely competitive effects of the proposed 
        transaction.
          (2) Designation by agency.--The appropriate Federal banking 
        agency, with the concurrence of the antitrust agencies, shall 
        designate and require the form and content of the competitive 
        effects section.
          (3) Notice of suspension.--Upon notification by the 
        appropriate antitrust agency that the competitive effects 
        section of an application is incomplete, the appropriate 
        Federal banking agency shall notify the applicant that the 
        agency will suspend processing of the application until the 
        appropriate antitrust agency notifies the agency that the 
        application is complete.
          (4) Emergency action.--This provision shall not affect the 
        appropriate Federal banking agency's authority to act 
        immediately--
                  (A) to prevent the probable failure of 1 of the banks 
                involved; or
                  (B) to reduce or eliminate a post approval waiting 
                period in case of an emergency requiring expeditious 
                action.
          (5) Exemption for certain filings.--With the concurrence of 
        the antitrust agencies, the appropriate Federal banking agency 
        may exempt classes of persons, acquisitions, or transactions 
        that are not likely to violate the antitrust laws from the 
        requirement that applicants file a competitive effects section.
  (b) Interagency Data Sharing Requirement.--
          (1) In general.--To the extent not prohibited by other law, 
        the Federal banking agencies shall make available to the 
        antitrust agencies any data in their possession that the 
        antitrust agencies deem necessary for antitrust reviews of 
        transactions requiring approval under section 3 of the Bank 
        Holding Company Act of 1956 or section 18(c) of the Federal 
        Deposit Insurance Act.
          (2) Continuation of data collection and analysis.--The 
        Federal banking agencies shall continue to provide market 
        analysis, deposit share information, and other relevant 
        information for determining market competition as needed by the 
        Attorney General in the same manner such agencies provided 
        analysis and information under section 18(c) of the Federal 
        Deposit Insurance Act and 3(c) of the Bank Holding Company Act 
        of 1956 (as such sections were in effect on the day before the 
        date of the enactment of this Act) and shall continue to 
        collect information necessary or useful for such analysis.
  (c) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Antitrust agencies.--The term ``antitrust agencies'' 
        means the Attorney General and the Federal Trade Commission.
          (2) Appropriate antitrust agency.--With respect to a 
        particular transaction, the term ``appropriate antitrust 
        agency'' means the antitrust agency engaged in reviewing the 
        competitive effects of such transaction.

SEC. 144. APPLICABILITY OF ANTITRUST LAWS.

  No provision of this subtitle shall be construed as affecting--
          (1) the applicability of antitrust laws (as defined in 
        section 11(d) of the Bank Holding Company Act of 1956; as so 
        redesignated pursuant to this subtitle); or
          (2) the applicability, if any, of any State law which is 
        similar to the antitrust laws.

SEC. 145. CLARIFICATION OF STATUS OF SUBSIDIARIES AND AFFILIATES.

  (a) Clarification of Federal Trade Commission Jurisdiction.--Any 
person which directly or indirectly controls, is controlled directly or 
indirectly by, or is directly or indirectly under common control with, 
any bank or savings association (as such terms are defined in section 3 
of the Federal Deposit Insurance Act) and is not itself a bank or 
savings association shall not be deemed to be a bank or savings 
association for purposes of the Federal Trade Commission Act or any 
other law enforced by the Federal Trade Commission.
  (b) Savings Provision.--No provision of this section shall be 
construed as restricting the authority of any Federal banking agency 
(as defined in section 3 of the Federal Deposit Insurance Act) under 
any Federal banking law, including section 8 of the Federal Deposit 
Insurance Act.

SEC. 146. EFFECTIVE DATE.

  This subtitle shall take effect 6 months after the date of enactment 
of this Act.

Subtitle F--Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

 SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND EQUALITY 
                    OF COMPETITIVE OPPORTUNITY TO FOREIGN BANKS THAT 
                    ARE FINANCIAL HOLDING COMPANIES.

  Section 8(c) of the International Banking Act of 1978 (12 U.S.C. 
3106(c)) is amended by adding at the end the following new paragraph:
          ``(3) Termination of grandfathered rights.--
                  ``(A) In general.--If any foreign bank or foreign 
                company files a declaration under section 6(b)(1)(D) or 
                which receives a determination under section 10(e)(1) 
                of the Bank Holding Company Act of 1956, any authority 
                conferred by this subsection on any foreign bank or 
                company to engage in any activity which the Board has 
                determined to be permissible for financial holding 
                companies under section 6 of such Act shall terminate 
                immediately.
                  ``(B) Restrictions and requirements authorized.--If a 
                foreign bank or company that engages, directly or 
                through an affiliate pursuant to paragraph (1), in an 
                activity which the Board has determined to be 
                permissible for financial holding companies under 
                section 6 of the Bank Holding Company Act of 1956 has 
                not filed a declaration with the Board of its status as 
                a financial holding company under such section or 
                received a determination under section 10(e)(1) by the 
                end of the 2-year period beginning on the date of 
                enactment of the Financial Services Act of 1997, the 
                Board, giving due regard to the principle of national 
                treatment and equality of competitive opportunity, may 
                impose such restrictions and requirements on the 
                conduct of such activities by such foreign bank or 
                company as are comparable to those imposed on a 
                financial holding company organized under the laws of 
                the United States, including a requirement to conduct 
                such activities in compliance with any prudential 
                safeguards established under section 5(h) of the Bank 
                Holding Company Act of 1956.''.

SEC. 152. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND EQUALITY OF 
                    COMPETITIVE OPPORTUNITY TO FOREIGN BANKS AND 
                    FOREIGN FINANCIAL INSTITUTIONS THAT ARE WHOLESALE 
                    FINANCIAL INSTITUTIONS.

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

                  Subtitle G--Effective Date of Title

SEC. 171. EFFECTIVE DATE.

  Except with regard to any subtitle or other provision of this title 
for which a specific effective date is provided, this title and the 
amendments made by this title shall take effect at the end of the 270-
day period beginning on the date of the enactment of this Act.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

SEC. 201. DEFINITION OF BROKER.

  Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(4)) is amended to read as follows:
          ``(4) Broker.--
                  ``(A) In general.--The term `broker' means any person 
                engaged in the business of effecting transactions in 
                securities for the account of others.
                  ``(B) Exception for certain bank activities.--A bank 
                shall not be considered to be a broker because the bank 
                engages in any of the following activities under the 
                conditions described:
                          ``(i) Third party brokerage arrangements.--
                        The bank enters into a contractual or other 
                        arrangement with a broker or dealer registered 
                        under this title under which the broker or 
                        dealer offers brokerage services on or off the 
                        premises of the bank if--
                                  ``(I) such broker or dealer is 
                                clearly identified as the person 
                                performing the brokerage services;
                                  ``(II) the broker or dealer performs 
                                brokerage services in an area that is 
                                clearly marked and, to the extent 
                                practicable, physically separate from 
                                the routine deposit-taking activities 
                                of the bank;
                                  ``(III) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement clearly indicate that the 
                                brokerage services are being provided 
                                by the broker or dealer and not by the 
                                bank;
                                  ``(IV) any materials used by the bank 
                                to advertise or promote generally the 
                                availability of brokerage services 
                                under the contractual or other 
                                arrangement are in compliance with the 
                                Federal securities laws before 
                                distribution;
                                  ``(V) bank employees (other than 
                                associated persons of a broker or 
                                dealer who are qualified pursuant to 
                                the rules of a self-regulatory 
                                organization) perform only clerical or 
                                ministerial functions in connection 
                                with brokerage transactions including 
                                scheduling appointments with the 
                                associated persons of a broker or 
                                dealer, except that bank employees may 
                                forward customer funds or securities 
                                and may describe in general terms the 
                                range of investment vehicles available 
                                from the bank and the broker or dealer 
                                under the contractual or other 
                                arrangement;
                                  ``(VI) bank employees do not directly 
                                receive incentive compensation for any 
                                brokerage transaction unless such 
                                employees are associated persons of a 
                                broker or dealer and are qualified 
                                pursuant to the rules of a self-
                                regulatory organization, except that 
                                the bank employees may receive 
                                compensation for the referral of any 
                                customer if the compensation is a 
                                nominal one-time cash fee of a fixed 
                                dollar amount and the payment of the 
                                fee is not contingent on whether the 
                                referral results in a transaction;
                                  ``(VII) such services are provided by 
                                the broker or dealer on a basis in 
                                which all customers which receive any 
                                services are fully disclosed to the 
                                broker or dealer;
                                  ``(VIII) the bank does not carry a 
                                securities account of the customer 
                                except in a customary custodian or 
                                trustee capacity; and
                                  ``(IX) the bank, broker, or dealer 
                                informs each customer that the 
                                brokerage services are provided by the 
                                broker or dealer and not by the bank 
                                and that the securities are not 
                                deposits or other obligations of the 
                                bank, are not guaranteed by the bank, 
                                and are not insured by the Federal 
                                Deposit Insurance Corporation.
                          ``(ii) Trust activities.--The bank--
                                  ``(I) effects transactions in a 
                                trustee capacity and is primarily 
                                compensated based on a percentage of 
                                assets under management; or
                                  ``(II) is an insured bank and--
                                          ``(aa) effects transactions 
                                        in a fiduciary capacity in its 
                                        trust department in connection 
                                        with the provision of 
                                        investment advice or the 
                                        exercise of investment 
                                        discretion;
                                          ``(bb) is primarily 
                                        compensated based on a 
                                        percentage of assets under 
                                        management, and does not 
                                        receive incentive compensation 
                                        for such brokerage activities;
                                          ``(cc) does not publicly 
                                        solicit brokerage business, 
                                        other than by advertising that 
                                        it effects transactions in 
                                        securities in conjunction with 
                                        advertising its other trust 
                                        activities; and
                                          ``(dd) such services are not 
                                        provided by an employee of the 
                                        bank who is also an employee of 
                                        a broker or dealer.
                          ``(iii) Permissible securities 
                        transactions.--The bank effects transactions 
                        in--
                                  ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                  ``(II) exempted securities, other 
                                than transactions in municipal revenue 
                                bonds that a national bank is not 
                                explicitly authorized to buy or sell 
                                for its own account by the Seventh 
                                paragraph of section 5136 of the 
                                Revised Statutes of the United States 
                                (as in effect on September 1, 1997) 
                                without percentage limitation on the 
                                amount of the investment for its own 
                                account;
                                  ``(III) qualified Canadian government 
                                obligations as defined in section 5136 
                                of the Revised Statutes, in conformity 
                                with section 15C of this title and the 
                                rules and regulations thereunder, or 
                                obligations of the North American 
                                Development Bank; or
                                  ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                          ``(iv) Employee and shareholder benefit 
                        plans.--The bank effects transactions in--
                                  ``(I) the securities of an issuer as 
                                part of any pension, retirement, 
                                profit-sharing, bonus, thrift, savings, 
                                incentive, or other similar benefit 
                                plan for the employees of that issuer 
                                or its subsidiaries, if the bank does 
                                not--
                                          ``(aa) solicit transactions; 
                                        or
                                          ``(bb) receive any 
                                        compensation directly or 
                                        indirectly from employees for 
                                        effecting such transactions, 
                                        other than a flat per order 
                                        processing fee that does not 
                                        exceed the bank's incremental 
                                        costs directly attributable to 
                                        effecting such transactions; or
                                  ``(II) the securities of an issuer as 
                                part of that issuer's dividend 
                                reinvestment and stock purchase plan 
                                for its shareholders, if the bank does 
                                not--
                                          ``(aa) solicit transactions;
                                          ``(bb) receive any 
                                        compensation directly or 
                                        indirectly from shareholders 
                                        for effecting such 
                                        transactions, other than a flat 
                                        per order processing fee that 
                                        does not exceed the bank's 
                                        incremental costs directly 
                                        attributable to effecting such 
                                        transactions; or
                                          ``(cc) net shareholders' buy 
                                        and sell orders.
                          ``(v) Sweep accounts.--The bank effects 
                        transactions as part of a program for the 
                        investment or reinvestment of bank deposit 
                        funds into any no-load, open-end management 
                        investment company registered under the 
                        Investment Company Act of 1940 that holds 
                        itself out as a money market fund.
                          ``(vi) Affiliate transactions.--The bank 
                        effects transactions for the account of any 
                        affiliate of the bank (as defined in section 2 
                        of the Bank Holding Company Act of 1956) other 
                        than--
                                  ``(I) a registered broker or dealer; 
                                or
                                  ``(II) an affiliate that is engaged 
                                in merchant banking, as described in 
                                section 17(i)(7)(B)(ii)(VIII) of this 
                                title.
                          ``(vii) Private securities offerings.--The 
                        bank--
                                  ``(I) effects sales as part of a 
                                primary offering of securities not 
                                involving a public offering, pursuant 
                                to section 3(b), 4(2), or 4(6) of the 
                                Securities Act of 1933 or the rules and 
                                regulations issued thereunder;
                                  ``(II) at any time after one year 
                                after the date of enactment of the 
                                Financial Services Act of 1997, is not 
                                affiliated with a broker or dealer that 
                                has been registered for more than one 
                                year; and
                                  ``(III) effects transactions 
                                exclusively with qualified investors.
                          ``(viii) Safekeeping and custody services.--
                        The bank--
                                  ``(I) provides safekeeping or custody 
                                services with respect to securities 
                                that are pledged by one customer to 
                                another customer in connection with a 
                                repurchase agreement or similar 
                                financing arrangement;
                                  ``(II) facilitates the transfer of 
                                funds or securities, as a custodian or 
                                a clearing agency, in connection with 
                                the clearance and settlement of its 
                                customers' transactions in securities; 
                                or
                                  ``(III) effects or facilitates the 
                                lending or borrowing of securities with 
                                or on behalf of its customers as part 
                                of services provided to those customers 
                                pursuant to subclause (I) or (II).
                          ``(ix) Banking products.--The bank effects 
                        transactions in banking products, as defined in 
                        paragraph (54) of this subsection.
                          ``(x) De minimis exception.--The bank 
                        effects, other than in transactions referred to 
                        in clauses (i) through (ix), not more than 500 
                        transactions in securities in any calendar 
                        year, and such transactions are not effected by 
                        an employee of the bank who is also an employee 
                        of a broker or dealer.
                  ``(C) Exception for entities subject to section 
                15(e).--The term `broker' does not include a bank 
                that--
                          ``(i) was, immediately prior to the enactment 
                        of the Financial Services Act of 1997, subject 
                        to section 15(e); and
                          ``(ii) is subject to such restrictions and 
                        requirements as the Commission considers 
                        appropriate.''.

 SEC. 202. DEFINITION OF DEALER.

  Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(5)) is amended to read as follows:
          ``(5) Dealer.--
                  ``(A) In general.--The term `dealer' means any person 
                engaged in the business of buying and selling 
                securities for such person's own account through a 
                broker or otherwise.
                  ``(B) Exception for person not engaged in the 
                business of dealing.--The term `dealer' does not 
                include a person that buys or sells securities for such 
                person's own account, either individually or in a 
                fiduciary capacity, but not as a part of a regular 
                business.
                  ``(C) Exception for certain bank activities.--A bank 
                shall not be considered to be a dealer because the bank 
                engages in any of the following activities under the 
                conditions described:
                          ``(i) Permissible securities transactions.--
                        The bank buys or sells--
                                  ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                  ``(II) exempted securities, other 
                                than purchases and sales of municipal 
                                revenue bonds that a national bank is 
                                not explicitly authorized to buy or 
                                sell for its own account by the Seventh 
                                paragraph of section 5136 of the 
                                Revised Statutes of the United States 
                                (as in effect on September 1, 1997) 
                                without percentage limitation on the 
                                amount of the investment for its own 
                                account;
                                  ``(III) qualified Canadian government 
                                obligations as defined in section 5136 
                                of the Revised Statutes of the United 
                                States, in conformity with section 15C 
                                of this title and the rules and 
                                regulations thereunder, or obligations 
                                of the North American Development Bank; 
                                or
                                  ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                          ``(ii) Investment, trustee, and fiduciary 
                        transactions.--The bank buys or sells 
                        securities for investment purposes--
                                  ``(I) for the bank; or
                                  ``(II) for accounts for which the 
                                bank acts as a trustee or fiduciary.
                          ``(iii) Asset-backed transactions.--The bank 
                        engages in the issuance or sale to qualified 
                        investors, through a grantor trust or 
                        otherwise, of securities backed by or 
                        representing an interest in notes, drafts, 
                        acceptances, loans, leases, receivables, other 
                        obligations, or pools of any such obligations 
                        predominantly originated by the bank, or a 
                        syndicate of banks of which the bank is a 
                        member, or an affiliate of any such bank other 
                        than a broker or dealer.
                          ``(iv) Transactions in banking products.--The 
                        bank buys or sells banking products, as defined 
                        in paragraph (54) of this subsection.
                          ``(v) Derivative instruments.--The bank 
                        issues, buys, or sells any derivative 
                        instrument to which the bank is a party--
                                  ``(I) to or from a corporation, 
                                limited liability company, or 
                                partnership that owns and invests on a 
                                discretionary basis, not less than 
                                $10,000,000 in investments, or to or 
                                from a qualified investor, except that 
                                if the instrument provides for the 
                                delivery of one or more securities 
                                (other than a derivative instrument or 
                                government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                  ``(II) to or from other persons, 
                                except that if the derivative 
                                instrument provides for the delivery of 
                                one or more securities (other than a 
                                derivative instrument or government 
                                security), or is a security (other than 
                                a government security), the transaction 
                                shall be effected with or through a 
                                registered broker or dealer; or
                                  ``(III) to or from any person if the 
                                instrument is neither a security nor 
                                provides for the delivery of one or 
                                more securities (other than a 
                                derivative instrument).''.

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

  Section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) 
is amended by inserting after subsection (i) the following new 
subsection:
  ``(j) Registration for Sales of Private Securities Offerings.--A 
registered securities association shall create a limited qualification 
category for any associated person of a member who effects sales as 
part of a primary offering of securities not involving a public 
offering, pursuant to section 3(b), 4(2), or 4(6) of the Securities Act 
of 1933 and the rules and regulations thereunder, and shall deem 
qualified in such limited qualification category, without testing, any 
bank employee who, in the six month period preceding the date of 
enactment of this Act, engaged in effecting such sales.''.

SEC. 204. GRIEVANCE PROCESS.

  Section 18 of the Federal Deposit Insurance Act is amended by adding 
at the end the following new subsection:
  ``(s) Grievance Process With Respect to Securities Activities.--
          ``(1) Procedures required.--The appropriate Federal banking 
        agencies shall jointly establish procedures and facilities for 
        receiving and expeditiously processing complaints against any 
        bank or employee of a bank arising in connection with the 
        purchase or sale of a security by a customer. The use of any 
        such procedures and facilities by such a customer shall be at 
        the election of the customer.
          ``(2) Required actions.--The actions required by the Federal 
        banking agencies under paragraph (1) shall include the 
        following:
                  ``(A) establishing a group, unit, or bureau within 
                each such agency to receive such complaints;
                  ``(B) developing and establishing procedures for 
                investigating such complaints;
                  ``(C) developing and establishing procedures for 
                informing customers of the rights they may have in 
                connection with such complaints; and
                  ``(D) developing and establishing procedures for 
                resolving such complaints, including procedures for the 
                recovery of losses to the extent appropriate.
          ``(3) Procedures in addition to other remedies.--The 
        procedures and remedies provided under this subsection shall be 
        in addition to, and not in lieu of, any other remedies 
        available under law.
          ``(4) Definition.--As used in this subsection, the term 
        `security' has the meaning provided in section 3(a)(10) of the 
        Securities Exchange Act of 1934.''.

SEC. 205. INFORMATION SHARING.

  Section 18 of the Federal Deposit Insurance Act is amended by adding 
at the end the following new subsection:
  ``(t) Recordkeeping Requirements.--
          ``(1) Requirements.--Each appropriate Federal banking agency, 
        after consultation with and consideration of the views of the 
        Commission, shall establish recordkeeping requirements for 
        banks relying on exceptions contained in paragraphs (4) and (5) 
        of section 3(a) of the Securities Exchange Act of 1934. Such 
        recordkeeping requirements shall be sufficient to demonstrate 
        compliance with the terms of such exceptions and be designed to 
        facilitate compliance with such exceptions. Each appropriate 
        Federal banking agency shall make any such information 
        available to the Commission upon request.
          ``(2) Definitions.--As used in this subsection the term 
        `Commission' means the Securities and Exchange Commission.''.

SEC. 206. BANKING PRODUCTS, DERIVATIVE INSTRUMENT, AND QUALIFIED 
                    INVESTOR DEFINED.

  Section 3(a) of the Securities Exchange Act of 1934 is amended by 
adding at the end the following new paragraphs:
          ``(54) Banking product.--
                  ``(A) Definition.--The term `banking product' means--
                          ``(i) a deposit account, savings account, 
                        certificate of deposit, or other deposit 
                        instrument issued by a bank;
                          ``(ii) a banker's acceptance;
                          ``(iii) a letter of credit issued or loan 
                        made by a bank;
                          ``(iv) a debit account at a bank arising from 
                        a credit card or similar arrangement;
                          ``(v) a participation in a loan which the 
                        bank or an affiliate of the bank (other than a 
                        broker or dealer) funds, participates in, or 
                        owns that is sold--
                                  ``(I) to qualified investors; or
                                  ``(II) by an employee of a bank who 
                                is not also an employee of a broker or 
                                dealer to other persons that--
                                          ``(aa) have the opportunity 
                                        to review and assess any 
                                        material information, including 
                                        information regarding the 
                                        borrower's creditworthiness; 
                                        and
                                          ``(bb) based on such factors 
                                        as financial sophistication, 
                                        net worth, and knowledge and 
                                        experience in financial 
                                        matters, have the capability to 
                                        evaluate the information 
                                        available; or
                          ``(vi) any derivative instrument, whether or 
                        not individually negotiated, involving or 
                        relating to foreign currencies, except options 
                        on foreign currencies that trade on a national 
                        securities exchange.
                  ``(B) Classification limited.--Classification of a 
                particular product as a banking product pursuant to 
                this paragraph shall not be construed as finding or 
                implying that such product is or is not a security for 
                any purpose under the securities laws, or is or is not 
                an account, agreement, contract, or transaction for any 
                purpose under the Commodity Exchange Act.
          ``(55) Derivative instrument.--
                  ``(A) Definition.--The term `derivative instrument' 
                means any individually negotiated contract, agreement, 
                warrant, note, or option that is based, in whole or in 
                part, on the value of, any interest in, or any 
                quantitative measure or the occurrence of any event 
                relating to, one or more commodities, securities, 
                currencies, interest or other rates, indices, or other 
                assets, but does not include a banking product.
                  ``(B) Classification limited.-- Classification of a 
                particular contract as a derivative instrument pursuant 
                to this paragraph shall not be construed as finding or 
                implying that such instrument is or is not a security 
                for any purpose under the securities laws, or is or is 
                not an account, agreement, contract, or transaction for 
                any purpose under the Commodity Exchange Act.
          ``(56) Qualified investor.--
                  ``(A) Definition.--The term `qualified investor' 
                means--
                          ``(i) any investment company registered with 
                        the Commission under section 8 of the 
                        Investment Company Act of 1940;
                          ``(ii) any issuer eligible for an exclusion 
                        from the definition of investment company 
                        pursuant to section 3(c)(7) of the Investment 
                        Company Act of 1940;
                          ``(iii) any bank (as defined in paragraph (6) 
                        of this subsection), savings and loan 
                        association (as defined in section 3(b) of the 
                        Federal Deposit Insurance Act), broker, dealer, 
                        insurance company (as defined in section 
                        2(a)(13) of the Securities Act of 1933), or 
                        business development company (as defined in 
                        section 2(a)(48) of the Investment Company Act 
                        of 1940);
                          ``(iv) any small business investment company 
                        licensed by the United States Small Business 
                        Administration under section 301(c) or (d) of 
                        the Small Business Investment Act of 1958;
                          ``(v) any State sponsored employee benefit 
                        plan, or any other employee benefit plan, 
                        within the meaning of the Employee Retirement 
                        Income Security Act of 1974, other than an 
                        individual retirement account, if the 
                        investment decisions are made by a plan 
                        fiduciary, as defined in section 3(21) of that 
                        Act, which is either a bank, savings and loan 
                        association, insurance company, or registered 
                        investment adviser;
                          ``(vi) any trust whose purchases of 
                        securities are directed by a person described 
                        in clauses (i) through (v) of this 
                        subparagraph;
                          ``(vii) any market intermediary exempt under 
                        section 3(c)(2) of the Investment Company Act 
                        of 1940;
                          ``(viii) any associated person of a broker or 
                        dealer other than a natural person; or
                          ``(ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International Banking 
                        Act of 1978).
                  ``(B) Additional authority.--The Commission may, by 
                rule or order, define a `qualified investor' as any 
                other person, other than a natural person, taking into 
                consideration such factors as the person's financial 
                sophistication, net worth, and knowledge and experience 
                in financial matters.''.

SEC. 207. GOVERNMENT SECURITIES DEFINED.

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

SEC. 208. EFFECTIVE DATE.

  This subtitle shall take effect at the end of the 270-day period 
beginning on the date of the enactment of this Act.

             Subtitle B--Bank Investment Company Activities

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

  (a) Management Companies.--Section 17(f) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
          (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively;
          (2) by striking ``(f) Every registered'' and inserting the 
        following:
  ``(f) Custody of Securities.--
          ``(1) Every registered'';
          (3) by redesignating the 2d, 3d, 4th, and 5th sentences of 
        such subsection as paragraphs (2) through (5), respectively, 
        and indenting the left margin of such paragraphs appropriately; 
        and
          (4) by adding at the end the following new paragraph:
          ``(6) The Commission may adopt rules and regulations, and 
        issue orders, consistent with the protection of investors, 
        prescribing the conditions under which a bank, or an affiliated 
        person of a bank, either of which is an affiliated person, 
        promoter, organizer, or sponsor of, or principal underwriter 
        for, a registered management company may serve as custodian of 
        that registered management company.''.
  (b) Unit Investment Trusts.--Section 26 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-26) is amended--
          (1) by redesignating subsections (b) through (e) as 
        subsections (c) through (f), respectively; and
          (2) by inserting after subsection (a) the following new 
        subsection:
  ``(b) The Commission may adopt rules and regulations, and issue 
orders, consistent with the protection of investors, prescribing the 
conditions under which a bank, or an affiliated person of a bank, 
either of which is an affiliated person of a principal underwriter for, 
or depositor of, a registered unit investment trust, may serve as 
trustee or custodian under subsection (a)(1).''.
  (c) Fiduciary Duty of Custodian.--Section 36(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
          (1) in paragraph (1), by striking ``or'' at the end;
          (2) in paragraph (2), by striking the period at the end and 
        inserting ``; or''; and
          (3) by inserting after paragraph (2) the following:
          ``(3) as custodian.''.

SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

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

SEC. 213. INDEPENDENT DIRECTORS.

  (a) In General.--Section 2(a)(19)(A) of the Investment Company Act of 
1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
          (1) by striking clause (v) and inserting the following new 
        clause:
                          ``(v) any person or any affiliated person of 
                        a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                  ``(I) the investment company,
                                  ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services, or
                                  ``(III) any account over which the 
                                investment company's investment adviser 
                                has brokerage placement discretion,'';
          (2) by redesignating clause (vi) as clause (vii); and
          (3) by inserting after clause (v) the following new clause:
                          ``(vi) any person or any affiliated person of 
                        a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has loaned money or other 
                        property to--
                                  ``(I) the investment company,
                                  ``(II) any other investment company 
                                having the same investment adviser as 
                                such investmentcompany or holding 
itself out to investors as a related company for purposes of investment 
or investor services, or
                                  ``(III) any account for which the 
                                investment company's investment adviser 
                                has borrowing authority,''.
  (b) Conforming Amendment.--Section 2(a)(19)(B) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is amended--
          (1) by striking clause (v) and inserting the following new 
        clause:
                          ``(v) any person or any affiliated person of 
                        a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                  ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such,
                                  ``(II) any investment company holding 
                                itself out to investors, for purposes 
                                of investment or investor services, as 
                                a company related to any investment 
                                company for which the investment 
                                adviser or principal underwriter serves 
                                as such, or
                                  ``(III) any account over which the 
                                investment adviser has brokerage 
                                placement discretion,'';
          (2) by redesignating clause (vi) as clause (vii); and
          (3) by inserting after clause (v) the following new clause:
                          ``(vi) any person or any affiliated person of 
                        a person (other than a registered investment 
                        company) that, at any time during the 6-month 
                        period preceding the date of the determination 
                        of whether that person or affiliated person is 
                        an interested person, has loaned money or other 
                        property to--
                                  ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such,
                                  ``(II) any investment company holding 
                                itself out to investors, for purposes 
                                of investment or investor services, as 
                                a company related to any investment 
                                company for which the investment 
                                adviser or principal underwriter serves 
                                as such, or
                                  ``(III) any account for which the 
                                investment adviser has borrowing 
                                authority,''.
  (c) Affiliation of Directors.--Section 10(c) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking 
``bank, except'' and inserting ``bank (together with its affiliates and 
subsidiaries) or any one bank holding company (together with its 
affiliates and subsidiaries) (as such terms are defined in section 2 of 
the Bank Holding Company Act of 1956), except''.
  (d) Effective Date.--The amendments made by this section shall take 
effect at the end of the 1-year period beginning on the date of 
enactment of this subtitle.

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

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

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

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

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

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

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

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

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

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

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

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

SEC. 220. INTERAGENCY CONSULTATION.

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

``SEC. 210A. CONSULTATION.

  ``(a) Examination Results and Other Information.--
          ``(1) The appropriate Federal banking agency shall provide 
        the Commission upon request the results of any examination, 
        reports, records, or other information to which such agency may 
        have access with respect to the investment advisory 
        activities--
                  ``(A) of any--
                          ``(i) bank holding company,
                          ``(ii) bank, or
                          ``(iii) separately identifiable department or 
                        division of a bank,
                that is registered under section 203 of this title; and
                  ``(B) in the case of a bank holding company or bank 
                that has a subsidiary or a separately identifiable 
                department or division registered under that section, 
                of such bank or bank holding company.
          ``(2) The Commission shall provide to the appropriate Federal 
        banking agency upon request the results of any examination, 
        reports, records, or other information with respect to the 
        investment advisory activities of any bank holding company, 
        bank, or separately identifiable department or division of a 
        bank, any of which is registered under section 203 of this 
        title.
  ``(b) Effect on Other Authority.--Nothing in this section shall limit 
in any respect the authority of the appropriate Federal banking agency 
with respect to such bank holding company, bank, or department or 
division under any provision of law.
  ``(c) Definition.--For purposes of this section, the term 
`appropriate Federal banking agency' shall have the same meaning as in 
section 3 of the Federal Deposit Insurance Act.''.

SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

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

SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAVING CONTROLLING 
                    INTEREST IN REGISTERED INVESTMENT COMPANY.

  Section 15 of the Investment Company Act of 1940 (15 U.S.C. 80a-15) 
is amended by adding at the end the following new subsection:
  ``(g) Controlling Interest in Investment Company Prohibited.--
          ``(1) In general.--If an investment adviser to a registered 
        investment company, or an affiliated person of that investment 
        adviser, holds a controlling interest in that registered 
        investment company in a trustee or fiduciary capacity, such 
        person shall--
                  ``(A) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any employee benefit 
                plan subject to the Employee Retirement Income Security 
                Act of 1974, transfer the power to vote the shares of 
                the investment company through to another person acting 
                in a fiduciary capacity with respect to the plan who is 
                not an affiliated person of that investment adviser or 
                any affiliated person thereof; or
                  ``(B) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any person or entity 
                other than an employee benefit plan subject to the 
                Employee Retirement Income Security Act of 1974--
                          ``(i) transfer the power to vote the shares 
                        of the investment company through to--
                                  ``(I) the beneficial owners of the 
                                shares;
                                  ``(II) another person acting in a 
                                fiduciary capacity who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof; or
                                  ``(III) any person authorized to 
                                receive statements and information with 
                                respect to the trust who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof;
                          ``(ii) vote the shares of the investment 
                        company held by it in the same proportion as 
                        shares held by all other shareholders of the 
                        investment company; or
                          ``(iii) vote the shares of the investment 
                        company as otherwise permitted under such 
                        rules, regulations, or orders as the Commission 
                        may prescribe or issue consistent with the 
                        protection of investors.
          ``(2) Exemption.--Paragraph (1) shall not apply to any 
        investment adviser to a registered investment company, or any 
        affiliated person of that investment adviser, that holds shares 
        of the investment company in a trustee or fiduciary capacity if 
        that registered investment company consists solely of assets 
        held in such capacities.
          ``(3) Safe harbor.--No investment adviser to a registered 
        investment company or any affiliated person of such investment 
        adviser shall be deemed to have acted unlawfully or to have 
        breached a fiduciary duty under State or Federal law solely by 
        reason of acting in accordance with clause (i), (ii), or (iii) 
        of paragraph (1)(B).''.

SEC. 223. CONFORMING CHANGE IN DEFINITION.

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

SEC. 224. CONFORMING AMENDMENT.

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

SEC. 225. EFFECTIVE DATE.

  This subtitle shall take effect 90 days after the date of the 
enactment of this Act.

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

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

  (a) Amendment.--Section 17 of the Securities Exchange Act of 1934 (15 
U.S.C. 78q) is amended--
          (1) by redesignating subsection (i) as subsection (l); and
          (2) by inserting after subsection (h) the following new 
        subsections:
  ``(i) Investment Bank Holding Companies.--
          ``(1) Mandatory supervision of any investment bank holding 
        company substantially engaged in the securities business, 
        having an affiliate that is a wholesale financial 
        institution.--
                  ``(A) Mandatory supervision.--An investment bank 
                holding company that--
                          ``(i) is substantially engaged in the 
                        securities business;
                          ``(ii) controls one or more wholesale 
                        financial institutions that, in the aggregate, 
                        have--
                                  ``(I) consolidated risk-weighted 
                                assets that are less than 
                                $15,000,000,000; and
                                  ``(II) annual gross revenues that 
                                represent less than 25 percent of the 
                                consolidated annual gross revenues of 
                                the company;
                          ``(iii) does not control--
                                  ``(I) a bank other than a wholesale 
                                financial institution;
                                  ``(II) an insured bank other than an 
                                institution permitted under 
                                subparagraph (D), (F), or (G) of 
                                section 2(c)(2) of the Bank Holding 
                                Company Act of 1956; or
                                  ``(III) a savings association;
                          ``(iv) is not a foreign bank; and
                          ``(v) has not elected to be supervised by the 
                        Board of Governors of the Federal Reserve 
                        System,
                shall be regulated by the Commission as a supervised 
                investment bank holding company in accordance with this 
                section and comply with the rules promulgated by the 
                Commission applicable to supervised investment bank 
                holding companies.
                  ``(B) Method of calculation.--
                          ``(i) Risk-weighted assets.--For purposes of 
                        subparagraph (A)(ii)(I), the consolidated risk-
                        weighted assets of a wholesale financial 
                        institution shall--
                                  ``(I) be based on the average 
                                consolidated risk-weighted assets of 
                                the institution for the four previous 
                                calendar quarters; and
                                  ``(II) include risk-weighted claims 
                                on affiliates only to the extent such 
                                claims, in the aggregate, exceed the 
                                aggregate risk-weighted claims of 
                                affiliates on the wholesale financial 
                                institution.
                        For purposes of this clause, the term 
                        `affiliates' shall not include any subsidiary 
                        of the wholesale financial institution.
                          ``(ii) Indexed growth.--The dollar amount 
                        contained in subparagraph (A)(ii)(I) shall be 
                        adjusted annually after December 31, 1998, by 
                        the annual percentage increase in the Consumer 
                        Price Index for Urban Wage Earners and Clerical 
                        Workers published by the Bureau of Labor 
                        Statistics.
          ``(2) Elective supervision of an investment bank holding 
        company not having a bank or savings association affiliate.--
                  ``(A) In general.--An investment bank holding company 
                that is not--
                          ``(i) an affiliate of a wholesale financial 
                        institution, an insured bank (other than an 
                        institution described in paragraph 
                        (1)(A)(iii)(II)), or a savings association,
                          ``(ii) a foreign bank, foreign company, or 
                        company that is described in section 8(a) of 
                        the International Banking Act of 1978, or
                          ``(iii) a foreign bank that controls, 
                        directly or indirectly, a corporation chartered 
                        under section 25A of the Federal Reserve Act,
                may elect to become supervised by filing with the 
                Commission a notice of intention to become supervised, 
                pursuant to subparagraph (B) of this paragraph. Any 
                investment bank holding company filing such a notice 
                shall be supervised in accordance with this section and 
                comply with the rules promulgated by the Commission 
                applicable to supervised investment bank holding 
                companies.
                  ``(B) Notification of status as a supervised 
                investment bank holding company.--An investment bank 
                holding company that elects under subparagraph (A) to 
                become supervised by the Commission shall file with the 
                Commission a written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents concerning 
                such investment bank holding company as the Commission, 
                by rule, may prescribe as necessary or appropriate in 
                furtherance of the purposes of this section. Unless the 
                Commission finds that such supervision is not necessary 
                or appropriate in furtherance of the purposes of this 
                section, such supervision shall become effective 45 
                days after receipt of such written notice by the 
                Commission or within such shorter time period as the 
                Commission, by rule or order, may determine.
          ``(3) Withdrawal from supervision by the commission as an 
        investment bank holding company for companies that must 
        continue to be supervised.--
                  ``(A) Mandatory withdrawal.--A supervised investment 
                bank holding company that owns or controls one or more 
                wholesale financial institutions, and ceases to meet 
                any requirements of paragraph (1), shall--
                          ``(i) file a written notice of withdrawal 
                        from Commission supervision upon such terms and 
                        conditions as the Commission, after 
                        consultation with the Board of Governors of the 
                        Federal Reserve System, deems necessary or 
                        appropriate;
                          ``(ii) provide a copy of such notice to the 
                        Board of Governors of the Federal Reserve 
                        System; and
                          ``(iii) be supervised by the Board of 
                        Governors of the Federal Reserve System under 
                        applicable provisions of the Bank Holding 
                        Company Act of 1956.
                  ``(B) Voluntary withdrawal.--A supervised investment 
                bank holding company described in paragraph (1)(A), 
                upon such terms and conditions asthe Commission deems 
necessary or appropriate after consultation with the Board of Governors 
of the Federal Reserve System, may elect not to be supervised by the 
Commission by filing with the Commission a written notice of withdrawal 
from Commission supervision, and shall provide a copy of such notice to 
the Board of Governors of the Federal Reserve System.
                  ``(C) Effective date of withdrawal.--A written notice 
                of withdrawal from Commission supervision pursuant to 
                this paragraph shall become effective 45 days after 
                receipt by the Commission or such shorter or longer 
                period as the Commission, by order, deems necessary or 
                appropriate to prevent evasion of the purposes of this 
                section.
                  ``(D) Required procedures.--The Commission, after 
                consultation with the Board of Governors of the Federal 
                Reserve System, shall, by rule, establish standards and 
                procedures to require or permit, as appropriate, 
                supervised investment bank holding companies described 
                in paragraph (1)(A) to withdraw from Commission 
                supervision pursuant to this paragraph.
          ``(4) Election not to be supervised by the commission as an 
        investment bank holding company for companies that are 
        voluntarily regulated.--
                  ``(A) Voluntary withdrawal.--A supervised investment 
                bank holding company that is supervised pursuant to 
                paragraph (2) may, upon such terms and conditions as 
                the Commission deems necessary or appropriate, elect 
                not to be supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become effective 
                until one year after receipt by the Commission, or such 
                shorter or longer period as the Commission deems 
                necessary or appropriate to ensure effective 
                supervision of the material risks to the supervised 
                investment bank holding company and to the affiliated 
                broker or dealer, or to prevent evasion of the purposes 
                of this section.
                  ``(B) Discontinuation of commission supervision for 
                companies that are voluntarily regulated.--If the 
                Commission finds that any supervised investment bank 
                holding company that is supervised pursuant to 
                paragraph (2) is no longer in existence or has ceased 
                to be an investment bank holding company, or if the 
                Commission finds that continued supervision of such a 
                supervised investment bank holding company is not 
                consistent with the purposes of this section, the 
                Commission may discontinue the supervision pursuant to 
                a rule or order, if any, promulgated by the Commission 
                under this section.
          ``(5) Supervision of investment bank holding companies.--
                  ``(A) Recordkeeping and reporting.--
                          ``(i) In general.--Every supervised 
                        investment bank holding company and each 
                        affiliate thereof shall make and keep for 
                        prescribed periods such records, furnish copies 
                        thereof, and make such reports, as the 
                        Commission may require by rule, in order to 
                        keep the Commission informed as to--
                                  ``(I) the company's or affiliate's 
                                activities, financial condition, 
                                policies, systems for monitoring and 
                                controlling financial and operational 
                                risks, and transactions and 
                                relationships between any broker, 
                                dealer, or wholesale financial 
                                institution affiliate of the supervised 
                                investment bank holding company; and
                                  ``(II) the extent to which the 
                                company or affiliate has complied with 
                                the provisions of this Act and 
                                regulations prescribed and orders 
                                issued under this Act.
                          ``(ii) Form and contents.--Such records and 
                        reports shall be prepared in such form and 
                        according to such specifications (including 
                        certification by an independent public 
                        accountant), as the Commission may require and 
                        shall be provided promptly at any time upon 
                        request by the Commission. Such records and 
                        reports may include--
                                  ``(I) a balance sheet and income 
                                statement;
                                  ``(II) an assessment of the 
                                consolidated capital of the supervised 
                                investment bank holding company;
                                  ``(III) an independent auditor's 
                                report attesting to the supervised 
                                investment bank holding company's 
                                compliance with its internal risk 
                                management and internal control 
                                objectives; and
                                  ``(IV) reports concerning the extent 
                                to which the company or affiliate has 
                                complied with the provisions of this 
                                title and any regulations prescribed 
                                and orders issued under this title.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Commission shall, to 
                        the fullest extent possible, accept reports in 
                        fulfillment of the requirements under this 
                        paragraph that the supervised investment bank 
                        holding company or its affiliates have been 
                        required to provide to another appropriate 
                        regulatory agency or self-regulatory 
                        organization.
                          ``(ii) Availability.--A supervised investment 
                        bank holding company or an affiliate of such 
                        company shall provide to the Commission, at the 
                        request of the Commission, any report referred 
                        to in clause (i).
                  ``(C) Examination authority.--
                          ``(i) Focus of examination authority.--The 
                        Commission may make examinations of any 
                        supervised investment bank holding company and 
                        any affiliate of such company in order to--
                                  ``(I) inform the Commission 
                                regarding--
                                          ``(aa) the nature of the 
                                        operations and financial 
                                        condition of the supervised 
                                        investment bank holding company 
                                        and its affiliates;
                                          ``(bb) the financial and 
                                        operational risks within the 
                                        supervised investment bank 
                                        holding company that may affect 
                                        any broker, dealer, or 
                                        wholesale financial institution 
                                        controlled by such supervised 
                                        investment bank holding 
                                        company; and
                                          ``(cc) the systems of the 
                                        supervised investment bank 
                                        holding company and its 
                                        affiliates for monitoring and 
                                        controlling those risks; and
                                  ``(II) monitor compliance with the 
                                provisions of this subsection, 
                                provisions governing transactions and 
                                relationships between any broker or 
                                dealer or wholesale financial 
                                institution affiliated with the 
                                supervised investment bank holding 
                                company and any of the company's other 
                                affiliates, and applicable provisions 
                                of subchapter II of chapter 53, title 
                                31, United States Code (commonly 
                                referred to as the `Bank Secrecy Act') 
                                and regulations thereunder.
                          ``(ii) Restricted focus of examinations.--The 
                        Commission shall limit the focus and scope of 
                        any examination of a supervised investment bank 
                        holding company to--
                                  ``(I) the company;
                                  ``(II) any affiliate of the company 
                                (other than a wholesale financial 
                                institution) that, because of its size, 
                                condition, or activities, the nature or 
                                size of the transactions between such 
                                affiliate and any affiliated broker, 
                                dealer, or wholesale financial 
                                institution, or the centralization of 
                                functions within the holding company 
                                system, could, in the discretion of the 
                                Commission, have a materially adverse 
                                effect on the operational or financial 
                                condition of the broker or dealer or 
                                any affiliated wholesale financial 
                                institution; and
                                  ``(III) any wholesale financial 
                                institution affiliate of an investment 
                                bank holding company, for the purpose 
                                of monitoring and enforcing compliance 
                                by such a wholesale financial 
                                institution or any of its affiliates 
                                with the Federal securities laws.
                          ``(iii) Notice.--To the fullest extent 
                        possible, the Commission shall notify the 
                        appropriate regulatory agency prior to 
                        conducting an examination of a wholesale 
                        financial institution.
                          ``(iv) Deference to other examinations.--For 
                        purposes of this subparagraph, the Commission 
                        shall, to the fullest extent possible, use the 
                        reports of examination of a wholesale financial 
                        institution or an institution described in 
                        subparagraph (D), (F), or (G) of section 
                        2(c)(2) of the Bank Holding Company Act of 1956 
                        made by the appropriate regulatory agency, or 
                        of a licensed insurance company made by the 
                        appropriate State insurance regulator.
                  ``(D) Information sharing.--The Commission shall, 
                upon request, provide to the appropriate regulatory 
                agency such reports, records, or other information as 
                the Commission has available concerning any supervised 
                investment bank holding company described in paragraph 
                (1) or any of its affiliates to assist the appropriate 
                regulatory agency in carrying out its responsibilities 
                under the Federal banking laws.
          ``(6) Holding company capital.--
                  ``(A) Authority.--If the Commission finds that it is 
                necessary to adequately supervise investment bank 
                holding companies and their broker, dealer, or 
                wholesale financial institution affiliates consistent 
                with the purposes of this subsection, the Commission 
                may adopt capital adequacy rules for supervised 
                investment bank holding companies.
                  ``(B) Method of calculation.--In developing rules 
                under this paragraph:
                          ``(i) Double leverage.--The Commission shall 
                        consider the use by the supervised investment 
                        bank holding company of debt and other 
                        liabilities to fund capital investments in 
                        affiliates.
                          ``(ii) No unweighted capital ratio.--The 
                        Commission shall not impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                          ``(iii) No capital requirement on regulated 
                        entities.--The Commission shall not, by rule, 
                        regulation, guideline, order or otherwise, 
                        impose any capital adequacy provision on a 
                        nonbanking affiliate (other than a broker or 
                        dealer) that is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority or State insurance 
                        authority.
                          ``(iv) Appropriate exclusions.--The 
                        Commission shall take full account of the 
                        applicable capital requirements of another 
                        Federal regulatory authority or State insurance 
                        regulator.
                  ``(C) Internal risk management models.--The 
                Commission may incorporate internal risk management 
                models into its capital adequacy rules for supervised 
                investment bank holding companies.
                  ``(D) Consultation with the board.--The Commission 
                shall consult with the Board of Governors of the 
                Federal Reserve System in developing capital adequacy 
                requirements for investment bank holding companies 
                described in paragraph (1).
          ``(7) Activities and investments.--
                  ``(A) In general.--Supervised investment bank holding 
                companies described in paragraph (1) may acquire and 
                own the shares of a wholesale financial institution in 
                accordance with section 3 of the Bank Holding Company 
                Act of 1956 and of any institution described in 
                subparagraph (D), (F), and (G) of section 2(c)(2) of 
                such Act. Such companies may also engage in activities, 
                and may acquire or retain ownership or control of 
                shares of any company engaged in any activities, to the 
                extent authorized by subparagraphs (B), (C), (D), (E), 
                and (G). Such investment bank holding companies may not 
                otherwise engage directly or indirectly in activities 
                or acquire and retain ownership or control of the 
                shares of companies.
                  ``(B) Permissible financial activities and 
                investments.--
                          ``(i) In general.--A supervised investment 
                        bank holding company described in paragraph (1) 
                        may engage in any activity, and may directly or 
                        indirectly acquire and retain ownership and 
                        control of shares of any company engaged in any 
                        activity--
                                  ``(I) that is permissible for a bank 
                                holding company under section 4(c)(1) 
                                through (14) of the Bank Holding 
                                Company Act of 1956; or
                                  ``(II) that are financial in nature 
                                or incidental to such financial 
                                activities, as determined under clause 
                                (ii), or that the Commission determines 
                                by rule, regulation, or order pursuant 
                                to clause (iii) to be financial in 
                                nature or incidental to such financial 
                                activities.
                          ``(ii) Activities that are financial in 
                        nature.--The following activities shall be 
                        considered to be financial in nature:
                                  ``(I) Lending, exchanging, 
                                transferring, investing for others, or 
                                safeguarding money or securities.
                                  ``(II) Insuring, guaranteeing, or 
                                indemnifying against loss, harm, 
                                damage, illness, disability, or death, 
                                or providing and issuing annuities, and 
                                acting as principal, agent, or broker 
                                for purposes of the foregoing.
                                  ``(III) Providing financial, 
                                investment, or economic advisory 
                                services, including advising an 
                                investment company (as defined in 
                                section 3 of the Investment Company Act 
                                of 1940).
                                  ``(IV) Issuing or selling instruments 
                                representing interests in pools of 
                                assets permissible for a bank to hold 
                                directly.
                                  ``(V) Underwriting, dealing in, or 
                                making a market in securities.
                                  ``(VI) Engaging in any activity that 
                                the Board of Governors of the Federal 
                                Reserve System has determined, by order 
                                or regulation that is in effect on the 
                                date of enactment of the Financial 
                                Services Act of 1997, to be so closely 
                                related to banking or managing or 
                                controlling banks as to be a proper 
                                incident thereto (subject to the same 
                                terms and conditions contained in such 
                                order or regulation, unless modified by 
                                the Board).
                                  ``(VII) Engaging, in the United 
                                States, in any activity that--
                                          ``(aa) a bank holding company 
                                        may engage in outside the 
                                        United States; and
                                          ``(bb) the Board of Governors 
                                        of the Federal Reserve System 
                                        has determined, under 
                                        regulations issued pursuant to 
                                        section 4(c)(13) of Bank 
                                        Holding Company Act (as in 
                                        effect on the day before the 
                                        date of enactment of the 
                                        Financial Services Act of 1997) 
                                        to be usual in connection with 
                                        the transaction of banking or 
                                        other financial operations 
                                        abroad.
                                  ``(VIII) Directly or indirectly 
                                acquiring or controlling, whether as 
                                principal, on behalf of 1 or more 
                                entities (including entities, other 
                                than a depository institution or 
                                subsidiary of a depository institution, 
                                that the investment bank holding 
                                company controls) or otherwise, shares, 
                                assets, or ownership interests 
                                (including without limitation debt or 
                                equity securities, partnership 
                                interests, trust certificates or other 
                                instruments representing ownership) of 
                                a company or other entity, whether or 
                                not constituting control of such 
                                company or entity, engaged in any 
                                activity not authorized pursuant to 
                                this section if--
                                          ``(aa) the shares, assets, or 
                                        ownership interests are not 
                                        acquired or held by a 
                                        depository institution or 
                                        subsidiary of a depository 
                                        institution;
                                          ``(bb) such shares, assets, 
                                        or ownership interests are 
                                        acquired and held by a 
                                        securities affiliate or an 
                                        affiliate thereof as part of a 
                                        bona fide underwriting or 
                                        merchant banking activity, 
                                        including investment activities 
                                        engaged in for the purpose of 
                                        appreciation and ultimate 
                                        resale or disposition of the 
                                        investment;
                                          ``(cc) such shares, assets, 
                                        or ownership interests, are 
                                        held only for such a period of 
                                        time as will permit the sale or 
                                        disposition thereof on a 
                                        reasonable basis consistent 
                                        with the nature of the 
                                        activities described in 
                                        division (bb); and
                                          ``(dd) during the period such 
                                        shares, assets, or ownership 
                                        interests are held, the 
                                        investment bank holding company 
                                        does not actively participate 
                                        in the day to day management or 
                                        operation of such company or 
                                        entity, except insofar as 
                                        necessary to achieve the 
                                        objectives of division (bb).
                                  ``(IX) Directly or indirectly 
                                acquiring or controlling, whether as 
                                principal, on behalf of 1 or more 
                                entities (including entities, other 
                                than a depository institution or 
                                subsidiary of a depository institution, 
                                that the investment bank holding 
                                company controls) or otherwise, shares, 
                                assets, or ownership interests 
                                (including without limitation debt or 
                                equity securities, partnership 
                                interests, trust certificates or other 
                                instruments representing ownership) of 
                                a company or other entity, whether or 
                                not constituting control of such 
                                company or entity, engaged in any 
                                activity not authorized pursuant to 
                                this section if--
                                          ``(aa) the shares, assets, or 
                                        ownership interests are not 
                                        acquired or held by a 
                                        depository institution or a 
                                        subsidiary of a depository 
                                        institution;
                                          ``(bb) such shares, assets, 
                                        or ownership interests are 
                                        acquired and held by an 
                                        insurance company that is 
                                        predominantly engaged in 
                                        underwriting life, accident and 
                                        health, or property and 
                                        casualty insurance (other than 
                                        credit-related insurance);
                                          ``(cc) such shares, assets, 
                                        or ownership interests 
                                        represent an investment made in 
                                        the ordinary course of business 
                                        of such insurance company in 
                                        accordance with relevant State 
                                        law governing such investments; 
                                        and
                                          ``(dd) during the period such 
                                        shares, assets, or ownership 
                                        interests are held, the 
                                        investment bank holding company 
                                        does not directly or indirectly 
                                        participate in the day-to-day 
                                        management or operation of the 
                                        company or entity except 
                                        insofar as necessary to achieve 
                                        the objectives of divisions 
                                        (bb) and (cc).
                          ``(iii) Actions required.--The Commission 
                        shall, by regulation or order, define, 
                        consistent with the purposes of this Act, the 
                        followingactivities as, and the extent to which 
such activities are, financial in nature or incidental to activities 
which are financial in nature:
                                  ``(A) Lending, exchanging, 
                                transferring, investing for others, or 
                                safeguarding financial assets other 
                                than money or securities.
                                  ``(B) Providing any device or other 
                                instrumentality for transferring money 
                                or other financial assets;
                                  ``(C) Arranging, effecting, or 
                                facilitating financial transactions for 
                                the account of third parties.
                          ``(iv) Consistency of interpretation.--The 
                        Commission shall consult with the Board of 
                        Governors of the Federal Reserve System 
                        concerning the exercise of its authority and 
                        responsibility under this subparagraph with 
                        respect to investment bank holding companies to 
                        assure, to the fullest extent possible, the 
                        consistency of interpretation and the 
                        maintenance of competitive equality.
                  ``(C) Permissible nonfinancial activities and 
                investments.--
                          ``(i) In general.--A supervised investment 
                        bank holding company described in paragraph (1) 
                        may engage in any activity not permitted under 
                        subparagraph (B) (hereinafter in this 
                        subparagraph and subparagraph (D) referred to 
                        as `nonfinancial activities'), and acquire and 
                        retain ownership and control of shares of any 
                        company engaged in any such nonfinancial 
                        activity, if--
                                  ``(I) the aggregate annual gross 
                                revenues derived from all such 
                                activities and of all such companies 
                                does not exceed 5 percent of the 
                                consolidated annual gross revenues of 
                                the supervised investment bank holding 
                                company;
                                  ``(II) the consolidated total assets 
                                of any company the shares of which are 
                                acquired by such investment bank 
                                holding company pursuant to this 
                                subparagraph are less than $750,000,000 
                                at the time such shares are acquired; 
                                and
                                  ``(III) such company provides notice 
                                to the Commission within 30 days of 
                                commencing the activity or acquiring 
                                the ownership or control.
                          ``(ii) Inclusion of grandfathered 
                        activities.--For purposes of determining 
                        compliance with the limits contained in clause 
                        (i) of this subparagraph, the gross revenues 
                        derived from all activities conducted, and 
                        companies the shares of which are held, under 
                        subparagraph (D) shall be considered to be 
                        derived or held under this subparagraph.
                  ``(D) Grandfathered activities.--
                          ``(i) In general.--Notwithstanding 
                        subparagraph (C)(i), a company that becomes a 
                        supervised investment bank holding company 
                        described in paragraph (1) may continue to 
                        engage, directly or indirectly, in any 
                        nonfinancial activity and may retain ownership 
                        and control of shares of a company engaged in 
                        any nonfinancial activity, if--
                                  ``(I) on the date of enactment of the 
                                Financial Services Act of 1997, such 
                                investment bank holding company was 
                                lawfully engaged in that nonfinancial 
                                activity, held the shares of such 
                                company, or had entered into a contract 
                                to acquire shares of any company 
                                engaged in such activity; and
                                  ``(II) the company engaged in such 
                                nonfinancial activity continues to 
                                engage only in the same activities that 
                                such company conducted on the date of 
                                enactment of the Financial Services Act 
                                of 1997, and other activities 
                                permissible under this subsection.
                          ``(ii) No expansion of grandfathered 
                        commercial activities through merger or 
                        consolidation.--An investment bank holding 
                        company described in paragraph (1) that engages 
                        in activities or holds shares pursuant to this 
                        paragraph, or a subsidiary of such investment 
                        bank holding company, may not acquire, in any 
                        merger, consolidation, or other type of 
                        business combination, assets of any other 
                        company which is engaged in any activity which 
                        the Commission has not determined to be 
                        financial in nature or incidental to activities 
                        that are financial in nature under subparagraph 
                        (B).
                          ``(iii) Limitation to single exemption.--No 
                        company that engages in any activity or 
                        controls any shares under subsection (f) or (g) 
                        of section 6 of the Bank Holding Company Act of 
                        1956 may engage in any activity or own any 
                        shares pursuant to this subparagraph or 
                        subparagraph (C).
                  ``(E) Commodities.--
                          ``(i) In general.--An investment bank holding 
                        company which was predominately engaged as of 
                        January 1, 1997, in securities activities in 
                        the United States (or any successor to any such 
                        company) may engage in, or directly or 
                        indirectly own or control shares of a company 
                        engaged in, activities related to the trading, 
                        sale, or investment in commodities and 
                        underlying physical properties that were not 
                        permissible for bank holding companies to 
                        conduct in the United States as of January 1, 
                        1997, if such investment bank holding company, 
                        or any subsidiary of such holding company, was 
                        engaged directly, indirectly, or through any 
                        such company in any of such activities as of 
                        January 1, 1997, in the United States.
                          ``(ii) Limitation.--Notwithstanding 
                        subparagraph (C)(i)(I), the attributed 
                        aggregate investment by an investment bank 
                        holding company in activities permitted under 
                        this subparagraph and not otherwise permitted 
                        for all investment bank holding companies under 
                        this subsection may not exceed 5 percent of the 
                        capital of the investment bank holding company, 
                        except that the Commission may increase such 
                        percentage of capital by such amounts and under 
                        such circumstances as the Commission considers 
                        appropriate, consistent with the purposes of 
                        this Act.
                          ``(iii) Attributed investment amount.--For 
                        purposes of clause (ii), the amount of the 
                        investment by an investment bank holding 
                        company which are attributable to activities 
                        described in such clause shall be determined 
                        pursuant to regulations issued by the 
                        Commission which attribute capital on the basis 
                        of such activities in relation to all 
                        activities of the company.
                  ``(F) Cross marketing restrictions.--A supervised 
                investment bank holding company described in paragraph 
                (1) shall not permit--
                          ``(i) any company whose shares it owns or 
                        controls pursuant to subparagraph (C) or (D), 
                        to offer or market any product or service of an 
                        affiliated wholesale financial institution; or
                          ``(ii) any affiliated wholesale financial 
                        institution to offer or market any product or 
                        service of any company whose shares are owned 
                        or controlled by such investment bank holding 
                        company pursuant to such subparagraphs.
                  ``(G) Developing Activities.--An investment bank 
                holding company described in paragraph (1) may engage, 
                or directly or indirectly acquire shares of any company 
                engaged, in any activity that the Commission has not 
                determined to be financial in nature or incidental to 
                financial activities under subparagraph (B) if--
                          ``(i) the holding company reasonably 
                        concludes that the activity is financial in 
                        nature or incidental to financial activities;
                          ``(ii) the gross revenues from all activities 
                        conducted under this subparagraph represent 
                        less than 5 percent of the consolidated gross 
                        revenues of the holding company;
                          ``(iii) the aggregate total assets of all 
                        companies the shares of which are held under 
                        this subparagraph do not exceed 5 percent of 
                        the holding company's consolidated total 
                        assets;
                          ``(iv) the total capital invested in 
                        activities conducted under this subparagraph 
                        represents less than 5 percent of the 
                        consolidated total capital of the holding 
                        company;
                          ``(v) the Commission has not previously 
                        determined that the activity is not financial 
                        in nature or incidental to financial activities 
                        under subparagraph (B); and
                          ``(vi) the holding company provides written 
                        notification to the Commission describing the 
                        activity commenced or conducted by the company 
                        acquired no later than 10 business days after 
                        commencing the activity or consummating the 
                        acquisition.
          ``(8) Functional regulation of banking and insurance 
        activities of supervised investment bank holding companies.--
        The Commission shall defer to--
                  ``(A) the appropriate regulatory agency with regard 
                to all interpretations of, and the enforcement of, 
                applicable banking laws relating to the activities, 
                conduct, ownership, and operations of banks, wholesale 
                financial institutions, and institutions described in 
                subparagraph (D), (F), and (G) of section 2(c)(2) of 
                the Bank Holding Company Act of 1956; and
                  ``(B) the appropriate State insurance regulators with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws relatingto the 
activities, conduct, and operations of insurance companies and 
insurance agents.
          ``(9) Reference to board backup examination and enforcement 
        authority.--The Board of Governors of the Federal Reserve 
        System has backup authority, pursuant to section 10(e) of the 
        Bank Holding Company Act of 1956, with respect to supervised 
        investment bank holding companies described in paragraph (1).
          ``(10) Definitions.--For purposes of this subsection and 
        subsection (j)--
                  ``(A) The term `investment bank holding company' 
                means--
                          ``(i) any person other than a natural person 
                        that owns or controls one or more brokers or 
                        dealers; and
                          ``(ii) the associated persons of the 
                        investment bank holding company.
                  ``(B) The term `supervised investment bank holding 
                company' means any investment bank holding company that 
                is supervised by the Commission pursuant to paragraph 
                (1) or (2) of this section.
                  ``(C) Any investment bank holding company is 
                `substantially engaged in the securities business' if--
                          ``(i) the annual total consolidated net 
                        revenues derived by the holding company from 
                        effecting transactions in or buying and selling 
                        securities as a broker or dealer represent at 
                        least 35 percent of the annual total 
                        consolidated net revenues of the company; or
                          ``(ii) the company controls one or more 
                        brokers or dealers that in the aggregate have 
                        total equity capital and qualifying 
                        subordinated debt (based on an average of the 
                        four preceding calendar quarters) in excess of 
                        $750,000,000 and such total equity capital and 
                        qualifying subordinated debt does not fall 
                        below $500,000,000 (based on an average for the 
                        four preceding calendar quarters).
                  ``(D) The term `wholesale financial institution' 
                means a wholesale financial institution subject to 
                section 9B of the Federal Reserve Act.
                  ``(E) The terms `affiliate,' `bank,' `bank holding 
                company,' `company,' `control,' `savings association,' 
                `well capitalized,' and `well managed' have the 
                meanings given to those terms in section 2 of the Bank 
                Holding Company Act of 1956 (12 U.S.C. 1841).
                  ``(F) The term `insured bank' has the meaning given 
                to that term in section 3 of the Federal Deposit 
                Insurance Act.
                  ``(G) The term `foreign bank' has the meaning given 
                to that term in section 1(b)(7) of the International 
                Banking Act of 1978.
                  ``(H) The terms ``person associated with an 
                investment bank holding company' and ``associated 
                person of an investment bank holding company' means any 
                person directly or indirectly controlling, controlled 
                by, or under common control with, an investment bank 
                holding company.
  ``(j) Commission Backup Authority.--
          ``(1) Inspection authority for investment bank holding 
        companies that are not supervised investment bank holding 
        companies.--
                  ``(A) Authority.--The Commission may make inspections 
                of any investment bank holding company that--
                          ``(i) controls a wholesale financial 
                        institution,
                          ``(ii) is not a foreign bank, and
                          ``(iii) does not control an insured bank 
                        (other than an institution permitted under 
                        subparagraph (D), (F), or (G) of section 
                        2(c)(2) of the Bank Holding Company Act of 
                        1956) or a savings association,
                and any affiliate of such company, for the purpose of 
                monitoring and enforcing compliance by the investment 
                bank holding company with the Federal securities laws.
                  ``(B) Limitation.--The Commission shall limit the 
                focus and scope of any inspection under subparagraph 
                (A) to those transactions, policies, procedures, or 
                records that are reasonably necessary to monitor and 
                enforce compliance by the investment bank holding 
                company or any affiliate with the Federal securities 
                laws.
                  ``(C) Deference to examinations.--To the fullest 
                extent possible, the Commission shall use, for the 
                purposes of this subsection, the reports of 
                examinations--
                          ``(i) made by the Board of Governors of the 
                        Federal Reserve System of any investment bank 
                        holding company that is supervised by the 
                        Board;
                          ``(ii) made by or on behalf of any State 
                        regulatory agency responsible for the 
                        supervision of an insurance company of any 
                        licensed insurance company; and
                          ``(iii) made by any Federal or State banking 
                        agency of any bank or institution described in 
                        subparagraph (D), (F), or (G) of section 
                        2(c)(2) of the Bank Holding Company Act of 
                        1956.
                  ``(D) Notice.--To the fullest extent possible, the 
                Commission shall notify the appropriate regulatory 
                agency prior to conducting an inspection of a wholesale 
                financial institution or institution described in 
                subparagraph (D), (F), or (G) of section 2(c)(2) of the 
                Bank Holding Company Act of 1956.
  ``(k) Authority To Limit Disclosure of Information.--Notwithstanding 
any other provision of law, the Commission shall not be compelled to 
disclose any information required to be reported under subsection (h), 
(i), or (j), or any information supplied to the Commission by any 
domestic or foreign regulatory agency that relates to the financial or 
operational condition of any associated person of a broker or dealer, 
investment bank holding company, or any affiliate of an investment bank 
holding company. Nothing in this subsection shall authorize the 
Commission to withhold information from Congress, or prevent the 
Commission from complying with a request for information from any other 
Federal department or agency or any self-regulatory organization 
requesting the information for purposes within the scope of its 
jurisdiction, or complying with an order of a court of the United 
States in an action brought by the United States or the Commission. For 
purposes of section 552 of title 5, United States Code, this subsection 
shall be considered a statute described in subsection (b)(3)(B) of such 
section 552. In prescribing regulations to carry out the requirements 
of this subsection, the Commission shall designate information 
described in or obtained pursuant to subparagraphs (A), (B), and (C) of 
paragraph (5) of subsection (i), and subsection (j) as confidential 
information for purposes of section 24(b)(2) of this title.''.
  (b) Conforming Amendments.--
          (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
        following new subparagraphs:
                  ``(H) When used with respect to a wholesale financial 
                institution--
                          ``(i) the Board of Governors of the Federal 
                        Reserve System, in the case of a wholesale 
                        financial institution that has a national bank 
                        charter, a State bank charter, or is operating 
                        under the Code of Law for the District of 
                        Columbia; and
                          ``(ii) the Comptroller of the Currency, in 
                        the case of a wholesale financial institution 
                        that has a national bank charter or is 
                        operating under the Code of Law for the 
                        District of Columbia.
                  ``(I) When used with respect to an institution 
                described in subparagraph (D), (F), or (G) of section 
                2(c)(2) of the Bank Holding Company Act of 1956--
                          ``(i) the Comptroller of the Currency, in the 
                        case of a national bank or a bank in the 
                        District of Columbia examined by the 
                        Comptroller of the Currency;
                          ``(ii) the Board of Governors of the Federal 
                        Reserve System, in the case of a State member 
                        bank of the Federal Reserve System or any 
                        corporation chartered under section 25A of the 
                        Federal Reserve Act;
                          ``(iii) the Federal Deposit Insurance 
                        Corporation, in the case of any other bank the 
                        deposits of which are insured in accordance 
                        with the Federal Deposit Insurance Act; or
                          ``(iv) the Commission in the case of all 
                        other such institutions.''.
          (2) Section 15(b)(6)(A) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78o(b)(6)(A)) is amended by inserting after 
        ``With respect to any person who is associated,'' the 
        following: ``including an investment bank holding company, a 
        wholesale financial institution, or institution described in 
        subparagraph (D), (F), or (G) of section 2(c)(2) of the Bank 
        Holding Company Act of 1956,''.
          (3) Section 3(a)(18) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)(18)) is amended by inserting after ``under 
        common control with such broker or dealer'' the following: 
        ``(including an investment bank holding company, wholesale 
        financial institution, or institution described in subparagraph 
        (D), (F), or (G) of section 2(c)(2) of the Bank Holding Company 
        Act of 1956 that is affiliated with an investment bank holding 
        company)''.
          (4) Section 3(a)(21) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)(21)) is amended by inserting after ``under 
        common control with such member'' the following: ``(including 
        an investment bank holding company, wholesale financial 
        institution or institution described in subparagraph (D), (F), 
        or (G) of section 2(c)(2) of the Bank Holding Company Act of 
        1956 that is affiliated with an investment bank holding 
        company)''.
          (5) Section 1112(e) of the Right to Financial Privacy Act of 
        1978 (12 U.S.C. 3412(e)) is amended--
                  (A) by striking ``this title'' and inserting ``law''; 
                and
                  (B) by inserting ``, examination reports'' after 
                ``financial records''.

                           Subtitle D--Study

SEC. 241. STUDY OF METHODS TO INFORM INVESTORS AND CONSUMERS OF 
                    UNINSURED PRODUCTS.

  Within one year after the date of enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress regarding the efficacy, costs, and benefits of requiring that 
any depository institution that accepts federally insured deposits and 
that, directly or through a contractual or other arrangement with a 
broker, dealer, or agent, buys from, sells to, or effects transactions 
for retail investors in securities or consumers of insurance to inform 
such investors and consumers through the use of a logo or seal that the 
security or insurance is not insured by the Federal Deposit Insurance 
Corporation.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

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

  The Act entitled ``An Act to express the intent of the Congress with 
reference to the regulation of the business of insurance'' and approved 
March 9, 1945 (15 U.S.C. 1011 et seq.), commonly referred to as the 
``McCarran-Ferguson Act'') remains the law of the United States.

SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.

  No person or entity shall provide insurance in a State as principal 
or agent unless such person or entity is licensed by the appropriate 
insurance regulator of such State.

SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

  The insurance sales activity of any person or entity shall be 
functionally regulated.

SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

  (a) In General.--Except as provided in section 306, a national bank 
and the subsidiaries of a national bank may not provide insurance in a 
State as principal except that this prohibition shall not apply to 
authorized products.
  (b) Authorized Products.--For the purposes of this section, a product 
is authorized if--
          (1) as of January 1, 1997, the Comptroller of the Currency 
        had determined in writing that national banks may provide such 
        product as principal, or national banks were in fact lawfully 
        providing such product as principal;
          (2) no court of relevant jurisdiction had, by final judgment, 
        overturned a determination of the Comptroller of the Currency 
        that national banks may provide such product as principal; and
          (3) the product is not title insurance, or an annuity 
        contract the income of which is subject to tax treatment under 
        section 72 of the Internal Revenue Code of 1986.
  (c) Definition.--For purposes of this section, the term ``insurance'' 
means--
          (1) any product regulated as insurance as of January 1, 1997, 
        in accordance with the relevant State insurance law, in the 
        State in which the product is provided;
          (2) any product first offered after January 1, 1997, which--
                  (A) a State insurance regulator determines shall be 
                regulated as insurance in the State in which the 
                product is provided because the product insures, 
                guarantees, or indemnifies against liability, loss of 
                life, loss of health, or loss through damage to or 
                destruction of property, including, but not limited to, 
                life insurance, health insurance, title insurance, and 
                property and casualty insurance (such as private 
                passenger or commercial automobile,homeowners, 
commercial multiperil, general liability, professional liability, 
workers' compensation, fire and allied lines, farm owners multiperil, 
aircraft, fidelity, surety, medical malpractice, ocean marine, inland 
marine, and boiler and machinery insurance); and
                  (B) is not a product or service of a bank that is (i) 
                a deposit product, (ii) a loan, discount, letter of 
                credit, or other extension of credit, (iii) a trust or 
                other fiduciary service, (iv) a qualified financial 
                contract (as defined in or determined pursuant to 
                section 11(e)(8)(D)(i) of the Federal Deposit Insurance 
                Act), or (v) a financial guaranty, except that this 
                subparagraph (B) shall not apply to a product that 
                includes an insurance component such that if the 
                product is offered or proposed to be offered by the 
                bank as principal--
                          (I) it would be treated as a life insurance 
                        contract under section 7702 of the Internal 
                        Revenue Code of 1986, as amended; or
                          (II) in the event that the product is not a 
                        letter of credit or other similar extension of 
                        credit, a qualified financial contract, or a 
                        financial guaranty, it would qualify for 
                        treatment for losses incurred with respect to 
                        such product under section 832(b)(5) of the 
                        Internal Revenue Code of 1986, as amended, if 
                        the bank were subject to tax as an insurance 
                        company under section 831 of such Code; or
          (3) any annuity contract the income on which is subject to 
        tax treatment under section 72 of the Internal Revenue Code of 
        1986, as amended.

SEC. 305. NEW BANK AGENCY ACTIVITIES ONLY THROUGH ACQUISITION OF 
                    EXISTING LICENSED AGENTS.

  If a national bank or a subsidiary of a national bank is not 
providing insurance as agent in a State as of the date of the enactment 
of this Act, the national bank and the subsidiary of the national bank 
may provide insurance (which such bank or subsidiary is otherwise 
authorized to provide) as agent in such State after such date only by 
acquiring a company which has been licensed by the appropriate State 
regulator to provide insurance as agent in such State for not less than 
2 years before such acquisition.

SEC. 306. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND THEIR 
                    AFFILIATES.

  (a) Authority.--
          (1) In general.--Notwithstanding any other provision of this 
        Act or any other law, no national bank, and no subsidiary of a 
        national bank, may engage in any activity involving the 
        underwriting or sale of title insurance other than title 
        insurance activities in which such national bank or subsidiary 
        was actively and lawfully engaged before the date of the 
        enactment of this Act.
          (2) Insurance affiliate.--In the case of a national bank 
        which has an affiliate which provides insurance as principal 
        and is not a subsidiary of the bank, the national bank and any 
        subsidiary of the national bank may not engage in any activity 
        involving the underwriting or sale of title insurance pursuant 
        to paragraph (1).
          (3) Insurance subsidiary.--In the case of a national bank 
        which has a subsidiary which provides insurance as principal 
        and has no affiliate which provides insurance as principal and 
        is not a subsidiary, the national bank may not engage in any 
        activity involving the underwriting or sale of title insurance 
        pursuant to paragraph (1).
          (4) Affiliate and subsidiary defined.--For purposes of this 
        section, the terms ``affiliate'' and ``subsidiary'' have the 
        meaning given such terms in section 2 of the Bank Holding 
        Company Act of 1956.
  (b) Parity Exception.--Notwithstanding subsection (a), in the case of 
any State in which banks organized under the laws of such State were 
authorized to sell title insurance as agent as of January 1, 1997, a 
national bank and a subsidiary of a national bank may sell title 
insurance as agent in such State in the same manner and to the same 
extent such State banks are authorized to sell title insurance as agent 
in such State.

SEC. 307. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FINANCIAL 
                    REGULATORS.

  (a) In General.--
          (1) Filing.--In the case of a regulatory conflict between a 
        State insurance regulator and a Federal financial regulator as 
        to whether any product is or is not insurance or whether a 
        State law regulating an insurance activity is properly treated 
        as preempted under Federal law, any State insurance regulator 
        or any Federal financial regulator may seek an expedited 
        judicial determination of such conflict including the 
        appropriate classification or definition of a new product, or 
        regulation of an insurance activity, by filing an action in--
                  (A) any United States district court in which such 
                action may be brought under chapter 87 of title 28, 
                United States Code; or
                  (B) the United States District Court for the District 
                of Columbia.
          (2) Expedited review.--The United States district court in 
        which an action described in paragraph (1) is filed shall 
        complete all action on such case, including rendering a 
        judgment, before the end of the 90-day period beginning on the 
        date such action is filed, unless all parties to such action 
        agree to any extension of such period.
          (3) Savings provision.--This section shall not apply with 
        respect to any determination as to whether any product is or is 
        not a security for purposes of the securities laws (as such 
        term is defined in section 3(a) of the Securities Exchange Act 
        of 1934).
  (b) Appeal.--
          (1) In general.--Any petition for review by any party to an 
        action described in subsection (a)(1) of any final judgment of 
        a United States district court with respect to such action 
        shall be filed by such party before the end of the 10-day 
        period beginning on the date such judgment is issued by the 
        district court in--
                  (A) the United States court of appeals for the 
                circuit in which such United States district court is 
                located; or
                  (B) the United States Court of Appeals for the 
                District of Columbia.
          (2) Expedited review.--The United States court of appeals in 
        which a petition for review is filed in accordance with 
        paragraph (1) shall complete all action on such petition, 
        including rendering a judgment, before the end of the 60-day 
        period beginning on the date such petition is filed, unless all 
        parties to such proceeding agree to any extension of such 
        period.
  (c) Supreme Court Review.--Any request for certiori to the Supreme 
Court of the United States of any judgment of a United States court of 
appeals with respect to a petition for review in accordance with 
subsection (b) shall be filed with the United States Supreme Court as 
soon as practicable after such judgment is issued.
  (d) Statute of Limitation.--No action may be filed under this section 
challenging an order, ruling, determination, or other action of a 
Federal financial regulator or State insurance regulator after the 
later of--
          (1) the end of the 12-month period beginning on the date the 
        first public notice is made of such order, ruling, or 
        determination in its final form; or
          (2) the end of the 6-month period beginning on the date such 
        order, ruling, or determination takes effect.
  (e) Standard of Review.--The court shall decide an action filed under 
this section based on its review on the merits of all questions 
presented under State and Federal law, including the nature of the 
product or activity and the history and purpose of its regulation under 
State and Federal law, without unequal deference.
  (f) Injunctions.--The court may issue an injunction against a 
financial regulator or any person to which an action filed under this 
section relates.
  (g) Federal Financial Regulator Defined.--For purposes of this 
section, the term ``Federal financial regulator'' means--
          (1) any Federal banking agency (as defined in section 3(z) of 
        the Federal Deposit Insurance Act); and
          (2) the Securities and Exchange Commission only with respect 
        to the responsibilities of the Commission under section 17(i) 
        of the Securities Exchange Act of 1934.

SEC. 308. CONSUMER PROTECTION REGULATIONS.

  (a) Regulations Required.--
          (1) In general.--Each Federal banking agency shall prescribe 
        and publish in final form, before the end of the 1-year period 
        beginning on the date of the enactment of this Act, consumer 
        protection regulations which--
                  (A) apply to retail sales, solicitations, 
                advertising, or offers of any insurance product by any 
                insured depository institution or any person who is 
                engaged in such activities at an office of the 
                institution or on behalf of the institution; and
                  (B) meet the requirements of this section and provide 
                such additional protections for consumers to whom such 
                sales, solicitations, advertising, or offers are 
                directed as the agency determines to be appropriate.
          (2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiaries of an insured depository 
        institution, as deemed appropriate by the regulators referred 
        to in paragraph (3), where such extension is necessary to 
        ensure the consumer protections provided by this section.
          (3) Consultation and joint regulations.--The Federal banking 
        agencies shall consult with each other and prescribe joint 
        regulations pursuant to paragraph (1), after consultation with 
        the State insurance regulators, as appropriate.
  (b) Sales Practices.--The regulations prescribed pursuant to 
subsection (a) shall include anticoercion rules applicable to the sale 
of insurance products which prohibit an insured depository institution 
from engaging in any practice that would lead a consumer to believe an 
extension of credit, in violation of section 106(b) of the Bank Holding 
Company Act Amendments of 1970, is conditional upon--
          (1) the purchase of an insurance product from the institution 
        or any of its affiliates or subsidiaries; or
          (2) an agreement by the consumer not to obtain, or a 
        prohibition on the consumer from obtaining, an insurance 
        product from an unaffiliated entity.
  (c) Disclosures and Advertising.--The regulations prescribed pursuant 
to subsection (a) shall include the following provisions relating to 
disclosures and advertising in connection with the initial purchase of 
an insurance product:
          (1) Disclosures.--
                  (A) In general.--Requirements that the following 
                disclosures be made orally and in writing before the 
                completion of the initial sale and, in the case of 
                clause (iv), at the time of application for an 
                extension of credit:
                          (i) Uninsured status.--As appropriate, the 
                        product is not insured by the Federal Deposit 
                        Insurance Corporation, the United States 
                        Government, or the insured depository 
                        institution.
                          (ii) Investment risk.--In the case of a 
                        variable annuity or other insurance product 
                        which involves an investment risk, that there 
                        is an investment risk associated with the 
                        product, including possible loss of value.
                          (iv) Coercion.--The approval of an extension 
                        of credit may not be conditioned on--
                                  (I) the purchase of an insurance 
                                product from the institution in which 
                                the application for credit is pending 
                                or any of its affiliates or 
                                subsidiaries; or
                                  (II) an agreement by the consumer not 
                                to obtain, or a prohibition on the 
                                consumer from obtaining, an insurance 
                                product from an unaffiliated entity.
                  (B) Making disclosure readily understandable.--
                Regulations prescribed under subparagraph (A) shall 
                encourage the use of disclosure that is conspicuous, 
                simple, direct, and readily understandable, such as the 
                following:
                          (i) ``NOT FDIC-INSURED''.
                          (ii) ``NOT GUARANTEED BY THE BANK''.
                          (iii) ``MAY GO DOWN IN VALUE''.
                  (C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements under 
                subparagraphs (A) and (D), necessary adjustments shall 
                be made for purchase in person, by telephone, or by 
                electronic media to provide for the most appropriate 
                and complete form of disclosure and acknowledgements.
                  (D) Consumer acknowledgement.--A requirement that an 
                insured depository institution shall require any person 
                selling an insurance product at any office of, or on 
                behalf of, the institution to obtain, at the time a 
                consumer receives the disclosures required under this 
                paragraph or at the time of the initial purchase by the 
                consumer of such product, an acknowledgement by such 
                consumer of the receipt of the disclosure required 
                under this subsection with respect to such product.
          (2) Prohibition on misrepresentations.--A prohibition on any 
        practice, or any advertising, at any office of, or on behalf 
        of, the insured depository institution, or any subsidiary as 
        appropriate, which could mislead any person or otherwise cause 
        a reasonable person to reach an erroneous belief with respect 
        to--
                  (A) the uninsured nature of any insurance product 
                sold, or offered for sale, by the institution or any 
                subsidiary of the institution; or
                  (B) in the case of a variable annuity or other 
                insurance product that involves an investment risk, the 
                investment risk associated with any such product.
  (d) Separation of Banking and Nonbanking Activities.--
          (1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such provisions as the 
        Federal banking agencies consider appropriate to ensure that 
        the routine acceptance of deposits and the making of loans is 
        kept, to the extent practicable, physically segregated from 
        insurance product activity.
          (2) Requirements.--Regulations prescribed pursuant to 
        paragraph (1) shall include the following requirements:
                  (A) Separate setting.--A clear delineation of the 
                setting in which, and the circumstances under which, 
                transactions involving insurance products should be 
                conducted in a location physically segregated from an 
                area where retail deposits are routinely accepted or 
                loans are made.
                  (B) Referrals.--Standards which permit any person 
                accepting deposits from, or making loans to, the public 
                in an area where such transactions are routinely 
                conducted in an insured depository institution to refer 
                a customer who seeks to purchase any insurance product 
                to a qualified person who sells such product, only if 
                the person making the referral receives no more than a 
                one-time nominal fee of a fixed dollar amount for each 
                referral that does not depend on whether the referral 
                results in a transaction.
                  (C) Qualification and licensing requirements.--
                Standards prohibiting any insured depository 
                institution from permitting any person to sell or offer 
                for sale any insurance product in any part of any 
                office of the institution, or on behalf of the 
                institution, unless such person is appropriately 
                qualified and licensed.
  (e) Domestic Violence Discrimination Prohibition.--
          (1) Regulations required.--The Federal banking agencies shall 
        jointly establish regulations which shall prohibit 
        discrimination, except as required under State law, against 
        victims of domestic violence by prohibiting the consideration 
        of such status as a criterion in any decision with regard to 
        insurance underwriting, pricing, renewal of insurance policies, 
        or payment of insurance claims.
          (2) Scope of application.--The regulations prescribed under 
        paragraph (1) shall apply to any insurance product which is 
        sold or offered for sale, as principal, agent, or broker, by 
        any insured depository institution or any person who is engaged 
        in such activities at an office of the institution or on behalf 
        of the institution.
          (3) Sense of the congress.--It is the sense of the Congress 
        that, by the end of the 30-month period beginning on the date 
        of the enactment of this Act, the States should enact or adopt 
        regulations prohibiting discrimination with respect to 
        insurance products that are at least as strict as the 
        regulations required by paragraph (1) of this subsection.
  (f) Consumer Grievance Process.--The Federal banking agencies shall 
jointly establish a consumer complaint mechanism, for receiving and 
expeditiously addressing consumer complaints alleging a violation of 
regulations issued under the section, which shall--
          (1) establish a group within each regulatory agency to 
        receive such complaints;
          (2) develop procedures for investigating such complaints;
          (3) develop procedures for informing consumers of rights they 
        may have in connection with such complaints; and
          (4) develop procedures for addressing concerns raised by such 
        complaints, as appropriate, including procedures for the 
        recovery of losses to the extent appropriate.
  (g) No Effect on Other Authority.--No provision of this section shall 
be construed as granting, limiting, or otherwise affecting--
                  (A) any authority of the Securities and Exchange 
                Commission, any self-regulatory organization, the 
                Municipal Securities Rulemaking Board, or the Secretary 
                of the Treasury under any Federal securities law;
                  (B) any authority of any State insurance commissioner 
                or other State authority under any State law; or
                  (C) the applicability of any State law, or any 
                regulation prescribed by any State insurance 
                commissioner or other State authority pursuant to any 
                such law, to any person.
  (h) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Appropriate federal banking agency; insured depository 
        institution.--The terms ``appropriate Federal banking agency'' 
        and ``insured depository institution'' have the same meanings 
        as in section 3 of the Federal Deposit Insurance Act.
          (2) Insurance product.--The term ``insurance product'' 
        includes an annuity contract the income of which is subject to 
        tax treatment under section 72 of the Internal Revenue Code of 
        1986.

SEC. 309. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE 
                    COMPANIES AND AFFILIATES.

  No State may, by law, regulation, order, interpretation, or 
otherwise--
          (1) prevent or restrict any insurer, or any affiliate of an 
        insurer (whether such affiliate is organized as a stock 
        company, mutual holding company, or otherwise), from becoming a 
        financial holding company or acquiring control of an insured 
        depository institution;
          (2) limit the amount of an insurer's assets that may be 
        invested in the voting securities of an insured depository 
        institution (or any company which controls such institution), 
        except that the laws of an insurer's State of domicile may 
        limit the amount of such investment to an amount that is not 
        less than 5 percent of the insurer's admitted assets; or
          (3) prevent, restrict, or have the authority to review, 
        approve, or disapprove a plan of reorganization by which an 
        insurer proposes to reorganize from mutual form to become a 
        stock insurer (whether as a direct or indirect subsidiary of a 
        mutual holding company or otherwise) unless such State is the 
        State of domicile of the insurer.

             Subtitle B--Redomestication of Mutual Insurers

SEC. 311. GENERAL APPLICATION.

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

SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.

  (a) Redomestication.--A mutual insurer organized under the laws of 
any State may transfer its domicile to a transferee domicile as a step 
in a reorganization in which, pursuant to the laws of the transferee 
domicile and consistent with the standards in subsection (f), the 
mutual insurer becomes a stock insurer that is a direct or indirect 
subsidiary of a mutual holding company.
  (b) Resulting Domicile.--Upon complying with the applicable law of 
the transferee domicile governing transfers of domicile and completion 
of a transfer pursuant to this section, the mutual insurer shall cease 
to be a domestic insurer in the transferor domicile and, as a 
continuation of its corporate existence, shall be a domestic insurer of 
the transferee domicile.
  (c) Licenses Preserved.--The certificate of authority, agents' 
appointments and licenses, rates, approvals and other items that a 
licensed State allows and that are in existence immediately prior to 
the date that a redomesticating insurer transfers its domicile pursuant 
to this subtitle shall continue in full force and effect upon transfer, 
if the insurer remains duly qualified to transact the business of 
insurance in such licensed State.
  (d) Effectiveness of Outstanding Policies and Contracts.--
          (1) In general.--All outstanding insurance policies and 
        annuities contracts of a redomesticating insurer shall remain 
        in full force and effect and need not be endorsed as to the new 
        domicile of the insurer, unless so ordered by the State 
        insurance regulator of a licensed State, and then only in the 
        case of outstanding policies and contracts whose owners reside 
        in such licensed State.
          (2) Forms.--
                  (A) Applicable State law may require a 
                redomesticating insurer to file new policy forms with 
                the State insurance regulator of a licensed State on or 
                before the effective date of the transfer.
                  (B) Notwithstanding subparagraph (A), a 
                redomesticating insurer may use existing policy forms 
                with appropriate endorsements to reflect the new 
                domicile of the redomesticating insurer until the new 
                policy forms are approved for use by the State 
                insurance regulator of such licensed State.
  (e) Notice.--A redomesticating insurer shall give notice of the 
proposed transfer to the State insurance regulator of each licensed 
State and shall file promptly any resulting amendments to corporate 
documents required to be filed by a foreign licensed mutual insurer 
with the insurance regulator of each such licensed State.
  (f) Procedural Requirements.--No mutual insurer may redomesticate to 
another State and reorganize into a mutual holding company pursuant to 
this section unless the State insurance regulator of the transferee 
domicile determines that the plan of reorganization of the insurer 
includes the following requirements:
          (1) Approval by board of directors and policyholders.--The 
        reorganization is approved by at least a majority of the board 
        of directors of the mutual insurer and at least a majority of 
        the policyholders who vote after notice, disclosure of the 
        reorganization and the effects of the transaction on 
        policyholder contractual rights, and reasonable opportunity to 
        vote, in accordance with such notice, disclosure, and voting 
        procedures as are approved by the State insurance regulator of 
        the transferee domicile.
          (2) Continued voting control by policyholders; review of 
        public stock offering.--After the consummation of a 
        reorganization, the policyholders of the reorganized insurer 
        shall have the same voting rights with respect to the mutual 
        holding company as they had before the reorganization with 
        respect to the mutual insurer. With respect to an initial 
        public offering of stock, the offering shall be conducted in 
        compliance with applicable securities laws and in a manner 
        approved by the State insurance regulator of the transferee 
        domicile.
          (3) Award of stock or grant of options to officers and 
        directors.--For a period of 6 months after completion of an 
        initial public offering, neither a stock holding company nor 
        the converted insurer shall award any stock options or stock 
        grants to persons who are elected officers or directors of the 
        mutual holding company, the stock holding company, or the 
        converted insurer, except with respect to any such awards or 
        options to which a person is entitled as a policyholder and as 
        approved by the State insurance regulator of the transferee 
        domicile.
          (4) Contractual rights.--Upon reorganization into a mutual 
        holding company, the contractual rights of the policyholders 
        are preserved.
          (5) Fair and equitable treatment of policyholders.--The 
        reorganization is approved as fair and equitable to the 
        policyholders by the insurance regulator of the transferee 
        domicile.

SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.

  (a) In General.--Unless otherwise permitted by this subtitle, State 
laws of any transferor domicile that conflict with the purposes and 
intent of this subtitle are preempted, including but not limited to--
          (1) any law that has the purpose or effect of impeding the 
        activities of, taking any action against, or applying any 
        provision of law or regulation to, any insurer or an affiliate 
        of such insurer because that insurer or any affiliate plans to 
        redomesticate, or has redomesticated, pursuant to this 
        subtitle;
          (2) any law that has the purpose or effect of impeding the 
        activities of, taking action against, or applying any provision 
        of law or regulation to, any insured or any insurance licensee 
        or other intermediary because such person or entity has 
        procured insurance from or placed insurance with any insurer or 
        affiliate of such insurer that plans to redomesticate, or has 
        redomesticated, pursuant to this subtitle, but only to the 
        extent that such law would treat such insured licensee or other 
        intermediary differently than if the person or entity procured 
        insurance from, or placed insurance with, an insured licensee 
        or other intermediary which had not redomesticated;
          (3) any law that has the purpose or effect of terminating, 
        because of the redomestication of a mutual insurer pursuant to 
        this subtitle, any certificate of authority, agent appointment 
        or license, rate approval, or other approval, of any State 
        insurance regulator or other State authority in existence 
        immediately prior to the redomestication in any State other 
        than the transferee domicile.
  (b) Differential Treatment Prohibited.--No State law, regulation, 
interpretation, or functional equivalent thereof, of a State other than 
a transferee domicile may treat a redomesticating or redomesticated 
insurer or any affiliate thereof any differently than an insurer 
operating in that State that is not a redomesticating or redomesticated 
insurer.
  (c) Laws Prohibiting Operations.--If any licensed State fails to 
issue, delays the issuance of, or seeks to revoke an original or 
renewal certificate of authority of a redomesticated insurer 
immediately following redomestication, except on grounds and in a 
manner consistent with its past practices regarding the issuance of 
certificates of authority to foreign insurers that are not 
redomesticating, then the redomesticating insurer shall be exempt from 
any State law of the licensed State to the extent that such State law 
or the operation of such State law would make unlawful, or regulate, 
directly or indirectly, the operation of the redomesticated insurer, 
except that such licensed State may require the redomesticated insurer 
to--
          (1) comply with the unfair claim settlement practices law of 
        the licensed State;
          (2) pay, on a nondiscriminatory basis, applicable premium and 
        other taxes which are levied on licensed insurers or 
        policyholders under the laws of the licensed State;
          (3) register with and designate the State insurance regulator 
        as its agent solely for the purpose of receiving service of 
        legal documents or process;
          (4) submit to an examination by the State insurance regulator 
        in any licensed state in which the redomesticated insurer is 
        doing business to determine the insurer's financial condition, 
        if--
                  (A) the State insurance regulator of the transferee 
                domicile has not begun an examination of the 
                redomesticated insurer and has not scheduled such an 
                examination to begin before the end of the 1-year 
                period beginning on the date of the redomestication; 
                and
                  (B) any such examination is coordinated to avoid 
                unjustified duplication and repetition;
          (5) comply with a lawful order issued in--
                  (A) a delinquency proceeding commenced by the State 
                insurance regulator of any licensed State if there has 
                been a judicial finding of financial impairment under 
                paragraph (7); or
                  (B) a voluntary dissolution proceeding;
          (6) comply with any State law regarding deceptive, false, or 
        fraudulent acts or practices, except that if the licensed State 
        seeks an injunction regarding the conduct described in this 
        paragraph, such injunction must be obtained from a court of 
        competent jurisdiction as provided in section 314(a);
          (7) comply with an injunction issued by a court of competent 
        jurisdiction, upon a petition by the State insurance regulator 
        alleging that the redomesticating insurer is in hazardous 
        financial condition or is financially impaired;
          (8) participate in any insurance insolvency guaranty 
        association on the same basis as any other insurer licensed in 
        the licensed State; and
          (9) require a person acting, or offering to act, as an 
        insurance licensee for a redomesticated insurer in the licensed 
        State to obtain a license from that State, except that such 
        State may not impose any qualification or requirement that 
        discriminates against a nonresident insurance licensee.

SEC. 314. OTHER PROVISIONS.

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

SEC. 315. DEFINITIONS.

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

SEC. 316. EFFECTIVE DATE.

  This subtitle shall take effect on the date of enactment of this Act.

   Subtitle C--National Association of Registered Agents and Brokers

SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.

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

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

  (a) Establishment.--There is established the National Association of 
Registered Agents and Brokers (hereafter in this subtitle referred to 
as the ``Association'')
  (b) Status.--The Association shall--
          (1) be a nonprofit corporation and be presumed to have the 
        status of an organization described in section 501(c)(6) of the 
        Internal Revenue Code of 1986 unless the Secretary of the 
        Treasury determines that the Association does not meet the 
        requirements of such section;
          (2) have succession until dissolved by an Act of Congress;
          (3) not be an agency or establishment of the United States 
        Government; and
          (4) except as otherwise provided in this Act, be subject to, 
        and have all the powers conferred upon a nonprofit corporation 
        by the District of Columbia Nonprofit Corporation Act (D.C. 
        Code, sec. 29y-1001 et seq.).

SEC. 323. PURPOSE.

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

SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

  The Association shall be subject to the supervision and oversight of 
the National Association of Insurance Commissioners (hereafter in this 
subtitle referred to as the ``NAIC'') and shall not be an agency or an 
instrumentality of the United States Government.

SEC. 325. MEMBERSHIP.

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

 SEC. 326. BOARD OF DIRECTORS.

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

 SEC. 327. OFFICERS.

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

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

  (a) Adoption and Amendment of Bylaws.--
          (1) Copy required to be filed with the naic.--The board of 
        directors of the Association shall file with the NAIC a copy of 
        the proposed bylaws or any proposed amendment to the bylaws, 
        accompanied by a concise general statement of the basis and 
        purpose of such proposal.
          (2) Effective date.--Except as provided in paragraph (3), any 
        proposed bylaw or proposed amendment shall take effect--
                  (A) 30 days after the date of the filing of a copy 
                with the NAIC;
                  (B) upon such later date as the Association may 
                designate; or
                  (C) such earlier date as the NAIC may determine.
          (3) Disapproval by the naic.--Notwithstanding paragraph (2), 
        a proposed bylaw or amendment shall not take effect if, after 
        public notice and opportunity to participate in a public 
        hearing--
                  (A) the NAIC disapproves such proposal as being 
                contrary to the public interest or contrary to the 
                purposes of this subtitle and provides notice to the 
                Association setting forth the reasons for such 
                disapproval; or
                  (B) the NAIC finds that such proposal involves a 
                matter of such significant public interest that public 
                comment should be obtained, in which case it may, after 
                notifying the Association in writing of such finding, 
                require that the procedures set forth in subsection (b) 
                be followed with respect to such proposal, in the same 
                manner as if such proposed bylaw change were a proposed 
                rule change within the meaning of such paragraph.
  (b) Adoption and Amendment of Rules.--
          (1) Filing proposed regulations with the naic.--
                  (A) In general.--The board of directors of the 
                Association shall file with the NAIC a copy of any 
                proposed rule or any proposed amendment to a rule of 
                the Association which shall be accompanied by a concise 
                general statement of the basis and purpose of such 
                proposal.
                  (B) Other rules and amendments ineffective.--No 
                proposed rule or amendment shall take effect unless 
                approved by the NAIC or otherwise permitted in 
                accordance with this paragraph.
          (2) Initial consideration by the naic.--Within 35 days after 
        the date of publication of notice of filing of a proposal, or 
        before the end of such longer period not to exceed 90 days as 
        the NAIC may designate after such date if the NAIC finds such 
        longer period to be appropriate and sets forth its reasons for 
        so finding, or as to which the Association consents, the NAIC 
        shall--
                  (A) by order approve such proposed rule or amendment; 
                or
                  (B) institute proceedings to determine whether such 
                proposed rule or amendment should be modified or 
                disapproved.
          (3) NAIC proceedings.--
                  (A) In general.--Proceedings instituted by the NAIC 
                with respect to a proposed rule or amendment pursuant 
                to paragraph (2) shall--
                          (i) include notice of the grounds for 
                        disapproval under consideration;
                          (ii) provide opportunity for hearing; and
                          (iii) be concluded within 180 days after the 
                        date of the Association's filing of such 
                        proposed rule or amendment.
                  (B) Disposition of proposal.--At the conclusion of 
                any proceeding under subparagraph (A), the NAIC shall, 
                by order, approve or disapprove the proposed rule or 
                amendment.
                  (C) Extension of time for consideration.--The NAIC 
                may extend the time for concluding any proceeding under 
                subparagraph (A) for--
                          (i) not more than 60 days if the NAIC finds 
                        good cause for such extension and sets forth 
                        its reasons for so finding; or
                          (ii) for such longer period as to which the 
                        Association consents.
          (4) Standards for review.--
                  (A) Grounds for approval.--The NAIC shall approve a 
                proposed rule or amendment if the NAIC finds that the 
                rule or amendment is in the public interest and is 
                consistent with the purposes of this Act.
                  (B) Approval before end of notice period.--The NAIC 
                shall not approve any proposed rule before the end of 
                the 30-day period beginning onthe date the Association 
files proposed rules or amendments in accordance with paragraph (1) 
unless the NAIC finds good cause for so doing and sets forth the 
reasons for so finding.
          (5) Alternate procedure.--
                  (A) In general.--Notwithstanding any provision of 
                this subsection other than subparagraph (B), a proposed 
                rule or amendment relating to the administration or 
                organization of the Association may take effect--
                          (i) upon the date of filing with the NAIC, if 
                        such proposed rule or amendment is designated 
                        by the Association as relating solely to 
                        matters which the NAIC, consistent with the 
                        public interest and the purposes of this 
                        subsection, determines by rule do not require 
                        the procedures set forth in this paragraph; or
                          (ii) upon such date as the NAIC shall for 
                        good cause determine.
                  (B) Abrogation by the naic.--
                          (i) In general.--At any time within 60 days 
                        after the date of filing of any proposed rule 
                        or amendment under subparagraph (A)(i) or 
                        (B)(ii), the NAIC may repeal such rule or 
                        amendment and require that the rule or 
                        amendment be refiled and reviewed in accordance 
                        with this paragraph, if the NAIC finds that 
                        such action is necessary or appropriate in the 
                        public interest, for the protection of 
                        insurance producers or policyholders, or 
                        otherwise in furtherance of the purposes of 
                        this subtitle.
                          (ii) Effect of reconsideration by the naic.--
                        Any action of the NAIC pursuant to clause (i) 
                        shall--
                                  (I) not affect the validity or force 
                                of a rule change during the period such 
                                rule or amendment was in effect; and
                                  (II) not be considered to be final 
                                action.
  (c) Action Required by the NAIC.--The NAIC may, in accordance with 
such rules as the NAIC determines to be necessary or appropriate to the 
public interest or to carry out the purposes of this subtitle, require 
the Association to adopt, amend, or repeal any bylaw, rule or amendment 
of the Association, whenever adopted.
  (d) Disciplinary Action by the Association.--
          (1) Specification of charges.--In any proceeding to determine 
        whether membership shall be denied, suspended, revoked, and not 
        renewed (hereafter in this section referred to as a 
        ``disciplinary action''), the Association shall bring specific 
        charges, notify such member of such charges and give the member 
        an opportunity to defend against the charges, and keep a 
        record.
          (2) Supporting statement.--A determination to take 
        disciplinary action shall be supported by a statement setting 
        forth--
                  (A) any act or practice in which such member has been 
                found to have been engaged;
                  (B) the specific provision of this subtitle, the 
                rules or regulations under this subtitle, or the rules 
                of the Association which any such act or practice is 
                deemed to violate; and
                  (C) the sanction imposed and the reason for such 
                sanction.
  (e) NAIC Review of Disciplinary Action.--
          (1) Notice to the naic.--If the Association orders any 
        disciplinary action, the Association shall promptly notify the 
        NAIC of such action.
          (2) Review by the naic.--Any disciplinary action taken by the 
        Association shall be subject to review by the NAIC--
                  (A) on the NAIC's own motion; or
                  (B) upon application by any person aggrieved by such 
                action if such application is filed with the NAIC not 
                more than 30 days after the later of--
                          (i) the date the notice was filed with the 
                        NAIC pursuant to paragraph (1); or
                          (ii) the date the notice of the disciplinary 
                        action was received by such aggrieved person.
  (f) Effect of Review.--The filing of an application to the NAIC for 
review of a disciplinary action, or the institution of review by the 
NAIC on the NAIC's own motion, shall not operate as a stay of 
disciplinary action unless the NAIC otherwise orders.
  (g) Scope of Review.--
                  (A) In general.--In any proceeding to review such 
                action, after notice and the opportunity for hearing, 
                the NAIC shall--
                          (i) determine whether the action should be 
                        taken;
                          (ii) affirm, modify, or rescind the 
                        disciplinary sanction; or
                          (iii) remand to the Association for further 
                        proceedings.
                  (B) Dismissal of review.--The NAIC may dismiss a 
                proceeding to review disciplinary action if the NAIC 
                finds that--
                          (i) the specific grounds on which the action 
                        is based exist in fact;
                          (ii) the action is in accordance with 
                        applicable rules and regulations; and
                          (iii) such rules and regulations are, and 
                        were, applied in a manner consistent with the 
                        purposes of this Act.

 SEC. 329. ASSESSMENTS.

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

 SEC. 330. FUNCTIONS OF THE NAIC.

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

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

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

 SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

  (a) In General.--The Association shall be established without NAIC 
oversight and the provisions set forth in section 324, subsections (a), 
(b), (c), and (e) of section 328, and sections 329(b) and 330 of this 
subtitle shall cease to be effective if, at the end of the 2-year 
period after the date on which the provisions of this subtitle take 
effect pursuant to section 321--
          (1) at least a majority of the States representing at least 
        50 percent of the total United States commercial-lines 
        insurance premiums have not satisfied the uniformity or 
        reciprocity requirements of subsections (a) and (b) of section 
        321; and
          (2) the NAIC has not approved the Association's bylaws as 
        required by section 328, the NAIC is unable to operate or 
        supervise the Association, or the Association is not conducting 
        its activities as required under this Act.
  (b) Board Appointments.--If the repeals required by subsection (a) 
are implemented--
          (1) General appointment power.--The President, with the 
        advice and consent of the United States Senate, shall appoint 
        the members of the Association's Board established under 
        section 326 from lists of candidates recommended to the 
        President by the National Association of Insurance 
        Commissioners.
          (2) Procedures for obtaining national association of 
        insurance commissioners appointment recommendations.--
                  (A) Initial determination and recommendations.--After 
                the date on which the provisions of part a of this 
                section take effect, then the National Association of 
                Insurance Commissioners shall have 60 days to provide a 
                list of recommended candidates to the President. If the 
                National Association of Insurance Commissioners fails 
                to provide a list by that date, or if any list that is 
                provided does not include at least 14 recommended 
                candidates or comply with the requirements of section 
                326(c), the President shall, with the advice and 
                consent of the United States Senate, make the requisite 
                appointments without considering the views of the NAIC.
                  (B) Subsequent appointments.--After the initial 
                appointments, the National Association of Insurance 
                Commissioners shall provide a list of at least 6 
                recommended candidates for the Board to the President 
                by January 15 of each subsequent year. If the National 
                Association of Insurance Commissioners fails to provide 
                a list by that date, or if any list that is provided 
                does not include at least 6 recommended candidates or 
                comply with the requirements of section 326(c), the 
                President, with the advice and consent of the Senate, 
                shall make the requisite appointments without 
                considering the views of the NAIC.
                  (C) Presidential oversight.--
                          (i) Removal.--If the President determines 
                        that the Association is not acting in the 
                        interests of the public, the President may 
                        remove the entire existing Board for the 
                        remainder of the term to which the members of 
                        the Board were appointed and appoint, with the 
                        advice and consent of the Senate, new members 
                        to fill the vacancies on the Board for the 
                        remainder of such terms.
                          (ii) Suspension of rules or actions.--The 
                        President, or a person designated by the 
                        President for such purpose, may suspend the 
                        effectiveness of any rule, or prohibit any 
                        action, of the Association which the President 
                        or the designee determines is contrary to the 
                        public interest.
  (d) Annual Report.--As soon as practicable after the close of each 
fiscal year, the Association shall submit to the President and to 
Congress a written report relative to the conduct of its business, and 
the exercise of the other rights and powers granted by this subtitle, 
during such fiscal year. Such report shall include financial statements 
setting forth the financial position of the Association at the end of 
such fiscal year and the results of its operations (including the 
source and application of its funds) for such fiscal year.

 SEC. 333. RELATIONSHIP TO STATE LAW.

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

 SEC. 334. COORDINATION WITH OTHER REGULATORS.

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

 SEC. 335. JUDICIAL REVIEW.

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

 SEC. 336. DEFINITIONS.

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

TITLE IV--MERGER OF BANK AND THRIFT CHARTERS, REGULATORS, AND INSURANCE 
                                 FUNDS

SEC. 401. SHORT TITLE; DEFINITIONS.

  (a) Short Title.--This title may be cited as the ``Thrift Charter 
Transition Act of 1997''.
  (b) Definitions.--Unless otherwise defined in this title, the terms 
``bank holding company'', ``depository institution'', ``Federal savings 
association'', ``insured depository institution'', ``savings 
association'', ``State bank'', and ``State savings association'' have 
the same meanings as in section 3 of the Federal Deposit Insurance Act, 
as in effect on the day before the date of enactment of this Act.

  Subtitle A--Facilitating Conversion of Savings Associations to Banks

SEC. 411. CONVERSION TO STATE OR NATIONAL BANKS.

  (a) Automatic Conversion of Federal Savings Associations to National 
Banks.--
          (1) In general.--Effective 2 years after the date of 
        enactment of this Act, each Federal savings association then in 
        existence shall be converted to a national bank by operation of 
        law.
          (2) Preservation of rights, powers, and privileges.--Unless 
        otherwise provided in this Act, a Federal savings association 
        that is converted to a State bank or a national bank under this 
        section shall continue to have all of the rights, powers, 
        privileges, and immunities that such bank had as a Federal 
        savings association on the day before the date of the 
        conversion to a bank.
          (3) Retention of ``federal'' in name of converted federal 
        savings association.--Section 2 of the Act entitled ``An Act to 
        enable national banking associations to increase their capital 
        stock and to change their names or locations.'' and approved 
        May 1, 1886 (12 U.S.C. 30) is amended by adding at the end the 
        following new subsection:
  ``(d) Retention of `Federal' in Name of Converted Federal Savings 
Association.--
          ``(1) In general.--Notwithstanding subsection (a) or any 
        other provision of law, any depository institution the charter 
        of which is converted from that of a Federal savings 
        association to a national bank or a State bank after the date 
        of the enactment of the Financial Services Act of 1997 may 
        retain the term `Federal' in the name of such institution so 
        long as such depository institution remains an insured 
        depository institution.
          ``(2) Definitions.--For purposes of this subsection, the 
        terms `depository institution', `insured depository 
        institution', `national bank', and `State bank' have the same 
        meanings given to such terms in section 3 of the Federal 
        Deposit Insurance Act.''.
  (b) Earlier Conversions to National Bank.--The following paragraphs 
shall apply during the 22-month period beginning 60 days after the date 
of enactment of this Act:
          (1) Accelerated conversion of federal savings associations.--
        Any Federal savings association may file with the Comptroller 
        of the Currency a notice of its election to accelerate its 
        conversion to a national bank to a specified date that is not 
        earlier than 30 days after the date on which the notice is 
        filed, and the association shall be converted to a national 
        bank on the date specified in the notice.
          (2) Streamlined conversion of state savings associations.--
        Any State savings association may (to the extent consistent 
        with State law) convert to a national bank by filing with the 
        Comptroller of the Currency a notice of its election to convert 
        on a specified date that is not earlier than 30 days after the 
        date on which the notice is filed, and the association shall be 
        converted to a national bank on the date specified in the 
        notice.
  (c) Conversion to Mutual National Bank.--A savings association that 
is operating in mutual form on the date it is converted to a national 
bank under this section shall be converted to a mutual national bank as 
defined in section 5133A of the Revised Statutes of the United States.
  (d) Other Authority Not Affected.--The authority to convert to a 
national bank under this section shall be in addition to any other 
authority of a savings association to convert to a national bank, State 
bank, or State savings association.
  (e) Effective Date.--This section shall take effect 60 days after the 
date of enactment of this Act.

SEC. 412. MUTUAL NATIONAL BANKS AND FEDERAL MUTUAL BANK HOLDING 
                    COMPANIES AUTHORIZED.

  (a) In General.--Chapter one of title LXII of the Revised Statutes of 
the United States (12 U.S.C. 21 et seq.) is amended by inserting after 
section 5133 the following new sections:

``SEC. 5133A. MUTUAL NATIONAL BANKS.

  ``(a) In General.--The Comptroller of the Currency may charter 
national banking associations as mutual national banks, either de novo 
or through the conversion of an insured depository institution, in 
accordance with this section and such regulations as the Comptroller 
may prescribe.
  ``(b) Applicable Law.--Unless otherwise provided by this section or 
by the Comptroller of the Currency because of the mutual form of the 
institution, a mutual national bank--
          ``(1) shall be subject to the same laws, requirements, 
        duties, and obligations that apply to a national banking 
        association operating in stock form;
          ``(2) shall have the same powers and privileges as, and may 
        engage in the same activities subject to the same restrictions 
        and limitations that apply to, a national banking association 
        operating in stock form; and
          ``(3) shall be supervised and examined by the Comptroller in 
        the same manner and to the same extent as a national banking 
        association operating in stock form.
  ``(c) Conversions.--Subject to any requirements imposed by the 
Comptroller--
          ``(1) a mutual national bank may convert to, or acquire and 
        retain all or substantially all of the assets and liabilities 
        of, a national banking association operating in stock form; and
          ``(2) a national banking association operating in stock form 
        may convert to a mutual national bank.
  ``(d) Definitions.--For purposes of this section, the following 
definitions shall apply:
          ``(1) Insured depository institution.--The term `insured 
        depository institution' has the same meaning as in section 3 of 
        the Federal Deposit Insurance Act.
          ``(2) Mutual national bank.--The term `mutual national bank' 
        means a national banking association that operates in mutual 
        form and is chartered by the Comptroller under this section.
  ``(e) Conforming References.--Unless otherwise provided by the 
Comptroller--
          ``(1) any reference in any Federal law to a national bank, 
        including a reference to the term `national banking 
        association', `member bank', `national bank', `national 
        association', `bank', `insured bank', `insured depository 
        institution', or `depository institution', shall be deemed to 
        refer also to a `mutual national bank';
          ``(2) any reference in any Federal law to the term 
        `shareholder', `shareholders', `stockholder', or `stockholders' 
        of a national bank shall be deemed to refer also to any member 
        or members of a mutual national bank;
          ``(3) any reference in any Federal law to the term `board of 
        directors', `director', or `directors' of a national bank shall 
        be deemed to refer also to the board of trustees, trustee, or 
        trustees, respectively, of a mutual national bank; and
          ``(4) any terms in Federal law that may apply only to a 
        national bank operating in stock form, including the terms 
        `stock', `shares', `shares of stock', `capital stock', `common 
        stock', `stock certificate', `stock certificates', `certificate 
        representing shares of stock', `stock dividend', `transferable 
        stock', `each class of stock', `cumulate such shares', `par 
        value', `preferred stock', `body corporate', `corporation', 
        `corporate powers', `incorporated', `articles of association', 
        and `corporate existence', shall not apply to a mutual national 
        bank, unless the Comptroller determines that the context 
        requires otherwise.

``SEC. 5133B. FEDERAL MUTUAL BANK HOLDING COMPANIES.

  ``(a) Reorganization of Mutual National Bank as a Holding Company.--
          ``(1) In general.--Subject to approval under the Bank Holding 
        Company Act of 1956, a mutual national bank may reorganize so 
        as to become a Federal mutual bank holding company by 
        submitting a reorganization plan to the Comptroller of the 
        Currency for the Comptroller's approval.
          ``(2) Plan approval.--Upon the approval of the reorganization 
        plan by the Comptroller of the Currency and the issuance of the 
        appropriate charters--
                  ``(A) the substantial part of the mutual national 
                bank's assets and liabilities, including all of the 
                bank's insured liabilities, shall be transferred to a 
                national banking association, the stock of which is 
                owned (except as otherwise provided by this section) by 
                the mutual national bank; and
                  ``(B) the mutual national bank shall become a Federal 
                mutual bank holding company.
  ``(b) Directors and Certain Account Holders' Approval of Plan 
Required.--This subsection does not authorize a reorganization unless--
          ``(1) a majority of the mutual national bank's board of 
        directors has approved the plan providing for such 
        reorganization; and
          ``(2) in the case of a mutual national bank in which holders 
        of accounts and obligors exercise voting rights, a majority of 
        such individuals has approved theplan at a meeting held at the 
call of the directors under the procedures prescribed by the bank's 
charter and bylaws.
  ``(c) Retention of Capital.--In connection with a transaction 
described in subsection (a), a mutual national bank may, subject to the 
Comptroller's approval, retain capital at the holding company level to 
the extent that the capital retained at the holding company level 
exceeds the amount of capital required for the national banking 
association chartered as a part of a transaction described in 
subsection (a) to meet all relevant capital standards established by 
the Comptroller for national banking associations.
  ``(d) Ownership.--
          ``(1) In general.--Persons having ownership rights in the 
        mutual national bank under Federal or State law shall have the 
        same ownership rights with respect to the Federal mutual bank 
        holding company.
          ``(2) Holders of certain accounts.--Holders of savings, 
        demand, or other accounts in the following institutions shall 
        have the same ownership rights with respect to the Federal 
        mutual bank holding company as persons described in paragraph 
        (1):
                  ``(A) A national bank chartered as part of a 
                transaction described in subsection (a).
                  ``(B) A mutual bank acquired through the merger of 
                the mutual bank into a national bank subsidiary of the 
                holding company or an interim national bank subsidiary 
                of the holding company.
  ``(e) Regulation.--A Federal mutual bank holding company shall be--
          ``(1) chartered by the Comptroller of the Currency and shall 
        be subject to such regulations as the Comptroller shall 
        prescribe; and
          ``(2) regulated under the Bank Holding Company Act of 1956 on 
        the same terms and subject to the same limitations as any other 
        company that controls a bank.
  ``(f) Capital Improvement.--
          ``(1) Pledge of stock of national bank subsidiary.--This 
        section shall not prohibit a Federal mutual bank holding 
        company from pledging all or a portion of the stock of a 
        national banking association chartered as part of a transaction 
        described in subsection (a) to raise capital for such bank.
          ``(2) Issuance of nonvoting shares.--This section shall not 
        prohibit a national banking association chartered as part of a 
        transaction described in subsection (a) from issuing any 
        nonvoting shares, or less than 50 percent of the voting shares 
        of such bank, to any person other than the Federal mutual bank 
        holding company.
  ``(g) Insolvency and Liquidation.--
          ``(1) In general.--Notwithstanding any other provision of 
        law, the Comptroller of the Currency may file a petition under 
        chapter 7 of title 11, United States Code, with respect to a 
        Federal mutual bank holding company upon--
                  ``(A) the default of any national bank--
                          ``(i) the stock of which is owned by the 
                        Federal mutual bank holding company; and
                          ``(ii) that was chartered in a transaction 
                        described in subsection (a); or
                  ``(B) a foreclosure on a pledge by the Federal mutual 
                bank holding company described in subsection (f)(1).
          ``(2) Distribution of net proceeds.--Except as provided in 
        paragraph (3), the net proceeds of any liquidation of any 
        Federal mutual bank holding company under paragraph (1) shall 
        be transferred to persons who hold ownership interests in such 
        Federal mutual bank holding company.
          ``(3) Recovery by fdic.--If the Federal Deposit Insurance 
        Corporation incurs a loss as a result of the default of any 
        insured bank subsidiary of a Federal mutual bank holding 
        company that is liquidated under paragraph (1), the Federal 
        Deposit Insurance Corporation shall succeed to the ownership 
        interests of the depositors of the bank in the Federal mutual 
        bank holding company, to the extent of the Federal Deposit 
        Insurance Corporation's loss.
  ``(h) Definitions.--
          ``(1) Federal mutual bank holding company.--The term `Federal 
        mutual bank holding company' means a corporation chartered 
        under this section.
          ``(2) Default.--With respect to a national bank, the term 
        `default' means an adjudication or other official determination 
        by any court of competent jurisdiction, the Comptroller, or 
        other public authority pursuant to which a conservator, 
        receiver, or other legal custodian is appointed for the 
        national bank.''.
  (b) Technical Amendment.--The table of sections for chapter one of 
title LXII of the Revised Statutes of the United States (12 U.S.C. 21 
et seq) is amended by inserting after the item relating to section 5133 
the following new items:

``5133A. Mutual national banks.
``5133B. Federal mutual bank holding companies.''.

  (c) Appropriate Federal Banking Agency for Federal Mutual Bank 
Holding Companies.--Section 3(q)(1) of the Federal Deposit Insurance 
Act (12 U.S.C. 1813(q)(1)) is amended to read as follows:
          ``(1) The Comptroller of the Currency in the case of--
                  ``(A) any national banking association, any District 
                bank, or any Federal branch or agency of a foreign 
                bank; and
                  ``(B) supervisory or regulatory proceedings arising 
                from the authority given to the Comptroller under 
                section 5133B of the Revised Statutes of the United 
                States.''.
  (d) Mutual Holding Company Conversion.--
          (1) In general.--Any mutual holding company may convert to a 
        Federal mutual bank holding company by filing with the 
        Comptroller of the Currency a notice of its election to convert 
        on a specified date that is not earlier than 30 days after the 
        date on which the notice is filed, and the mutual holding 
        company shall be converted to a Federal mutual holding company 
        charter on the date specified in the notice.
          (2) Automatic conversion.--On the date 2 years after the date 
        of enactment of this Act, each mutual holding company shall 
        become a Federal mutual bank holding company by operation of 
        law.
          (3) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                  (A) Federal mutual bank holding company.--The term 
                ``Federal mutual bank holding company'' has the same 
                meaning as in section 5133B of the Revised Statutes of 
                the United States (as added by this section).
                  (B) Mutual holding company.--The term ``mutual 
                holding company'' has the same meaning as in section 
                10(o)(10)(A) of the Home Owners' Loan Act as in effect 
                on the day before the date of enactment of this Act.
  (e) Limitation on Federal Regulation of Mutual State Banks.--Except 
as otherwise provided in Federal law, the Comptroller of the Currency, 
Board of Governors of the Federal Reserve System, and Federal Deposit 
Insurance Corporation may not adopt or enforce any regulation which 
contravenes the corporation governance rules prescribed by State law or 
regulation for mutual State banks unless the Comptroller, Board, or 
Corporation finds that such Federal regulation is necessary to assure 
the safety and soundness of such State banks.
  (f) Effective Date.--This section shall take effect 60 days after the 
date of enactment of this Act.

SEC. 413. GRANDFATHERED ACTIVITIES OF SAVINGS ASSOCIATIONS.

  (a) Savings Associations That Convert to National Banks.--
          (1) Powers of converted savings associations.--A national 
        bank that resulted from the conversion of a savings association 
        under section 411 may not engage in any activity, including the 
        holding of any asset, except as provided in this section, or as 
        otherwise permitted for a national bank that does not result 
        from the conversion of a savings association.
          (2) Grandfathered activities.--Except as provided in 
        subsection (b), any Federal savings association that converted 
        to a national bank under section 411 may continue to engage in 
        any activity, including the holding of any asset, in which it 
        was lawfully engaged prior to conversion pursuant to section 
        411.
  (b) Investments Not Authorized for National Banks To Hold Directly.--
          (1) In general.--Notwithstanding section 5136 of the Revised 
        Statutes of the United States or any other provision of law, a 
        national bank resulting from the conversion of a savings 
        association to a national bank under section 411 may retain an 
        equity investment that is not permissible for a national bank 
        to hold directly only if the bank complies with section 5(t)(5) 
        of the Home Owners' Loan Act (as in effect on the day before 
        the date of the enactment of the Thrift Charter Transition Act 
        of 1997) to the same extent as if the institution were a 
        savings association subject to the Home Owners' Loan Act.
          (2) Regulations of existing activities.--Investments held by 
        a national bank resulting from the conversion of a savings 
        association referred to in paragraph (1) held on the date of 
        the enactment of the Thrift Charter Transition Act of 1997 
        shall be subject to the same regulations and supervision as if 
        the institution were a savings association subject to the Home 
        Owners' Loan Act asin effect on the day before the date of the 
enactment of the Thrift Charter Transition Act of 1997.
          (3) Investments acquired after enactment.--For investments 
        acquired after the date of enactment of the Thrift Charter 
        Transition Act of 1997 but before the conversion of a savings 
        association to a national bank under section 411, such national 
        bank--
                  (A) may, if a subsidiary of the bank is engaged in an 
                activity that is not permissible for a national bank to 
                engage in directly, retain an equity investment in the 
                subsidiary only if the bank and the subsidiary comply 
                with section 5136A of the Revised Statutes of the 
                United States; and
                  (B) shall, in determining compliance with applicable 
                capital standards, deduct from the bank's assets and 
                tangible equity capital the amount of any equity 
                investment (other than investment subject to 
                subparagraph (A)) that is not a permissible investment 
                for a national bank to hold directly.
  (c) Permissible Activities of State Savings Associations That Convert 
to State Banks.--For purposes of section 24 of the Federal Deposit 
Insurance Act, a State savings association that converts to a State 
bank may, to the extent permitted by applicable State law, continue to 
engage (in the same manner) in any activity, including the holding of 
any asset, permitted under section 28 of the Federal Deposit Insurance 
Act (as in effect on the day before the date of enactment of this Act) 
in which the savings association was lawfully engaged on the day before 
the date of enactment of this Act.
  (d) Transition Provision.--Notwithstanding any other provision of 
this Act, in the case of any insured savings association described in 
this section securities offerings and other financing transactions 
completed by such an institution on or before the date of its 
conversion pursuant to section 411 shall continue to be governed by the 
capital and accounting rules of the Office of Thrift Supervision as in 
effect on the date that such institution converts to a bank or becomes 
treated as a State bank.

SEC. 414. BRANCHES OF FORMER SAVINGS ASSOCIATIONS.

  (a) Branches.--
          (1) Existing branches retained.--Notwithstanding any other 
        provision of law, any depository institution that qualifies 
        under paragraph (2), and any successor to such an institution, 
        may continue, after the depository institution becomes a bank, 
        to operate any branch or agency that the institution operated 
        as a branch or agency, or was in the process of establishing as 
        a branch or agency, respectively, as of the date of enactment 
        of the Thrift Charter Transition Act of 1997.
          (2) Depository institution defined.--A depository institution 
        qualifies under this paragraph for purposes of paragraph (1) if 
        it--
                  (A)(i) is a savings association on the date of 
                enactment of the Thrift Charter Transition Act of 1997; 
                or
                  (ii) has filed an application to become a savings 
                association by the date of enactment of the Thrift 
                Charter Transition Act of 1997; and
                  (B) on or before the date 2 years after the date of 
                enactment of this Act, becomes a State or national 
                bank.
  (b) Branching Rights Obtained in Assisted Acquisitions.--
Notwithstanding any other provision of law, if a depository institution 
has branching rights under a contract entered into with the Federal 
Home Loan Bank Board or the Federal Savings and Loan Insurance 
Corporation or pursuant to a resolution of the Federal Home Loan Bank 
Board or action of the Office of Thrift Supervision or Resolution Trust 
Corporation as part of a transaction in which the depository 
institution acquired or merged with a failed or failing savings 
association (prior to 1992), the depository institution may continue to 
branch in a manner consistent with that contract, resolution, or 
action.
  (c) Branching Rights of State Chartered Institutions Not Affected.--
Except as provided in subsection (b), applicable State law and Federal 
law shall govern the authority of a savings association that converts 
to a State savings association charter or a State bank charter to 
continue to operate any branch or agency that the institution operated 
prior to conversion and the future branching rights of the converted 
institution.
  (d) Intrastate Branches.--Any branch operated under subsection (a)(1) 
in a State other than the depository institution's home State may 
acquire, establish or operate additional branches in the host State to 
the same extent as permitted for a national bank with its main office 
located in the host State.

SEC. 415. PROGRAMS FOR PROMOTING HOUSING FINANCE.

  Section 22 of the Federal Deposit Insurance Act (12 U.S.C. 1830) is 
amended by--
          (1) striking ``It is not'' and inserting ``(a) In General.--
        It is not''; and
          (2) adding at the end the following new subsection:
  ``(b) Programs for Promoting Housing Finance.--
          ``(1) Findings.--The Congress finds that it is in the 
        national interest to protect and promote housing finance in the 
        process of converting savings associations to banks and 
        eliminating the separate Federal regulation of savings 
        associations.
          ``(2) Programs required.--In furtherance of paragraph (1), 
        each appropriate Federal banking agency shall--
                  ``(A) develop and implement a program designed to--
                          ``(i) facilitate the conversion of savings 
                        associations to banks and the treatment of 
                        State savings associations as State banks; and
                          ``(ii) promote housing finance by assuring 
                        that insured depository institutions may, at 
                        their own election, specialize in acquisition, 
                        development, residential mortgage finance, and 
                        residential mortgage and housing production 
                        lending; and
                  ``(B) develop guidelines and procedures for assuring 
                that insured depository institutions are not subject to 
                supervisory criticism or sanction for prudently 
                concentrating in acquisition, development, residential 
                mortgage finance, and residential mortgage and housing 
                production lending.''.

SEC. 416. SAVINGS AND LOAN HOLDING COMPANIES.

  Section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) is 
amended by inserting after subsection (g) the following new subsection:
  ``(h) Savings and Loan Holding Company Powers Grandfathered.--
          ``(1) In general.--A company that qualifies under paragraph 
        (2) may--
                  ``(A) maintain or enter into any nonbank affiliation 
                that the company was permitted pursuant to section 10 
                of the Home Owners' Loan Act to maintain or enter into 
                prior to becoming a bank holding company pursuant to 
                paragraph (2)(C); and
                  ``(B) engage in any activity, including holding any 
                asset, in which the company or any affiliate described 
                in subparagraph (A) was permitted pursuant to section 
                10 of the Home Owners' Loan Act to engage before 
                becoming a bank holding company in a manner described 
                in paragraph (2)(C).
          ``(2) Qualified grandfathered companies.--
                  ``(A) Grandfathered companies defined.--A company 
                qualifies under this paragraph for purposes of 
                paragraph (1) if--
                          ``(i) as of September 16, 1997, the company 
                        (or any affiliated company)--
                                  ``(I) was a savings and loan holding 
                                company (as defined in section 10 of 
                                the Home Owners' Loan Act, as in effect 
                                on that date); or
                                  ``(II) had filed an application to 
                                become a savings and loan holding 
                                company; and
                          ``(ii) the company--
                                  ``(I) becomes a bank holding company 
                                by operation of law; or
                                  ``(II) was exempt from section 4 (as 
                                in effect on the date of enactment of 
                                the Thrift Charter Transition Act of 
                                1997) under an order issued by the 
                                Board under section 4(d) (as in effect 
                                on the date of enactment of the Thrift 
                                Charter Transition Act of 1997).
                  ``(B) Holding companies with identical 
                shareholders.--A company also qualifies under this 
                paragraph for purposes of paragraph (1) if the 
                company--
                          ``(i) is formed by a company qualified under 
                        subparagraph (A); and
                          ``(ii) the shareholders of such company are 
                        identical to the shareholders of the company 
                        referred to in (i).
                  ``(C) Operation of law defined.--For purposes of this 
                subsection, a savings and loan holding company becomes 
                a bank holding company by operation of law if a savings 
                association controlled by the company is converted to a 
                bank or is treated as a bank under an amendment made by 
                the Thrift Charter Transition Act of 1997.
          ``(3) Requirements to retain grandfathered powers.--
                  ``(A) In general.--Paragraph (1) shall cease to apply 
                to a company if the company does not comply with this 
                paragraph.
                  ``(B) Acquisition of banks.--
                          ``(i) In general.--The company may not 
                        acquire (by any form of business combination) 
                        control of a bank after the date of enactment 
                        of the Thrift Charter Transition Act of 1997.
                          ``(ii) Exceptions to prohibition.--Clause (i) 
                        shall not apply to the acquisition of--
                                  ``(I) a bank, during the period 
                                ending on the date 2 years after the 
                                date of enactment of the Thrift Charter 
                                Transition Act of 1997, if the 
                                acquisition results from the conversion 
                                of a savings association or the 
                                treatment of a savings association as a 
                                bank under amendments made by the 
                                Thrift Charter Transition Act of 1997;
                                  ``(II) shares held as a bona fide 
                                fiduciary (whether with or without the 
                                sole discretion to vote such shares);
                                  ``(III) shares held by any person as 
                                a bona fide fiduciary solely for the 
                                benefit of employees of either the 
                                company or any subsidiary of the 
                                company and the beneficiaries of those 
                                employees;
                                  ``(IV) an entity described in section 
                                2(c)(2);
                                  ``(V) shares held temporarily 
                                pursuant to an underwriting commitment 
                                in the normal course of an underwriting 
                                business;
                                  ``(VI) shares held in an account 
                                solely for trading purposes;
                                  ``(VII) shares over which no control 
                                is held other than control of voting 
                                rights acquired in the normal course of 
                                a proxy solicitation;
                                  ``(VIII) shares or assets acquired in 
                                securing or collecting a debt 
                                previously contracted in good faith, 
                                during the 2-year period beginning on 
                                the date of such acquisition or for 
                                such additional time (not exceeding 3 
                                years) as the Board may permit if the 
                                Board determines that such an extension 
                                will not be detrimental to the public 
                                interest;
                                  ``(X) a bank from the Federal Deposit 
                                Insurance Corporation, in any capacity; 
                                and
                                  ``(XI) a bank in an acquisition in 
                                which the bank has been found to be in 
                                danger of default by the appropriate 
                                Federal or State authority.
                  ``(C) The company may not control a savings 
                association or a national bank resulting from the 
                conversion of a savings association to a national bank 
                pursuant to section 411 if such savings association or 
                national bank fails to comply with the requirements of 
                section 5(c)(2) and section 10(m) of the Home Owners' 
                Loan Act as in effect on the day before the date of the 
                enactment of the Thrift Charter Transition Act of 1997.
          ``(4) Grandfathered powers nontransferable.--
                  ``(A) In general.--Paragraph (1) shall not apply with 
                respect to any company if after the date of the 
                enactment of the Thrift Charter Transition Act of 
                1997--
                          ``(i) any company (other than a company 
                        qualified under paragraph (2)) not under common 
                        control with such company as of that date 
                        acquires, directly, or indirectly, control of 
                        the company; or
                          ``(ii) the company is the subject of any 
                        merger, consolidation, or other type of 
                        business combination as a result of which a 
                        company (other than a company qualified under 
                        paragraph (2)) not under common control with 
                        such company acquires, directly or indirectly, 
                        control of such company.
                  ``(B) Anti-evasion.--The appropriate Federal banking 
                agency may issue interpretations, regulations, or 
                orders that it deems necessary to administer and carry 
                out the purpose, and prevent evasions, of this 
                paragraph, including determining that (notwithstanding 
                the form of a transaction) the transaction would in 
                substance effect a change in control.
          ``(5) Transactions with nonfinancial affiliates.--An insured 
        depository institution controlled by a company that qualifies 
        under paragraph (2) may not engage in a covered transaction (as 
        defined by section 23A(b)(7) of the Federal Reserve Act) with--
                  ``(A) any affiliate unless the affiliate is engaged 
                only in activities authorized for a financial holding 
                company pursuant to section 6 (other than subsection 
                (f) or (g) of such section); or
                  ``(B) any company controlled by an affiliate pursuant 
                to subparagraphs (H) or (I) of subsection (c)(3) of 
                such section.
          ``(6) Savings and loan holding companies that become bank 
        holding companies.--
                  ``(A) Exclusion from application requirement.--A 
                company that qualifies under subparagraph (B) shall not 
                be required to obtain the approval of the Board under 
                subsection (a) to become a bank holding company if such 
                company becomes a bank holding company after the date 
                of enactment of the Thrift Charter Transition Act of 
                1997 as a result of the conversion of a savings 
                association subsidiary to a bank or by virtue of the 
                treatment of a savings association subsidiary as a bank 
                under an amendment made by this Act.
                  ``(B) Companies excluded from application 
                requirement.--A company qualifies for purposes of 
                subparagraph (A) if the company, as of the date of the 
                enactment of the Thrift Charter Transition Act of 1997, 
                was a savings and loan holding company (as defined in 
                section 10(a) of the Home Owners' Loan Act as in effect 
                on that date) or has filed an application to become a 
                savings and loan holding company.
                  ``(C) Supervision and regulation of companies that 
                were previously savings and loan holding companies.--
                          ``(i) In general.--Any company that qualifies 
                        under paragraph (2) and complies with paragraph 
                        (3) and was registered and regulated under 
                        section 10 of the Home Owners' Loan Act on the 
                        day before becoming a bank holding company 
                        described in paragraphs (2) and (3) shall 
                        continue to be regulated, for a period of 3 
                        years after becoming such holding company, 
                        under the terms of section 10 of the Home 
                        Owners' Loan Act in the same manner and to the 
                        same extent and subject to the same 
                        requirements as by the Office of Thrift 
                        Supervision before the date of the enactment of 
                        the Thrift Charter Transition Act of 1997.
                          ``(ii) Holding company capital exception.--
                        With regard to holding company capital, any 
                        company that qualifies under paragraph (2) and 
                        complies with paragraph (3) and was registered 
                        and regulated under section 10 of the Home 
                        Owners' Loan Act before June 19, 1997, or had 
                        an application pending to do so on such date, 
                        shall continue to be regulated under the terms 
                        of section 10 of the Home Owners' Loan Act in 
                        the same manner and to the same extent and 
                        subject to the same requirements as by the 
                        Office of Thrift Supervision before the date of 
                        the enactment of the Thrift Charter Transition 
                        Act of 1997.
                          ``(iii) Submissions to regulators.--A company 
                        shall provide for a period of 3 years after 
                        becoming a bank holding company described in 
                        paragraphs (2) and (3) the appropriate Federal 
                        banking agency with--
                                  ``(I) notice of acquisition of any 
                                company not controlled or affiliated on 
                                the date of enactment of the Thrift 
                                Charter Transition Act of 1997 that is 
                                engaged in nonbanking activities within 
                                15 days after completion of any such 
                                transaction; and
                                  ``(II) copies of such quarterly and 
                                annual reports as it is otherwise 
                                required to file with any other 
                                governmental agency.
                          ``(iv) Reporting requirements.--The 
                        appropriate Federal banking agency may adopt, 
                        for a period of 3 years after a company becomes 
                        a bank holding company described in paragraphs 
                        (2) and (3), reporting requirements 
                        substantially similar to and no more burdensome 
                        than required by the Office of Thrift 
                        Supervision as of January 1, 1997.
                          ``(v) Regulatory authority.--The appropriate 
                        Federal banking agency shall, for a period of 3 
                        years after a company becomes a bank holding 
                        company described in paragraphs (2) and (3)--
                                  ``(I) have the same authority to 
                                examine a company or any subsidiary or 
                                affiliate thereof only to the same 
                                extent as the Office of Thrift 
                                Supervision had as of January 1, 1997; 
                                and
                                  ``(II) conduct only the same type of 
                                examination and with the same frequency 
                                as the Office of Thrift Supervision 
                                prior to January 1, 1997, unless 
                                required to prevent an unsafe or 
                                unsound activity or course of conduct 
                                of the savings institution converted to 
                                a bank pursuant to the Thrift Charter 
                                Transition Act of 1997.
          ``(7) Overdrafts prohibited.--A depository institution 
        controlled by a company described in paragraph (2) may not 
        permit any overdraft (including any intraday overdraft) on 
        behalf of any affiliate (as defined in section 2 of the Bank 
        Holding Company Act of 1956), or incur any such overdraft in 
        such institution's account at a Federal reserve bank or Federal 
        home loan bank on behalf of any affiliate.''.

SEC. 417. TREATMENT OF REFERENCES IN ADJUSTABLE RATE MORTGAGES.

  (a) Treatment of References in Adjustable Rate Mortgages Issued 
Before FIRREA.--For purposes of section 402(e) of Financial 
Institutions Reform, Recovery, and Enactment Act of 1989 (12 U.S.C. 
1437 note), any reference in such section to--
          (1) the Director of the Office of Thrift Supervision shall be 
        deemed to be a reference to the Secretary of the Treasury; and
          (2) a Savings Association Insurance Fund member shall be 
        deemed to be a reference to an insured depository institution 
        (as defined in section 3 of the Federal Deposit Insurance Act).
  (b) Treatment of References in Adjustable Rate Mortgages Instruments 
Issued After FIRREA.--
          (1) In general.--For purposes of adjustable rate mortgage 
        instruments that are in effect as of the date of enactment of 
        this Act, any reference in the instrument to the Director of 
        the Office of Thrift Supervision or Savings Association 
        Insurance Fund members shall be treated as a reference to the 
        Secretary of the Treasury or insured depository institutions 
        (as defined in section 3 of the Federal Deposit Insurance Act), 
        as appropriate.
          (2) Substitution for indexes.--If any index used to calculate 
        the applicable interest rate on any adjustable rate mortgage 
        instrument is no longer calculated and made available as a 
        direct or indirect result of the enactment of this title, any 
        index--
                  (A) made available by the Secretary of the Treasury; 
                or
                  (B) determined by the Secretary of the Treasury, 
                pursuant to paragraph (4), to be substantially similar 
                to the index which is no longer calculated or made 
                available,
        may be substituted by the holder of any such adjustable rate 
        mortgage instrument upon notice to the borrower.
          (3) Agency action required to provide continued availability 
        of indexes.--Promptly after the enactment of this subsection, 
        the Secretary of the Treasury, the Chairperson of the Federal 
        Deposit Insurance Corporation, and the Comptroller of the 
        Currency shall take such action as may be necessary to assure 
        that the indexes prepared by the Director of the Office of 
        Thrift Supervision immediately before the enactment of this 
        subsection and used to calculate the interest rate on 
        adjustable rate mortgage instruments continue to be available.
          (4) Requirements relating to substitute indexes.--If any 
        agency can no longer make available an index pursuant to 
        paragraph (3), an index that is substantially similar to such 
        index may be substituted for such index for purposes of 
        paragraph (2) if the Secretary of the Treasury determines, 
        after notice and opportunity for comment, that--
                  (A) the new index is based upon data substantially 
                similar to that of the original index; and
                  (B) the substitution of the new index will result in 
                an interest rate substantially similar to the rate in 
                effect at the time the original index became 
                unavailable.

SEC. 418. COST OF FUNDS INDEXES.

  (a) Cost of Funds Index Defined.--The term ``cost of funds indexed'' 
means any index that is published by a Federal home loan bank and is 
based, in whole or in part, upon the cost of funds of such bank's 
members.
  (b) Calculations Based on Type of Charter and Insurance Fund 
Membership of Members.--If any cost of funds index includes data based 
on charter type, insurance fund membership, or other similar 
characteristics of members of a Federal home loan ban, such index shall 
be calculated after the date of the enactment of this Act using data 
only from insured depository institutions which were bank members and 
whose data was included in such index on or before such date of 
enactment.
  (c) Acquisition of Data.--
          (1) In general.--Each insured depository institution the data 
        from which is required to compile a cost of funds index in 
        accordance with subsection (b) shall provide to the Federal 
        home loan bank which maintains the index such information as 
        may be necessary, and in such form as may be appropriate, for 
        the bank to calculate and publish the index.
          (2) Enforcement by banking agencies.--Each appropriate 
        Federal banking agency shall take such action as may be 
        necessary to ensure that insured depository institutions which 
        are required to provide information to any Federal home loan 
        bank under paragraph (1) furnish such information on a timely 
        basis and in the form required by the bank.
          (3) Treatment of institutions.--Notwithstanding any other 
        provision of law, an insured depository institution which 
        furnishes information to a Federal home loan bank pursuant to 
        this section for use in compiling a cost of funds index shall 
        not be deemed to control, directly, or indirectly, such index.
  (d) Certain Data Excluded.--Notwithstanding subsections (b) and (c), 
no cost of funds index shall include any data from any insured 
depository institution which results from the merger, consolidation, or 
other combination of a member of a Federal home loan bank with a 
nonmember of any such bank if--
          (1) the total assets of the nonmember exceed the total assets 
        of the bank member at the time of such merger, consolidation, 
        or other combination; or
          (2) in the case of a merger, consolidation, or other merger 
        in which a member of a Federal home loan bank is the resulting 
        insured depository institution, combined ration of the average 
        amount of single-family loan balances to average total assets 
        of all insured depository institutions involved in such merger, 
        consolidation, or other combination for the 12-months period 
        ending on the date of such transaction is less than 70 percent.
  (e) Other Definitions.--For purposes of this section, the terms 
``appropriate Federal banking agency'' and ``insured depository 
institution'' shall have the same meanings as in section 3 of the 
Federal Deposit Insurance Act.

Subtitle B--Ending Separate Federal Regulation of Savings Associations 
                 and Savings and Loan Holding Companies

SEC. 421. STATE SAVINGS ASSOCIATIONS TREATED AS STATE BANKS UNDER 
                    FEDERAL BANKING LAW.

  (a) Amendments to the Federal Deposit Insurance Act.--Section 3 of 
the Federal Deposit Insurance Act (12 U.S.C. 1813) is amended--
          (1) by striking paragraph (2) of subsection (a) and inserting 
        the following new paragraph:
          ``(2) State bank.--
                  ``(A) In general.--The term `State bank' means any 
                bank, banking association, trust company, savings bank, 
                industrial bank (or similar depository institution 
                which the Board of Directors finds to be operating in 
                substantially the same manner as an industrial bank), 
                building and loan association, savings and loan 
                association, homestead association, cooperative bank, 
                or other banking institution--
                          ``(i) which is engaged in the business of 
                        receiving deposits, other than trust funds (as 
                        defined in this section); and
                          ``(ii) which--
                                  ``(I) is incorporated under the laws 
                                of any State;
                                  ``(II) is organized and operating 
                                according to the laws of the State in 
                                which such institution is chartered or 
                                organized; or
                                  ``(III) is operating under the Code 
                                of Law for the District of Columbia 
                                (except a national bank).
                  ``(B) Certain insured banks included.--The term 
                `State bank' includes any cooperative bank or other 
                unincorporated bank the deposits of which were insured 
                by the Corporation on the day before the date of 
                enactment of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989.
                  ``(C) Certain uninsured banks excluded.--The term 
                `State bank' shall not include any cooperative bank or 
                other unincorporated bank the deposits of which were 
                not insured by the Corporation on the day before the 
                date of enactment of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989.''; and
          (2) in subsection (q), by--
                  (A) inserting ``and'' after the semicolon at the end 
                of paragraph (2);
                  (B) striking ``; and'' at the end of paragraph (3) 
                and inserting a period; and
                  (C) striking paragraph (4).
  (b) Amendment to the Bank Holding Company Act of 1956.--Section 
2(a)(5) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(5)) 
is amended by striking subparagraph (E).
  (c) Effective Date.--This section shall take effect 2 years after the 
date of the enactment of this Act.

SEC. 422. HOME OWNERS' LOAN ACT REPEALED.

  Effective 2 years after the date of enactment of this Act, the Home 
Owners' Loan Act (12 U.S.C. 1461 et seq.) is repealed.

SEC. 423. CONFORMING AMENDMENT REFLECTING ELIMINATION OF THE FEDERAL 
                    THRIFT CHARTER AND THE SEPARATE SYSTEM OF THRIFT 
                    REGULATION.

  Section 2704(c) of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 is amended to read as follows:
  ``(c) Effective Date.--This section and the amendments made by this 
section shall take effect on the earlier of--
          ``(1) January 1, 2000; or
          ``(2) the end of the 2-year period beginning on the date of 
        the enactment of the Thrift Charter Transition Act of 1997.''.

SEC. 424. CONFORMING AMENDMENTS TO THE FEDERAL HOME LOAN BANK ACT.

  (a) Amendment to Section 2.--Section 2 of the Federal Home Loan Bank 
Act (12 U.S.C. 1422) is amended by striking paragraph (9) and 
redesignating paragraphs (10), (11), and (12) as paragraphs (9), (10), 
and (11), respectively.
  (b) Amendments to Section 10.--Subsection (h) of section 10 of the 
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as 
follows:
  ``(h) [Repealed]''.
  (c) Amendments to Section 11.--Section 11(e)(2)(C) of the Federal 
Home Loan Bank Act (12 U.S.C. 1431(e)(2)(C)) is amended by--
          (1) striking ``, and with respect to the collection and 
        settlement (including payment by the payor institution) of 
        items payable by Federal savings and loan associations and 
        Federal mutual savings banks,''; and
          (2) striking ``, associations, or banks''.
  (d) Amendment to Section 18.--Section 18(c) of the Federal Home Loan 
Bank Act (12 U.S.C. 1438(c)) is repealed.
  (e) Amendment to Section 22.--Section 22(a) of the Federal Home Loan 
Bank Act (12 U.S.C. 1442(a)) is amended by striking ``, and the 
Director of the Office of Thrift Supervision'' each place such appears 
and inserting ``and'' before ``the Chairperson of the National Credit 
Union Administration''.
  (f) Amendment to Section 24.--Section 24 of the Federal Home Loan 
Bank Act (12 U.S.C. 1444) is repealed.
  (g) Effective Date.--This section shall become effective 2 years 
after the date of enactment of this Act.

SEC. 425. AMENDMENTS TO TITLE 11, UNITED STATES CODE.

  (a) Definition of Federal Mutual Bank Holding Company.--Section 101 
of title 11, United States Code, is amended by inserting after 
paragraph (21B) the following new paragraph:
          ``(21C) `Federal mutual bank holding company' has the same 
        meaning as in section 5133B(h)(1) of the Revised Statutes of 
        the United States.''.
  (b) Conservator or Receiver May Petition.--Section 303(b) of title 
11, United States Code, is amended--
          (1) in paragraph (3)(B) by striking ``or'' at the end;
          (2) in paragraph (4) by striking the period at the end and 
        inserting ``; or''; and
          (3) by adding at the end the following:
          ``(5) in a proceeding concerning a Federal mutual bank 
        holding company, the Comptroller of the Currency.''
  (c) Effect of Involuntary Petition by Comptroller.--
          (1) Exemption from indemnification.--Section 303(e) of title 
        11, United States Code, is amended by inserting ``, other than 
        a petitioner specified in subsection (b)(5),'' after 
        ``petitioners under this section''.
          (2) Restriction on operation pending court order of relief.--
        Section 303(f) of title 11, United States Code, is amended by 
        inserting ``or a petition was filed by a petitioner specified 
        in subsection (b)(5)'' after ``otherwise''.
          (3) Interim trustee to be appointed.--Section 303(g) of title 
        11, United States Code, is amended by inserting after the 1st 
        sentence the following new sentence: ``Upon the filing of a 
        petition by a petitioner specified in subsection (b)(5), and 
        without requiring notice or hearing, the United States Trustee 
        shall appoint an interim trustee from a list submitted by the 
        Comptroller of the Currency of 5 disinterested persons that are 
        qualified and willing to serve.''

                   Subtitle C--Combining OTS and OCC

SEC. 431. PROHIBITION OF MERGER OR CONSOLIDATION REPEALED.

  Section 321 of title 31, United States Code, is amended by striking 
subsection (e).

SEC. 432. SECRETARY OF THE TREASURY REQUIRED TO FORMULATE PLANS FOR 
                    COMBINING OFFICE OF THRIFT SUPERVISION WITH OFFICE 
                    OF THE COMPTROLLER OF THE CURRENCY.

  Not later than 9 months after the date of the enactment of this Act, 
the Secretary of the Treasury, in consultation with the Director of the 
Office of Thrift Supervision and the Comptroller of the Currency, shall 
formulate a plan for consolidating the Office of Thrift Supervision 
with the Office of the Comptroller of the Currency by the end of the 2-
year period beginning on the date of enactment of this Act. The 
Director of the Office of Thrift Supervision and the Comptroller of the 
Currency shall implement that plan, notwithstanding any other provision 
of Federal banking laws.

SEC. 433. OFFICE OF THRIFT SUPERVISION AND POSITION OF DIRECTOR OF THE 
                    OFFICE OF THRIFT SUPERVISION ABOLISHED.

  Effective 2 years after the date of enactment of this Act, the Office 
of Thrift Supervision and the position of Director of the Office of 
Thrift Supervision are abolished.

SEC. 434. RECONFIGURATION OF BOARD OF DIRECTORS OF FDIC AS A RESULT OF 
                    REMOVAL OF DIRECTOR OF THE OFFICE OF THRIFT 
                    SUPERVISION.

  (a) In General.--Section 2(a)(1) of the Federal Deposit Insurance Act 
(12 U.S.C. 1812(a)(1)) is amended to read as follows:
          ``(1) In general.--The management of the Corporation shall be 
        vested in a Board of Directors consisting of 5 members--
                  ``(A) 1 of whom shall be the Comptroller of the 
                Currency; and
                  ``(B) 4 of whom shall be appointed by the President, 
                and with the advice and consent of the Senate, from 
                among individuals who are citizens of the United 
                States, 1 of whom shall have State bank supervisory 
                experience.''.
  (b) Technical and Conforming Amendments.--
          (1) Section 2(d)(2) of the Federal Deposit Insurance Act (12 
        U.S.C. 1812(d)(2)) is amended--
                  (A) by striking ``or the office of Director of the 
                Office of Thrift Supervision'';
                  (B) by striking ``or such Director'';
                  (C) by striking ``or the acting Director of the 
                Office of Thrift Supervision, as the case may be''; and
                  (D) by striking ``or Director''.
          (2) Section 2(f)(2) of the Federal Deposit Insurance Act (12 
        U.S.C. 1812(f)(2)) is amended by striking ``or of the Office of 
        Thrift Supervision''.
  (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect at the end of the 2-year period beginning on the date 
of the enactment of this Act.

SEC. 435. CONTINUATION PROVISIONS.

  (a) Continuation of Orders, Resolutions, Determinations and 
Regulations.--All orders, resolutions, determinations and regulations 
of the Office of Thrift Supervision that have been issued, made, 
prescribed or allowed to become effective by the Office of Thrift 
Supervision (including orders, resolutions, determinations and 
regulations that relate to the conduct of conservatorship and 
receiverships), or by a court of competent jurisdiction, and are in 
effect on the day before the date of enactment, shall continue in 
effect according to the terms of such orders, resolutions, 
determinations, and regulations and shall be enforceable by or against 
the appropriate successor agency until modified, terminated, set aside 
or superseded in accordance with applicable law by the appropriate 
successor agency or by a court of competent jurisdiction or by 
operation of law.
  (b) Continuation of Suits.--No action or other proceeding commenced 
by or against the Office of Thrift Supervision shall abate because of 
the enactment of this Act, except that the appropriate successor agency 
to the Office of Thrift Supervision shall be substituted for the Office 
of Thrift Supervision as a party to any such action or proceeding.
  (c) Continuation of Agency Services.--Any agency, department, or 
other instrumentality of the United States, and any successor to such 
agency, department,or instrumentality, that was providing supporting 
services to the Office of Thrift Supervision shall--
          (1) continue to provide such services, on a reimbursable 
        basis or as otherwise agreed before the date of enactment, to 
        the Office of Thrift Supervision; and
          (2) consult with the Office of Thrift Supervision to 
        coordinate and facilitate a prompt and reasonable completion or 
        termination of such services.
  (d) Transfer of Property.--Not later than two years of the date of 
enactment, all property of the Office of Thrift Supervision shall be 
transferred to the Office of the Comptroller of the Currency, or 
another appropriate successor agency, in accordance with the division 
of responsibilities and activities effected by this Act. For purposes 
of this subsection, the term ``property'' includes, but is not limited 
to, all interests in real property and all personal property, including 
financial assets, computer hardware and software, furniture, fixtures, 
books, accounts, records, reports of examination, work papers and 
correspondence related to such reports of examination, and any 
information, materials, property, and assets not specifically listed. 
The Secretary of the Treasury shall resolve any disagreement between 
successor agencies.

   Subtitle D--Technical and Conforming Amendments to the Depository 
                          Institution Statutes

SEC. 441. AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT.

  (a) Amendment to Section 1.--Section 1(a) of the Federal Deposit 
Insurance Act (12 U.S.C. 1811(a)) is amended by striking ``and savings 
associations''.
  (b) Amendments to Section 3.--Section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813) is amended--
          (1) in subsection (b)--
                  (A) by striking subparagraph (A) of paragraph (1);
                  (B) by striking ``and the Director of the Office of 
                Thrift Supervision jointly determine'' in paragraph 
                (1)(C) and inserting ``determines'';
                  (C) by redesignating subparagraphs (B) and (C) of 
                paragraph (1) (as amended by subparagraph (B) of this 
                paragraph) as subparagraphs (A) and (B), respectively;
                  (D) by striking paragraph (2); and
                  (E) by redesignating paragraph (3) as paragraph (2);
          (2) in subsection (l)(5)--
                  (A) by striking ``or savings association'' each place 
                such term appears; and
                  (B) by striking ``Director of the Office of Thrift 
                Supervision''; and
          (3) in subsection (z), by striking ``the Director of the 
        Office of Thrift Supervision,''.
  (c) Amendment to Section 4.--Section 4(a) of the Federal Deposit 
Insurance Act (12 U.S.C. 1814(a)) is amended--
          (1) by striking ``(1) Banks.--''; and
          (2) by striking paragraph (2).
  (d) Amendments to Section 7.--Section 7 of the Federal Deposit 
Insurance Act (12 U.S.C. 1817) is amended--
          (1) in subsection (a)(2)(A), by striking ``the Director of 
        the Office of Thrift Supervision,'';
          (2) in subsection (a)(2)(B)--
                  (A) by inserting ``and'' after ``Comptroller of the 
                Currency,''; and
                  (B) by striking ``and the Director of the Office of 
                Thrift Supervision,'';
          (3) in subsection (a)(3)--
                  (A) by inserting ``and'' after ``Comptroller of the 
                Currency,''; and
                  (B) by striking ``, and the Director of the Office of 
                Thrift Supervision'';
          (4) in subsection (a)(7), by striking ``the Director of the 
        Office of Thrift Supervision,'' ; and
          (5) by striking subsection (n).
  (e) Amendments to Section 8.--Section 8 of the Federal Deposit 
Insurance Act (12 U.S.C. 1818) is amended--
          (1) in paragraph (7) (as so redesignated by section 
        136(c)(1)(B) of this Act) of subsection (a)--
                  (A) by striking subparagraph (B); and
                  (B) by redesignating subparagraphs (C) through (H) as 
                subparagraphs (B) through (G), respectively;
          (2) in subsection (b)--
                  (A) by striking paragraph (9); and
                  (B) by redesignating paragraph (10) as paragraph (9);
          (3) in subsection (o), by striking the last sentence; and
          (4) in subsection (w)(3)(A), by striking ``and the Office of 
        Thrift Supervision, where appropriate''.
  (f) Amendment to Section 10.--Section 10(c) of the Federal Deposit 
Insurance Act (12 U.S.C. 1820(c)) is amended by striking ``savings 
association,''.
  (g) Amendments to Section 11.--Section 11 of the Federal Deposit 
Insurance Act (12 U.S.C. 1821) is amended--
          (1) in subsection (c)--
                  (A) by striking paragraph (6); and
                  (B) by redesignating paragraphs (7) through (13) as 
                paragraphs (6) through (12), respectively;
          (2) in subsection (d)(2)(F), by striking ``receiver--'' and 
        all that follows through ``(ii) with'' and inserting ``receiver 
        with'';
          (3) in subsection (d)(17)(A), by striking ``or the Director 
        of the Office of Thrift Supervision''; and
          (4) in subsection (d)(18)(B), by striking ``or the Director 
        of the Office of Thrift Supervision''.
  (h) Amendment to Section 13.--Section 13 of the Federal Deposit 
Insurance Act (12 U.S.C. 1823) is amended by striking subsection (k).
  (i) Amendments to Section 18.--Section 18 of the Federal Deposit 
Insurance Act (12 U.S.C. 1828) is amended--
          (1) in subsection (c)(2)--
                  (A) by inserting ``and'' after the semicolon at the 
                end of subparagraph (B);
                  (B) in subparagraph (C), by striking ``(except a 
                District bank or a savings bank supervised by the 
                Director of the Office of Thrift Supervision); and'' 
                and inserting ``(except a District bank).''; and
                  (C) by striking subparagraph (D);
          (2) in subsection (g)(1), by striking ``and the Director of 
        the Office of Thrift Supervision'';
          (3) in subsection (i)(2)--
                  (A) by inserting ``and'' after the semicolon at the 
                end of subparagraph (B);
                  (B) by striking ``; and'' in subparagraph (C) and 
                inserting a period; and
                  (C) by striking subparagraph (D); and
          (4) by striking subsection (m).
  (j) Amendments to Section 22.--Section 22 of the Federal Deposit 
Insurance Act (12 U.S.C. 1830) is amended--
          (1) by striking ``or State savings associations and in favor 
        of national or member banks or Federal savings associations, 
        respectively'' and inserting ``and in favor of national or 
        member banks''; and
          (2) by striking ``and savings associations''.
  (k) Amendment to Section 28.--Section 28 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831e) is repealed.
  (l) Amendment to Section 33.--Section 33(e) of the Federal Deposit 
Insurance Act (12 U.S.C. 1831j(e)) is amended by striking ``, and the 
Director of the Office of Thrift Supervision'' and inserting ``and'' 
before ``the Comptroller of the Currency''.
  (m) Amendment to Section 38.--Section 38(o) of the Federal Deposit 
Insurance Act (12 U.S.C. 1831o(o)) is repealed.

SEC. 442. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956.

  Section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841) is 
amended by striking subsections (i) and (j) and inserting the following 
new subsections:
  ``(i) [Repealed]
  ``(j) [Repealed]''.

SEC. 443. AMENDMENTS TO THE FEDERAL RESERVE ACT.

  (a) Amendments to Section 11.--Section 11(a)(2)(B) of the Federal 
Reserve Act (12 U.S.C. 248(a)(2)(B)) is amended--
          (1) by inserting ``and'' after the comma at the end of clause 
        (ii);
          (2) by striking clause (iii); and
          (3) by redesignating clause (iv) as clause (iii).
  (b) Amendments to Section 19.--Section 19(b) of the Federal Reserve 
Act (12 U.S.C. 461(b)) is amended--
          (1) in paragraph (1)(A)--
                  (A) by inserting ``and'' after the semicolon at the 
                end of clause (v);
                  (B) by striking clause (vi); and
                  (C) by redesignating clause (vii) as clause (vi); and
          (2) by striking ``the Director of the Office of Thrift 
        Supervision,'' each place it appears.

SEC. 444. AMENDMENTS TO ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT OF 
                    1982.

  Section 804(a) of the Alternative Mortgage Transaction Parity Act of 
1982 (12 U.S.C. 3803) is amended--
          (1) in paragraph (1)--
                  (A) by inserting ``(as such term is defined in 
                section 3 of the Federal Deposit Insurance Act) and all 
                other housing creditors'' after ``with respect to 
                banks''; and
                  (B) by inserting ``and'' after the semicolon at the 
                end of the paragraph;
          (2) by deleting ``; and'' at the end of paragraph (2) and 
        inserting a period; and
          (3) by striking paragraph (3).

SEC. 445. AMENDMENTS TO THE BANK PROTECTION ACT OF 1968.

  Section 2 of the Bank Protection Act of 1968 (12 U.S.C. 1881) is 
amended--
          (1) by striking the comma at the end of paragraph (2) and 
        inserting ``; and'';
          (2) by striking ``, and'' at the end of paragraph (3) and 
        inserting a period; and
          (3) by striking paragraph (4).

SEC. 446. AMENDMENTS TO THE COMMUNITY REINVESTMENT ACT OF 1977.

  Section 803 of the Community Reinvestment Act of 1977 (12 U.S.C. 
2902) is amended--
          (1) in paragraph (1)--
                  (A) by inserting ``and'' after the semicolon at the 
                end of subparagraph (B); and
                  (B) by striking ``and'' after the semicolon at the 
                end of subparagraph (C);
          (2) by striking the first paragraph (2); and
          (3) in paragraph (3)(A), by striking ``or Federal savings and 
        loan association''.

SEC. 447. AMENDMENTS TO THE DEPOSITORY INSTITUTIONS DEREGULATION AND 
                    MONETARY CONTROL ACT OF 1980.

  Section 208(a) of the Depository Institutions Deregulation and 
Monetary Control Act of 1980 (12 U.S.C. 3507(a)) is amended--
          (1) by striking ``; and'' at the end of paragraph (1)(C) and 
        inserting a period; and
          (2) by striking paragraph (2).

SEC. 448. AMENDMENTS TO THE DEPOSITORY INSTITUTION MANAGEMENT 
                    INTERLOCKS ACT.

  (a) Amendment to Section 202.--Section 202(2) of the Depository 
Institution Management Interlocks Act (12 U.S.C. 3201(2)) is amended by 
inserting ``or'' before ``a company which would be'' and striking ``, 
or a savings and loan holding company'' and all that follows through 
``Housing Act''.
  (b) Amendment to Section 205.--Section 205 of the Depository 
Institution Management Interlocks Act (12 U.S.C. 3204) is amended--
          (1) in the portion of paragraph (8)(A) which precedes clause 
        (i), by striking ``diversified savings'' and all that follows 
        through ``with respect to'' and inserting ``company which is, 
        or has filed an application to become, a depository institution 
        holding company and which satisfies the consolidated net worth 
        and consolidated net earnings requirements for a diversified 
        savings and loan holding company (as set forth in section 
        10(1)(F) of the Home Owners' Loan Act, as such section is in 
        effect and interpreted on such date, which shall be applicable 
        for purposes of this paragraph without regard to the fact that 
        a depository institution subsidiary of such holding company has 
        ceased to be a savings association after January 1, 1997) with 
        respect to''; and
          (2) by striking paragraph (9).
  (c) Amendments to Section 207.--Section 207 of the Depository 
Institution Management Interlocks Act (12 U.S.C. 3206) is amended--
          (1) by striking paragraph (4); and
          (2) by redesignating paragraphs (5) and (6) as paragraphs (4) 
        and (5), respectively.
  (d) Amendment to Section 209.--Section 209 of the Depository 
Institution Management Interlocks Act (12 U.S.C. 3207) is amended--
          (1) by inserting ``and'' after the comma at the end of 
        paragraph (3);
          (2) by striking paragraph (4); and
          (3) by redesignating paragraph (5) as paragraph (4).

SEC. 449. AMENDMENT TO THE ECONOMIC GROWTH AND REGULATORY PAPERWORK 
                    REDUCTION ACT OF 1996.

  Section 2227 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (Public Law 104-208) is amended by striking ``the 
Director of the Office of Thrift Supervision,''.

SEC. 450. AMENDMENT TO THE EMERGENCY HOME FINANCE ACT OF 1970.

  Section 305(b) of the Emergency Home Finance Act of 1970 (12 U.S.C. 
1454(b)) is amended by striking ``any Federal savings and loan 
association,''.

SEC. 451. AMENDMENTS TO THE EXPEDITED FUNDS AVAILABILITY ACT.

  Section 610(a) of the Expedited Funds Availability Act (12 U.S.C. 
4009(a)) is amended--
          (1) by inserting ``and'' after the semicolon at the end of 
        paragraph (1)(C);
          (2) by striking paragraph (2); and
          (3) by redesignating paragraph (3) as paragraph (2).

SEC. 452. AMENDMENTS TO THE FEDERAL CREDIT UNION ACT.

  (a) Amendment to Section 107.--Section 107(7)(D) of the Federal 
Credit Union Act (12 U.S.C. 1757(7)(D)) is amended by striking ``the 
Federal Savings and Loan Insurance Corporation or''.
  (b) Amendment to Section 206.--Section 206(g)(7)(A)(ii) of the 
Federal Credit Union Act (12 U.S.C. 1786(g)(7)(A)(ii)) is amended by 
striking ``, or as a savings association under section 8(b)(8) of such 
Act''.

SEC. 453. AMENDMENTS TO THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION 
                    COUNCIL ACT OF 1978.

  (a) Amendment to Section 1003(1).--Section 1003(1) of the Federal 
Financial Institutions Examination Council Act of 1978 (12 U.S.C. 
3302(1)) is amended by striking ``the Office of Thrift Supervision,''.
  (b) Amendment to Section 1004.--Section 1004(a) of the Federal 
Financial Institutions Examination Council Act of 1978 (12 U.S.C. 
3303(a)) is amended--
          (1) by inserting ``and'' after the comma at the end of 
        paragraph (3);
          (2) by striking paragraph (4); and
          (3) by redesignating paragraph (5) as paragraph (4).

SEC. 454. AMENDMENTS TO THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, 
                    AND ENFORCEMENT ACT OF 1989.

  (a) Amendment to Section 1121.--Section 1121(6) of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3350(6)) is amended by striking ``the Office of Thrift Supervision,''.
  (b) Amendment to Section 1206.--Section 1206 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
1833b) is amended by striking ``and the Office of Thrift Supervision,'' 
and inserting ``and'' before ``the Farm Credit Administration''.
  (c) Amendment to Section 1216.--Section 1216 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
1833e) is amended--
          (1) in subsection (a), by striking paragraph (2) and 
        redesignating paragraphs (3) through (6) as paragraphs (2) 
        through (5), respectively; and
          (2) in subsection (c), by striking ``the Director of the 
        Office of Thrift Supervision,''.

SEC. 455. AMENDMENTS TO THE HOME MORTGAGE DISCLOSURE ACT OF 1975.

  (a) Amendments to Section 304.--Section 304(h) of the Home Mortgage 
Disclosure Act of 1975 (12 U.S.C. 2803(h)) is amended--
          (1) by striking paragraph (2);
          (2) in paragraph (5), by striking ``(4)'' and inserting 
        ``(3)''; and
          (3) by redesignating paragraphs (3) through (5) as paragraphs 
        (2) through (4), respectively.
  (b) Amendments to Section 305.--Section 305(b) of the Home Mortgage 
Disclosure Act of 1975 (12 U.S.C. 2804(b)) is amended--
          (1) by striking paragraph (2); and
          (2) by redesignating paragraphs (3) and (4) as paragraphs (2) 
        and (3), respectively.
  (c) Amendments to Section 306.--Section 306(b) of the Home Mortgage 
Disclosure Act of 1975 (12 U.S.C. 2805(b)) is amended by striking 
``shall be enforced under--'' and all that follows through ``Federal 
Deposit Insurance Corporation'' and inserting ``under section 8 of the 
Federal Deposit Insurance Act (12 U.S.C. 1818) in the case of national 
banks, by the Comptroller of the Currency''.

SEC. 456. AMENDMENTS TO THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 
                    1992.

  (a) Amendment to Section 1315.--Section 1315(b) of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4515(b)) is amended by 
striking ``, and the Office of Thrift Supervision'' and inserting 
``and'' before ``the Federal Deposit Insurance Corporation''.
  (b) Amendment to Section 1317(c).--Section 1317(c) of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4517(c)) is amended by 
striking ``, or the Director of the Office of Thrift Supervision'' and 
inserting ``or'' before ``the Federal Deposit Insurance Corporation''.

SEC. 457. AMENDMENT TO THE INTERNATIONAL BANKING ACT OF 1978.

  Section 15 of the International Banking Act of 1978 (12 U.S.C. 3109) 
is amended by striking ``Federal Deposit Insurance Corporation, and 
Director of the Office of Thrift Supervision'' each place that it 
appears and inserting ``and Federal Deposit Insurance Corporation''.

SEC. 458. AMENDMENTS TO THE NATIONAL HOUSING ACT.

  (a) Amendments to Section 203.--The 1st of the 2 subsections 
designated as subsection (s) of section 203 of the National Housing Act 
(12 U.S.C. 1709(s)) is amended--
          (1) by inserting ``and'' after the semicolon at the end of 
        paragraph (6);
          (2) in paragraph (7)--
                  (A) by inserting ``(as defined in section 3 of the 
                Federal Deposit Insurance Act)'' after ``State bank''; 
                and
                  (B) striking ``; and'' and inserting a period; and
          (3) by striking paragraph (8).
  (b) Amendment to Section 502.--Section 502 of the National Housing 
Act (12 U.S.C. 1701c(c)) is amended by striking ``and the Director of 
the Office of Thrift Supervision, respectively''.

SEC. 459. AMENDMENT TO PUBLIC LAW 93-495.

  Section 202(a)(12) of Public Law 93-495 (12 U.S.C. 2402(a)(12)) is 
amended by striking ``thrift, or other business entities, including one 
representative each of commercial banks, mutual savings banks, savings 
and loan associations,'' and inserting ``or other business entities, 
including 3 representatives from different types of insured depository 
institutions (as defined in section 3 of the Federal Deposit Insurance 
Act) and 1 representative each of''.

SEC. 460. AMENDMENT TO THE REAL ESTATE SETTLEMENT PROCEDURES ACT OF 
                    1974.

  The 1st sentence of section 4(a) of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2603(a)) is amended--
          (1) by striking the comma after ``Affairs'';
          (2) by inserting ``and'' before ``the Federal Deposit 
        Insurance Corporation''; and
          (3) by striking ``, and the Director of the Office of Thrift 
        Supervision''.

SEC. 461. AMENDMENT TO THE REVISED STATUTES OF THE UNITED STATES.

  Section 324 of the Revised Statutes of the United States (12 U.S.C. 
1) is amended by striking ``The Comptroller of the Currency shall have 
the same authority over matters within the jurisdiction of the 
Comptroller as the Director of the Office of Thrift Supervision has 
over matters within the Director's jurisdiction under section 3(b)(3) 
of the Home Owners' Loan Act'' and inserting ``The Secretary of the 
Treasury may not intervene in any matter or proceeding before the 
Comptroller of the Currency (including agency enforcement actions) 
unless otherwise specifically provided by law''.

SEC. 462. AMENDMENTS TO THE RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY 
                    IMPROVEMENT ACT OF 1994.

  (a) Amendment to Section 307.--Section 307(a) of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4805(a)) 
is amended by striking ``savings association financial reports,''.
  (b) Amendment to Section 117.--Section 117(e) of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4716(e)) 
is amended by striking ``the Director of the Office of Thrift 
Supervision,''.

SEC. 463. AMENDMENTS TO THE RIGHT TO FINANCIAL PRIVACY ACT OF 1978.

  Section 1101 of the Right to Financial Privacy Act of 1978 (12 U.S.C. 
3401) is amended--
          (1) in paragraph (6)--
                  (A) by inserting ``and'' after the semicolon at the 
                end of subparagraph (A);
                  (B) by striking ``; and'' at the end of subparagraph 
                (B) and inserting a period; and
                  (C) by striking subparagraph (C); and
          (2) in paragraph (7)--
                  (A) by striking subparagraph (B); and
                  (B) by redesignating subparagraphs (C) through (H) as 
                subparagraphs (B) through (G), respectively.

SEC. 464. AMENDMENTS TO THE TRUTH IN SAVINGS ACT.

  Section 270(a)(1) of the Truth in Savings Act (12 U.S.C. 4309(a)(1)) 
is amended--
          (1) by inserting ``and'' after the semicolon at the end of 
        subparagraph (A);
          (2) in subparagraph (B)--
                  (A) by striking ``or (iii)'' and inserting ``(iii), 
                or (v)''; and
                  (B) by striking ``; and'' and inserting a period; and
          (3) by striking subparagraph (C).

SEC. 465. EFFECTIVE DATE.

  This subtitle shall take effect at the end of the 2-year period 
beginning on the date of the enactment of this Act.

                          Purpose and Summary

    The purpose of H.R. 10, the Financial Services Act of 1997 
(the Act), as reported by the Committee on Commerce, is to 
establish a comprehensive framework to permit affiliations 
among securities firms, insurance companies, commercial banks, 
and, subject to certain limitations, commercial enterprises. 
The primary objective of allowing such affiliations is to 
enhance consumer choice in the financial services marketplace, 
eliminate anti-competitive regulatory disparities among 
financial services providers, and increase competition among 
providers of financial services. This legislation seeks to help 
participants in the financial services marketplace to realize 
the cost savings, efficiency, and other benefits resulting from 
increased competition. The Act is also designed to improve the 
international competitiveness of U.S. companies, which may have 
been constrained by the barriers to affiliation that exist 
pursuant to certain sections of the Banking Act of 1933, 
commonly referred to as the Glass-Steagall Act. (Sections 16, 
20, 21, and 32 of the Banking Act of 1933 are referred to as 
the ``Glass-Steagall Act.'')
    The Act provides for a number of prudential safeguards 
designed to protect investors, avoid risk to the Federal 
deposit insurance funds, protect the safety and soundness of 
insured depository institutions and the Federal payments 
system, and protect consumers.

                                TITLE I

    Title I repeals the anti-affiliation provisions of the 
Glass-Steagall Act (Section 20 and Section 32 of the Banking 
Act of 1933). It also sets up a new structure, different from 
that in the Bank Holding Company Act of 1956, permitting 
affiliation among securities firms, insurance companies, and 
banks. This structure is designed to promote efficiency and 
competition and to protect investors and consumers.
    The Committee found that a structure based on a financial 
services holding company was the most beneficial to the goals 
of efficiency, competition, and protection of investors and 
consumers. Specifically, requiring that securities and 
insurance underwriting activities be conducted in separately 
capitalized affiliates in a holding company structure creates 
obstacles to the migration of taxpayer subsidized funds in 
banks to finance activities in these affiliates. The Committee 
does not wish to expand unnecessarily the reach of the Federal 
safety net. It has, therefore, opted for a structure based on 
affiliation in a financial services holding company rather than 
one based on granting powers to direct subsidiaries of insured 
depository institutions.
    Title I preempts State laws that prevent affiliation among 
financial services providers. In addition, the title prevents 
the States from significantly interfering in the ability of 
national banks or wholesale financial institutions to engage in 
activities authorized under Sections 6 and 10 of the Bank 
Holding Company Act or Section 17(i) of the Securities Exchange 
Act of 1934. Although the Committee intends the new subsection 
(c)(2) of Section 7 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1846) to be parallel to the analysis of the United 
States Supreme Court in Barnett Bank of Marion County, N.A. v. 
Nelson, 116 S.Ct. 1103 (1996), it does not intend, by 
implication or otherwise, to expand or narrow the scope of the 
Barnett ruling.
    Title I also expressly limits the authority of the Board of 
Governors of the Federal Reserve System (Federal Reserve Board) 
over the affiliates of financial services holding companies. 
These limitations are designed to facilitate functional 
regulation of the operative components of a financial services 
holding company. Specifically, the preeminent authority of the 
Securities and Exchange Commission (SEC or Commission) and the 
State insurance regulators over securities firms and the 
business of insurance, respectively, is preserved.
    Title I also grants to State insurance commissioners and 
the SEC the authority to prevent the Federal Reserve Board from 
compelling the insurance and securities subsidiaries of a 
financial holding company to provide funds to any 
undercapitalized insured depository institution. This provision 
makes clear that the source of strength doctrine does not 
extend to securities firms and insurance companies affiliated 
with banks.
    Title I specifically limits the activities of national bank 
subsidiaries to those activities a national bank is authorized 
to engage in directly. Title I also specifically authorizes 
national bank subsidiaries to engage in insurance sales. The 
Comptroller of the Currency (OCC or the Comptroller) has 
proposed interpretative changes to Part 5 of the National Bank 
Act that theCommittee found: (1) exceed the Comptroller's 
statutory authority; and (2) are bad public policy. The Committee 
intends that this provision prevent future unauthorized actions by the 
Comptroller.
    Title I sets up a structure for supervision of investment 
bank holding companies, and creates a new depository 
institution, a Wholesale Financial Institution (WFI), which 
investment bank holding companies may own. Because WFIs do not 
take retail deposits or have Federal deposit insurance, their 
holding companies do not require as extensive regulatory 
oversight as do financial holding companies that own insured 
banks. The Committee has set up a supervisory structure in 
which either the SEC or the Federal Reserve Board may be the 
holding company regulator for investment bank holding 
companies.
    Title I provides for limited affiliations between banking 
and commercial activities. It permits financial holding 
companies to engage in activities, or own entities engaged in 
activities, that are not ``financial in nature'' to the extent 
of the lesser of five percent of the holding company's gross 
worldwide revenues or $500 million, subject to a limitation 
that no bank holding company may purchase a non-financial firm 
with assets of over $750 million. In addition, the title 
includes a grandfather provision that permits financial holding 
companies to retain all non-financial activities and 
affiliates, subject to no limitation on future growth, so long 
as the financial holding company derived at least 85 percent of 
its gross worldwide revenues from financial activities at the 
time it became a financial holding company. These provisions 
are designed to provide financial holding companies that own 
insured banks with the flexibility to not only maintain and 
grow non-financial activities in which they may be engaged, but 
also to develop new such activities, without providing for such 
a broad mixture of banking and commercial activities that it 
would create a risk to the safety and soundness of the U.S. 
banking system or create undue concentration of service 
providers and limit competition. The title provides a similar 
grandfather provision applicable to WFIs. Title I also allows 
these entities to directly or indirectly acquire or control 
shares, assets, or ownership interests in commercial concerns 
without limit for the purpose of appreciation and ultimate 
resale by expressly including ``merchant banking'' in the 
definition of activities that are ``financial in nature.''
    With further respect to activities that are included as 
``financial in nature,'' the term ``providing financial, 
investment or economic advisory services, including advising an 
investment company (as defined in section 3 of the Investment 
Company Act of 1940)'' is intended to include all activities 
that are necessary or incidental to the business or operation 
of an investment company or an investment adviser registered 
under the Investment Advisors Act of 1940, including the 
provision of personnel to an investment company or to a company 
that provides products or services to an investment company, as 
well as money management and investment management services and 
related activities for other clients. It is the Committee's 
intention that these activities be deemed financial in nature, 
regardless of whether they are conducted separately or in 
combination with other activities, and regardless of whether 
they are conducted in accordance with limitations imposed by 
the Federal Reserve Board prior to the enactment of this Act. 
The term, thus, includes, for example, such activities as 
acting as the sponsor, organizer, distributor, principal 
underwriter, sales agent, broker, dealer, placement agent, 
administrator, transfer agent, registrar, shareholder servicing 
agent, dividend disbursement agent, custodian, investment 
adviser or sub-investment adviser of an investment company, or 
controlling an investment company.

                                TITLE II

    Subtitle A of Title II of the Act amends the Federal 
securities laws in order to provide functional regulation of 
bank securities activities. The Act repeals the exemptions 
under the Federal securities laws that currently apply to 
banks, subjecting banks and their affiliates and subsidiaries 
to the same regulation as all other providers of securities 
products.
    H.R. 10, as reported by the Banking Committee, also 
eliminated the blanket exceptions for banks from the 
definitions of ``broker'' and ``dealer,'' but included sixteen 
new exceptions for activities in which banks could engage 
without being subject to broker-dealer regulation under the 
Federal securities laws. The breadth of the exceptions in the 
Banking Committee's bill would have had the effect of 
permitting banks to continue to engage in extensive securities 
activities, without being subject to the securities laws that 
apply to their broker-dealer competitors engaged in the same 
activities.
    However, the Committee concluded that, with modifications 
that (i) address competitiveness concerns, (ii) address market 
integrity issues, and (iii) minimize the risks to investors, 
particularly individuals, many of the areas exempt in the 
Banking Committee bill could be appropriately excepted from 
securities regulation.
    Accordingly, the Committee provided for a number of 
exceptions that permit banks to engage in certain securities 
activities that have traditionally been provided by banks, 
subject to certain limitations, without becoming subject to the 
Federal securities laws. These exceptions relate to third-party 
networking arrangements, trust activities, traditional banking 
transactions such as commercial paper and exempted securities, 
employee and shareholder benefit plans, sweep accounts, 
affiliate transactions, private placements, safekeeping and 
custody services, asset-backed securities, and derivatives.
    Banks today also engage in a wide range of investment 
advisory activities that are comparable to, and competitive 
with, the services of other investment advisers. Banks that 
advise mutual funds, however, are not currently required to 
register as investment advisers under the Investment Advisers 
Act of 1940 and, therefore, are not subject to the same 
securities regulatory scheme that applies to other entities 
that advise mutual funds. The Committee believes that existing 
banking regulation does not adequately address the investor 
protection concerns that are raised by bank involvement in 
mutual fund activities. Subtitle B amends the Investment 
Advisers Act to subject banks that advise mutual funds to the 
same regulatory scheme as other advisers to mutual funds. 
Subtitle B also addresses specific conflicts of interest that 
may arise when banks advise mutual funds.
    Subtitle B broadens the definition of ``investment 
adviser'' in the Investment Advisers Act to include banks that 
advise mutual funds. This amendment ensures that all mutual 
fund advisers are subject to the same rules. The current 
exclusion for banks under the Investment Advisers Act, like the 
exclusions for banks under the Securities Act of 1933 and the 
Securities Exchange Act of 1934 (the Exchange Act), is a 
holdover from a time when it was assumed that banks could not 
engage in securities-related activities. That assumption is no 
longer valid, and the Committee believes that corrective 
legislation is essential. Excluding banks from the definition 
of ``investment adviser'' hampers effective Commission 
oversight of bank-advised mutual funds because Commission 
examiners do not have access to all of the books and records 
normally available when they examine a mutual fund whose 
adviser is registered with the Commission. Requiring banks that 
advise mutual funds to register under the Investment Advisers 
Act provides the Commission with the authority it needs to 
oversee the activities of these advisers, and provides 
investors in bank-advised mutual funds with the same 
protections enjoyed by other mutual fund investors.
    Although the Investment Company Act and the Investment 
Advisers Act currently restrict transactions between mutual 
funds and their affiliates, the statutes do not address 
specifically all of the concerns that may exist when banks 
provide investment management and related services to funds. 
Because banks advising mutual funds may be subject to 
particular conflicts of interest because of the nature of their 
other activities, H.R. 10 provides the Commission with 
additional authority to address special conflicts of interest 
that may exist when a bank and the mutual fund it advises do 
business with each other. These conflicts may arise, for 
example, when a bank loans money to a fund it advises, acts as 
the fund's custodian, or holds the fund's shares in a fiduciary 
capacity. Another area of concern involves the potential 
investor confusion that may be created when a bank advises a 
mutual fund or sells fund shares on bank premises. Because the 
federal government insures bank deposits, it is possible that 
some investors may mistakenly believe that a mutual fund 
advised by a bank or sold on bank premises also is insured. The 
bill addresses this concern by requiring banks to disclose, in 
this situation, that an investment in the fund is not insured 
by the Federal Deposit Insurance Corporation (FDIC) or any 
other government agency. Because the Committee believes that 
the potential for investor confusion about whether a mutual 
fund investment is insured by the government exists only where 
those funds are sold through, or advised by a bank, H.R. 10 
applies this disclosure obligation only to such funds, and not 
to funds that are not sold through or advised by a bank.
    The bill grants the Commission authority to address 
concerns that arise when banks advise or sell mutual funds. 
This authority is not intended to subject bank advisers to more 
regulation than other fund advisers, but rather is intended to 
provide the Commission with the flexibility to effectively 
address problems particular to mutual funds that are advised by 
a bank or sold on bank premises.
    Subtitle C creates a new investment bank holding company 
structure under the Securities Exchange Act. This subtitle is 
designed to implement a new concept of SEC supervision of 
holding companies with small affiliated WFIs that are 
substantially engaged in the securities business. These 
investment bank holding companies are authorized to engage in a 
wide range of ``financial activities,'' to continue existing 
commercial activities, to engage in a limited amount of new 
commercial activities, and to engage in a limited amount of 
``developing'' activities and commodities activities. (These 
investment bank holding companies alternatively may elect 
Federal Reserve Board supervision.) The Committee has 
determined that this regulatory structure is needed because 
these companies are primarily engaged in the securities 
business and are not affiliated with an insured bank. The 
Committee also has determined that this regulatory structure is 
consistent with functional regulation, in that it provides a 
supervisory structure in which the SEC is the supervisory 
regulator for investment bank holding companies substantially 
engaged in the securities business.
    Moreover, broker-dealer holding companies that do not have 
affiliated WFIs may voluntarily elect SEC supervision as an 
investment bank holding company under Subtitle C. Under this 
voluntary supervision, the SEC will have greater authority to 
oversee the entire entity, thus satisfying the expectations of 
foreign jurisdictions and some financial counterparties that 
the entity be subject to consolidated supervision. This 
provision is designed to improve the competitiveness of U.S. 
investment bank holding companies that do business in foreign 
jurisdictions that require consolidated holding company 
supervision for securities firms. Investment bank holding 
companies with no affiliated WFIs that voluntarily ``opt'' into 
this investment bank holding company supervisory scheme will 
remain free to engage in--or affiliate with entities engaged 
in--unlimited commercial activities.

                               TITLE III

    Title III pertains to the regulation of insurance. Subtitle 
A provides guidelines for the regulation of insurance 
activities, particularly those of national banks, and sets 
forth appropriate standards for judicial review of regulatory 
insurance disputes. These provisions were drafted after 
numerous hearings in which the Committee found that there were 
significant questions regarding which regulators had the 
responsibility to regulate the insurance activities of 
Federally chartered entities, and serious questions were raised 
about the applicability and enforcement of consumer protections 
in the underwriting and sale of insurance by various financial 
entities.
    Subtitle A specifically provides for the functional 
regulation of insurance. The Committee's purpose in the first 
part of Subtitle A is to reaffirm the McCarran-Ferguson Act and 
require State licensing for insurance activities. The Committee 
further requires functional regulation of insurance, although 
it does not intend to alter or affect the ruling of the United 
States Supreme Court in Barnett Bank of Marion County, N.A. v. 
Nelson, 116 S.Ct. 1103 (1996).
    Subtitle A prohibits national banks and their subsidiaries 
from underwriting insurance, except for products that they are 
currently providing or authorized to provide. A definition of 
insurance versus banking products is created, based on State 
insurance codes and referencing sections from the Internal 
Revenue Code which determine whether a product is treated as 
insurance for tax purposes, with carve-outs for core banking 
products.
    The Committee is concerned about de novo bank insurance 
sales activity in a State, and accordingly requires national 
banks and their subsidiaries that are initiating a new 
insurance agency activity in a State to acquire an existing 
agency that has been licensed for at least two years in such 
State to ensure a minimum level of expertise and understanding 
of local State insurance laws and regulations.
    The Committee heard conflicting views from witnesses on the 
propriety of allowing banks to underwrite and sell title 
insurance. In particular, concerns were raised about conflicts 
of interest, consumer confusion, and unfair competition, in 
contrast to conflicting testimony about the need to increase 
competition, provide more availability for consumers, and the 
synergies created between a bank's mortgage or loan functions 
and title insurance activities. Not wanting to push banks out 
of business they are currently engaged in, the Committee in 
Subtitle A grandfathered title insurance activities for 
national banks, unless such bank has an insurance affiliate or 
subsidiary engaged in insurance underwriting (in which case a 
push-out into the affiliate or subsidiary is required). 
However, in States that have authorized their State banks to 
sell title insurance, the Committee desired not to disadvantage 
national banks competitively, and thus grants them parity 
powers to the same manner and extent authorized for State banks 
as of January 1, 1997.
    To address concerns that the insurance industry was placed 
at a competitive disadvantage versus national banks in terms of 
the regulatory tensions between Federal banking and State 
insurance regulators, Subtitle A includes an expedited and 
equalized dispute resolution procedure. Such inter-regulatory 
conflicts would be brought to and decided by a United States 
District Court within an expedited time frame, with the courts 
directed to look at the merits of the questions presented, 
under both State and Federal law, including the nature and 
history of a product and its regulation, without unequal 
deference. This provision helps create an even playing field, 
on the merits, for inter-industry disputes.
    Subtitle A also codifies a modified version of guidelines 
drafted by the Federal banking regulators, to ensure a minimum 
level of consumer protection for bank insurance customers, 
including requirements for: anti-coercion rules (prohibiting 
banks from misleading consumers into believing that an 
extension of credit is conditional upon the purchase of 
insurance); easily understandable disclosures as to whether a 
product is FDIC insured; an appropriate delineation of the 
settings and circumstances under which insurance sales should 
be physically segregated from bank loan and teller activities; 
standards limiting compensation systems for insurance referrals 
by bank tellers or loan personnel; proper licensing and 
qualification of bank insurance personnel; prohibitions on 
insurance discrimination against victims of domestic violence; 
and establishment of a consumer grievance process to address 
consumer complaints.
    In order to complete the repeal of anti-affiliation 
provisions begun in Title I that prevent financial companies 
from integrating and fully competing with each other, Subtitle 
A of Title III preempts State laws that prohibit insurance 
companies from affiliating in a financial holding company or 
from buying or investing in a bank.
    During the Committee's consideration of financial services 
reform, concerns were raised regarding the financial stability 
of mutual insurance companies following reform of Glass-
Steagall, particularly if the State of domicile of the mutual 
insurance company did not have a statute or regulation allowing 
such company to reorganize into a mutual holding company. The 
last provision in Subtitle A of Title III protects the 
reorganization of a mutual insurance company in a State which 
has an enabling statute, applying against States (other than 
the insurer's domicile) that may try to prevent or restrict 
such reorganization, either directly or indirectly through a 
formal review or approval requirement.
    Subtitle B of Title III allows for redomestication and 
reorganization of mutual insurance companies domiciled in 
States which do not have enabling reorganization laws or 
regulations for mutual holding companies. The Committee's 
purpose in this Subtitle is to avoid preempting reasonable 
State laws which allow such reorganizations, and only apply 
Federal procedures to those States that are silent on the 
issue. To allow such a reorganization to be reasonably 
effected, the Committee has directed that all company licenses 
be preserved and all policies and forms remain in force during 
the transition, and that laws in such States (other than those 
of the transferee State domicile) which discriminate or 
otherwise impede the reorganization are preempted. To take 
advantage of these provisions, a redomesticating and 
reorganizing mutual insurer must present a plan to the State 
insurance regulator of the transferee State, and such regulator 
must affirmatively determine that the plan includes 
requirements for: a majority vote of policyholders and the 
board of directors after reasonable notice and disclosure; a 
transfer of equivalent voting and contractual rights in the new 
holding company parent; certain limits on initial public stock 
offerings; and awards of stock options to elected officers and 
directors. The insurance regulator of the transferee domicile 
must also determine that the reorganization is fair and 
equitable to the company's policyholders.
    Subtitle C of Title III requires uniform licensing of 
insurance agents and brokers. The Committee received lengthy 
hearing testimony that many States imposed brokerage licensing 
requirements that did not appear to serve a pro-competitive or 
consumer protection purpose, and which made the placement of 
insurance on a multi-state basis prohibitively expensive. 
Questions were raised to the Committee, for example, as to what 
purpose is served by requiring multiple continuing education 
requirements in numerous States when the material learned may 
be largely duplicative.
    Subtitle C first allows the States an opportunity to 
establish uniform or reciprocal licensing and continuing 
eligibility requirements independently without further Federal 
imposition. If such uniformity or reciprocity is not achieved 
within three years, then the National Association of Insurance 
Commissioners (NAIC) is directed to establish the National 
Association of Agents and Brokers (NARAB) under its 
supervision. The NARAB shall be a private, non-profit 
corporation, which shall establish national uniform licensing 
qualifications and continuing education requirements that would 
preempt State licensing standards for NARAB's members.
    A broker whose license has been suspended or revoked by a 
State is ineligible for NARAB membership for three years, and 
NARAB members shall remit to the States the appropriate fees 
for license renewal. The NARAB shall establish an Office of 
Consumer Complaints to investigate consumer problems and 
recommend disciplinary actions for members, referring such 
complaints to State insurance regulators where appropriate. The 
NARAB's board shall be appointed by the NAIC, and the NARAB's 
bylaws and any rules are subject to disapproval by the NAIC. 
State laws which discriminate against NARAB's members based on 
residency are preempted, as are State laws requiring additional 
licensing requirements for NARAB members, except for State 
unfair trade practices, consumer protection laws, and counter-
signature requirements. If the NAIC does not implement the 
NARAB, and the States do not meet the uniformity and 
reciprocity requirements, then the NARAB shall be created and 
supervised by the President, with its board members subject to 
the advice and consent of the Senate.

                                title iv

    Title IV effectuates the merger of the banking and thrift 
charters. This merger is a prerequisite to the merger of the 
Bank Insurance Fund (BIF) and the Savings Association Insurance 
Fund (SAIF), pursuant to the Deposit Insurance Funds Act of 
1996. The Committee had concerns with respect to this title, 
including the grandfather provisions, as reported by the 
Banking Committee. In order to provide converting thrifts with 
the greatest flexibility possible, while limiting the potential 
for risk to the safety and soundness of the banking system, and 
the potential for competitive unfairness among financial 
services providers, the Committee approved an amendment that 
expanded the ``grandfather'' provisions in the title as adopted 
by the Subcommittee on Finance and Hazardous Materials. 
Pursuant to that amendment, the grandfather provisions permit a 
savings and loan holding company that was such a holding 
company or had filed an application to become such a holding 
company as of September 16, 1997, to maintain or enter into any 
non-bank affiliation and to engage in any activity, including 
holding any asset, that was permissible pursuant to the Home 
Owners' Loan Act (HOLA) as of the day before the date of 
enactment of the Act.
    Because these expansive grandfather rights would permit a 
converted savings and loan holding company to engage in 
unlimited commercial, securities, and other activities without 
becoming subject to the limitations on these activities that 
would apply to bank holding companies and their subsidiaries 
pursuant to Titles I, II, and III of the Act, the grandfather 
rights, as approved by the Committee on Commerce, are subject 
to prudential limitations. A savings and loan holding company's 
grandfather rights cannot be transferred, and cease to exist if 
a converted savings and loan acquires control of another bank.
    In addition, the grandfather provisions of Title IV as 
approved by the Committee on Commerce eliminate provisions that 
were included in the bill as reported by the Banking Committee 
that would have permitted national banks to ``charter up,'' or 
acquire all the powers granted to savings and loan associations 
pursuant to HOLA. Those provisions would have granted banks the 
authority to engage in securities activities without becoming 
subject to the Federal securities laws, which would have been 
inconsistent with and undermined the functional regulation of 
those activities as provided in Titles I, II, and III of the 
Act.
    Title IV would merge the Office of Thrift Supervision (OTS) 
with the Office of the Comptroller of the Currency, and merge 
the SAIF and BIF.

                  Background and Need for Legislation

    The Glass-Steagall Act imposes barriers between commercial 
banking, commonly the taking of deposits and the making of 
commercial loans, and investment banking, the raising of 
capital for companies through the public offering of 
securities. The stated legislative purpose for the Glass-
Steagall Act, passed in the wake of the stock market crash of 
1929 and the ensuing Depression, was to prevent banks from 
engaging in activity deemed at the time to be too risky for 
banks, such as securities underwriting, and to prevent 
conflicts of interest between commercial and investment 
banking, which were thought to have led to speculative frenzy 
on the stock market. The principal Federal statute governing 
securities activity, the Securities Exchange Act, was enacted 
in 1934. Because commercial banks effectively were barred from 
the securities industry by the Glass-Steagall Act, the Exchange 
Act excluded banks from the definitions of ``broker'' and 
``dealer'', effectively excluding banks from broker-dealer 
regulation under the Federal securities laws.
    In recent years, the financial services industry has 
undergone significant change, largely as a result of 
administrative actions by Federal banking regulators. Actions 
by the OCC and by the Federal Reserve Board have enabled banks 
to become increasingly engaged in securities and insurance 
activities. Notably, the erosion of these limitations has 
resulted from administrative, rather than Congressional action, 
by broad interpretations of the Glass-Steagall Act and the 
National Bank Act.
    In November of 1996, the OCC announced interpretive changes 
to Part 5 of the National Bank Act, greatly expanding the 
standard for determining the scope of permissible activities 
for national banks. Pursuant to this interpretive action, 
national banks would be permitted, through their operating 
subsidiaries, to engage in activities that are statutorily 
prohibited to the bank itself. Based on these interpretive 
changes by the Comptroller, national banks to date have applied 
to the Comptroller for the authority to conduct real estate 
development in an operating subsidiary and to underwrite 
municipal revenue bonds in an operating subsidiary.
    The OCC has further undertaken numerous 
``reinterpretations'' of the National Bank Act to authorize 
increased national bank insurance activities. Of particular 
note is a decision by the OCC to reinterpret Federal banking 
laws to authorize national banks to sell insurance nationwide 
through small town branches. The OCC has also expanded the 
sphere of bank-eligible and incidental products into what many 
insurance underwriters have argued is their traditional turf.
    The Federal Reserve Board also has taken action that has 
expanded the extent to which bank holding companies, through 
their affiliates, may engage in securities activities. 
Originally,in 1987, the Federal Reserve Board permitted a bank 
holding company affiliate to derive no more than 5 percent of its gross 
revenues from securities activities. This limitation was designed to 
comply with the language of section 20 of the Glass-Steagall Act 
prohibiting commercial bankers from being ``engaged principally'' in 
investment banking. In 1989, the Federal Reserve Board raised the so-
called ``section 20 caps'' to 10 percent of the affiliate's gross 
revenues, and in 1996, raised the caps again to 25 percent. In August 
of this year, the Federal Reserve Board rescinded many of the 
prudential restrictions, commonly referred to as firewalls, imposed in 
its original section 20 order and designed to prevent the risks of 
securities underwriting and dealing from being passed to an affiliated 
bank. The Board consolidated the remaining restrictions as a series of 
eight operating standards.
    The administrative actions of the OCC have led to numerous 
court battles to define permissible lines of activities among 
financial services providers, focusing primarily upon 
activities involving insurance sales and underwriting. The 
actions of banking regulators expanding the permissible 
securities activities of banks have also led to competitive 
imbalances among financial services providers, by providing for 
differing regulatory schemes among banks, securities and 
insurance providers engaged in the same activities. The ability 
of banks to own securities firms and engage in securities and 
insurance activities, while securities and insurance firms are 
unable to own banks, has given banks competitive advantages 
that are unavailable to securities and insurance firms.
    The Financial Services Act addresses these developments by 
creating a new regulatory structure that permits affiliations 
among different financial services providers, provides for 
functional regulation of securities activities, and preserves 
State regulation of insurance activities, while preserving the 
ability of banks to engage in traditional banking activities.

                              affiliations

    Title I of the bill eliminates the barriers to affiliation 
among financial services providers that are contained in the 
Glass-Steagall Act of 1933 and the Bank Holding Company Act of 
1956, and creates a new type of financial holding company that 
is permitted to control banks, securities firms, insurance 
companies, and other financial firms. As a result, for the 
first time, securities firms and insurance companies would be 
permitted to own or affiliate with a commercial bank, thus 
creating competitive equality among financial services 
providers. Financial holding companies would be subject to 
streamlined oversight by the Federal Reserve Board to ensure 
that activities of the holding company and its affiliates are 
consistent with the preservation of the safety and soundness of 
the U.S. banking system and monetary system and are not subject 
to unnecessary or duplicative Federal regulation.
    Title I also includes provisions limiting the powers of 
operating subsidiaries of national banks to only those powers 
that are permissible for national banks to engage in, except 
that the title also authorizes national banks to own operating 
subsidiaries that are engaged in general insurance agency 
activities. These provisions are designed to limit the 
expansion of the Federal safety net that many argue would 
result if operating subsidiaries, which enjoy the subsidy 
created by the existence of Federal deposit insurance, access 
to the Federal payment system, and favorable access to the 
Federal Reserve Board discount window, were able to engage in 
securities and other activities that are prohibited to their 
parents, and to prevent the competitive disparities that would 
result from such an expansion of the Federal safety net. In 
hearings before the Subcommittee on Finance and Hazardous 
Materials, Federal Reserve Board Chairman Alan Greenspan raised 
concerns with respect to the competitive disparity that would 
be created by permitting national bank operating subsidiaries 
to engage in activities, such as securities activities, not 
permitted to the national bank itself:

          [* * *] one cannot eliminate the fact that equity 
        investment in [bank] subsidiaries is funded by the sum 
        of insured deposits and other bank borrowings that 
        directly benefit from the subsidy of the safety net.
          Thus, inevitably, a bank subsidiary must have lower 
        cost of capital than an independent entity and even a 
        subsidiary of the bank's parent [(e.g., a separately 
        capitalized affiliate)]. Indeed, one would expect that 
        a rational banking organization would, as much as 
        possible, shift its nonbank activity from the bank 
        holding company structure to the bank subsidiary 
        structure. Such a shift from affiliates to bank 
        subsidiaries would increase the subsidy and the 
        competitive advantage of the entire banking 
        organization relative to its nonbank 
        competitors.1
---------------------------------------------------------------------------
    \1\ Testimony of Alan Greenspan, Chairman, Board of Governors of 
the Federal Reserve, before the Committee on Banking and Financial 
Services, February 13, 1997. (PRINTED, Serial No. 105-1, Committee on 
Banking and Financial Services).
---------------------------------------------------------------------------

                         functional regulation

    The Committee strongly believes that functional 
regulation--regulation of the same functions, or activities, by 
the same expert regulator, regardless of the nature of the 
entity engaging in those activities--has become essential to a 
coherent financial regulatory scheme, as activities and 
affiliations expand and change within the financial 
marketplace. Title II amends the Federal securities laws to 
provide for functional regulation of securities activities.
    Subtitle A of Title II amends the Exchange Act to eliminate 
the blanket exceptions for banks from the definitions of 
``broker'' and ``dealer.'' These exceptions, which have been 
part of the Exchange Act since its inception, were included in 
the Exchange Act based on the assumption that the Glass-
Steagall Act, which had become law just one year before the 
Exchange Act, had prohibited all but extremely limited 
specified bank securities activities. Specifically, at the time 
of its enactment, the Glass-Steagall Act included exceptions 
that permitted banks to underwrite and deal in obligations of 
the United States and many of its instrumentalities, as well as 
obligations of States and their subdivisions. Amendments to the 
Glass-Steagall Act made in 1935 permitted banks to provide 
limited securities brokerage services as an accommodation to 
their customers, by permitting banks to engage in stock 
purchases and sales in an ``agency'' capacity, at the request 
of customers.
    Section 20 of the Glass-Steagall Act forbids affiliation of 
any Federal Reserve member bank with any business entity 
``principally engaged'' in investment banking activities. For 
more than fifty years following the enactment of the Glass-
Steagall Act, bank holding companies could not underwrite 
securities.
    As noted above, however, the limitations on bank securities 
activities have eroded as a result of administrative actions by 
Federal banking regulators. The rationale for the exceptions in 
the Federal securities laws that apply to banks is, thus, no 
longer sound, given the extensive and increasing securities 
activities in which banks are engaging.
    In addition, these exceptions have created a competitive 
disparity between competitors in the financial services 
marketplace by permitting banks to engage in securities 
activities without being subject to the same regulatory 
requirements that apply to broker-dealers engaging in the same 
activities. The Committee is also greatly concerned that these 
exceptions have permitted banks to engage in securities 
activities for investors who are not protected by the 
provisions of the Federal securities laws.
    Blanket exceptions from securities regulation no longer 
work for banks actively participating in securities activities. 
The Committee believes that functional regulation is necessary 
to ensure that all entities engaged in securities activities 
and securities professionals are regulated by the same 
regulatory scheme, administered by the same functional 
regulator: the Securities and Exchange Commission, which has 
over 60 years of expertise focused specifically on these 
activities. The Committee recognizes, however, that certain 
limited existing bank securities activities may remain excepted 
from SEC regulation without significantly jeopardizing investor 
protection and market integrity, based on the limited nature of 
certain activities and the existing scheme of regulation of 
other activities.
    The exceptions from the definitions of ``broker'' and 
``dealer'' in H.R. 10, as reported by the Committee on 
Commerce, reflect the Committee's commitment to ensure that 
activities that require securities regulation are subject to 
the Federal securities laws, with minimal disruption of 
traditional banking activities. The Committee has crafted these 
exceptions to preserve the ability of banks to continue to 
engage in activities that they have traditionally been engaged 
in, while preventing activities that should be subject to 
securities regulation from being conducted by banks without 
functional regulation. The Committee also notes that last year 
in the National Securities Markets Improvement Act of 1996 
(Public Law 104-290, October 11, 1996), it gave the SEC broad 
exemptive authority as new Section 36 of the Exchange Act and 
that authority can be utilized should banks require additional 
appropriate exemption in this area.

                               insurance

    Ever since the Great Depression and the enactment of Glass-
Steagall barriers between banking and commerce, questions have 
been raised over the extent to which banks should be allowed to 
participate in traditionally non-banking activities such as 
insurance. Recent regulatory actions by the OCC have greatly 
increased the controversy over appropriate bank insurance 
powers.
    The Committee's concern over the recent trend towards 
expansion of bank insurance powers is partly a recognition of 
the differing goals of traditional banking and insurance 
regulators. The primary goal of Federal banking regulators is 
to protect the liquidity and solvency of the banking system. In 
contrast, insurance regulators are primarily focused on market 
conduct of agents in terms of consumer protection and the long-
term ability of underwriters to pay claims in order to protect 
insurance consumers and State insurance guarantee funds. These 
objectives are sometimes in conflict, particularly in relation 
to the transfer of funds between bank and insurance affiliates.
    Banks are allowed to choose between a State or Federal 
charter and have some degree of regulatory arbitrage available 
in the competition between the different regulators. In 
contrast to the dual regulatory system provided for banks under 
Federal law, insurance is governed solely at the State level, 
by fifty separate State statutes. When the Supreme Court in 
1944 tried to shift the power of insurance regulation from the 
States to the Federal government, Congress passed the McCarran-
Ferguson Act, overturning the Supreme Court ruling and 
clarifying State supremacy in insurance regulation. The 
McCarran-Ferguson Act states that:

        No Act of Congress shall be construed to invalidate, 
        impair, or supersede any law enacted by any State for 
        the purpose of regulating the business of insurance, * 
        * * unless such Act specifically relates to the 
        business of insurance. 15 U.S.C. Sec. 1012(b).

    The banking and insurance regulatory systems potentially 
clash when banks become involved in insurance activities. 
Despite the limits of the McCarran-Ferguson Act, the OCC over 
the last decade has slowly been encouraging national banks to 
expand into the field of insurance, beyond what has been 
permissible under State law. When the OCC and State insurance 
regulators clash over whether a product is a banking or 
insurance activity and how it should be regulated, courts, as a 
result of the United States Supreme Court Chevron ruling, defer 
to reasonable interpretations of law by Federal regulators--in 
this case, the OCC. In Barnett Bank of Marion County, N.A. v. 
Nelson, the Supreme Court upheld the OCC's Federal preemption 
of State insurance law, ruling that State regulation would only 
be applicable where it did not ``prevent or significantly 
interfere'' with the Federally authorized activities of a 
national bank.
    Because the courts are required to give deference to 
Federal agencies over State regulators, this gives the OCC the 
upper hand in choosing which insurance powers it wants to give 
to its Federally chartered banks, and which State laws it wants 
to preempt or allow. For example, the OCC is currently 
considering whether to preempt Rhode Island law governing bank 
insurance sales, which sets forth licensing and disclosure 
requirements, as well as limits on the sale of insurance by 
loan officers. The OCC has also expanded the ``town of 5,000'' 
law, whichpermitted bank insurance sales within small towns, to 
allow insurance sales nationwide through banks which have a branch in a 
small town.
    The Committee also recognizes, however, that a majority of 
States now allow their State chartered banks some degree of 
permissible insurance activities. Many States have ``wild 
card'' statutes which allow their State chartered banks parity 
with any insurance powers authorized by the OCC for Federally 
chartered banks, in order to equalize competition and lessen 
the number of banks that switch charters to take advantage of 
the regulator offering them the most new powers and the least 
regulation. The Committee also received testimony from numerous 
witnesses pointing out that bank insurance activities could 
increase consumer choice and create greater synergies, 
particularly in under-served communities. Additional testimony 
was received on the advantages of uniform national insurance 
standards over 50plus different State standards, many of which 
are arguably anti-competitive or discriminatory in nature.
    In considering the appropriate level of regulation and 
consumer protection that should be applied to banks, the 
Committee took particular note of the Illinois State bill 
governing bank insurance activities. This agreement was jointly 
negotiated and widely supported by all of the involved 
industries and addresses many of the same issues involved in 
the current Glass-Steagall reform legislation.
    In reviewing the Illinois agreement, the Committee received 
oral and written testimony from agent associations and consumer 
groups indicating concern about banks tying their customer 
loans into insurance purchases. While Federal law prohibits 
direct tying, the fear is that many bank customers applying for 
a loan will mistakenly believe that their loan approval 
probability would increase if they also purchased insurance 
from the bank. The Illinois bill requires written disclosures 
and signage noting a consumers ``Freedom of Choice'' to agree 
to or reject insurance solicitations without impairing the loan 
approval. For large bank branches with over $100 million in 
deposits, the Illinois law also requires the loan officer to 
refer the customer to another individual (not involved in that 
particular loan transaction) at a different desk.
    The Committee also heard testimony on the importance of 
distinguishing between insurance and banking products for the 
purpose of determining bank underwriting eligibility and 
regulation. When Glass-Steagall was first enacted, the lines 
between traditional bank and insurance products were readily 
discernable and easy to draw. Recently, these lines have become 
increasingly blurred, as many modern financial products are 
hybrids of banking, securities, and insurance services. For 
example, a variable annuity might include elements of actuarial 
expectations (insurance), traditional bank savings, and 
securities investments.
    Currently, the courts are required to defer to the OCC's 
determination of whether an insurance related instrument is a 
bank product, or even ``incidental'' to a banking product. Past 
legislative proposals have tried to define insurance, based on 
either specific definitions or according to current State law. 
Other proposals have separately, or in conjunction with a 
definition, tried to create a dispute resolution system to 
equalize the deference given to the banking regulator over the 
insurance regulators.
    H.R. 10, as reported by the Banking Committee, provided 
that a bank may not underwrite (noncredit-related) insurance 
directly or in an operating subsidiary, except for products 
currently offered or which banks are expressly authorized to 
offer by the OCC as of January 1, 1997. It further defined 
insurance as any product regulated as of January 1, 1997, by 
the States as insurance, and any new form of such product that 
is developed in the future, as well as any annuity contract. If 
the Comptroller classified a new product as a banking product 
based on the definitions of current banking products, then a 
State insurance regulator could challenge such determination 
with a newly created National Council on Financial Services 
(the Council). In such case, the Council would submit the 
petition to the Federal Reserve Board, which determines if the 
arguments raised a substantial question on the merits. If so, 
the Council may conduct a public hearing on the issue and then 
resolve the issue. The State insurance regulator, the 
Comptroller, or other affected party may then appeal the 
Council's decision to the Federal Court of Appeals for judicial 
review.
    Many banks objected to the definitions of insurance and 
banking products in H.R. 10, as reported by the Banking 
Committee, arguing that the insurance definition is too 
expansive, potentially allowing a State insurance regulator to 
preclude a bank from offering a future hybrid product that is 
primarily a core banking activity. Numerous industry groups and 
various Federal and State financial regulators also criticized 
the regulatory role of the newly created Council. This 
resolution process adopted by the Banking Committee was 
intended to overcome problems with the Supremacy clause and the 
Chevron doctrine--which effectively resulted in the Comptroller 
trumping any insurance product determination by State 
regulators. Eliminating the Council requires the creation of an 
alternative dispute resolution process which allows a 
regulatory conflict between a State insurance regulator and 
Federal banking regulators to be determined on the merits, not 
based on deference to the regulators of one particular 
industry.

                             THRIFT CHARTER

    As reported by the Banking Committee, H.R. 10 included a 
title that would require that all Federal savings associations 
convert to national banks within two years after the date of 
enactment. At that time, State-chartered savings associations 
would be treated as commercial banks for purposes of Federal 
banking law. However, section 316 of the Banking Committee 
thrift title specifically limits the supervision and regulation 
of converted savings and loan holding companies for a period of 
three years after becoming bank holding companies to the same 
manner and extent and subject to the same requirements as 
heretofore administered by the Office of Thrift Supervision 
(OTS). The title also provided for the merger of the OTS with 
the OCC, as well as the merger of the Savings Association 
Insurance Fund (SAIF) and the Bank Insurance Fund (BIF).
    This title would carry out the merger of the banking and 
thrift charters as required by the Deposit Insurance Funds Act 
of 1996 as a prerequisite to the merger of the BIF and the 
SAIF.
    The Committee on Commerce has retained this title in large 
part, with amendments to provisions within the Committee's 
jurisdiction relating to the grandfathering of securities and 
other powers by converting savings and loan associations.
    The Committee on Commerce continues to have significant 
concerns about retaining this title in the Act as the 
legislation proceeds to consideration by the full House of 
Representatives. Existing savings and loan institutions and 
holding companies, as well as the many institutions that have 
applied for a savings and loan charter in recent months, have 
raised concerns that eliminating the savings and loan charter 
will reduce competition within the financial marketplace and 
needlessly eradicate a useful and flexible vehicle that is 
instrumental in providing mortgage financing. Moreover, if this 
title is retained by the House, the Committee has serious 
reservations about exempting these converted holding companies 
from the same prudential safeguards applicable to all other 
financial holding companies both as regards fair competition 
and consistent protections for investors, consumers, and 
taxpayers.

                                Hearings

    The Subcommittee on Finance and Hazardous Materials held 
three oversight hearings on Financial Services Reform on May 1, 
1997, May 14, 1997, and June 24, 1997. The hearing on May 1, 
1997 focused on A Two Way Street and Functional Regulation. The 
Subcommittee received testimony from the following witnesses: 
Mr. James F. Higgins, President, Dean Witter Financial, Dean 
Witter, Discover and Company; Mr. Mark Sutton, Executive Vice 
President and Director of Private Client Group, Paine Webber, 
Inc.; Mr. Arnold D. Scott, Senior Executive Vice President, 
Massachusetts Financial Services Company; Ms. Cheryl Cook-
Snyder, Partner, Edward D. Jones, Inc.; Mr. Mark Pope, Vice 
President and Director of Federal Government Relations, Lincoln 
National Corporation; and Mr. W. Craig Zimpher, Vice President, 
Government Relations, Nationwide Insurance Enterprise.
    On May 14, 1997, the Subcommittee held a hearing which 
focused on Consolidation in the Brokerage Industry. The 
Subcommittee received testimony from the following witnesses: 
Mr. Saul S. Cohen, Proskauer Rose Goetz, & Mendelsohn, LLP; Mr. 
Brandon Becker, Wilmer, Cutler & Pickering; Mr. Martin Mayer, 
Economic Studies Program, The Brookings Institution; and The 
Honorable Richard C. Breeden, Richard C. Breeden & Co.
    On June 24, 1997, the Subcommittee concluded its oversight 
hearings with a hearing on Insurance Regulation. The 
Subcommittee received testimony from the following witnesses: 
Mr. Glenn Pomeroy, Vice President, National Association of 
Insurance Commissioners; Mr. Dino Gavanes, CIC, Premier Risk 
Services, Inc., representing the Professional Independent 
Insurance Agents of Illinois and Illinois Life Underwriters 
Association; Mr. Arthur Wilkinson, Chief Executive Officer, 
State Bank of Bement; Dr. Nicos A. Scordis, Economist, College 
of Insurance; and Mr. Larry Zimpleman, President, American 
Academy of Actuaries.
    In addition, the Subcommittee on Finance and Hazardous 
Materials held three days of legislative hearings on H.R. 10, 
the Financial Services Competitiveness Act of 1997, on July 17, 
1997, July 25, 1997, and July 30, 1997.
    On July 17, 1997, the Subcommittee received testimony on 
H.R. 10 from the following witnesses: The Honorable Arthur 
Levitt, Chairman, Securities and Exchange Commission; The 
Honorable John D. Hawke, Jr., Under Secretary, Department of 
the Treasury; The Honorable Alan Greenspan, Chairman, Board of 
Governors, Federal Reserve System; The Honorable George 
Nichols, III, Chairman, Former Special Committee on Banks and 
Insurance, Commissioner of Insurance, Kentucky Department of 
Insurance, representing: The National Association of Insurance 
Commissioners; The Honorable Eugene Ludwig, Comptroller, Office 
of the Comptroller of the Currency; Mr. William J. Baer, 
Director, Bureau of Competition, Federal Trade Commission; The 
Honorable Andrew C. Hove, Jr., Acting Chairman, Federal Deposit 
Insurance Corporation; The Honorable Thomas E. Geyer, 
Commissioner of Securities, State of Ohio, representing North 
American Securities Administrators Association; The Honorable 
Nicolas Retsinas, Director, Office of Thrift Supervision; and 
The Honorable Catherine A. Ghiglieri, Banking Commissioner, 
State of Texas, representing the Conference of State Bank 
Supervisors.
    On July 25, 1997, the Subcommittee received testimony on 
H.R. 10 from the following witnesses: Mr. Mark S. Pope, Vice 
President, Federal Government Affairs, Lincoln National 
Corporation; Mr. L. Gerald Roach, President, Mutual Assurance 
Society of Virginia; Mr. Kenneth S. Cohen, Senior Vice 
President, Massachusetts Mutual Life Insurance Company; Mr. 
John P. Hamill, President, Fleet Bank; Ms. Ann M. Kappler, 
Partner, Jenner & Block, representing the Independent Insurance 
Agents of America, Inc., the National Association of Life 
Underwriters, and the National Association of Professional 
Insurance Agents; Mr. Steven C. Alonso, President, Banc One 
Financial Services Inc.; Mr. Dan R. Wentzel, Chairman and Chief 
Executive Officer, North American Title Company; Mr. Harold U. 
Blythe, President and Chief Executive Officer, James River 
Bankshares Inc.; and Mr. Albert R. Counselman, CPCU and 
Chairman, Riggs, Counselman, Michaels, Downs.
    On July 30, 1997, the Subcommittee received testimony on 
H.R. 10 from the following witnesses: Mr. James S. Riepe, 
Managing Director, T. Rowe Price Associates, Inc.; Mr. Harley 
Bergmeyer, Chairman, President, and Chief Executive Officer, 
Saline State Bank, Wilber, Nebraska; and Ms. Mary Griffin, 
Insurance Counsel, Consumers Union.

                        Committee Consideration

    On October 24, 1997, the Subcommittee on Finance and 
Hazardous Materials met in an open markup session and 
considered a Committee Print dated October 23, 1997, which was 
made in order as original text for the purposes of amendment. 
The Subcommittee approvedH.R. 10, the Financial Services Act of 
1997, for Full Committee consideration by a roll call vote of 23 yeas 
to 2 nays, amended with an amendment in the nature of a substitute 
consisting of the text of the Committee Print dated October 23, 1997, 
as amended by the Subcommittee.
    On October 30, 1997, the Full Committee met in an open 
markup session and considered a Committee Print showing H.R. 
10, as adopted by the Subcommittee on Finance and Hazardous 
Materials, which was made in order as original text for the 
purposes of amendment. The Full Committee ordered H.R. 10, the 
Financial Services Act of 1997, reported to the House by a roll 
call vote of 33 yeas to 11 nays, with 2 voting present, amended 
with the text of a Committee Print showing H.R. 10, as adopted 
by the Subcommittee on Finance and Hazardous Materials, as 
amended by the Full Committee.

                             Rollcall Votes

    Clause 2(l)(2)(B) of rule XI of the Rules of the House 
requires the Committee to list the recorded votes on the motion 
to report legislation and amendments thereto. The following 
includes the recorded vote on the motion to report H.R. 10, 
including the names of those members voting for and against, 
and the list of amendments considered during the Full Committee 
markup.


                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of 
the House of Representatives, the Committee held legislative 
and oversight hearings and made findings that are reflected in 
this report.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

               New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee finds that 
H.R 10, the Financial Services Act of 1997, would result in no 
new or increased budget authority or tax expenditures or 
revenues.

  Committee Cost Estimate, Congressional Budget Office Estimate, and 
                       Federal Mandates Statement

    At the time of the filing of this report, the Congressional 
Budget Office's (CBO's) analysis of the amendment to H.R. 10 
reported by the Committee on Commerce concerning cost estimates 
and unfunded mandates was not available. The CBO analysis will 
be provided in a supplement to this report.
    Based upon consultation with the Congressional Budget 
Office and CBO's analysis of H.R. 10 as reported by the Banking 
Committee, the Committee on Commerce finds that the Committee 
amendment to H.R. 10 will: (1) have little or no effect on the 
Federal budget over time; and (2) does not create any unfunded 
mandates above the threshold established under the Unfunded 
Mandates Reform Act.
    CBO's analysis of H.R. 10 as reported by the Banking 
Committee indicated that the legislation would create certain 
private sector mandates because of provisions of the subtitle 
affecting the Federal Home Loan Bank System. The Committee on 
Commerce deleted this subtitle in its entirety from its 
amendment to H.R. 10. Thus, the Committee finds that the 
private sector mandates analysis of the CBO is not relevant to 
the Committee on Commerce's amendment.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

Section 1. Short title; purposes

    Section 1 designates the Act as the ``Financial Services 
Act of 1997''.

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

                        Subtitle A--Affiliations

Section 101. Glass-Steagall Act reformed

    Section 101 of the Financial Services Act of 1997 (the Act) 
repeals Section 20 and Section 32 of the Banking Act of 1933, 
the anti-affiliation provisions of the Glass-Steagall Act.
    Section 20 currently prohibits any bank that is a member of 
the Federal Reserve System from affiliating with any company 
that is ``engaged principally in the issue, floatation, 
underwriting, public sale or distribution'' of securities (12 
U.S.C. 377). The effect of repealing Section 20 is to permit 
affiliations between securities firms and banks regardless of 
the type or volume of securities activities conducted by the 
securities firm.
    This change is intended to facilitate a two way competitive 
street between securities firms, insurance companies, and 
banks. Under current law, banking regulators have effectively 
allowed banks into the securities business and the business of 
insurance sales. Securities firms and insurance companies are 
statutorily barred from owning insured depository institutions. 
Repeal of this section is necessary to facilitate a two way 
street.
    Section 32 currently prohibits any officer, director, or 
employee of a company ``primarily engaged in the issue, 
floatation, underwriting, public sale, or distribution'' of 
securities from serving simultaneously as an officer, director, 
or employee of any member bank, except asallowed by the Federal 
Reserve Board (12 U.S.C. 78). Repealing Section 32 will permit banks 
and securities firms to have common officers, directors, and employees.

Section 102. Activity restrictions applicable to bank holding companies 
        which are not financial holding companies

    Section 102 amends Section 4(c)(8) of the Bank Holding 
Company Act of 1956, as amended (HCA), to permit all bank 
holding companies to engage in those activities that the 
Federal Reserve Board has determined, by regulation in effect 
as of the day before enactment of the Act, to be so closely 
related to banking as to be a proper incident thereto. Bank 
holding companies that qualify as financial holding companies 
also may engage in those activities authorized under Section 6 
of the HCA, as added by Section 103 of the Act. Section 102 
also makes technical and conforming amendments to Section 105 
of the Bank Holding Company Act Amendments of 1970 and Section 
4(f) of the Bank Service Company Act.

Section 103. Financial holding companies

    Section 103 adds a new Section 6 to the Bank Holding 
Company Act and creates a structure for affiliations, entitled 
``Financial Holding Companies.'' This section establishes the 
new framework for affiliations between and among securities 
firms, insurance companies, banks, and other financial 
entities. The framework adopted in Section 6 is significantly 
different than that currently found in Section 4 of the Bank 
Holding Company Act.
    This section permits financial holding companies to 
affiliate with any company engaged in activities that are 
``financial in nature'' or that are incidental to activities 
that are financial in nature (even if the incidental activity 
is not itself financial in nature). Certain activities, 
including insurance and securities underwriting activities, 
investment advisory activities, and merchant banking 
activities, are deemed to be financial in nature by the Act.
    Financial holding companies also may engage in any other 
activity that the Federal Reserve Board determines or has 
determined to be financial in nature. The ``financial in 
nature'' test established by section 103 is significantly more 
flexible than the ``closely related to banking'' standard in 
current law and permits authorization of financial activities 
that banks cannot conduct or are not equipped to conduct. In 
defining these activities, the Federal Reserve Board is 
required to take into account factors such as the Act's 
authorization of affiliations between banks, securities firms, 
insurance companies, investment advisers and others, as well as 
technological and other changes in the marketplace for 
financial products and services, and whether it is appropriate 
to permit financial holding companies to conduct the activity 
in order to compete effectively with other companies that 
provide financial services.
    Financial holding companies are also permitted by section 
103 to engage in and acquire companies engaged in a limited 
basket of nonfinancial activities. In addition, companies that 
become both a bank holding company and a financial holding 
company after the date of enactment of the Act are permitted to 
retain nonfinancial activities and affiliations so long as the 
company remains predominantly engaged in financial activities. 
These expanded financial and nonfinancial affiliations are 
permissible for holding companies that meet the criteria set 
forth for financial holding companies. This is a new test that 
is independent of the restrictions contained in the Bank 
Holding Company Act. Existing holding companies may limit their 
activities to those that currently are permissible under 
section 4 of the Bank Holding Company Act may do so without 
meeting the requirements for being a financial holding company.
            a. Financial holding companies
    As set forth in section 6(b), a bank holding company 
qualifies as a financial holding company if all of the holding 
company's subsidiary depository institutions are well 
capitalized, well managed, and have a satisfactory or better 
rating under the Community Reinvestment Act of 1977 (CRA) as of 
the most recent examination of the depository institution.
            b. Financial activities
    The Act provides specifically that certain activities are 
financial in nature, including insurance and securities 
underwriting activities; activities that the Federal Reserve 
Board previously has determined by order or regulation to be 
closely related to banking; financial, investment or economic 
advisory services; activities conducted in the United States 
that the Federal Reserve Board has found by regulation to be 
both permissible for a bank holding company and usual in 
connection with the transaction of banking or other financial 
operations abroad; and issuing or selling instruments 
representing interests in pools of assets permissible for a 
bank to hold directly. Section 6(c) also authorizes a financial 
holding company to engage in any activity that the Federal 
Reserve Board has determined to be financial in nature or 
incidental to such financial activities. In determining whether 
an activity is financial in nature or incidental to financial 
activities, the Federal Reserve Board is directed to take into 
account changes or reasonably expected changes in the 
marketplace in which financial holding companies compete and 
changes in the technology by which these services are 
delivered. Section 6 also gives the Federal Reserve Board broad 
authority to define and authorize other activities as financial 
in nature or incidental to financial activities, and directs 
the Federal Reserve Board to define the permissible scope of 
several activities, including arranging financial transactions 
for the account of third parties, transferring financial assets 
and lending or investing financial assets other than money or 
securities.
    Section 6(c)(3)(H) authorizes a financial holding company 
that controls a securities firm to own an interest in any 
company as part of a bona fide underwriting or merchant banking 
activity. Section 6(c)(3)(I) authorizes an insurance company 
that is predominantly engaged in insurance underwriting and is 
controlled by a financial holding company to make investments 
in any company in the ordinary course of its insurance business 
and in accordance with State law. Under these provisions, a 
financial holding company may not directlyor indirectly engage 
in merchant banking or insurance company investment activities under 
these subsections and may not engage in covered transactions (as 
defined in Section 23A of the Federal Reserve Act) with any affiliate 
engaged in merchant banking or insurance company investment activities.
            c. Authority to engage in financial activities
    Section 6(c) provides that a financial holding company may 
engage, directly or indirectly, in any financial activity 
authorized under Section 6 (other than the acquisition of a 
savings association) without the prior approval of the Federal 
Reserve Board. This change is intended to facilitate the 
entrepreneurial culture of investment banks which take risk 
without need for prior government approval of their activities. 
In order to inform the Federal Reserve Board of the company's 
activities, the financial holding company must provide the 
Federal Reserve Board with written notice within 30 days of 
commencing an activity or acquiring shares of a company under 
Section 6(c).
            d. Noncompliance with the criteria for financial holding 
                    companies
    Section 6(d) sets out the procedures to be followed if a 
financial holding company or its subsidiaries fail to continue 
to meet the capital, management and CRA requirements set out in 
Section 6(b) for such companies and subsidiaries. If the 
Federal Reserve Board finds that a financial holding company is 
not in compliance with the requirements contained in Section 
6(b), the Federal Reserve Board must provide notice to the 
company. The company must, within 45 days of receipt of such 
notice (or such additional period as the Federal Reserve Board 
may permit), execute an agreement with the Federal Reserve 
Board to comply with the requirements for financial holding 
companies. Until the company complies with the requirements of 
Section 6(b), the Federal Reserve Board may impose such 
limitations on the company or an affiliate as the Federal 
Reserve Board deems appropriate. If a financial holding company 
has not restored its subsidiary depository institutions to 
compliance with the capital, managerial, or CRA requirements of 
Section 6(b) within specified time periods, the Federal Reserve 
Board may require the company either to divest control of any 
subsidiary depository institution or cease engaging in any 
activity under Section 6. The Federal Reserve Board may take 
similar action if the company fails to execute and implement an 
agreement with the Federal Reserve Board, or abide by any 
limitations imposed by the Federal Reserve Board under Section 
6(d).
            e. Internal controls
    Section 6(e) requires a financial holding company to have 
appropriate internal controls to assure that its procedures for 
identifying and managing financial and operational risks within 
the company and its subsidiaries adequately protect the 
company's subsidiary insured depository institutions from such 
risks and that it has reasonable policies and procedures to 
preserve the separate corporate identity and limited liability 
of the company and its subsidiaries for the protection of the 
subsidiary insured depository institutions.
            f. Limited basket of nonfinancial activities; grandfather 
                    rights
    Section 6(f) permits any financial holding company to 
engage in, or acquire the shares of a company engaged in, a 
limited basket of nonfinancial activities. First, the aggregate 
annual gross revenues derived by the financial holding company 
from all such activities and all such companies must not exceed 
5 percent of the financial holding company's consolidated 
annual gross revenue or $500,000,000, whichever is less. For 
purposes of determining compliance with the revenue limitation, 
the revenues of all activities conducted or companies held 
pursuant to the grandfather rights established by Section 6(g) 
must be included in the basket. Second, a financial holding 
company may not acquire the shares of any company that has 
consolidated total assets of $750,000,000 or more at the time 
of the acquisition. To inform the Federal Reserve Board of the 
company's activities, a financial holding company that engages 
in a nonfinancial activity, or acquires the shares of a company 
engaged in a nonfinancial activity, must provide the Federal 
Reserve Board with notice within 30 days of commencing the 
activity or acquiring the shares.
    Section 6(g) permits a company (other than a bank holding 
company or a foreign bank) that becomes a financial holding 
company after the date of enactment of the Act to retain those 
nonfinancial investments and activities that the company held 
or engaged in as of September 30, 1997. To qualify for these 
grandfather rights, the company must have derived at least 85 
percent of its annual gross revenues from financial activities 
as of the day before the company became a financial holding 
company. Thus, an eligible company that becomes a financial 
holding company after the date of enactment of the Act may 
continue to engage in nonfinancial activities under section 
6(g) provided that such activities did not comprise more than 
15 percent of the company's annual gross revenues on the day 
before the company acquired a bank. Section 6 limits the 
expansion of these grandfathered nonfinancial activities. Any 
company engaged in grandfathered activities under Section 6(g) 
may engage in new activities, acquire shares of a company or 
acquire assets of a company in a merger, consolidation or other 
business combination only to the extent otherwise permissible 
for non-grandfathered companies under Section 6. An insured 
depository institution subsidiary of a financial holding 
company that engages in nonfinancial activities or owns any 
company engaged in nonfinancial activities may not engage in 
covered transactions (as defined in Section 23A of the Federal 
Reserve Act) with any affiliate engaged in nonfinancial 
activities. All depository institution subsidiaries of the 
company also are prohibited from engaging in cross marketing 
activities with such nonfinancial affiliates, as well as with 
any affiliate held pursuant to the merchant banking or 
insurance company investment authority.
            g. Developing activities
    Section 6(h) allows all financial holding companies to 
engage in a limited amount of financial activities in 
circumstances where the Federal Reserve Board has not 
previously considered whether the activity in question is 
financial in nature. This section has been specifically 
included by the Committee to allow financial holding companies 
to respond quickly and efficiently to developments in the 
financial services industry. In particular, a financialholding 
company may engage in an activity that the Federal Reserve Board has 
not yet determined to be a financial activity if the holding company 
reasonably believes that the activity is financial in nature or 
incidental to financial activities. The company's determination must 
take into consideration the factors set forth in section 6(c), as well 
as actions taken by the Federal Reserve Board under section 6(c), 
including whether the Federal Reserve Board previously has determined 
that the activity is not financial in nature (or incidental to 
financial activities). Activities conducted pursuant to section 6(h) 
also are subject to certain revenue, asset, and capital investment 
limitations. A financial holding company must provide the Federal 
Reserve Board with written notice within 10 business days of acquiring 
shares or commencing an activity under section 6(h).

Section 104. Certain State affiliation laws preempted

    Section 104 prohibits States from preventing or restricting 
an insured depository institution or wholesale financial 
institution (as established in section 136 of the Act) from 
being affiliated with any entity where such affiliation is 
permitted by the Act or section 17(i) of the Securities 
Exchange Act of 1934 (Exchange Act). The section also prohibits 
States from preventing or significantly interfering with the 
ability of a national bank or a wholesale financial institution 
to engage, directly or indirectly or in conjunction with such 
any affiliate permitted under the HCA or section 17(i) of the 
Exchange Act, in any activity authorized under sections 6 or 10 
of the HCA or section 17(i) of the Exchange Act.
    Although the Committee intends the new subsection (c)(2) of 
section 7 of the Bank Holding Company Act of 1956 (12 U.S.C. 
1846) to be parallel to the analysis of the United States 
Supreme Court in Barnett Bank of Marion County, N.A. v. Nelson, 
116 S. Ct. 1103 (1996), it does not intend, by implication or 
otherwise, to expand or narrow the scope of the Barnett ruling.

Section 105. Mutual bank holding companies authorized

    Section 105 provides that mutual bank holding companies 
will be regulated similarly to other bank holding companies.

Section 106. Prohibition on deposit production offices

    Section 106 applies the provisions of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act regarding 
deposit production offices and out-of-State lending to any 
interstate branch established or acquired under this Act. In 
addition, this section expands the definition of interstate 
branch for purposes of the deposit production provisions to 
include all branches of a bank owned by an out-of-State bank 
holding company.

Section 107. Clarification of branch closure requirements

    Section 107 applies the provisions of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act regarding 
branch closures by an interstate bank to any branch of a bank 
that is controlled by an out-of-State bank holding company.

Section 108. Amendments relating to limited purpose banks

    Limited purpose banks are banks that do not accept demand 
deposits and make commercial loans, but that are insured by the 
Federal Deposit Insurance Corporation (FDIC). Prior to 1987, 
companies that controlled limited purpose banks were not 
subject to the HCA. The Competitive Equality Banking Act of 
1987 grandfathered those companies that controlled a limited 
purpose bank in existence at the time. In order to retain their 
exemption from the HCA, grandfathered companies and the limited 
purpose banks they control are required to comply with certain 
restrictions.
    Specifically, a limited purpose bank currently is not 
allowed to engage in any activity in which it was not engaged 
in as of March 5, 1987. Section 108 permits well capitalized 
and well managed limited purpose banks to engage in any banking 
activity, but maintains the restriction whereby limited purpose 
banks are permitted to either accept demand deposits or make 
commercial loans, but not both. Limited purpose banks that 
accept demand deposits would continue to be restricted in their 
ability to engage in making traditional commercial loans, but 
the section would permit them to issue corporate credit cards 
(e.g., cards used by business employees for travel and 
entertainment expenses). This section also amends current law 
to permit limited purpose banks to cross market affiliate 
products.
    Current law requires divestiture of a limited purpose bank 
that violates the established activities restrictions. Section 
108 amends current law to permit limited purpose banks to avoid 
divestiture by correcting violations within six months upon 
receiving notice from the Federal Reserve Board.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

    This subtitle establishes a new system of supervision for 
financial holding companies and their affiliates. The Committee 
determined that because securities firms and insurance 
companies will be important components of these holding 
companies, a new regulatory structure for them would be 
appropriate, consistent with the Committee's interest in 
securities and exchanges and regulation of the business of 
insurance.

Section 111. Streamlining financial holding company supervision

    This section makes significant changes in the role of the 
Federal Reserve Board in overseeing holding companies. The 
Committee determined that these changes are necessary 
toimplement the two way street and avoid duplicative regulation of 
securities firms and insurance companies. Section 111 changes the 
reporting and examination requirements currently applicable to bank 
holding companies under section 5(c) of the Bank Holding Company Act. 
These changes were made because the Committee determined that the new 
structure being established for financial services companies including 
securities firms and insurance companies necessitated different 
regulatory treatment.
    Section 111 provides that the Federal Reserve Board may not 
examine the non-bank subsidiaries of financial services holding 
companies, absent exigent circumstances. The Committee 
determined that although it was appropriate for the Federal 
Reserve Board to have supervisory authority over holding 
companies, the authority over affiliates should be confined to 
the functional regulators. Section 111 requires the Federal 
Reserve Board, to the fullest extent possible, to focus its 
examinations on the holding company and affiliates that may 
pose a material risk to a depository institution affiliate. The 
Federal Reserve Board must use reports of examinations made by 
the Securities and Exchange Commission (SEC), State insurance 
regulators and other authorities that the Federal Reserve Board 
finds comprehensively supervise an affiliate. The Federal 
Reserve Board may examine a bank holding company and its 
subsidiaries to inform the Federal Reserve Board of: (1) the 
nature of the operations and financial condition of the holding 
company and its subsidiaries; (2) the financial and operational 
risks within the holding company system that may pose a threat 
to the safety and soundness of any subsidiary depository 
institution; and (3) the company's systems for monitoring and 
controlling such risks.
    The Federal Reserve Board may examine a functionally 
regulated non-depository subsidiary only if the Federal Reserve 
Board has reasonable cause to believe that the subsidiary (1) 
is engaged in activities that pose a material risk to an 
affiliated depository institution, or (2) is not in compliance 
with the provisions of the Bank Holding Company Act, as amended 
by this Act, or with the provisions governing transactions with 
affiliated depository institutions, and the Federal Reserve 
Board cannot determine compliance through an examination of the 
bank holding company or its subsidiary depository institutions.
    The Federal Reserve Board shall, to the fullest extent 
possible, use the reports provided by the bank holding company 
or subsidiary to other Federal or State regulatory agencies or 
appropriate self-regulatory organizations, information that is 
otherwise publicly reported and audited financial statements. 
If the Federal Reserve Board seeks a report from a functionally 
regulated subsidiary (i.e., a registered securities broker or 
dealer, a registered investment adviser with regard to 
investment advisory activities, an insurance company, or an 
entity regulated by the Commodity Futures Trading Commission 
(CFTC) with respect to commodities activities) of a bank 
holding company that is not required by the subsidiary's 
functional regulator or appropriate self-regulatory 
organization, the Federal Reserve Board must first ask the 
subsidiary's functional regulator or appropriate self-
regulatory organization to obtain the report.
    Section 111 also provides that the Federal Reserve Board 
may not impose any capital adequacy rules, guidelines or other 
actions on a non-depository subsidiary of a bank holding 
company that is in compliance with the applicable capital 
requirements of another Federal regulatory authority or State 
insurance authority. The Federal Reserve Board also may not 
impose capital adequacy rules on a non-depository subsidiary 
that is a registered investment adviser with respect to such 
subsidiary's investment advisory or incidental activities. The 
Committee determined that the SEC and the State insurance 
regulators are better situated to regulate these entities.
    Section 111 authorizes the Federal Reserve Board to 
designate the appropriate Federal banking agency for the bank 
holding company's lead depository institution as the 
appropriate Federal banking agency for the bank holding company 
if the bank holding company is not significantly involved in 
nonbanking activities. In such circumstances, the designated 
Federal banking agency would have the same authority as the 
Federal Reserve Board to take actions under specified provision 
of the Bank Holding Company Act and other specified laws.
    This section also requires the Federal Reserve Board to 
defer to the SEC regarding the interpretation and enforcement 
of applicable Federal securities laws relating to the 
activities of registered brokers, dealers, investment advisers, 
and investment companies. The Committee also expects the Office 
of the Comptroller of the Currency (OCC) and the Office of 
Thrift Supervision (OTS) to defer to the SEC with regard to the 
interpretation and application of the Federal securities laws 
relating to the activities of registered brokers, dealers, 
investment advisers, and investment companies that are 
subsidiaries of national banks or thrifts. In addition, this 
section requires the Federal Reserve Board to defer to the 
relevant State insurance authorities regarding the 
interpretation and enforcement of applicable State insurance 
laws relating to the activities of insurance companies and 
agents.
    The standards established in section 111 for the 
supervision of holding companies are consistent with standards 
adopted internationally and by some major trading partners of 
the United States.

Section 112. Elimination of application requirement for financial 
        holding companies

    Section 5(a) of the Bank Holding Company Act is amended to 
provide that a declaration filed under section 6 by a company 
seeking to be a financial holding company satisfies the bank 
holding company registration requirement but not any 
requirement to file an application to acquire a bank under 
section 3. The divestiture provisions of section 5(e) are 
amended to allow a bank holding company to make a choice 
between divesting a nonbanking subsidiary and divesting an 
insured depository institution.

Section 113. Authority of state insurance regulator and Securities and 
        Exchange Commission

    This section limits the Federal Reserve Board's ability to 
require that an insurance company or a registered broker or 
dealer provide funds to an affiliated bank if the State 
insurance authority or the SEC determines in writing that such 
action would have a materially adverse effect on the financial 
condition of the insurance company or the broker or dealer. 
TheCommittee determined that this provision was necessary to make clear 
that the source of strength doctrine does not extend to securities and 
insurance affiliates of banks. The section allows the Federal Reserve 
Board to require the bank holding company to divest the bank within 180 
days of receiving such notice from the State insurance authority or the 
SEC.

Section 114. Prudential safeguards

    Section 114 authorizes the Federal Reserve Board to impose 
restrictions on relationships or transactions between a 
depository institution subsidiary of a bank holding company and 
any of its affiliates other than a subsidiary of the depository 
institution. Such restrictions may be imposed to avoid 
significant risk to the safety and soundness of depository 
institutions or to the Federal deposit insurance funds. 
Restrictions also may be imposed for the purpose of enhancing 
the financial stability of financial holding companies, 
avoiding conflicts of interest, enhancing the privacy of 
customers, and promoting the application of national treatment 
and equality of competitive opportunity between domestic and 
foreign bank holding companies. The Federal Reserve Board is 
required to regularly review the continuing need for any 
restrictions that may be imposed. Limitations are imposed by 
section 116 on the Federal Reserve Board's authority to 
establish prudential safeguards under section 114 on certain 
functionally regulated affiliates. The Committee determined 
that these limitations were appropriate to avoid duplicative 
regulation.

Section 115. Examination of investment companies

    Section 115 provides that the Federal banking agencies may 
not examine or inspect a registered investment company that is 
not a bank holding company. The SEC is granted sole authority 
to inspect such registered investment companies and must 
provide to the Federal banking agencies, upon request, the 
results of any examination or other information with respect to 
a registered investment company.

Section 116. Limitation on rulemaking, prudential, supervisory, and 
        enforcement authority of the Board

    Section 116 adds a new Section 10A to the Bank Holding 
Company Act (HCA) that provides that the Federal Reserve Board 
may not take any action under the HCA or section 8 of the 
Federal Deposit Insurance Act (FDIA) against a regulated 
subsidiary of a bank holding company unless such action is 
necessary to prevent or redress an unsafe or unsound practice 
or breach of fiduciary duty by such subsidiary that poses a 
material risk to the financial safety, soundness or stability 
of an affiliated depository institution or to the domestic or 
international payment systems. This section is intended to 
protect regulated subsidiaries of financial holding companies 
from duplicative regulation by the Federal Reserve Board. This 
section prohibits the Federal Reserve Board from regulating the 
day-to-day operations of regulated subsidiaries. The Committee 
found that this type of regulation is more appropriately left 
to the functional regulators. The Federal Reserve Board also 
may not take such an action against a regulated subsidiary if 
it is reasonably possible for the Federal Reserve Board to 
protect effectively against the risk by taking action against a 
depository institution or against depository institutions 
generally.
    The Committee intends the term ``material risk'' to mean a 
risk of serious harm to the financial safety, soundness, or 
stability of the particular depositary institution or to the 
payment system.
    Section 10A does not affect the Federal Reserve Board's 
ability to take action under the HCA or section 8 of the FDIA 
to enforce compliance by a regulated subsidiary with any 
Federal law that the Federal Reserve Board has specific 
jurisdiction to enforce against the subsidiary. For purposes of 
this section, a regulated subsidiary means a company that (1) 
is not a bank holding company, and (2) is a registered 
securities broker or dealer, a registered investment advisor 
(to the extent of such company's investment advisory and 
incidental activities), a licensed insurance company, or an 
entity regulated by the Commodity Futures Trading Commission 
(to the extent of its commodities activities).

               Subtitle C--Subsidiaries of National Banks

Section 121. Permissible activities for subsidiaries of national banks

            a. Limitation to activities permissible for national banks
    Section 121 imposes a general prohibition on a subsidiary 
of a national bank engaging in any activity, or owning any 
shares of a company engaged in any activity, that a national 
bank is not permitted to engage in directly or that is 
conducted under terms or conditions other than those that would 
govern the conduct of the activity by a national bank. Section 
121 allows a national bank to own a subsidiary engaged in 
activities that are not permissible for a national bank, but 
only if a national bank is specifically authorized by the 
express terms of a Federal statute to own or control the 
subsidiary. For example, a national bank may control a 
subsidiary established under Section 25A of the Federal Reserve 
Act. Section 121 also amends Section 21 of the Glass-Steagall 
Act, which applies to all banks, to clarify that a subsidiary 
of a bank may not engage in securities underwriting or dealing, 
as those terms are commonly defined and interpreted under the 
Federal securities laws.
            b. Insurance agency authorization
    Section 121 also specifically authorizes a national bank to 
own a subsidiary engaged in general insurance agency 
activities, if the national bank and all of its depository 
institution affiliates are well capitalized and well managed 
and have achieved a ``satisfactory'' or better rating under the 
CRA at the institution's most recent examination. In addition, 
prior to establishing any insurance agency subsidiary, the 
national bank must receive the approval of the Comptroller of 
the Currency. Because an insurance agency subsidiary may engage 
in activities not permissible for a national bank, such 
subsidiaries are treated as nonbank affiliates of thebank for 
purposes of applying the anti-tying restrictions of the Bank Holding 
Company Act Amendments of 1970 and the restrictions of Section 23B of 
the Federal Reserve Act.

Section 122. Misrepresentations regarding depository institution 
        liability for obligations of affiliates

    Section 122 makes it a criminal offense for any 
institution-affiliated party of an insured depository 
institution or of a subsidiary or affiliate of an insured 
depository institution to represent fraudulently that an 
insured depository institution is liable for any obligation of 
its subsidiary or affiliate.

Section 123. Repeal of stock loan limit in Federal Reserve Act

    Section 123 repeals the restriction in section 11(m) of the 
Federal Reserve Act on loans by Federal Reserve member banks 
secured by stock or bond collateral. Limitations on loans to 
one borrower imposed pursuant to other statutory authorizations 
are not affected.

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

    Subtitle D creates a new type of depository institution--a 
wholesale financial institution (WFI)--that can accept 
wholesale deposits which are not insured by the Federal Deposit 
Insurance Corporation (FDIC). The Committee determined that 
this new institution, which would not take Federally insured 
deposits, should have holding company supervision diminished 
from that required of financial holding companies that hold 
insured depositary institutions. The subtitle also establishes 
a special supervisory regime for companies that do not own a 
depository institution other than a WFI or specified, limited-
purpose institutions. To qualify for this supervisory regime, 
the company must either be substantially engaged in the 
securities business or have been a bank holding company on the 
date of enactment of the Act and, in either case, not own any 
depository institution other than a WFI or a credit card bank, 
trust company or Edge Act company. Such ``investment bank 
holding companies'' are subject to primary supervision by the 
Federal Reserve Board or the SEC, depending on the aggregate 
and relative size of the company's banking operations.

              CHAPTER 1--INVESTMENT BANK HOLDING COMPANIES

Section 131. Investment bank holding companies established

            a. Definition of investment bank holding companies
    Section 131 amends Section 10 of the HCA to create a new 
structure governing the nonbanking activities and supervision 
of investment bank holding companies. An investment bank 
holding company is a bank holding company that controls one or 
more WFIs and does not control any other type of bank (other 
than a credit card bank, a limited purpose trust company, or 
Edge or Agreement Corporation) or a savings association. The 
company also must be substantially engaged in the securities 
business, or have been a bank holding company on the date of 
enactment of the Act. A company is substantially engaged in the 
securities business if the company owns one or more SEC-
registered brokers or dealers and either (1) derives more than 
35 percent of its annual consolidated net revenues from 
effecting transactions in or buying and selling securities as a 
broker or dealer, or (2) controls brokers or dealers that have 
total consolidated equity capital and qualifying subordinated 
debt of more than $750,000,000 (provided such equity capital 
and qualifying subordinated debt does not thereafter fall below 
$500,000,000).
            b. Allocation of primary supervisory responsibility
    The SEC is granted primary supervisory responsibility for 
investment bank holding companies that control WFIs that are 
small in both total and relative size. Specifically, the SEC is 
granted primary supervisory authority for any investment bank 
holding company that is substantially engaged in the securities 
business and controls one or more WFIs that have, in the 
aggregate, consolidated risk-weighted assets of less than $15 
billion and annual gross revenues that represent less than 25 
percent of the consolidated annual gross revenues of the 
company. Title II of the Act creates a new section 17(i) of the 
Exchange Act, which mirrors section 10 of the HCA, governing 
the supervision of SEC-supervised investment bank holding 
companies by the SEC. All other investment bank holding 
companies are supervised by the Federal Reserve Board under 
section 10 of the HCA. Section 131 provides that SEC-supervised 
investment bank holding companies shall be considered bank 
holding companies only for certain provisions of the HCA, the 
FDIA, and the Bank Holding Company Act Amendments of 1970. 
Section 131 also permits an SEC-supervised investment bank 
holding company to voluntarily elect to become supervised by 
the Federal Reserve Board and to revoke such an election.
            c. Federal Reserve Board supervised investment bank holding 
                    companies
    Section 131 establishes the provisions governing the 
reporting, examination, and capital requirements for Federal 
Reserve Board supervised investment bank holding companies. The 
Federal Reserve Board may require such a company and any 
subsidiary to submit reports to inform the Federal Reserve 
Board of the company's or subsidiary's activities, financial 
condition, policies, risk-management systems, and transactions 
with affiliated depository institutions. The Federal Reserve 
Board also may require reports to keep it informed regarding 
the compliance of a company or its subsidiaries with the HCA 
and related regulations and orders. The Federal Reserve Board 
is required to accept, to the fullest extent possible, reports 
submitted to other Federal or State supervisors or appropriate 
self-regulatory organizations. The Federal Reserve Board may 
grant exemptions from its reporting requirements to any company 
or class of companies. In determining whether to grant such an 
exemption, the Federal Reserve Board must consider, among other 
factors, the primary business of the company, the nature and 
extent of the regulation of the company's activities, and 
whether the requested information is available from other 
domestic or foreign regulatory agencies.
    The Federal Reserve Board is permitted to examine a Federal 
Reserve Board supervised investment bank holding company or any 
subsidiary to monitor compliance with: (1) the HCA and the laws 
governing transactions and relationships with affiliated 
depository institutions; (2) the company's or subsidiary's 
operations or financial condition; and (3) the risks within the 
holding company system that may affect an affiliated depository 
institution and the systems for controlling such risks. The 
Federal Reserve Board must, to the fullest extent possible, 
limit the focus and scope of any examination to the holding 
company itself and any subsidiary that for specified reasons 
could have a materially adverse effect on a depository 
institution affiliate of the company. In addition, the Federal 
Reserve Board must, to the fullest extent possible, use reports 
of examinations made by other Federal banking agencies, the 
SEC, and State insurance regulators.
    The Federal Reserve Board is authorized to adopt capital 
adequacy rules or guidelines for Federal Reserve Board 
supervised investment bank holding companies. Any such capital 
requirements must be based on appropriate risk-weighting 
considerations and must focus on the use by holding companies 
of so-called ``double leverage,'' that is debt and other 
liabilities incurred by a company to fund investments in 
subsidiaries. The Federal Reserve Board may not impose any 
capital adequacy requirement on a nondepository subsidiary that 
is in compliance with applicable capital requirements of 
another Federal regulatory authority or State insurance 
authority. The Federal Reserve Board also may not impose 
capital adequacy rules on a non-depository subsidiary that is 
registered as an investment adviser with the SEC with respect 
to such subsidiary's investment advisory or incidental 
activities. Furthermore, the Federal Reserve Board must take 
full account of the capital requirements imposed on a 
nondepository subsidiary by such a Federal or State authority 
and industry norms for capitalization of unregulated 
subsidiaries.
            d. Limited nonfinancial investments and activities
    Section 131(d) allows a Federal Reserve Board supervised 
investment bank holding company to engage in a limited 
``basket'' of nonfinancial activities, provided that the 
aggregate revenue derived from all such activities and of all 
companies engaged in such activities does not exceed 5 percent 
of the holding company's consolidated gross revenue. For 
purposes of determining compliance with this limitation, the 
revenues of all activities conducted or companies held pursuant 
to the grandfather rights established by section 131 must be 
included in the ``basket.'' In addition, an investment bank 
holding company may not acquire the shares of a nonfinancial 
company that has consolidated assets of $750,000,000 or more at 
the time of the acquisition. The Federal Reserve Board, in 
consultation with the SEC, must submit a report to the Congress 
regarding the nonfinancial activities and affiliations 
permitted by this limited ``basket'' (and the parallel basket 
in section 17(i) of the Exchange Act for SEC supervised 
investment bank holding companies) not later than 5 years after 
the date of enactment of the Act.
    Companies that become investment bank holding companies may 
continue to engage in any activity, or control shares of a 
company engaged in any activity, that the company was engaged 
in or held on the date of enactment of the Act. These 
grandfathered investments and activities may not be expanded 
through a merger, consolidation, or any other type of business 
combination. An investment bank holding company that engages in 
any activity or holds shares pursuant to the 5 percent basket 
or the grandfather rights conferred under section 131(d) may 
not take advantage of the similar basket or grandfather rights 
provided in section 6(f) of the HCA, which permit eligible 
financial holding companies to retain a limited amount of 
nonfinancial activities.
    Section 131 permits an investment bank holding company to 
engage in, or own shares of a company lawfully engaged in, 
commodity investment and trading activities if the holding 
company was predominantly engaged in the securities business in 
the United States as of January 1, 1997, and was engaged in 
such commodity investment and trading activities in the United 
States on that date. The aggregate annual gross revenue from 
such commodity activities, however, may not exceed 5 percent of 
the capital of the investment bank holding company.
    Section 2(a)(1)(A) of the Commodity Exchange Act confers 
upon the CFTC exclusive jurisdiction with respect to accounts, 
agreements, and transactions involving contracts of sale of a 
commodity for future delivery. Nothing contained in section 131 
of H.R. 10 is intended to supersede or limit the jurisdiction 
at any time conferred on the CFTC, or to restrict the CFTC from 
carrying out its duties and responsibilities under the 
Commodity Exchange Act or any other law.
    Under section 131, the subsidiary WFIs of an investment 
bank holding company may not engage in cross marketing 
activities with any nonfinancial company whose shares are held 
under the 5 percent basket provision, the grandfather provision 
or the commodities provision.
            e. Foreign banks
    Foreign banks are not eligible for supervision as 
investment bank holding companies under section 10 of the HCA. 
A foreign bank that maintains no banking presence in the United 
States other than uninsured branches, agencies or commercial 
lending companies, however, may request a determination from 
the Federal Reserve Board that it be treated as an investment 
bank holding company for purposes of the provisions allowing 
investment bank holding companies to make limited nonfinancial 
investments affiliations.
    To be eligible for treatment as an investment bank holding 
company, a foreign bank must control a securities company 
engaged in the underwriting of equity securities and its 
affiliates must not hold any deposits insured by the FDIC. In 
addition, the foreign bank must meet risk-based capital 
standards comparable to those required for a WFI. The Act 
provides that a foreign bank that is treated as an investment 
bank holding company shall be considered a WFI for certain 
specified purposes. In addition, if a foreign bank is treated 
as an investment bank holding company, then Sections 23A and 
23B of the Federal Reserve Act apply to any transactions 
between the bank's branches, agencies and commercial lending 
affiliates and any nonfinancial company owned by the foreign 
bank pursuant to section 10(d) of the HCA. Aforeign bank that 
is treated as an investment bank holding company is not eligible for 
any exception provided in section 2(h) of the HCA from that Act's 
nonbanking restrictions.
    The Act does not limit in any way the Federal Reserve 
Board's authority under the International Banking Act of 1987 
with respect to the regulation, supervision, or examination of 
foreign banks.
            f. Federal Reserve Board backup authority for SEC 
                    supervised investment holding companies
    The SEC has primary authority for enforcing the provisions 
of the banking laws and section 17(i) of the Exchange Act as 
they apply to SEC supervised investment bank holding companies. 
Section 131 grants the Federal Reserve Board backup authority 
to take any action authorized by the HCA or the FDIA against an 
SEC supervised investment bank holding company, a subsidiary of 
such a company, or any institution-affiliated party of such a 
company or subsidiary for the purpose of enforcing compliance 
with the HCA, the Bank Holding Company Act Amendments of 1970, 
section 17(i) of the Exchange Act, the FDIA, or the Federal 
Reserve Act. The Federal Reserve Board must provide the SEC 
with prior notice of any proposed action, unless immediate 
action is necessary or appropriate in light of exigent 
circumstances.
    The Federal Reserve Board also is granted backup authority 
to examine an SEC supervised investment bank holding company or 
subsidiary to monitor and enforce compliance with the HCA, 
section 17(i) of the Exchange Act, and all other Federal 
statutes for which the Federal Reserve Board has enforcement 
authority. The Federal Reserve Board must restrict the focus of 
any such exam in light of the limited purpose of the Federal 
Reserve Board's backup examination authority. The Federal 
Reserve Board also must, to the fullest extent possible, defer 
to the reports of examinations of a broker or dealer by the SEC 
or of an insurance company by the relevant State insurance 
authority.
    Section 131 also requires that the Federal Reserve Board 
and the Comptroller of the Currency provide the SEC, at its 
request, any reports or records that the Federal Reserve Board 
or the Comptroller has available concerning a WFI controlled by 
an SEC supervised investment bank holding company.
            g. Enforcement authority over uninsured State banks
    Section 131(b) provides that the provisions of the banking 
laws authorizing the Federal Reserve Board to take enforcement 
actions, including section 3(u), subsections (j) and (k) of 
section 7, and subsections (b) through (n), (s), (u), and (v) 
of section 8 of the FDIA, apply to an uninsured State bank in 
the same manner that they apply to insured State member banks.

Section 132. Authorization to release reports

    Section 132 authorizes the Federal Reserve Board to release 
reports of examination or other confidential supervisory 
information concerning any entity that the Federal Reserve 
Board has authority to examine to any Federal or State 
supervisory or regulatory authorities, the officers, directors 
or receivers of the entity, or any other person deemed proper 
by the Federal Reserve Board. Section 132 also amends the Right 
to Financial Privacy Act to treat the CFTC in a manner 
consistent with the other financial supervisory agencies.

Section 133. Conforming amendments

    Section 133 defines the terms ``wholesale financial 
institution'', ``Commission'', ``depository institution'', and 
``insured bank'' for purposes of the HCA and amends the 
definition of the term ``bank'' in the HCA to include WFIs. 
Section 3(e) is amended to permit a bank holding company to 
control a WFI even though the deposits of such institutions are 
not insured by the FDIC. The Federal Reserve Board also is 
designated as the appropriate Federal banking agency for a WFI 
under the FDIA.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

Section 136. Wholesale financial institutions

    Section 136(a) authorizes the establishment of WFIs. A WFI 
may be either a national bank or a State member bank. A 
national bank is required to apply to the Comptroller for 
permission to operate as a WFI. The approval of the Federal 
Reserve Board is required for a State bank to operate as a WFI. 
Section 136 also authorizes State banking authorities to grant 
a charter to a WFI notwithstanding any State law requiring that 
a State bank obtain deposit insurance.
    Section 136(b) amends the Federal Reserve Act by adding a 
new section 9B that requires all WFIs to become members of the 
Federal Reserve System. All WFIs are subject to the provisions 
of Section 9B and to the other provisions of the Federal 
Reserve Act to the same extent and in the same manner as if the 
WFI were a State member insured bank, except that a WFI may 
only terminate membership on the terms and conditions set by 
the Federal Reserve Board and with prior written approval of 
the Federal Reserve Board.
    Section 9B also contains special capital requirements 
applicable to wholesale financial institutions. The Federal 
Reserve Board is authorized to adopt capital requirements for 
WFIs, taking into account their uninsured status and providing 
for the safe and sound operation of such institutions without 
undue risk to creditors or other persons, including Federal 
Reserve Banks, engaged in transactions with the institution.
    Section 9B also makes WFIs subject to the prompt corrective 
action provisions contained in section 38 of the FDIA, the 
enforcement provisions contained in the FDIA, the Bank 
MergerAct, and the International Lending Supervision Act. WFIs may 
branch to the extent permitted by the Federal Reserve Board and with 
the approval of the Federal Reserve Board or the Comptroller. State 
chartered WFIs are treated as State member insured banks for purposes 
of the provisions of Section 27 of the FDIA governing the activities of 
interstate branches and are granted all the rights, powers, privileges 
and immunities of national banks.
    A WFI may not receive initial deposits of $100,000 or less 
other than on an incidental and occasional basis. Deposits of 
that amount received on an incidental basis may not represent 
more than 5 percent of the institution's total deposits and are 
subject to regulations prescribed by the Federal Reserve Board. 
In addition, deposits of a WFI may not be insured by the FDIC.
    The Federal Reserve Board is authorized to adopt for WFIs: 
(1) limitations on transactions with affiliates to prevent the 
transfer or risk to the deposit insurance funds or an affiliate 
from gaining access to, or the benefits of, credit from a 
Federal reserve bank; (2) special clearing balances; and (3) 
any additional requirements that the Federal Reserve Board 
determines necessary or appropriate to achieve designated 
purposes. Transactions between an insured bank and an 
affiliated WFI are not eligible for the sister bank exemption 
from Section 23A of the Federal Reserve Act. The Federal 
Reserve Board also may grant a WFI exemptions from any 
requirement applicable to member banks.
    Any WFI that is controlled by an investment bank holding 
company must remain well capitalized and well managed. If a WFI 
is not well capitalized or well managed, any company that 
controls the WFI must execute an agreement with the Federal 
Reserve Board to restore the WFI to well capitalized and well 
managed status. The Federal Reserve Board may order an 
investment bank holding company, whether such company is 
supervised by the Federal Reserve Board or the SEC, to divest 
its subsidiary depository institutions if the company does not 
execute an acceptable agreement with the Federal Reserve Board 
or restore the WFI to well capitalized or well managed status 
within specified time periods. The Federal Reserve Board must 
notify the SEC prior to ordering an SEC supervised investment 
bank holding company to divest control of a subsidiary WFI.
    In order to permit existing insured banks to become WFIs, 
section 136(c) adds a new section 8A to the FDIA. Section 8A 
permits a State-chartered or national bank to terminate its 
status as an insured institution after providing 6 months prior 
notice to the FDIC, the Federal Reserve Board, and depositors. 
An insured bank may terminate its insurance if the deposit 
insurance fund of which the bank is a member has met or exceeds 
its designated reserve ratio and the bank pays an exit fee to 
the FDIC, or the bank receives regulatory approval and pays the 
appropriate exit fee. A depository institution that voluntarily 
terminates its deposit insurance under section 8A must either 
become a WFI or terminate all deposit-taking activities. 
Transition arrangements are established that permit previously 
insured deposits (less withdrawals) of a bank that terminates 
its insured status under section 8A to remain insured for up to 
2 years.

  Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and 
                                Mergers

Section 141. Amendments to the Bank Holding Company Act of 1956

    Section 141 requires a copy of an application and other 
materials submitted to the Federal Reserve Board under section 
3 of the HCA to be filed by the applicant with the Department 
of Justice. The company also must file a copy of such materials 
with the Federal Trade Commission (FTC) if the transaction also 
involves the acquisition of nonbanking assets or shares under 
section 4 or section 6 of the HCA. Section 141 also removes 
``competitive factors'' from the list of factors that the 
Federal Reserve Board must consider when reviewing a proposed 
acquisition or merger under section 3. The Federal Reserve 
Board will continue to consider the financial and managerial 
resources of the companies and banks involved in the 
transaction as well as the convenience and needs of the 
community to be served. However, the Department of Justice or 
the FTC, as appropriate, will have the sole responsibility for 
reviewing the competitive effects of the transaction under the 
antitrust laws.
    Section 141 retains the requirement that the Federal 
Reserve Board notify the Department of Justice of approval of 
acquisitions and mergers. While the 30-day post-approval 
waiting period is also retained, the Department of Justice and 
the FTC are given authority to prescribe a shorter waiting 
period. The automatic stay and immunity provisions remain in 
place. Section 141 also deletes the provisions requiring a 
court to: (1) conduct a de novo review of the antitrust issues 
presented; and (2) apply the same standards applied by the 
Federal Reserve Board in approving a transaction if any 
acquisition, merger or consolidation is challenged on 
competitive grounds. The same standards that apply under the 
antitrust laws apply to transactions approved under section 3 
of the HCA. In addition, the statutory authority of the Federal 
Reserve Board and the appropriate State bank authority to 
appear in cases where the Department of Justice challenges a 
bank acquisition or merger is eliminated.

Section 142. Amendments to the Federal Deposit Insurance Act to vest in 
        the Attorney General sole responsibility for antitrust review 
        of depository institution mergers

    Section 142 removes the authority of the Federal banking 
agencies to review competitive factors in a transaction under 
the Bank Merger Act. The Federal banking agencies will continue 
to consider the financial and managerial resources of the 
institutions involved in the transaction as well as the 
convenience and needs of the community to be served. The 
Department of Justice will have the sole responsibility for 
reviewing the competitive effects of the transaction under the 
antitrust laws. As in the proposed amendments to the HCA, 
section 142 leaves in place the 30-day post approval waiting 
period for proposed mergers but allows the Department of 
Justice to prescribe a shorter period. The Federal banking 
agencies can permit immediate consummation of a transaction 
upon a determination that such action is necessary to prevent a 
probable bank failure. The automatic stay and immunity 
provisions are maintained.
    Section 142 also deletes the provisions of the Bank Merger 
Act requiring a court to: (1) conduct a de novo review of the 
antitrust issues presented, and (2) apply the same standards 
the appropriate Federal banking agency applied in approving a 
transaction if any acquisition, merger or consolidation is 
challenged under the antitrust laws. In addition, the statutory 
authority of the appropriate Federal banking agency and the 
appropriate State bank authority to appear in cases where the 
Department of Justice challenges a bank acquisition or merger 
is eliminated. Applicants are required to file copies of any 
application materials submitted to an appropriate Federal 
banking agency with the Department of Justice.

Section 143. Information filed by depository institutions; interagency 
        data sharing

    Section 143 provides that applications filed under section 
3 of the HCA or the Bank Merger Act must contain a description 
of the likely competitive effects of the proposed transaction. 
The appropriate Federal banking agencies, with the concurrence 
of the Department of Justice and the FTC, must establish the 
form and content of the competitive effects section of an 
application. If the Department of Justice or the FTC notifies 
the appropriate Federal banking agency that the competitive 
effects section of an application is incomplete, the agency 
must suspend processing of the application unless action is 
necessary in light of emergency circumstances or the probable 
failure of a bank involved. Section 143 also requires that the 
Federal banking agencies share data on the antitrust 
implications of a banking acquisition with the Department of 
Justice and the FTC where permissible under law.

Section 144. Applicability of antitrust laws

    No provision of subtitle E affects the applicability of the 
Federal or State antitrust laws.

Section 145. Clarification of status of subsidiaries and affiliates

    Section 145 clarifies that any affiliate of a bank or 
savings association that is not itself a bank or a savings 
association shall not be considered a bank for purposes of the 
Federal Trade Commission Act or any other law enforced by the 
FTC.

Section 146. Effective date

    Subtitle E is effective 6 months after the date of 
enactment of the Act.

Subtitle F --Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

Section 151. Applying the principles of national treatment and equality 
        of competitive opportunity to foreign banks that are financial 
        bank holding companies

    Section 151 amends section 8(c) of the International 
Banking Act of 1978 (IBA) to provide that, if a foreign bank or 
foreign company becomes a financial holding company, the 
foreign bank or foreign company shall forfeit its grandfather 
rights under the IBA with respect to all financial activities. 
The IBA provided such grandfather rights because of the 
activity restrictions contained in current law. With the repeal 
of these restrictions, foreign banks with grandfathered 
financial affiliates would be permitted to retain these 
affiliates under section 6 of the HCA, subject to the same 
terms and conditions that govern the ownership of such 
companies by domestic banking organizations. In order to 
provide both competitive equality between domestic and foreign 
banks and fairness to the foreign banks that have relied for 
many years on their grandfathering rights, the foreign bank is 
granted two years in which to have an application approved 
under section 6. Failing such approval within this time period, 
the Federal Reserve Board may impose restrictions and 
requirements comparable to those on a financial holding 
company, including a requirement that the activities be 
conducted in compliance with any prudential safeguards 
established under section 5(h) of the HCA.

Section 152. Applying the principles of national treatment and equality 
        of competitive opportunity to foreign banks and foreign 
        financial institutions that are wholesale financial 
        institutions

    Section 152 amends section 8A of the FDIA (as added by this 
Act) to allow an insured branch of a foreign bank to 
voluntarily terminate its deposit insurance in the same manner 
and to the same extent as insured State and national banks. 
This section is intended to allow foreign banks to convert 
their insured branches to WFIs.

                  Subtitle G--Effective Date of Title

Section 171. Effective date

    Except as otherwise provided, the effective date for Title 
I is 270 days after the date of enactment of the Act.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

    Subtitle A amends the definitions of ``broker'' and 
``dealer'' in the Securities Exchange Act of 1934 (Exchange 
Act) to eliminate antiquated broad exceptions for banks. In 
place of thebroad exceptions, subtitle A provides circumscribed 
exceptions from the definitions for specific activities. These 
exceptions reflect important considerations such as investor 
protection. Subtitle A also contains a provision setting out a 
grievance process for customers who purchase or sell securities 
directly through banks pursuant to the exemptions. Finally, subtitle A 
includes a record keeping requirement for banks and an information 
sharing provision to allow banking regulators and the Commission to 
determine whether banks are complying with the terms of the exceptions 
and exemptions.

Section 201. Definition of broker

    Section 3(a)(4) of the Exchange Act currently excludes 
banks from its definition of ``broker'' (15 U.S.C. 
Sec. 78c(a)(4)). As a result, banks that directly conduct 
brokerage activities are not required to register as broker-
dealers or to satisfy most other requirements applicable to 
SEC-registered brokers under the Exchange Act.
    Section 201 amends the Exchange Act's definition of 
``broker'' to include banks, subject to certain exceptions. As 
a general matter, a bank will be considered a ``broker'' under 
the Exchange Act if it is engaged in the business of effecting 
transactions in securities for the account of others.
    Section 201, however, contains ten circumscribed 
exceptions. If a bank limits its brokerage activities to the 
activities described in these exceptions, then the bank will 
not be subject to broker-dealer registration and regulation 
under the Exchange Act. These exceptions recognize that it may 
not be necessary, under certain conditions, to require a bank 
to register as a broker-dealer. In particular, registration may 
not be required because the conditions imposed on the excepted 
activities are adequately tailored to protect investors and 
ensure competitive fairness among different types of financial 
services providers.
            1. Third Party Brokerage Arrangements
    Currently, banks sell securities to bank customers in one 
of three ways: (1) by contracting with registered broker-
dealers; (2) by registering broker-dealer subsidiaries or 
affiliates; or (3) by selling securities directly through bank 
employees who are neither registered as broker-dealers nor 
licensed as registered representatives of a broker-dealer. 
Unregistered bank employees may sell securities directly to 
customers because, under existing law, banks are specifically 
excluded from broker-dealer registration under the Federal 
securities laws.
    Section 201 provides that a bank will not be considered a 
``broker'' if it offers brokerage services to its customers on 
its premises pursuant to a contract or other arrangement with 
an affiliated or unaffiliated broker-dealer. This so-called 
``networking'' provision is intended to ensure that investors 
who purchase securities from the broker-dealer on the bank's 
premises adequately understand the risks and are fully 
protected under the Federal securities laws. This exception 
follows a long line of SEC no-action letters.
    The broker-dealer ``networking'' activities must be 
conducted at a location that is clearly identified and, to the 
extent practicable, physically separate from the routine 
deposit-taking activities of the bank.
    As part of these networking arrangements, banks frequently 
designate employees who become licensed registered 
representatives under the supervision of a broker-dealer for 
the purpose of conducting brokerage transactions. These 
employees, known as ``dual employees,'' are associated persons 
of a broker-dealer and receive incentive compensation (i.e., 
compensation that depends on the successful outcome of the 
transaction) from the broker-dealer. Such employees are subject 
to regulation and disciplinary actions by the securities self-
regulatory organizations and the SEC in connection with their 
brokerage activities.
    Bank employees who are not dual employees may only perform 
clerical or ministerial functions and may not receive incentive 
compensation. Bank employees may, however, receive a one-time 
nominal referral fee of a fixed dollar amount that does not 
depend on whether the referral results in a transaction. 
Permissible clerical or ministerial functions include 
scheduling appointments with an associated person of a broker-
dealer. In addition to their clerical or ministerial functions, 
bank employees also may forward customer funds or securities 
and may describe in general terms the range of investments 
available. Bank employees who are not registered 
representatives, however, may not make general or specific 
investment recommendations regarding securities, qualify a 
customer as eligible to purchase securities, or accept orders 
for securities.
    In order to ensure that an investor has Securities Investor 
Protection Corporation (SIPC) protection for the securities 
that he or she purchases--protection that is available from a 
broker-dealer but not from a bank--the broker-dealer that is 
part of a networking arrangement must carry the investor's 
account. Section 201 also contains provisions governing 
advertising and promotional materials and disclosure 
requirements.
            2. Trust Activities
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions in a trustee capacity and is primarily 
compensated based on a percentage of assets under management. 
Under this exception, a bank must act as trustee and be fully 
subject to applicable Federal and State trust laws. To be 
eligible for any part of the exception for trust and fiduciary 
activities, bank regulators must regulate and examine these 
activities as part of their routine bank trust department 
inspections.
    An insured bank will also not be considered a ``broker'' 
if, subject to certain conditions, it conducts brokerage 
transactions in a fiduciary capacity in its trust department in 
connection with the provision of investment advice or the 
exercise of investment discretion. The bank cannot: (1) 
publicly solicit this brokerage business, except in connection 
with advertising its other trust activities; (2) receive 
incentive compensation; or (3) use brokerage employees to 
effect transactions.
    The trust exception would permit banks to continue to sell 
securities in their historic role as trustees. Banks (i) acting 
as ``bona fide'' trustees, or (ii) who engage in fiduciary 
activities in their trust departments could sell securities 
without being subject to Federal securities regulation. These 
activities are subject to Federal and State trust law and are 
examined by trust examiners, which provides bank trust 
department customers with some basic protections and, 
therefore, mitigates concerns that would otherwise exist 
because of the lack of Federal securities law protections for 
these customers.
            3. Permissible Securities Transactions
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions in commercial paper, bankers 
acceptances, commercial bills, or ``exempted securities'' under 
the Exchange Act. For purposes of this exception, municipal 
revenue bonds are not treated as ``exempted securities.'' In 
addition, a bank will not be considered a ``broker'' if it 
effects transactions in qualified Canadian government 
obligations under the regulatory framework applicable to U.S. 
government securities, securities of the North American 
Development Bank, or Brady Bonds.
            4. Employee and Shareholder Benefit Plans
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions for employee and shareholder benefit 
plans if it does not solicit investors and is compensated based 
on a flat per order fee designed to recover the bank's 
incremental costs directly attributable to such transactions. 
In addition, a bank will not be considered a ``broker'' if it 
conducts brokerage transactions for an issuer's current 
shareholders in a dividend reinvestment and stock purchase 
plan, and the bank (1) does not solicit investors, (2) is 
compensated based on a flat per order fee designed to recover 
the bank's incremental costs directly attributable to such 
transactions, and (3) does not net shareholders' buy and sell 
orders.
    The exception would permit banks, as they currently do 
today, to act as agents for issuers that want to sell 
securities directly to their current employees and 
shareholders. Currently, issuers pay banks to establish these 
programs, and banks do not receive ``success'' or incentive- 
based fees from the employees or shareholders. Banks that act 
like broker-dealers--i.e., soliciting public customers--should 
be treated the same as all other broker-dealers, so that 
financial services providers of different types can compete 
fairly. In addition, investors dealing with entities that 
charge success-based fees should be protected from overreaching 
and conflicts of interest by the Federal securities laws.
            5. Sweep Accounts
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions for the purpose of investing or 
reinvesting depositors' funds in money market accounts. The 
exception has the effect of permitting banks to continue 
``sweeping'' deposits from depository accounts into money 
market accounts.
            6. Affiliate Transactions
    A bank will not be considered a ``broker'' if it conducts 
brokerage transactions for the account of any affiliate of the 
bank, as defined in section 2 of the Bank Holding Company Act, 
other than an affiliate that is a broker-dealer or an affiliate 
that is engaged in merchant banking as defined in section 6(h) 
of the Bank Holding Company Act.
            7. Private Securities Offerings
    A bank that has not been affiliated with a broker-dealer 
for more than one year will not be considered a ``broker'' if 
it privately places securities exclusively to qualified 
investors. ``Qualified investors'' include mutual funds, hedge 
funds, banks, thrifts, business development companies, small 
business investment companies licensed under the Small Business 
Investment Act, certain employee benefit plans, trusts managed 
by any of the preceding investors, market intermediaries 
exempted under the Investment Company Act, associated persons 
of a broker-dealer (other than natural persons), and foreign 
banks. The SEC may expand the list of qualified investors, 
provided it considers such factors as the person's financial 
sophistication, net worth, and knowledge and experience in 
financial matters. In the interest of investor protection, the 
SEC may not add natural persons to the list of qualified 
investors. This exception does not apply to a bank that is 
affiliated with a broker-dealer for more than a year. As 
described more fully below, section 203 of Title I directs 
registered securities associations to grandfather certain bank 
employees who have participated in sales of privately placed 
securities in the six months before the Act's enactment.
    Private placement of securities is a traditional broker-
dealer activity, requiring broker- dealer regulation. The fact 
that private placements are an ``agency'' activity may mean it 
does not pose a risk to the bank, but that begs the question of 
how the people who invest in these securities should be 
protected. They should receive the same protections regardless 
of where they choose to do business. An untrained bank employee 
does not provide the same protections to an investor as a 
trained securities professional, registered and regulated under 
the Federal securities laws. Private placements are not immune 
from abuse by those who sell them: for example, the Prudential 
Securities Inc. debacle involved private placements. The Act 
does permit small banks to continue to privately place 
securities with qualified investors, if they do not have 
affiliated or subsidiary broker-dealers, in recognition of the 
needs of smaller communities serviced by smaller banks.
            8. Safekeeping and Custody Services
    A bank will not be considered a ``broker'' if it engages in 
the customary banking activities of providing safekeeping and 
custody services to its customers with respect to securities 
pledged by one customer to another customer in connection with 
repurchase or similar financing arrangements. The bank may also 
facilitate the transfer of funds or securities, as a custodian 
or clearing agency, in connection with the clearance and 
settlement of its customers' transactions in securities, and 
effect or facilitate lending or borrowing of securities in 
connection withrepurchase or similar financing arrangements or 
clearance and settlement activities. Banks that perform functions 
customarily performed by clearing brokers, clearing agencies, or 
transfer agents in connection with securities other than exempted 
securities, however, must register as clearing agencies, or transfer 
agents as required under the Exchange Act.
    This subsection is designed to allow banks to perform the 
functions of a custodian or clearing agency without falling 
within the definition of a broker under this bill. The 
performance of certain of those functions (e.g., purchasing 
securities to cover shortfalls or liquidating collateral for 
the bank's own account) would not constitute the business of 
``effecting transactions in securities for the account of 
others,'' and thus would not subject a bank to treatment as a 
broker under this bill. Other functions (e.g., effecting 
delivery or receipt of securities as a custodian or clearing 
agency in the clearance and settlement of a contract to 
purchase, sell, pledge or repo securities) are specifically 
exempted because banks already conduct such activities today 
without being subject to regulation as brokers. Finally, a bank 
would not fall within the definition of a broker solely because 
it performed certain limited execution functions that are 
incidental to safekeeping, custody or clearing agency 
activities (e.g., selling securities dividends on custody 
securities or satisfying a guarantee or investing cash that 
serves as collateral on a securities loan). It would not, 
however, be incidental to safekeeping, custody or clearing 
agency activities for a bank to provide general securities 
execution services or investment advice to a custody or 
clearing agency customer solely because of that status 
(including to a self-directed IRA account).
            9. Banking Products
    A bank may continue to engage in brokerage transactions in 
products defined as ``banking products'' in section 3(a)(54) of 
the Exchange Act. ``Banking products'' include deposit 
accounts, letters of credit and loans made by a bank, credit 
card debit accounts, loan participations that are sold to 
qualified investors or other investors who have the financial 
sophistication and opportunity to review any material 
information, and derivative instruments involving foreign 
currencies (except options on foreign currencies traded on a 
national securities exchange). The classification of a product 
as a banking product does not imply that such product is or is 
not a security, or an account, agreement, contract, or 
transaction for any purpose under the Commodity Exchange Act.
            10. De Minimis Transactions
    A bank will be excepted from the definition of a ``broker'' 
if it effects less than 500 securities transactions in any 
calendar year (in addition to other excepted bank activities). 
In order to prevent this exception from being used to evade the 
Federal securities laws, bank employees who also are employees 
of a broker-dealer may not claim the exception for any 
transactions that they effect.

Section 202. Definition of dealer

    Section 3(a)(5) of the Exchange Act currently excludes 
banks from the definition of ``dealer'' (15 U.S.C. 
Sec. 78c(a)(5)). As a general matter, a bank will be deemed a 
``dealer'' if it is engaged in the business of buying and 
selling securities for its own account, through a broker or 
otherwise. Section 202 amends section 3(a)(5) to include banks 
within the general definition of dealer, but creates five 
specific exceptions for certain activities. Section 202 
preserves the existing distinction between dealer activities 
and non-dealer principal transactions, including bank 
investment and trading portfolio transactions for its own 
account, as reflected in current SEC interpretive positions 
regarding dealers.
            1. Permissible Securities Transactions
    A bank will not be considered a ``dealer'' if it buys or 
sells commercial paper, bankers acceptances, commercial bills, 
or ``exempted securities'' under the Exchange Act. For purposes 
of this exemption, municipal revenue bonds are not treated as 
``exempted securities.'' In addition, this exemption extends to 
a bank if it buys or sells qualified Canadian government 
obligations under the regulatory framework applicable to U.S. 
government securities, securities of the North American 
Development Bank, or Brady Bonds.
            2. Investment, Trustee, and Fiduciary Transactions
    A bank will not be considered a ``dealer'' because it buys 
and sells securities for investment purposes for the bank or 
for accounts for which the bank acts as trustee or fiduciary. 
This mirrors existing law distinguishing between investors and 
dealers, and is limited to the portfolio trading of the bank 
and accounts for which it makes investment decisions.
            3. Asset-Backed Transactions
    A bank will not be considered a ``dealer'' if it issues or 
sells to qualified investors, securities that are exclusively 
backed by or represent an interest in obligations or pools of 
obligations predominantly originated by the bank, a syndicate 
of banks of which the bank is a member, or an affiliate of the 
bank (other than a broker or dealer). This has the effect of 
generally limiting availability of this exception to securities 
originated by banks on a syndicate- by-syndicate basis.
            4. Transactions in Banking Products
    A bank will not be considered a ``dealer'' if it buys or 
sells banking products as defined in new section 3(a)(54) of 
the Exchange Act, discussed below. ``Banking products'' include 
deposit accounts, letters of credit issued by a bank and loans 
made by a bank, credit card debit accounts, loan participations 
that are sold to qualified investors or other investors who 
have the financial sophistication and opportunity to review any 
material information, and derivativeinstruments involving 
foreign currencies (except options on foreign currencies traded on a 
national securities exchange).
            5. Derivative Instruments
    The Committee recognizes the useful risk-management and 
investment tools that derivatives provide, and has crafted this 
exception to ensure that banks can continue to act in their 
traditional, historical role as counterparties, or dealers, in 
derivatives transactions with sophisticated counterparties. The 
exception permits banks to continue to book all securities 
derivatives transactions in the bank, and to sell them to 
sophisticated institutions without being subject to the Federal 
securities laws. Where a derivative transaction is not a 
security, and is not settled by the delivery of a security, the 
exception provides that the Federal securities laws will not 
apply. When banks sell complex securities derivatives products 
to individuals and smaller institutions, however, while banks 
may continue to act as underwriter, or counterparty, to the 
transaction, the Federal securities laws, including broker 
training and suitability requirements, would apply, and the 
transaction would have to be effected by a broker. Where the 
derivatives are or involve the delivery of a security, retail 
and smaller institutional clients should receive the investor 
protections provided under the Federal securities laws. In 
addition, broker-dealers compete with banks to provide these 
same services, and must comply with Federal securities 
regulation; thus, this exception also creates a level playing 
field for entities engaged in the same activity.
    A bank will not be considered a ``dealer'' if it engages in 
certain derivative transactions. First, if the bank acts as 
counterparty in any derivatives transaction with a qualified 
investor (or a corporation, limited liability company, or 
partnership having at least $10 million in investments) and the 
transaction is settled in cash, the bank would not be deemed a 
``dealer'' or be required to effect the transaction through a 
registered broker-dealer affiliate. Transactions settled by 
delivering securities, however, would have to be done through a 
registered broker-dealer. Second, if the derivative is a 
security or the bank settles the transaction by delivering 
securities, and the transaction is effected with a person who 
is not a qualified investor (or a corporation, limited 
liability company, or partnership having at least $10 million 
in investments), the bank would be deemed a ``dealer'' or be 
required to effect the transaction through a broker-dealer 
affiliate. Third, if the derivative is neither a security nor 
provides for settlement by the delivery of securities, the bank 
would not be deemed a ``dealer'' and would be permitted to 
engage in the transaction directly. Banks also would be 
permitted to act as counterparty in transactions involving 
derivatives that are, or that require the delivery of, U.S. 
government securities without being deemed a ''dealer.''
    ``Derivative instruments'' are defined to include any 
individually negotiated contract, agreement, warrant, note, or 
option that is partially or wholly based on the value of, any 
interest in, or any quantitative measure, or the occurrence of 
any event relating to, one or more commodities, securities, 
currencies, interest or other rates, indices, or other assets. 
Equity and credit swaps are not treated separately under the 
exemption for derivative instruments. Their treatment will 
depend on whether the swaps may be deemed a security or require 
settlement by delivering one or more securities. Whether a swap 
or other derivative product is a security for Exchange Act 
purposes depends on whether it is an option on a security or 
satisfies established legal tests for determining whether a 
financial product is a security.
    ``Qualified investors'' include mutual funds, hedge funds, 
banks, thrifts, business development companies, small business 
investment companies licensed under the Small Business 
Investment Act, certain employee benefit plans, trusts managed 
by any of the preceding investors, market intermediaries 
exempted under the Investment Company Act, associated persons 
of a broker-dealer (other than natural persons), and foreign 
banks. The SEC may expand the list of qualified investors, 
provided it considers such factors as the person's financial 
sophistication, net worth, and knowledge and experience in 
financial matters. The SEC may not add natural persons to the 
list of qualified investors.

Section 203. Registration for sales of private securities offerings

    Section 203 amends section 15A of the Exchange Act, which 
sets out the requirements to be a registered securities 
association, to add new subsection (j). This new subsection 
directs a registered securities association to create a limited 
qualification category, without a testing requirement, for 
certain associated persons of members who effect private 
placement sales. Associated persons in this category must have 
been bank employees engaged in private placement sales in the 
six months before this bill is enacted.

Section 204. Grievance process

    Section 204 amends section 18 of the Federal Deposit 
Insurance Act by adding new subsection (s). This new subsection 
directs the appropriate Federal banking agencies to jointly 
establish procedures and facilities for receiving and 
expeditiously processing complaints against any bank or bank 
employee arising in connection with the purchase or sale of a 
security by a customer. These procedures and facilities are for 
use by customers at their election and are not intended for use 
by banks having grievances against customers who have purchased 
or sold securities.
    The Federal banking agencies are expressly directed to: (1) 
establish a group, unit or bureau in each agency to receive 
customers' complaints; (2) develop and establish procedures for 
investigating complaints; (3) develop and establish procedures 
for informing customers of their rights in connection with 
complaints; and (4) develop and establishing procedures for 
resolving complaints, including procedures for the recovery of 
losses to the extent appropriate.
    This grievance process is in addition to, and not in lieu 
of, any other remedies available under law.

Section 205. Information sharing

    Section 205 also amends section 18 of the Federal Deposit 
Insurance Act by adding new subsection (t). This new subsection 
requires each appropriate Federal banking agency, after 
consultation with and consideration of the Commission's views, 
to establish record keeping requirements for banks that are 
relying on the exceptions and exemptions from the definitions 
of ``broker'' and ``dealer'' in sections 3(a)(4) and 3(a)(5) of 
the Exchange Act made in sections 201 and 202 of Title I.
    These record keeping requirements must result in records 
that are sufficient to demonstrate compliance with the terms of 
the exceptions and exemptions. The records kept must be made 
available by the appropriate Federal banking agency upon the 
Commission's request.

Section 206. Banking products, derivative instrument, and qualified 
        investor defined

    Section 206 amends subsection 3(a) of the Exchange Act to 
add paragraphs (54), (55) and (56) defining, respectively, 
``banking products'', ``derivative instrument'', and 
``qualified investor.''
    New paragraph (54) defines ``banking product'' as: (1) a 
deposit account, savings account certificate of deposit, or 
other deposit instrument issued by a bank; (2) a banker's 
acceptance; (3) loans and letters of credit issued by a bank; 
(4) a debit account at a bank arising from a credit card or 
similar arrangement; (5) a participation in a loan which the 
bank or an affiliate of the bank (other than a broker or 
dealer) funds, participates in, or owns that (i) is sold to 
qualified investors or (ii) is sold by an employee of a bank 
who is not also a broker-dealer employee and sales are limited 
to persons who have the opportunity to review and assess 
material information, including information about the 
borrower's creditworthiness, and who, based on such factors as 
financial sophistication, net worth, and knowledge and 
experience in financial matters, have the capability to 
evaluate the information available; or (6) any derivative 
instrument, whether or not individually negotiated, involving 
or relating to foreign currencies, except options on foreign 
currencies that trade on a national securities exchange.
    The definition of ``banking products'' includes loans made 
by a bank. The exception for loans made by a bank is only 
available for loans that are not securities under the Exchange 
Act. What constitutes a loan that is not a security is 
determined by reference to the Supreme Court's decision in 
Reves v. Emst & Young, 494 U.S. 56 (1990), which sets out a 
``family resemblance test'' for notes to determine whether they 
are securities.
    In Reves a list of notes previously deemed not to be 
securities is recognized. These include: (1) the note delivered 
in consumer financing; (2) the note secured by a mortgage on a 
home; (3) the short-term note secured by a lien on a small 
business or some of its assets; (4) the note evidencing a 
character loan to a bank customer; (5) short-term notes secured 
by an assignment of accounts receivable; (6) a note which 
simply formalizes as an open-account debt incurred in the 
ordinary course of business; and (7) notes evidencing loans by 
commercial banks for current operations.
    For other instruments, Reves presumes that every note is a 
security and then applies the ``family resemblance'' test to 
determine whether the presumption is correct. The presumption 
is rebutted if a note bears a strong resemblance to any 
instrument on a list of notes that have previously been deemed 
not to be securities, or, if upon applying the test, it is 
determined that the note should be added to the list. Reves 
identifies four factors to consider in determining whether a 
note should be added to the list. These four factors are: (1) 
the motivations that would prompt a reasonable buyer and seller 
to enter into the transaction; (2) the plan of distribution of 
the instrument; (3) the reasonable expectations of the 
investing public; and (4) whether some factor, such as the 
existence of another regulatory scheme, significantly reduces 
the risk of the instrument, thereby rendering application of 
the securities laws unnecessary.
    Accordingly, the loans included in the definition of 
``banking products'' are limited to instruments that would not 
be deemed to be securities under the Reves family resemblance 
test--either because they are already included on the Reves 
list of non-securities or because they would be appropriately 
added to the Reves list of non-securities under the four-factor 
test. In general, the Reves list of non-securities is limited 
to instruments that are purchased, delivered, or sold in 
connection with consumer or commercial financing transactions. 
In contrast, notes that have characteristics typically 
associated with an investment purpose would be deemed 
securities under the Federal securities laws, and therefore 
outside the scope of the term ``banking product.''
    A similar analysis was used to create the conditions for 
sales of loan participations by banks.
    Nothing in paragraph (54) is intended to imply that any 
``banking product'' is, or is not, a security, or an account, 
agreement, contract, or transaction for any purpose under the 
Commodity Exchange Act.
    New paragraph (55) defines ``derivative instrument'' as any 
individually negotiated contract, agreement, warrant, note, or 
option that is based, in whole or in part, on the value of, any 
interest in, or any quantitative measure, or the occurrence of 
any event relating to, one or more commodities, securities, 
currencies, interest or other rates, indices, or other assets, 
but does not include a banking product.
    As in paragraph (54), nothing in paragraph (55) is intended 
to imply that any ``derivative instrument'' is or is not a 
security, or an account, agreement, contract, or transaction 
for any purpose under the Commodity Exchange Act.
    New paragraph (56) defines ``qualified investor.'' The 
definition includes (1) registered investment companies; (2) 
issuers eligible for any exclusion from the definition of 
investment company pursuant to section 3(c)(7) of the 
Investment Company Act; (3) banks, savings and 
loanassociations, brokers, dealers, insurance companies and business 
development companies (as defined in section 2(a)(48) of the Investment 
Company Act); (4) small business investment companies licensed by the 
Small Business Administration under section 301(c) or (d) of the Small 
Business Investment Act of 1958; (5) State sponsored employee benefit 
plans, and certain other employee benefit plans within the meaning of 
the Employee Retirement Income Securities Act of 1974, other than 
individual retirement accounts; (6) certain trusts; (7) market 
intermediaries exempted under section 3(c)(2) of the Investment Company 
Act of 1940; (8) associated persons of a broker or dealer that are not 
natural persons; and (9) foreign banks (as defined in section 1(b)(7) 
of the International Banking Act of 1978).

Section 207. Government securities defined

    Section 207 amends paragraph (42) of subsection 3(a) of the 
Exchange Act to add new subparagraph (E). This new subparagraph 
includes in the definition of ``government securities,'' for 
purposes of section 15C of the Exchange Act as applied to 
banks, qualified Canadian government obligations as defined in 
section 5136 of the Revised Statutes.

Section 208. Effective date

    Section 208 establishes the effective date of this subtitle 
as 270 days from the date of enactment.

             Subtitle B--Bank Investment Company Activities

    Subtitle B of the title addresses many of the concerns 
raised by the increased involvement of banks in investment 
company activities. Banks are now significant participants in 
the mutual fund industry. Because this was not the case when 
the Investment Company Act and the Investment Advisers Act were 
enacted, these statutes currently do not address many of the 
concerns that may arise when banks provide investment 
management and related services to investment companies. The 
bill addresses these concerns by, among other things, 
broadening the definition of ``investment adviser'' in the 
Investment Advisers Act to include banks that advise investment 
companies, and including specific provisions to address the 
conflicts of interest that may arise when banks provide 
investment management and related services to funds. In 
addition, the bill addresses potential customer confusion that 
can occur when investors purchase shares of an investment 
company on bank premises, or shares of an investment company 
that has a name similar to that of a bank. Finally, the bill 
addresses the circumstances under which bank-maintained common 
trust funds are exempt from the securities laws.

Section 211. Custody of investment company assets by affiliated bank

    The Investment Company Act does not currently limit the 
ability of a bank to serve as custodian of the assets of an 
affiliated management investment company or unit investment 
trust. Although the Investment Company Act gives the Commission 
general rulemaking authority regarding investment company 
custodial arrangements, section 211(a) and (b) of the bill 
clarifies and confirms that this rulemaking authority extends 
to custodial arrangements involving affiliated banks.
    Section 211(a) of the bill amends section 17(f) of the 
Investment Company Act (15 U.S.C. Sec. 80a-17(f)) to expressly 
authorize the Commission to adopt rules and issue orders 
prescribing the conditions under which a bank, or an affiliated 
person of a bank, either of which is an affiliated person, 
promoter, organizer, sponsor, or principal underwriter of such 
a company, may serve as the investment company's custodian.
    Section 26(a)(1) of the Investment Company Act (15 U.S.C. 
Sec. 80a-26(a)(1)) requires a unit investment trust to 
designate as trustee or custodian a bank meeting certain 
qualifications. Section 211(b) of the bill amends section 26(a) 
to expressly authorize the Commission to adopt rules and issue 
orders prescribing the conditions under which a bank, or an 
affiliated person of a bank, either of which is an affiliated 
person of a principal underwriter or depositor of a unit 
investment trust, may serve as trustee or custodian of the 
trust.
    Section 36(a) of the Investment Company Act authorizes the 
Commission to bring an action in Federal court against an 
officer, director, investment adviser, depositor, or principal 
underwriter of an investment company that engages in personal 
misconduct that constitutes a breach of fiduciary duty owed to 
the investment company. Section 211(c) of the bill extends 
section 36(a) to cover misconduct by an investment company 
custodian.

Section 212. Lending to an affiliated investment company

    Section 17(a) of the Investment Company Act makes it 
unlawful for an affiliated person of a registered investment 
company, or an affiliated person of that person, among other 
things, to borrow money or other property from the company, 
except as otherwise permitted under the Act. The Investment 
Company Act, however, does not restrict a person's ability to 
make a loan to an affiliated investment company. Loans to an 
investment company from an affiliate carry the potential for 
overreaching. The affiliate could, for example, charge the 
company an above-market interest rate. To address the potential 
for overreaching, section 212 of the bill amends section 17(a) 
to also make it unlawful for any affiliated person of an 
investment company, or any affiliated person of that person, to 
loan money or other property to the company in contravention of 
any rules or orders that the Commission may prescribe or issue.

Section 213. Independent directors

    The Investment Company Act deems certain persons with a 
material relationship to an investment company or to a 
company's investment adviser or principal underwriter to be 
``interested persons'' of those entities. The Act limits the 
number of interested persons who may serve on the board of an 
investment company and uses the interested person concept to 
minimize conflicts of interests. For example, the Act requires 
a fund's investment advisory contract to be approved annually 
by a majority of directors who are not interested persons of 
the fund or the fund's adviser.
    Section 2(A)(19)(A) of the Investment Company Act (15 
U.S.C. Sec. 80a-2(A)(19)(A)) currently defines ``interested 
person'' of an investment company to include six categories of 
persons with specified relationships to the company. 
Subparagraph (v) of the section currently defines ``interested 
person'' of an investment company to include any registered 
broker or dealer, or any affiliated person of the broker or 
dealer. The definition is over-inclusive because it applies to 
any registered broker or dealer, even one with no relationship 
with the fund. The Commission has recognized this problem and 
addressed it in part by adopting rule 2a19-1 under the 
Investment Company Act, which States, in relevant part, that a 
director of an investment company will not be considered an 
interested person of the company, or its adviser or principal 
underwriter, solely because the director is a registered broker 
or dealer or an affiliated person of a broker or dealer, 
provided that certain conditions are met.
    Section 213(a) largely codifies rule 2a19-1 by deleting the 
reference to ``registered broker or dealer'' in subparagraph 
(v) of section 2(a)(19)(A) and substituting ``any person or any 
affiliated person of a person that, during the six-month period 
preceding the determination of whether the person is an 
interested person, has executed any portfolio transactions for, 
engaged in any principal transactions with, or distributed 
shares for the investment company or a related investment 
company or account. Section 213(a) also adds a new subparagraph 
(vi) to section 2(a)(19)(A) that defines ``interested person'' 
to include any person, or any affiliated person of a person 
that, during the six month period preceding the determination 
of whether the person is an interested person, has loaned money 
or other property to the investment company or a related 
investment company or account. Section 213(b) amends section 
2(a)(19)(B) of the Investment Company Act, which is the 
definition of ``interested person'' of an investment adviser or 
principal underwriter of an investment company, to mirror the 
changes made by section 213(a) to section 2(a)(19)(A) of the 
Investment Company Act.
    Section 10(c) of the Investment Company Act (15 U.S.C. 
Sec. 80a-10(c)) currently prohibits a registered investment 
company from having a majority of its board of directors 
comprised of individuals who are officers, directors, or 
employees of any one bank. Section 213(c) of the bill amends 
section 10(c) to extend this prohibition to any one bank, 
together with its affiliates and subsidiaries, or any one bank 
holding company, together with its affiliates and subsidiaries. 
This provision would strengthen the independence of a fund's 
board of directors.
    To accommodate those funds that will have to change the 
composition of their boards as a result of sections 213(a), 
(b), and (c), section 213(d) provides that the amendments made 
by section 213 shall not take effect until one year after the 
enactment of Subtitle B.

Section 214. Additional SEC disclosure authority

    Section 214 of the bill is intended to address potential 
customer confusion that can occur when investors purchase 
shares of an investment company on bank premises, or shares of 
an investment company that has a name similar to that of a 
bank. Section 214 amends section 35(a) of the Investment 
Company Act to prohibit any person issuing or selling the 
securities of a registered investment company from representing 
or implying that the company or securities are insured by the 
Federal Deposit Insurance Corporation (FDIC) or are guaranteed 
by or otherwise an obligation of any insured depository 
institution.
    Section 214 further amends section 35(a) by requiring any 
person issuing or selling the securities of a registered 
investment company that is advised by or sold through a bank to 
disclose prominently that an investment in the company is not 
insured by the FDIC or any other government agency. Section 214 
authorizes the Commission to adopt rules and issue orders 
prescribing the manner in which such disclosure must be 
provided. Even if the Commission has not adopted rules under 
this section, however, bank advised investment companies still 
are required to disclose that an investment in the company is 
not insured by the FDIC or any other government agency.

Section 215. Definition of broker under the Investment Company Act of 
        1940

    Section 215 of the bill replaces the definition of 
``broker'' in section 2(a)(6) of the Investment Company Act 
with a reference to the definition of ``broker'' in the 
Exchange Act. The amended definition continues to exclude any 
person that would be deemed a broker solely because the person 
is an underwriter for one or more investment companies.

Section 216. Definition of dealer under the Investment Company Act of 
        1940

    Section 216 of the bill similarly replaces the definition 
of ``dealer'' in section 2(a)(11) of the Investment Company Act 
with a reference to the definition of ``dealer'' in the 
Exchange Act. The amended definition continues to exclude 
insurance companies and investment companies.

Section 217. Removal of the exclusion from the definition of investment 
        adviser for banks that advise investment companies

    Section 202(a)(11) of the Investment Advisers Act (15 
U.S.C. Sec. 80b-202(a)(11)) currently excludes banks and bank 
holding companies from the definition of ``investment 
adviser.'' Section 217(a) of the bill amends section 202(a)(11) 
to include within the definition of ``investment adviser'' any 
bank or bank holding company that serves as investment adviser 
to a registered investment company. This amendment is intended 
to make banks and bank holding companies that advise investment 
companies subject to the same regulatory scheme as other 
investment company advisers. It also is intended to help the 
Commission more effectively protect the interests of 
shareholders in bank-advised investment companies.2
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    \2\ Section 217 protects shareholders of bank-advised investment 
companies by giving the Commission access to records and information 
necessary to ensure that bank advisers comply with the Federal 
securities laws. Currently, when SEC examiners examine an investment 
company that is advised by a bank that is not a registered investment 
adviser, the Commission staff does not have the authority to require 
the bank to produce trading records related to advisory customers other 
than registered investment companies. This limitation makes it 
difficult to uncover certain practices that may violate the Federal 
securities laws. For example, a bank that advises an investment company 
could allocate more profitable trades to bank trust accounts and less 
profitable trades to the investment company. Bank advisory personnel 
also could engage in front running the securities transactions of the 
investment company by trading the same securities for their personal 
accounts. If all banks that advise investment companies were subject to 
the Advisers Act, the staff would have access to books and records that 
might reveal these practices.
---------------------------------------------------------------------------
    A bank may establish a ``separately identifiable department 
or division'' (SID) to act as investment adviser to a 
registered investment company, in which case only the SID, and 
not the bank, would be deemed an investment adviser under the 
Investment Advisers Act. Section 217(b) of the bill amends 
section 202(a) of the Investment Advisers Act to add a 
definition of a ``separately identifiable department or 
division'' of a bank.

Section 218. Definition of broker under the Investment Advisers Act of 
        1940

    Section 218 of the bill replaces the definition of 
``broker'' in section 202(a)(3) of the Investment Advisers Act 
(15 U.S.C. Sec. 80b-2(a)(3)) with a reference to the definition 
of ``broker'' in the Exchange Act.

Section 219. Definition of dealer under the Investment Advisers Act of 
        1940

    Section 219 of the bill similarly replaces the definition 
of ``dealer'' in section 202(a)(7) of the Investment Advisers 
Act (15 U.S.C Sec. 80b-2(a)(7)) with a reference to the 
definition of ``dealer'' in the Exchange Act. The amended 
definition continues to exclude insurance companies and 
investment companies.

Section 220. Interagency consultation

    Section 220 of the bill adds a new section 210A to the 
Investment Advisers Act that requires the appropriate Federal 
banking agency to share with the Commission, and the Commission 
to share with the banking agency, upon request, the results of 
any examination, reports, records, or other information 
regarding the investment advisory activities of any bank 
holding company, bank, or SID that is registered as an 
investment adviser under the Investment Advisers Act. If a bank 
holding company or bank has a subsidiary or a SID registered as 
an investment adviser under the Investment Advisers Act, the 
section requires that the banking agency share with the 
Commission, upon request, the results of any examination, 
reports, records, or other information regarding the bank 
holding company or bank. Section 220 also clarifies that it 
does not in any way limit the authority of the banking agency 
to regulate the bank holding company, bank, or SID.
    Section 220 is intended to assist the Commission and the 
Federal banking agencies in obtaining information from one 
another that may be necessary or helpful in carrying out their 
statutory responsibilities. The section also is intended to 
provide the Commission with access to information regarding a 
bank holding company or bank that, although not itself 
registered as an investment adviser under the Investment 
Advisers Act, has a subsidiary or SID that is registered as an 
investment adviser under the Investment Advisers 
Act.3
---------------------------------------------------------------------------
    \3\ See supra note 1.
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Section 221. Treatment of bank common trust funds

    The Federal securities laws currently exempt interests in 
common trust funds from the registration requirements of the 
Securities Act and exclude common trust funds from the 
definition of investment company under the Investment Company 
Act. In addition, because interests in common trust funds are 
exempted securities under the Exchange Act, persons effecting 
transactions in these interests need not register as broker-
dealers. All three statutes limit the exception to a common 
trust fund or similar fund maintained by a bank exclusively for 
the collective investment or reinvestment of moneys contributed 
thereto by the bank in its capacity as a trustee, executor, 
administrator, or guardian.
    Section 221 of the bill largely codifies a long-standing 
Commission position that the exception from the securities laws 
available to a bank common trust fund applies only when the 
underlying trust relationship is created for bona fide 
fiduciary purposes, and when the fund is operated for the 
administrative convenience of the bank in a manner incidental 
to the bank's traditional trust department activities and not 
as a vehicle for general investment by the public.
    Section 221 amends the common trust fund exception in 
section 3(c)(3) of the Investment Company Act (15 U.S.C. 
Sec. 80a-3(c)(3)) so that it applies only to a common trust 
fund that meets three conditions. First, the common trust fund 
must be employed solely as an administrative convenience for 
the management of accounts created and maintained for fiduciary 
purposes. Second, interests in the fund may not be advertised 
or offered for sale to the public, except in connection with 
generic advertising of the bank's overall fiduciary services. 
Third, the common trust fund may not charge fees and expenses 
in contravention of fiduciary principles established under 
applicable Federal or State law. Section 221 also amends the 
exemptions provided to common trust funds by section 3(a)(2) of 
the Securities Act (15 U.S.C. Sec. 77c(a)(2)) and section 
3(a)(12)(A)(iii) of the Exchange Act (15 U.S.C. 
Sec. 78c(a)(12)(A)(iii)) to reference the conditions set forth 
in section 3(c)(3) of the Investment Company Act.

Section 222. Investment advisers prohibited from having controlling 
        interest in registered investment company

    Section 222 of the bill amends section 15 of the Investment 
Company Act to add a new subsection (g) that is intended to 
address certain conflicts that may arise when an investment 
adviser to an investment company, or an affiliated person of 
the adviser, has voting control over the investment company 
through shares held in a trustee or fiduciary capacity. To 
ensure that the adviser does not use its fiduciary authority to 
further its own interests (such as by voting toperpetuate 
itself as adviser to the investment company), section 222 requires the 
fiduciary to follow certain procedures when voting investment company 
shares.
    If the adviser has a controlling interest in the investment 
company through shares held in a trustee or fiduciary capacity 
on behalf of an employee benefit plan subject to the Employee 
Retirement Income Security Act of 1974 (ERISA), section 222 
requires that the adviser transfer the power to vote the shares 
of the investment company to another fiduciary of the plan that 
is not an affiliated person of the investment adviser, or an 
affiliated person of such a person. Transferring the power to 
vote to another plan fiduciary (such as the plan administrator 
or plan sponsor) that will exercise voting authority in 
accordance with ERISA requirements is neither an improper 
delegation of voting authority nor an improper exercise of 
voting responsibilities by the investment adviser in violation 
of ERISA.
    If the adviser has a controlling interest in the investment 
company through shares held in a trustee or fiduciary capacity 
for persons other than employee benefit plans subject to ERISA, 
section 222 provides the adviser with several options for 
voting the shares. First, the adviser may transfer the power to 
vote the shares of the company to: (i) the beneficial owners of 
the shares; (ii) another fiduciary who is not an affiliated 
person of the adviser, or an affiliated person of such person; 
or (iii) any person authorized to receive statements and 
information with respect to the trust who is not an affiliated 
person of the adviser or an affiliated person of such person. 
Second, the adviser may vote the shares held by it in the same 
proportion as shares held by all other shareholders of the 
investment company. Finally, the adviser may vote the shares in 
accordance with such rules or orders as the Commission may 
prescribe or issue.
    Under well-established principles of fiduciary law, a 
fiduciary has an obligation to vote shares held by it in a 
fiduciary capacity in the best interests of the shareholders, 
without regard to the fiduciary's own interests. Transferring 
the power to vote the shares to another person therefore might 
be deemed to be an improper delegation or abdication of the 
fiduciary's responsibilities. Similar concerns are presented by 
proportionate voting of shares held in a fiduciary capacity. 
For this reason, section 222 includes a safe harbor that 
provides that an investment adviser to a registered investment 
company that has voting control over the investment company 
through shares held in a fiduciary capacity (for persons other 
than employee benefit plans subject to ERISA) will not be 
deemed to have acted unlawfully or to have breached a fiduciary 
duty under State or Federal law solely because it voted shares, 
or transferred the power to vote shares, in accordance with the 
standards set forth in new section 15(g) of the Investment 
Company Act.
    Section 222 further provides that the voting procedures 
described above shall not apply when the investment company 
consists solely of assets held in a trustee or fiduciary 
capacity. Fiduciary customers have adequate protection under 
applicable State and Federal fiduciary law. The voting 
procedures prescribed by section 222 are therefore meant only 
to protect those investors that are not fiduciary customers of 
the investment adviser, and these protections are not necessary 
when the investment company consists solely of assets held in a 
trustee or fiduciary capacity.

Section 223. Conforming change in definition

    Section 223 of the bill amends the definition of ``bank'' 
in section 2(a)(5) of the Investment Company Act by deleting 
the reference to ``a banking institution organized under the 
laws of the United States'', and substituting a reference to 
``a depository institution'', as defined in the Federal Deposit 
Insurance Act, or ``a branch or agency of a foreign bank,'' as 
those terms are defined in the International Banking Act of 
1978. The Exchange Act continues to define banks by reference 
to organization under the laws of the United States.

Section 224. Conforming amendment

    Section 224 of the bill amends section 202 of the 
Investment Advisers Act to add a new subsection (c) that 
requires that when the Commission, as part of a rulemaking, 
considers whether an action is necessary or appropriate in the 
public interest, it consider, in addition to the protection of 
investors, whether the action will promote efficiency, 
competition, and capital formation. This provision is intended 
to incorporate into the Investment Advisers Act a standard for 
Commission rulemaking similar to those that were added to the 
Securities Act, the Exchange Act, and the Investment Company 
Act as part of the Securities Markets Improvement Act of 1996.

Section 225. Effective date

    Subtitle B shall become effective 90 days after the date of 
enactment of this Act.

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

    Subtitle C creates a new investment bank holding company 
structure under the Federal securities laws. This subtitle is 
designed to implement a new concept of Securities and Exchange 
Commission (Commission) supervision of holding companies with 
affiliated wholesale financial institutions (WFIs) that are 
primarily in the securities business. All other holding 
companies affiliated with WFIs will be subject to Federal 
Reserve Federal Reserve Board regulation under a similar 
regulatory scheme contained in Title I. Broker-dealer holding 
companies that do not have an affiliated WFI do not 
automatically have holding company regulation, but may 
voluntarily elect Commission supervision as an investment bank 
holding company under this subtitle. Under this voluntary 
supervision, the Commission will have greater authority to 
oversee the entire entity, thus satisfying the expectations of 
foreign jurisdictions and some counterparties that the entity 
will be subject to consolidated supervision. This option should 
be useful for investment bank holding companies that do 
business in foreign jurisdictions that require consolidated 
holding company supervision.
    As more fully detailed elsewhere, investment bank holding 
companies that buy or affiliate with WFIs cannot be affiliated 
with any other bank (other than credit card banks, Edge 
Actcorporations, and State-chartered trust companies). The WFI itself 
is regulated by banking regulators for safety and soundness purposes as 
provided in Title I. Investment bank holding companies with affiliated 
WFIs are authorized to engage in a wide range of ``financial 
activities,'' to continue existing commercial activities, and to engage 
in a limited amount of new commercial activities. Under the subtitle, 
the Commission will be responsible for supervising investment bank 
holding companies with affiliated WFIs (i) that meet criteria 
demonstrating that they are primarily engaged in the securities 
business, and (ii) whose WFI is small in size relative to size of the 
overall holding company.
    Broker-dealer holding companies without affiliated WFIs 
that voluntarily ``opt'' into the investment bank holding 
company supervisory scheme will remain free, of course, to 
engage in--or affiliate with entities engaged in--unlimited 
commercial activities.

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

    Generally, section 231(a) of the bill amends section 17 of 
the Securities Exchange Act by adding new subsections (i), (j) 
and (k).
    New subsection 17(i) creates the investment bank holding 
company, which is defined in an amendment to section 3 of the 
Securities Exchange Act as (i) any person, other than a natural 
person, that owns or controls one or more brokers or dealers, 
and (ii) any associated person of an investment bank holding 
company. This new entity is subject to a scheme of mandatory 
Federal Reserve Federal Reserve Board or Commission supervision 
if it is affiliated with a bank that is a WFI. New subsection 
17(i) also prescribes a scheme of voluntary Commission 
oversight for investment bank holding companies that have no 
affiliated banks but desire consolidated holding company 
oversight.
    Subtitle C is not intended to affect the supervisory scheme 
described in Title I for any financial holding company or bank 
holding company that has both insured bank affiliates and 
broker or dealer affiliates.
            a. Mandatory supervision of investment bank holding 
                    companies that control one or more WFIs
    Paragraph (1) of new subsection 17(i) provides that the 
Commission is the supervisory regulator of an investment bank 
holding company that controls one or more WFIs and (i) the WFI 
has in the aggregate less than $15,000,000,000 in consolidated 
risk-weighted assets, and annual gross revenues that are less 
than 25 percent of the company's consolidated annual gross 
revenues, and (ii) that does not control any insured bank other 
than credit card banks, Edge Act corporations, and State 
chartered trust companies, or any other bank (other than a 
WFI), or does not control any savings association.
    Consolidated risk-weighed assets for purposes of this 
provision are based on the average consolidated risk-weighted 
assets of the institution for the four previous calendar 
quarters and include only those risk-weighted claims on 
affiliates that, in the aggregate, exceed the aggregate risk-
weighted claims of affiliates (other than WFI subsidiaries) on 
the WFI.
            b. Voluntary supervision of investment bank holding 
                    companies that do not have affiliated WFIs
    Paragraph (2) of new subsection 17(i) permits any 
investment bank holding company that does not have an 
affiliated WFI to elect Commission supervision. This 
supervision may be useful or necessary to engage in financial 
activities globally, and therefore may be a desirable option 
for those investment bank holding companies that operate on a 
global basis or with global parties.
    An investment bank holding company that does not have a WFI 
and voluntarily elects Commission supervision under paragraph 
(2) will be subject to the same supervisory scheme as WFI-
affiliated investment bank holding companies, with two 
significant differences. Most important, investment bank 
holding companies that do not have affiliated WFIs are not 
subject to any limitations on their commercial activities. In 
addition, they will have the option of voluntary withdrawal 
from supervision, as described in detail below.
            c. Withdrawals
    Paragraph (3) of new subsection (i) requires investment 
bank holding companies with affiliated WFIs that are supervised 
by the Commission and that cease to meet any one of the 
requirements described above to file a notice of withdrawal 
from Commission supervision. A Commission supervised investment 
bank holding company with an affiliated WFI also may 
voluntarily withdraw from Commission supervision. In either 
case, the Commission, after consultation with the Federal 
Reserve Federal Reserve Board, may impose any necessary terms 
and conditions on the withdrawal deemed necessary or 
appropriate. After withdrawal from Commission supervision, an 
investment bank holding company with a WFI must be supervised 
by the Federal Reserve Federal Reserve Board.
    Under paragraph (4), investment bank holding companies 
voluntarily supervised by the Commission may elect at any time 
not to be supervised by filing with the Commission a notice of 
withdrawal. In addition, the Commission may discontinue 
supervision over any voluntarily supervised investment bank 
holding company under certain circumstances. For example, if 
the Commission finds that the investment bank holding company 
no longer exists or is no longer an investment bank holding 
company, or that supervision is not consistent with the 
purposes of section 17(i), the Commission may discontinue its 
supervision.
            d. Scheme of regulation
    When the Commission is the primary supervisor of an 
investment bank holding company (whether or not affiliated with 
a WFI), the investment bank holding company and its affiliates 
are subject to Commission record keeping and reporting 
requirements, and to Commission examinations as set forth in 
paragraph (5).
            1. Record Keeping and Reporting
    Paragraph (5) of new subsection 17(i) contains the record 
keeping, reporting, and examination requirements applicable to 
investment bank holding companies supervised by the Commission. 
The Commission, in its new role as a holding company 
supervisor, may adopt rules necessary to provide information 
about each supervised investment bank holding company's 
activities, financial condition, policies, systems for 
monitoring and controlling financial and operational risks, and 
transactions and relationships between affiliated brokers, 
dealers or WFIs. The Commission also may adopt rules necessary 
to permit it to ascertain the extent to which each investment 
bank holding company and its affiliates are complying with the 
Securities Exchange Act.
    The Commission may require supervised investment bank 
holding companies to keep records containing the information 
necessary to inform the Commission as described above, and to 
make and provide reports to the Commission. Reports may include 
financial statements, capital assessments, reports by 
independent auditors regarding compliance with risk management 
and internal control objectives, and reports regarding such 
company's or affiliate's compliance with the Exchange Act and 
regulations.
    To minimize duplicative and burdensome regulatory 
requirements, the Commission is expressly directed to use, to 
the fullest extent possible, reports that a supervised 
investment bank holding company or its affiliates have provided 
to another appropriate regulatory agency or Self regulatory 
Organization (SRO). Supervised investment bank holding 
companies and their affiliates must provide reports prepared 
for other regulators to the Commission, when requested.
            2. Examinations
    The Commission may examine any supervised investment bank 
holding company and any affiliate to gather information about 
the operations and financial condition of the investment bank 
holding company and its affiliates, the risks within the 
investment bank holding company that may affect any affiliated 
broker-dealer or WFI, and the systems for monitoring such 
risks. Examinations also may be conducted to monitor compliance 
with new subsection 17(i), applicable restrictions on 
transactions between broker-dealers or WFIs and their 
affiliates, and the Bank Secrecy Act. Examinations must be 
restricted to the investment bank holding company and any 
affiliate that could have a material adverse effect on the 
condition of any affiliated broker-dealer or WFI. The 
Commission must, to the fullest extent possible, notify the 
appropriate regulatory agency prior to examining a WFI. In 
addition, the Commission must use, to the fullest extent 
possible, the examination reports made by other ``functional 
regulators'' such as the relevant bank regulator (for an 
affiliated WFI, credit card bank, Edge Act corporation, or 
State-chartered trust company) or the State insurance regulator 
(in the case of an affiliated insurance company).
            3. Capital Adequacy
    In addition, the Commission may adopt capital adequacy 
rules for investment bank holding companies if the Commission 
finds that such rules are necessary to adequately supervise 
investment bank holding companies and their broker, dealer or 
WFI affiliates pursuant to paragraph (6). The Committee does 
not encourage the Commission to exercise this authority. If, 
however, the Commission decides that capital adequacy rules are 
necessary, it must consider the use of double leverage, base 
any capital ratio on appropriate risk-weighting considerations, 
refrain from imposing any capital requirement on a nonbanking 
affiliate that is in compliance with the capital requirement of 
another Federal regulator or State insurance regulator, and 
take account of the capital requirements of other Federal 
regulators and State insurance regulators. The Commission 
should incorporate internal risk management models into any 
capital adequacy rules it adopts for investment bank holding 
companies. The Commission, in adopting any capital adequacy 
rules for investment bank holding companies with affiliated 
WFIs, must consult with the Federal Reserve Federal Reserve 
Board, in an effort to maintain consistency in regulation by 
the Commission and the Federal Reserve Federal Reserve Board.
            e. Permissible activities for investment bank holding 
                    companies with affiliated WFIs
    Investment bank holding companies with affiliated WFIs, 
regardless of their supervisory regulator, may engage in a much 
broader group of activities than previously permitted to bank 
holding companies. The reasons for this change are described in 
detail in the discussion of Title I. Generally, paragraph (7) 
sets forth certain permitted financial activities, as well as 
describing commercial and certain other permissible activities.
    Generally, pursuant to subparagraph (7)(A) of new 
subsection 17(i), Commission supervised investment bank holding 
companies with affiliated WFIs may engage in activities that 
are described in detail in subparagraphs (B), (C), (D), (E) and 
(G).
            1. Financial Activities
    New subparagraph (7)(B) specifies ``financial activities'' 
as activities that are permissible for a bank holding company 
under section 4(c)(1) through (14) of the Bank Holding Company 
Act of 1956 and activities that are financial in nature, 
incidental to such financial activities or activities the SEC 
determines by rule or regulation are financial in nature or 
incidental to such activities. Activities that are considered 
to be financial in nature or incidental to such activities 
include: (i) lending, exchanging, transmitting, investing or 
safeguarding money or securities; (ii) insuring, guaranteeing, 
or indemnifying against loss, harm, damage, illness, 
disability, or death,or providing and issuing annuities, and 
acting as principal agent, or broker for purposes of the foregoing; 
(iii) providing financial, investment, or economic advisory services, 
including advising an investment company (as defined in section 3 of 
the Investment Company Act of 1940); (iv) issuing or selling 
instruments representing interests in pools of assets permissible for a 
bank to hold directly; (v) underwriting, dealing in, or making a market 
in securities; (vi) activities permitted bank holding companies abroad; 
(vii) merchant banking activities; (viii) insurance investment 
activities; and (ix) any other activity that the Federal Reserve 
Federal Reserve Board has determined by order or regulation in effect 
on the date that the Act is enacted determined is so closely related to 
banking or managing or controlling banks as to be a proper incident to 
banking.
    The Commission is directed to adopt rules defining the 
following activities as financial in nature or incidental to 
activities that are financial in nature: (i) lending, 
exchanging, transferring, investing for others, or safeguarding 
financial assets other than money or securities; (ii) providing 
any advice or other instrumentality for transferring money or 
other financial assets; and (iii) arranging, effecting or 
facilitating financial transactions for the accounts of third 
parties.
    The Commission's authority to interpret the terms 
``financial in nature'' and ``incidental to financial in 
nature'' mirrors similar authority provided to the Federal 
Reserve Federal Reserve Board in Title I for those investment 
bank holding companies under the Federal Reserve Board's 
supervision. To encourage consistency, the Commission must 
consult with the Federal Reserve Federal Reserve Board when 
exercising its authority under this paragraph. Similarly, the 
Federal Reserve Federal Reserve Board is required, pursuant to 
parallel provisions in Title I, to consult with the Commission 
under the same circumstances. Such mutual consultation 
provisions are intended to maximize consistent interpretation 
of what activities are financial or incidental to financial 
activities and to maintain competitive equality for investment 
bank holding companies, regardless of supervisory regulator. 
Notably, any activity limitations imposed by the Commission and 
the Federal Reserve Federal Reserve Board are intended to be 
consistent, but not necessarily identical.
    Commission supervised investment bank holding companies 
have, by definition, small affiliated WFIs and the holding 
companies' business is predominantly not banking. In addition, 
their affiliated WFIs are not protected by Federal deposit 
insurance. For this reason, Commission supervised investment 
bank holding companies do not need all the limitations imposed 
on Federal Reserve Federal Reserve Board supervised investment 
bank holding companies. The Committee expects the Commission to 
act to preserve the flexibility and ability to innovate that 
characterizes securities firms currently by responding in a 
timely manner to innovation in financial services. The 
Committee recognizes that the Commission, pursuant to its 
authority under this new subparagraph, may at times construe 
financial activities somewhat differently than the Federal 
Reserve Federal Reserve Board will under parallel provisions in 
Title I. For example, the Federal Reserve Federal Reserve Board 
may determine that certain activities, although having some 
relationship to finance, would pose a threat to the banking 
system if engaged in by investment bank holding companies with 
large WFIs. The Commission could determine, however, that the 
same activities would be acceptable for an investment bank 
holding company engaged predominantly in securities activities 
and affiliated with a small WFI. Of course, the Committee 
expects, and the subtitle mandates, that the Commission and the 
Federal Reserve Federal Reserve Board consult on such matters 
so that competitive concerns are taken into account.
            2. Permissible Non-Financial Activities and Investments
    All investment bank holding companies with affiliated WFIs, 
whether supervised by the Federal Reserve Federal Reserve Board 
or the Commission, may engage in non-financial activities, and 
may acquire and retain ownership and control of shares of any 
company engaged in a non-financial activity, subject to certain 
limitations enumerated in the bill. For Commission supervised 
investment bank holding companies, these limitations are set 
forth in subparagraph 17(i)(7)(C). In particular, (1) non-
financial activities cannot account for more than 5 percent of 
the consolidated annual gross revenues of the investment bank 
holding company, (2) the consolidated assets of any non-
financial company whose shares are acquired by the investment 
bank holding company are less than $750,000,000 at the time of 
the acquisition, and (3) the investment bank holding company 
must notify the Commission within 30 days of beginning a non-
financial activity or acquiring ownership or control of a 
company engaged in non-financial activities.
    Investment bank holding companies predominantly engaged in 
the securities business may have non-financial activities or 
affiliates that predate the date of enactment of this bill. 
These preexisting activities and affiliates are expressly 
grandfathered in subparagraph 17(i)(7)(D). An investment bank 
holding company can continue to engage in any non-financial 
activities or retain ownership and control of any non-financial 
affiliates after enactment of the bill, even if these 
activities and affiliates exceed the 5 percent limit (or the 
$750,000,000 cap on the size of non-financial affiliates) 
discussed above.
    This grandfather limits affiliates engaged in non-financial 
activities, however, to the same activities that they engaged 
in on the date of enactment and other activities permissible 
under subsection 17(i). In addition, after the date of 
enactment of the bill, investment bank holding companies may 
not acquire assets of any company engaged in non-financial 
activities, except to the extent permitted in paragraph 
17(i)(7)(C).
            3. Commodity Activities
    Subparagraph (E) of subsection 17(i) permits certain 
investment bank holding companies with affiliated WFIs that 
were predominantly engaged in securities activities in the 
United States on January 1, 1997, or any successors to such 
companies, to engage in, or directly or indirectly own shares 
of a company lawfully engaged in trading, sale or investment in 
commodities and underlying physical properties. In order to 
take advantage of this provision, the company, or a subsidiary 
of the company, must have been engaged directly, indirectly or 
through a subsidiary, in any of these activities on January 1, 
1997.
    An investment bank holding company's attributed aggregate 
investment in these activities may not exceed five percent of 
the holding company's capital. The Commission may, however, 
increase the percent of capital attributable to these 
activities, as the Commission considers appropriate, consistent 
with the Exchange Act. In addition, the Commission has 
rulemaking authority to implement this subparagraph.
    Section 2(a)(1)(A) of the Commodity Exchange Act confers 
upon the Commodity Futures Trading Commission (CFTC) exclusive 
jurisdiction with respect to accounts, agreements, and 
transactions involving contracts of sale of a commodity for 
future delivery. Nothing contained in section 231 is intended 
to supersede or limit the jurisdiction at any time conferred on 
the CFTC, or to restrict the CFTC from carrying out its duties 
and responsibilities under the Commodity Exchange Act or any 
other law.
            4. Cross-Marketing Restrictions
    An investment bank holding company with an affiliated WFI 
may engage in somewhat more extensive activities than bank and 
financial holding companies. In particular, the level of 
permitted commercial activities for investment bank holding 
companies is substantially higher than the level for other 
bank- and financial holding companies. Regardless of the 
permitted activities of affiliates in an investment bank 
holding company, however, each affiliate should be functionally 
regulated, according to the services it offers. For this 
reason, subparagraph 17(i)(7)(F) prohibits affiliates and 
subsidiaries of Commission supervised investment bank holding 
companies with affiliated WFIs from offering or marketing any 
product or service of an affiliated WFI. Similarly, affiliated 
WFIs are prohibited from offering or marketing any product or 
service of any other affiliates within an investment bank 
holding company.
            5. Developing Activities
    In recognition of the rapid pace of change in the financial 
marketplace, and to protect innovation, subparagraph 
17(i)(7)(G) permits Commission-supervised investment bank 
holding companies to engage in any activity that has not been 
expressly defined as ``financial'' by the Commission, up to 5 
percent of each of the holding company's gross revenues, assets 
and capital, provided that the holding company reasonably 
concludes that the activity is financial in nature or 
incidental to financial activities and that the Commission has 
not previously reached a contrary determination as to the 
nature of the activity. Finally, any holding company relying on 
this subparagraph must provide the Commission with written 
notice describing the activity no later than 10 business days 
after beginning the activity or completing an acquisition of a 
company conducting the activity. Title I contains parallel 
provisions for financial holding companies and investment bank 
holding companies supervised by the Federal Reserve Federal 
Reserve Board.
            f. Functional regulation of banking and insurance 
                    activities
    Paragraph (8) of new subsection 17(i) requires that the 
Commission, in exercising its holding company supervisory 
authority, defer to the appropriate regulatory agency with 
regard to interpretations and enforcement of banking laws, and 
to the appropriate State insurance regulators with regard to 
interpretations and enforcement of applicable State insurance 
laws.
            g. Federal Reserve Board backup authority
    Paragraph (9) of new subsection 17(i) refers to backup 
examination and enforcement authority for Commission supervised 
investment bank holding companies affiliated with WFIs. The 
Commission is the primary regulator of these entities; however, 
section 10(e) of the Bank Holding Company Act gives the Federal 
Reserve Federal Reserve Board ``back-up'' examination and 
enforcement authority, subject to certain conditions and 
requirements set forth therein.
    The Committee expects that this authority will be sparingly 
used. In particular, the Committee does not intend for the 
Federal Reserve Board to use this authority to bring actions 
using its ``safety and soundness'' authority against entities 
that are not covered by Federal deposit insurance.
            h. Definitions
    Paragraph (10) of new subsection 17(i) defines the terms 
``investment bank holding company'', ``supervised investment 
bank holding company'', ``substantially engaged in the 
securities business'', ``person associated with an investment 
bank holding company'', and ``associated person of an 
investment bank holding company.'' The term ``wholesale 
financial institution'' is defined by reference to the Federal 
Reserve Act. The terms ``affiliate'', ``bank'', ``bank holding 
company'', ``company'', ``control'', ``savings association'', 
``well capitalized'', and ``well managed'', are defined by 
reference to the Bank Holding Company Act. The term ``insured 
bank'' is defined by reference to the Federal Deposit Insurance 
Act, and the term ``foreign bank'' is defined by reference to 
the International Banking Act of 1978.
            i. Securities and Exchange Commission backup authority
    New subsection 17(j) gives the Commission backup authority 
to inspect any investment bank holding company that is 
supervised by the Federal Reserve Federal Reserve Board and any 
of its affiliates, to monitor and enforce compliance with the 
Federal securities laws. The Commission must limit its 
inspections to the transactions, policies, procedures and 
records reasonably necessary to monitor and enforce compliance 
with the Federal securities laws. To the fullest extent 
possible, the Commission must use examination reports made by 
banking and insurance regulators. The Commission also must, to 
the fullest extent possible, notify the appropriate regulatory 
agency prior to conducting an inspection of a WFI, Edge Act 
corporation, State-chartered trust company, or credit card bank 
pursuant to the authority granted in this subsection.
            j. Exclusion from Freedom of Information Act
    New subsection 17(k) provides authority for the Commission 
to limit disclosure, pursuant to the Freedom of Information 
Act, of information required to be reported to it under 
subsections (h), (i), or (j), or information supplied to it by 
any domestic or foreign regulatory agency that relates to the 
financial or operational condition of any associated person of 
a broker or dealer, investment bank holding company, or any 
affiliate of an investment bank holding company. This 
subsection expressly does not authorize the Commission to 
withhold information from Congress or from another Federal 
department or agency.
            k. Conforming amendments
    Section 231(b) of the bill contains amendments that conform 
other provisions of the Exchange Act to the amendments to 
section 17 made in section 231(a) of the bill. These conforming 
amendments include amendments to the definition of 
``appropriate regulatory agency'' in section 3(a)(34) of the 
Exchange Act, the definitions of ``person associated with a 
broker or dealer'' or ``associated person of a broker or 
dealer'', and ``person associated with a member'' or 
``associated person of a member,'' in sections 3(a)(18) and 
3(a)(21) of the Exchange Act, and to persons identified as 
``associated'' in 15(b)(6)(A) of the Exchange Act. These 
amendments clarify the Commission's scope of jurisdiction over 
associated persons of investment bank holding companies, 
regardless of the supervisory regulator, for purposes of the 
Exchange Act. In particular, they clarify and confirm that the 
Commission may use its authority under the Exchange Act to 
bring actions against investment bank holding companies and 
their affiliates under provisions that provide it with 
authority to bring actions against ``associated'' persons.
    In addition, the Right to Financial Privacy Act is amended 
to facilitate information-sharing between financial regulators.

                           Subtitle D--Study

Section 241. Study of the methods to inform investors and consumers of 
        uninsured products

    Section 241 requires the Comptroller General of the United 
States to perform a study on the usefulness, including the 
potential costs and benefits, of a government seal or logo for 
helping bank customers to better understand when they are 
purchasing a product that is not insured by the Federal Deposit 
Insurance Corporation, such as a security or insurance product.
    Subtitle A amends the definitions of ``broker'' and 
``dealer'' in the Securities Exchange Act of 1934 (Exchange 
Act) to eliminate antiquated broad exceptions for banks. In 
place of the broad exceptions, subtitle A provides 
circumscribed exceptions from the definitions for specific 
activities. These exceptions reflect important considerations 
such as investor protection. Subtitle A also contains a 
provision setting out a grievance process for customers who 
purchase or sell securities directly through banks pursuant to 
the exemptions. Finally, subtitle A includes a record keeping 
requirement for banks and an information sharing provision to 
allow banking regulators and the Commission to determine 
whether banks are complying with the terms of the exceptions 
and exemptions.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Section 301. State regulation of the business of insurance

    Section 301 reaffirms that the McCarran-Ferguson Act 
remains the law of the United States.

Section 302. Mandatory insurance licensing requirements

    Section 302 provides that no person or entity shall provide 
insurance in a State as principal or agent unless such person 
or entity is licensed by the appropriate insurance regulator of 
such State. The Committee does not intend to impose a licensing 
requirement for insurance principals or agents where none 
exists under applicable State law, such as for certain surplus 
or reinsurance surplus lines in some States.

Section 303. Functional regulation of insurance

    Section 303 provides that the insurance sales activity of 
any person or entity shall be functionally regulated.

Section 304. Insurance underwriting in national banks

    Section 304 prohibits national banks and their subsidiaries 
from underwriting insurance, except for authorized products. 
Authorized products are anything that (1) as of January 1, 1997 
the Office of the Comptroller of the Currency (OCC) determined 
in writing that national banks may underwrite, or that national 
banks were in fact lawfully underwriting, and (2) where no 
court has overturned the OCCs determination, such products do 
not include title insurance or annuities. Insurance products 
are defined as anything regulated by the relevant State as 
insurance as of January 1, 1997, including annuities. Products 
developed in the future are classified as insurance if so 
regulated by the State, so long as they are based on specified 
insurance concepts. However, future products that are core 
banking products, such as deposits, loans, letters of credits, 
trusts, derivatives, and guarantees are protected for banks, 
unless they are treated as insurance under the Internal Revenue 
Service tax code, in which case such products are insurance 
(except where the product is a bank extension of credit, 
derivative, or financial guaranty).

Section 305. New bank agency activities only through acquisition of 
        existing licensed agents

    Section 305 specifies that national banks and their 
subsidiaries that are not currently engaged in insurance agency 
activities in a State may only begin such activities by 
acquiring an existing agency that has been licensed in such 
State for at least two years.

Section 306. Title insurance activities of national banks and their 
        affiliates

    Section 306 generally prohibits a national bank and its 
subsidiaries from selling or underwriting title insurance, but 
grandfathers those activities which a bank (or its 
subsidiaries) were actively and lawfully engaged in before the 
date of enactment. However, if a national bank has an insurance 
underwriting affiliate, any title insurance underwriting or 
sales activities must be pushed out into such affiliate; a 
national bank without such an affiliate, but which has a 
subsidiary that underwrites insurance, must push out any title 
insurance activities into such subsidiary.
    Section 306 also grants national banks and their 
subsidiaries the authority to sell title insurance in a State 
within which the State's own State-chartered banks were 
authorized under State law to sell title insurance as of 
January 1, 1997. However, such authority shall be subject to 
the same limitations and regulations as those applicable to any 
State-chartered bank in such State.

Section 307. Expedited and equalized dispute resolution for financial 
        regulators

    Section 307 establishes expedited and equalized dispute 
resolution mechanism to guide the courts in deciding a 
regulatory conflict between a State insurance regulator and 
Federal financial regulator as to whether a product is or is 
not insurance, or whether or not a State law regulating an 
insurance activity is or is not preempted by Federal law. 
Either party may file an action in the Federal District Court, 
with a judgment required to be rendered within 90 days. Any 
appeals of the District Court's ruling must be filed within ten 
days, and the United States Court of Appeals must render 
judgment within an additional 60 days. No action may be filed 
by either party after the later of (1) one year after the first 
public notice of a final regulation, or (2) six months after 
the regulation takes effect. The courts are directed to resolve 
the conflict based on the merits of all questions presented 
under State and Federal law, including the nature of the 
product or activity and the history and purpose of its 
regulation under State and Federal law, without unequal 
deference. This paragraph is designed to mediate disputes 
between insurance and banking regulation and is not intended to 
apply to issues regarding whether any product is a security.

Section 308. Consumer protection regulations

    Section 308 directs the Federal banking regulators to issue 
final consumer protection regulations within one year, which 
shall govern the sale of insurance by any bank, or any person 
at or on behalf of a bank. The regulators shall provide 
additional consumer protections as they deem appropriate. The 
regulators shall also (after consulting with State insurance 
regulators) jointly prescribe regulations where appropriate, 
including extending such regulations to bank operating 
subsidiaries where necessary to ensure consumer protection. 
Such regulations shall include:
          Anticoercion rules, prohibiting a bank from leading a 
        consumer to believe that an extension of a loan is 
        conditional upon the purchase of insurance from the 
        bank or its affiliates.
          Oral and written disclosures stating that the 
        applicable insurance product is not FDIC insured; in 
        the case of a variable annuity, that the product may 
        involve an investment risk and may lose value; and that 
        extension of credit may not be based on the purchase of 
        insurance. Such disclosures shall be simple and easily 
        understandable, such as ``not FDIC-insured'', ``not 
        guaranteed by the bank'', or ``may go down in value''. 
        Regulations may be modified according to whether the 
        purchase is in person or by electronic media, as 
        appropriate. An acknowledgment must be obtained from 
        the consumer that the disclosure has been conveyed, 
        either at the time of the disclosure or at the initial 
        purchase of the product.
          A clear delineation of the settings and circumstances 
        under which insurance transactions should be physically 
        segregated from areas where banks make loans or 
        routinely accept deposits.
          Standards limiting compensation for referrals by bank 
        tellers and loan personnel. Such compensation may not 
        exceed a one-time nominal fixed fee for each referral, 
        which can not be contingent upon a successful 
        transaction.
          Standards requiring proper qualification and 
        licensure under State law of those who solicit and sell 
        insurance on behalf of or on the premises of a bank.
          Prohibitions on discrimination against victims of 
        domestic violence, preventing such status from being 
        considered as a criterion in any insurance activity 
        conducted by or at a bank, or by a bank representative. 
        Such discrimination may only be allowed in accordance 
        with State law--the Committee anticipates that some 
        States may require affirmative discrimination on behalf 
        of domestic violence victims. A sense of Congress is 
        given that the States should adopt, within the next few 
        years, regulations prohibiting insurance discrimination 
        against domestic violence which are at least as strict 
        as those under this subsection. The Committee further 
        anticipates that the Federal banking regulators will 
        coordinate their anti-domestic violence regulations 
        with the States and the model laws being adopted by the 
        National Association of Insurance Commissioners.
          Establishment of a consumer grievance process to 
        receive and investigate consumer complaints, inform 
        consumers of their rights and address their concerns, 
        and recover losses to the extent appropriate. The 
        Committee anticipates that the consumer grievance 
        process will be coordinated and implemented in 
        cooperation with the appropriate State insurance 
        regulators.
    The regulations established pursuant to this section shall 
not affect the authority of other State or Federal agencies, 
and shall not be deemed as limiting any State law or 
regulation.

Section 309. Certain State affiliation laws preempted for insurance 
        companies and affiliates

    Section 309 preempts State laws that prevent or restrict 
insurance companies or insurance affiliates from becoming a 
financial holding company or acquiring control of a bank. The 
section further preempts State laws that limit the amount of an 
insurer's assets that can be invested in a bank, except that 
the insurer's State of domicile can limit such insurer's 
investments to 5 percent (or any higher threshold) of the 
insurer's admitted assets. If an insurance company is 
reorganizing from a mutual form into a stock company (including 
into a mutual holding company), then States other than the 
insurer's domicile may not prevent or restrict or require 
approval or formal review of such reorganization.

             Subtitle B--Redomestication of Mutual Insurers

Section 311. General application

    Section 311 limits application of the provisions of the 
Subtitle to those States which have not enacted, or promulgated 
through regulation, reasonable terms and conditions for 
allowing mutual insurance companies to reorganize into a mutual 
holding company.

Section 312. Redomestication of mutual insurers

    Section 312 allows mutual insurance companies to 
redomesticate to another State and reorganize into a mutual 
holding company or stock company. All licenses of the insurer 
are preserved, and all outstanding policies, contracts, and 
forms remain in full force. A redomesticating company must 
provide notice to the State insurance regulators of each State 
for which the company is licensed.
    A mutual insurance company may only redomesticate under 
this section if the State insurance regulator of the new 
(transferee) domicile affirmatively determines that the 
company's reorganization plan includes the following 
requirements:
          The reorganization must be approved by a majority of 
        the company's board of directors and voting 
        policyholders, after notice and disclosure of the 
        reorganization and its effects on policyholder 
        contractual rights. The notice and disclosure, as well 
        as a determination of ensuring a reasonable opportunity 
        for policyholders to vote, shall be determined by the 
        State insurance regulator of the transferee domicile.
          The policyholders must have equivalent voting rights 
        in the new mutual holding company as compared to the 
        original mutual insurer. Any initial public offering of 
        stock shall be in accordance with applicable securities 
        laws and under the supervision of the State insurance 
        regulator of the transferee domicile.
          The new mutual holding company, for six months after 
        the completion of an initial public offering, may not 
        award any stock options or grants to its elected 
        officers or directors or those of any of its 
        reorganized stock insurance companies. An exception is 
        created for awards or options entitled to 
        policyholders, where such awards or options are 
        approved by the State insurance regulators of the 
        transferee domicile.
          The reorganization preserves the contractual rights 
        of the policyholders. The reorganization is approved as 
        fair and equitable to the policyholders by the 
        insurance regulator of the transferee domicile.

Section 313. Effect on State laws restricting redomestication

    Section 313 preempts certain State laws (other than those 
of the transferee State domicile) which impede the 
redomestication or discriminate against the redomesticating 
company or its affiliates or policyholders. State laws are not 
preempted pertaining to unfair claim settlement practices, 
nondiscriminatory premiums and taxes, registration for service 
of legal documents and process, financial examination of the 
redomestication company if the insurance regulator of the new 
domicile has not scheduled such an examination to begin within 
a year of the redomestication, delinquency proceedings and 
voluntary dissolution proceedings, deceptive or false or 
fraudulent acts or practices, filing of petitions regarding 
financial impairment or hazardous condition of the 
redomesticating company, participation in insurance insolvency 
guaranty associations or other State insurance guaranty funds, 
or nondiscriminatory licensing requirements.

Section 314. Other provisions

    Section 314 grants the United States District Courts 
exclusive jurisdiction over litigation arising under this 
Subtitle. It further allows any provision of the Subtitle that 
is held invalid to be severed independently.

Section 315. Definitions

    Section 315 provides definitions for the purposes of this 
subtitle only.

Section 316. Effective date

    Section 316 makes the Subtitle effective upon enactment.

   Subtitle C--National Association of Registered Agents and Brokers

Section 321. State flexibility in multistate licensing reforms

    Section 321 provides that the National Association of 
Registered Agents and Brokers (NARAB) shall only become 
effective if, within 3 years, a majority of the States have not 
enacted uniform or reciprocal laws for licensing of persons 
engaged in insurance activities.
    Uniformity must include:
    1. Criteria for licensed producers regarding integrity, 
personal qualifications, training, and experience, including 
any suitability training requirements.
    2. Continuing education requirements.
    3. Ethics course requirements.
    4. Suitability requirements, including for annuity 
contracts (that are regulated at least in part as insurance by 
the States).
    5. No other additional licensing requirement that limits a 
producer's activities based on residence or location of 
operations. States may continue, however, to impose 
countersignature requirements.
    In the alternative, to meet the reciprocity requirement, a 
majority of States must:
    1. Permit each other's resident licensed producers to 
conduct insurance activities to the same extent as allowed for 
resident producers, by imposing no administrative licensing 
procedures other than submitting--
          A request for licensure.
          A copy of the home State license application.
          Proof of licensure and good standing in the resident 
        State.
          Payment of appropriate fees.
    2. Accept the completion by the non-resident producer of 
the producer's home State's continuing education requirements.
    3. Impose no limitations which discriminate against 
nonresidents (except for countersignature laws).
    The National Association of Insurance Commissioners (NAIC) 
shall determine if either the uniformity or reciprocity 
standard has been met within three years of enactment. 
Exclusive jurisdiction over any challenge of such determination 
shall be given to the appropriate United States District Court. 
If a majority of the States fail to maintain either uniform or 
reciprocal standards, then NARAB shall be created within two 
years (from a determination or ruling regarding such failure), 
unless within such time a majority of the States reachieve the 
uniformity or reciprocity standards. State insurance laws and 
regulations shall not be required to be altered to meet the 
requirements of this section except to the extent that they are 
inconsistent with a specific requirement of the section.

Section 322. National association of registered agents and brokers

    Section 322 provides that if the States do not enact 
uniform or reciprocal regulations in accordance with Section 
321, then NARAB is created as a non-profit private corporation 
under the law of the District of Columbia.

Section 323. Purpose

    Section 323 establishes that the purpose of NARAB is to 
provide for uniform licensing, appointment, and continuing 
education requirements for insurance agents. States shall 
continue unaffected in their capacity to license, supervise, 
enforce agency regulations regarding consumer protections and 
unfair trade practices, and impose countersignature laws.

Section 324. Relationship to the Federal Government

    Section 324 directs that NARAB shall be subject to the 
supervision and oversight of the NAIC, and shall not be 
considered a Federal agency.

Section 325. Membership

    Section 325 provides that membership in NARAB is voluntary 
and does not affect the rights of a producer under each 
individual State license. Any State-licensed insurance producer 
is eligible to join NARAB. A producer whose license has been 
suspended or revoked by a State within the previous three years 
is ineligible for NARAB membership, unless such suspension or 
revocation is overturned or such license renewed by the 
appropriate State. NARAB can establish other membership 
criteria or classes, which shall be based upon the highest 
levels of insurance producer qualifications set by the States 
on standards such as integrity, personal qualification, 
education, training, and experience. NARAB members shall 
continue to pay the appropriate fees required by each State in 
which they are licensed, and shall renew their membership 
annually. NARAB may inspect members records, and revoke a 
membership where appropriate. NARAB shall establish an Office 
of Consumer Complaints, which shall have a toll- free phone 
number to receive and investigate consumer complaints and 
recommend disciplinary actions. The Office shall maintain 
records of such complaints, which shall be made available to 
NAIC and individual State insurance regulators, and shall refer 
complaints, where appropriate, to such regulators.

Section 326. Board of directors

    Section 326 provides that the NARAB Board shall consist of 
seven members appointed by the NAIC, at least four of whom must 
have significant experience with the regulation of commercial 
insurance lines in the 20 States in which the greatest total 
dollar amount of commercial line insurance is placed in the 
United States. Terms shall be for three years each, with a 
third to be replaced each year. If within the required two-year 
period for NARABs creation (two years from the provisions of 
Section 322 taking effect), the NAIC has still notappointed the 
initial board of directors for NARAB, then the initial directors shall 
be the State insurance regulators of the seven States with the greatest 
amount of commercial lines insurance. If a State insurance regulator 
declines to serve under this appointment procedure, then the State 
insurance regulator from the State with the next greatest amount of 
commercial lines insurance shall be appointed to serve. If fewer than 
seven State insurance regulators accept appointment under this 
procedure, then NARAB will be created without NAIC oversight pursuant 
to section 332.

Section 327. Officers

    Section 327 provides that NARABs officers shall by elected 
or appointed for not more than three years. Only NAIC members 
may chair the board of directors (unless NARAB is established 
pursuant to section 332).

Section 328. Bylaws, rules, and disciplinary action

    Section 328 directs NARAB to adopt bylaws and file them 
with NAIC. Proposed bylaws shall take effect 30 days after 
filing with NAIC, unless NAIC disapproves them (after a public 
hearing with notice and opportunity to participate) as being 
contrary to the public interest or requiring a public hearing. 
Any proposed rules shall be filed with NAIC, which shall either 
approve the rules as being in the public interest, or institute 
review proceedings including an opportunity for a hearing. The 
NAIC may allow any rule relating solely to the administration 
or organization of NARAB to take effect without a public 
hearing immediately upon filing. The NAIC may require NARAB to 
adopt or repeal additional bylaws or rules as it determines 
appropriate to the public interest. In a disciplinary action of 
one of its members, NARAB must provide notice to the member of 
the specific charges, and provide a recorded opportunity for a 
defense. If a disciplinary action is ordered, NARAB must notify 
NAIC, which may review and modify or overturn such action.

Section 329. Assessments

    Section 329 allows NARAB to impose application and 
membership fees to cover its costs, including reimbursement to 
NAIC for its expenses. NARAB may not discriminate against 
smaller insurance producers in setting such fees. The Committee 
anticipates that NAIC shall determine whether a fee 
discriminates in such a manner.

Section 330. Functions of the NAIC

    Section 330 allows NAIC, after notice and hearing, to 
examine and inspect NARABs records, and require NARAB to 
furnish it with any reports. NARAB shall report to NAIC 
annually on its activities. The NAIC shall have the 
responsibility of overseeing NARAB.

Section 331. Liability of the association and the directors, officers, 
        and employees of the association

    Section 331 clarifies that NARAB is not an insurer or 
insurance producer. NARAB and its directors, officers, and 
employees shall not be liable for any action taken or omitted 
in good faith in connection with matters subject to this title.

Section 332. Elimination of NAIC oversight

    Section 332 provides that, if at the end of two years after 
NARAB is required to be established, (1) a majority of the 
States representing at least 50 percent of the total 
commercial-lines insurance premiums in the United States have 
not established uniform or reciprocal licensing regulations, or 
(2) NAIC has not approved NARABs bylaws or is unable to operate 
or supervise NARAB (or if NARAB is not conducting its 
activities under this Act), then NARAB shall be created and 
supervised by the President, and shall exist without NAIC 
oversight. The President shall appoint NARABs board, with the 
advice and consent of the Senate, from lists of candidates 
submitted by NAIC. If the President determines that NARABs 
board is not acting in the public interest, the President may 
replace the entire board with new members (subject to the 
advice and consent of the Senate). The President may also 
suspend the effectiveness of any rule or action by NARAB which 
the President determines is contrary to the public interest. 
NARAB shall report annually to the President and Congress on 
its activities.

Section 333. Relationship to State law

    Section 333 preempts State laws regulating insurance 
licensing that discriminate against NARAB members based on non-
residency. The section also preempts State laws and regulations 
which impose additional licensing requirements on non-resident 
NARAB members beyond those set forth in section 325, except 
that State unfair trade practices and consumer protection laws 
are protected from preemption, including counter-signature 
requirements.

Section 334. Coordination with other regulators

    Section 334 directs NARAB to coordinate its multistate 
licensing with the various States, while preserving the ability 
of each State to impose appropriate conditions on licensing 
issuance and renewal. NARAB shall also coordinate with the 
States a central clearinghouse for license issuance and 
renewal, and for the collection of regulatory information on 
insurance producer activities. NARAB shall further coordinate 
with the NASD to facilitate joint membership.

Section 335. Judicial review

    Section 335 provides that any dispute involving NARAB shall 
be brought in the appropriate United States District Court 
under Federal law, after all administrative remedies through 
NARAB and NAIC have been exhausted.

Section 336. Definitions

    Section 336 provides definitions for the purposes of the 
subtitle only.

TITLE IV--MERGER OF BANK AND THRIFT CHARTERS, REGULATORS, AND INSURANCE 
                                 FUNDS

Section 401. Short title; definitions

    Section 401 designates Title IV as the ``Thrift Charter 
Transition Act of 1997''. It also specifies that, unless 
otherwise defined, the terms ``bank holding company'', 
``depository institution'', ``Federal savings association'', 
``insured depository institution'', ``savings association'', 
``State bank'', and ``State savings association''--as used in 
the uncodified provisions of the Act--have the same meanings as 
in section 3 of the Federal Deposit Insurance Act (FDIA), as in 
effect on the day before enactment of this Act.

 Subtitle A--Facilitating Conversions of Savings Associations to Banks

Section 411. Conversion to State or national banks

    Under Section 411, all Federal savings associations in 
existence two years after the date of enactment will, by 
operation of law, become national banks at that time. A Federal 
savings association can accelerate its conversion to a national 
bank by filing a notice with the Comptroller of the Currency. 
The notice must specify a date for the association's 
conversion, and that date must be at least 30 days after the 
date the notice is filed. The Federal savings association will 
become a national bank on the date specified.
    A State savings association can become a national bank 
during the two-year period beginning on the date of enactment 
by filing a notice with the Comptroller. Like the notice filed 
by a Federal savings association, the State association's 
notice must contain a specified date for its conversion. The 
date must be at least 30 days after the date the notice is 
filed, and the association will become a national bank on the 
date specified.
    Any mutual savings association becoming a national bank 
under this section will become a mutual national bank. The 
conversion authority provided by this section does not affect 
any other authority of a savings association to become a 
national bank, State bank, or State savings association.
    Finally, a Federal savings association that has its charter 
converted to a national bank charter or a State depository 
institution charter, is permitted to retain the word 
``Federal'' in its name. The provision would apply to 
institutions whether the charter is converted voluntarily or by 
operation of law. In order to maintain its Federal nexus, the 
deposits of such institution must remain insured by the FDIC. 
This section becomes effective 60 days after the date of 
enactment of the Act.

Section 412. Mutual national banks and Federal mutual bank holding 
        companies authorized

    This section authorizes the Comptroller of the Currency to 
charter national banking associations as mutual national banks, 
either de novo or through conversions. Unless otherwise 
provided by this section or by the Comptroller, a mutual 
national bank will be subject to the same laws and requirements 
and will have the same powers and privileges as a national 
banking association operating in stock form. The Comptroller 
must supervise and examine mutual national banks in the same 
manner and to the same extent as stock national banks. Subject 
to conditions imposed by the Comptroller, a mutual national 
bank may become a stock national bank, and a stock national 
bank may become a mutual national bank.
    This section also authorizes the Comptroller to charter 
Federal mutual bank holding companies. Subject to approval 
under Bank Holding Company Act of 1956 (BHCA), a mutual 
national bank may reorganize into a Federal mutual bank holding 
company. The reorganization plan requires the Comptroller's 
approval. The plan also requires approval by a majority of the 
mutual national bank's board of directors. If account holders 
and obligors have voting rights in the mutual national bank, 
the plan also requires approval by a majority of such 
individuals.
    In addition, the section governs when capital can be 
retained at the holding company level, the ownership rights in 
the holding company, and the liquidation of Federal mutual bank 
holding companies. The HCA applies to Federal mutual bank 
holding companies. A mutual savings and loan holding company 
may become a Federal mutual bank holding company by filing a 
notice with the Comptroller specifying the date for its 
conversion. A mutual savings and loan holding company in 
existence two years after the date of enactment automatically 
becomes a Federal mutual bank holding company.

Section 413. Grandfathered activities of savings associations

    Section 413 provides that a national bank that results from 
the conversion of a savings association under section 411 may 
not engage in any activity, including the holding of any asset, 
unless the activity is authorized by section 413 or is 
otherwise permissible for national banks. Under section 413, a 
savings association that converts to a national bank may 
continue to engage in any activity, including holding any 
asset, in which it was lawfully engaged prior to its conversion 
to a national bank.
    These grandfather rights are subject to several safeguards. 
During the two-year period following the date of enactment, a 
national bank resulting from a conversion may retain an 
investment not permissible for national banks only if the bank 
complies with section 5(t)(5) of the Home Owners' Loan Act 
(HOLA), which requires that the investment be deducted from 
capital, to the same extent as if the bank was still a savings 
association. For investments made after the date of enactment 
but prior to conversion, the national bank may retain an 
equityinvestment in a subsidiary that is engaged in an activity 
impermissible for a national bank to engage in directly only if the 
converted institution and the subsidiary comply with section 5136A of 
the Revised Statutes (as added by section 141).

Section 414. Branches of former savings associations

    Section 414 authorizes a savings association that becomes a 
national bank to retain branches and agencies that it operated 
on the day before the date of enactment. This section also 
protects branching rights obtained in assisted acquisitions. 
Savings associations that become State banks will be subject to 
applicable State and Federal branching laws. Further branching 
by savings associations that become national banks will be 
governed by the same laws that apply to all national banks.

Section 415. Programs for promoting housing finance

    Section 415 requires each appropriate Federal banking 
agency to establish a program designed to facilitate the 
conversion of savings associations to banks, and the treatment 
of State savings associations as banks, and to assure that 
insured depository institutions may specialize in residential 
mortgage lending. The agencies also must develop guidelines and 
procedures for assuring that insured depository institutions 
are not subject to supervisory criticism or sanction for 
prudently concentrating in residential mortgage lending.

Section 416. Savings and loan holding companies

    Section 416 provides grandfather rights for savings and 
loan holding companies that become bank holding companies due 
to the automatic conversion provisions of section 411. A 
company qualifies for grandfather rights if, as of September 
16, 1997, the company was a savings and loan holding company 
(or had filed an application to become a savings and loan 
holding company) and becomes a bank holding company because of 
changes made by the Act.
    Also grandfathered are savings and loan holding companies 
that were exempt from the nonbanking limitations of the HCA 
pursuant to an order issued by the Board under Section 4(d) of 
that Act. If a company qualifies for grandfather rights, it may 
maintain or enter into any nondepository institution 
affiliation that was permissible under section 10 of the HOLA, 
and may engage in any activity (including holding any asset) 
that was permissible under section 10 of the HOLA. To retain 
its grandfather rights, a savings and loan holding company may 
not acquire control of another bank. Certain exceptions to this 
prohibition are provided, including an exception that permits 
the acquisition of a bank from the FDIC.
    A savings and loan holding company's grandfathered rights 
cannot be transferred. A savings and loan holding company that 
becomes a bank holding company due to the amendments adopted by 
the Act need not file an application under section 3(a)(1) of 
the HCA when its savings association converts to a bank by 
operation of law. Moreover, a grandfathered company that was 
regulated as a savings and loan holding company under section 
10 of HOLA before June 19, 1997, would be subject to holding 
company capital requirements to the same extent such capital 
requirements were imposed under section 10 of the HOLA by the 
Office of Thrift Supervision (OTS), and must otherwise be 
regulated in the same manner as a savings and loan holding 
company under section 10 of HOLA for a period of three years. 
An insured depository institution controlled by a grandfathered 
savings and loan holding company may not engage in a covered 
transaction (as defined in section 23A of the Federal Reserve 
Act) with any affiliate that is engaged in activities that are 
not financial in nature or that is held pursuant to merchant 
banking or insurance company investment authority. No 
depository institution controlled by a grandfathered savings 
and loan holding company also may provide overdrafts to any 
affiliate or incur overdrafts in the institution's account at a 
Federal Reserve Bank or Federal Home Loan Bank for the benefit 
of the affiliate.

Section 417. Treatment of references in adjustable rate mortgages

Section 418. Cost of funds indexes

    These sections provide for substitute or alternative cost 
of funds indexes used in calculating adjustable interest rate 
mortgages. These new formulas are needed because current ones 
include data based on charter type, insurance fund membership, 
or characteristics of members of Federal Home Loan Banks which 
are changed under the Act.

Subtitle B--Ending Separate Federal Regulation of Savings Associations 
                 and Savings and Loan Holding Companies

Section 421. State savings associations treated as State banks under 
        Federal banking law

    Section 421 amends the definition of ``State bank'' under 
the FDIA to include State chartered savings associations. It 
also amends the exceptions to the definition of ``bank holding 
company'' in the HCA by repealing the exemption for companies 
that own or control a State chartered bank or trust company 
that is wholly owned by thrift institutions or savings banks. 
These amendments become effective two years after the date of 
enactment.

Section 422. Home Owners' Loan Act repealed

    Section 422 repeals the Home Owners' Loan Act effective two 
years after the date of enactment.

Section 423. Conforming amendment reflecting elimination of the Federal 
        Thrift Charter and the separate system of thrift regulation

    Section 423 makes the merger of the Bank Insurance Fund and 
the Savings Association Insurance Fund effective two years 
after the date of enactment or January 1, 2000, whichever is 
earlier.

Section 424. Conforming amendments to the Federal Home Loan Bank Act

    Section 424 makes a series of conforming amendments to the 
Federal Home Loan Bank Act (FHLBA). The amendments to the FHLBA 
become effective two years after the date of enactment.

Section 425. Amendments to Title 11, United States Code

    Section 425 provides that a Federal mutual holding company 
will be treated under Federal bankruptcy law in a similar 
manner to a bank holding company that owns a national bank. It 
also provides Federal mutual bank holding companies with the 
same conservatorship, receivership, indemnification and trustee 
appointment rights given to other institutions.

                   Subtitle C--Combining OTS and OCC

Section 431. Prohibition of merger or consolidation repealed

    Effective on the date of enactment of the Act, section 431 
repeals the prohibition against the Secretary of the Treasury 
merging or consolidating functions of the Office of Thrift 
Supervision and the Office of the Comptroller of the Currency. 
With this repeal, the Secretary may combine functions or 
otherwise reorganize those offices as appropriate to manage 
their responsibilities and resources, consistent with other 
provisions of law.

Section 432. Secretary of Treasury required to formulate plans for 
        combining Office Of Thrift Supervision with Office of the 
        Comptroller of the Currency

    Section 432 requires the Secretary of Treasury, no later 
than nine months after the date of enactment of the Act, to 
develop a plan for merging the OTS with the OCC within 2 years 
of the date of enactment. The OTS and OCC are required to 
implement the plan. This section is intended to ensure that 
examination resources are appropriately allocated to maintain 
the safety and soundness of regulated institutions and that 
personnel and administrative matters are resolved in a 
coordinated manner.

Section 433. Office of Thrift Supervision and position of Director of 
        Office of Thrift Supervision abolished

    Section 433, effective two years after the date of 
enactment of the Act, abolishes the Office of Thrift 
Supervision and the position of Director of the Office of 
Thrift Supervision.

Section 434. Reconfiguration of Board of Directors of FDIC as a result 
        of removal of Director of the Office of Thrift Supervision

    Section 434 makes conforming changes in the Board of 
Directors of the FDIC to reflect the abolition of the OTS. It 
provides that the management of the Corporation will be vested 
in a five-member Board comprised of the Comptroller of the 
Currency, and four Presidential appointees that are confirmed 
by the Senate. One of these four appointees must have State 
bank supervisory experience. These changes are effective two 
years after enactment of the Act.

Section 435. Continuation provisions

    Section 435 continues all the orders, regulations and other 
regulatory actions of the OTS through the conversion period; 
ensures that the merger does not unintentionally effect the 
rights of parties in litigation; permits the continuation, if 
needed, of arrangements between the OTS and other agencies 
until those arrangements can be concluded in an orderly 
fashion; and transfers OTS property to the OCC or another 
appropriate successor agency.

   Subtitle D--Technical and Conforming Amendments to the Depository 
                          Institution Statutes

    Subtitle D contains technical and conforming amendments to 
statutes governing depository institutions and depository 
institution holding companies. These changes are necessary to 
reflect the changes made by the Act, including the abolition of 
the OTS and the conversion of savings and loan associations to 
banks. The amendments become effective two years after the date 
of enactment.

         Changes in Existing Law Made by the Bill, as Reported

  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):

                          BANKING ACT OF 1933

          * * * * * * *
    [Sec. 20. After one year from the date of the enactment of 
this Act, no member bank shall be affiliated in any manner 
described in section 2(b) hereof with any corporation, 
association, business trust, or other similar organization 
engaged principally in the issue, flotation, underwriting, 
public sale, or distribution at wholesale or retail or through 
syndicate participation of stocks, bonds, debentures, notes, or 
other securities: Provided, That nothing in this paragraph 
shall apply to any such organization which shall have been 
placed in formal liquidation and which shall transact no 
business except such as may be incidental to the liquidation of 
its affairs.
    [For every violation of this section the member bank 
involved shall be subject to a penalty not exceeding $1,000 per 
day for each day during which such violation continues. Such 
penalty may be assessed by the Federal Reserve Board, in its 
discretion, and, when so assessed, may be collected by the 
Federal reserve bank by suit or otherwise.
    [If any such violation shall continue for six calendar 
months after the member bank shall have been warned by the 
Federal Reserve Board to discontinue the same, (a) in the case 
of a national bank, all the rights, privileges, and franchises 
granted to it under the National Bank Act may be forfeited in 
the manner prescribed in section 2 of the Federal Reserve Act, 
as amended (U.S.C., title 12, secs. 141, 222-225, 281-286, and 
502) or, (b) in the case of a State member bank, all of its 
rights and privileges of membership in the Federal Reserve 
System may be forfeited in the manner prescribed in section 9 
of the Federal Reserve Act, as amended (U.S.C., title 12, secs. 
321-332).]
    Sec. 21. (a) After the expiration of one year after the 
date of enactment of this Act it shall be unlawful--
  (1) For any person, firm, corporation, association, business 
trust, or other similar organization, engaged in the business 
of issuing, underwriting, selling, or distributing, at 
wholesale or retail, or through syndicate participation, 
stocks, bonds, debentures, notes, or other securities, to 
engage at the same time, or to be a subsidiary of any person, 
firm, corporation, association, business trust, or similar 
organization engaged (unless such subsidiary was engaged in 
such securities activities as of September 15, 1997), to any 
extent whatever in the business of receiving deposits subject 
to check or to repayment upon presentation of a passbook, 
certificate of deposit, or other evidence of debt, or upon 
request of the depositor: Provided, That the provisions of this 
paragraph shall not prohibit national banks or State banks or 
trust companies (whether or not members of the Federal Reserve 
System) or other financial institutions or private bankers from 
dealing in, underwriting, purchasing, and selling investment 
securities, or issuing securities, to the extent permitted to 
national banking associations by the provisions of section 5136 
of the Revised Statutes, as amended (U.S.C. title 12, sec. 24; 
Supp. VII, title 12, sec. 24): Provided further, That nothing 
in this paragraph shall be construed as affecting in any way 
such right as any bank, banking association, savings bank, 
trust company, or other banking institution, may otherwise 
possess to sell, without recourse or agreement to repurchase, 
obligations evidencing loans on real estate; or
  (2) For any person, firm, corporation, association, business 
trust, or other similar organization to engage, to any extent 
whatever with others than his or its officers, agents or 
employees, in the business of receiving deposits subject to 
check or to repayment upon presentation of a pass book, 
certificate of deposit, or other evidence of debt, or upon 
request of the depositor, unless such person, firm, 
corporation, association, business trust, or other similar 
organization (A) shall be incorporated under, and authorized to 
engage in such business by, the laws of the United States or of 
any State, Territory, or District, and subjected, by the laws 
of the United States, or of the State, Territory, or District 
wherein located, to examination and regulation, or (B) shall be 
permitted by the United States, any State, territory, or 
district to engage in such business and shall be subjected by 
the laws of the United States, or such State, territory, or 
district to examination and regulations or, (C) shall submit to 
periodic examination by the banking authority of the State 
Territory, or District where such business is carried on and 
shall make and publish periodic reports of its condition, 
exhibiting in detail its resources and liabilities, such 
examination and reports to be made and published at the same 
times and in the same manner and under the same conditions as 
required by the law of such State, Territory, District in the 
case of incorporated banking institutions engaged in such 
business in the same locality.
          * * * * * * *
    [Sec. 32. No officer, director, or employee of any 
corporation or unincorporated association, no partner or 
employee of any partnership, and no individual, primarily 
engaged in the issue, flotation, underwriting, public sale, or 
distribution, at wholesale or retail, or through syndicate 
participation, of stocks, bonds, or other similar securities, 
shall serve the same time as an officer, director, or employee 
of any member bank except in limited classes of cases in which 
the Board of Governors of the Federal Reserve System may allow 
such service by general regulations when in the judgment of the 
said Board it would not unduly influence the investment 
policies of such member bank or the advice it gives its 
customers regarding investments.]
          * * * * * * *
                              ----------                              


                    BANK HOLDING COMPANY ACT OF 1956

          * * * * * * *

                              definitions

  Sec. 2. (a)(1) * * *
          * * * * * * *
  (5) Notwithstanding any other provision of this subsection--
          (A) * * *
          * * * * * * *
          [(E) No company is a bank holding company by virtue 
        of its ownership or control of any State-chartered bank 
        or trust company which--
          [(i) is wholly owned by thrift institutions or 
        savings banks; and
          [(ii) is restricted to accepting--
                  [(I) deposits from thrift institutions or 
                savings banks;
                  [(II) deposits arising out of the corporate 
                business of the thrift institutions or savings 
                banks that own the bank or trust company; or
                  [(III) deposits of public moneys.]
          * * * * * * *
  (c) Bank Defined.--For purposes of this Act--
          (1) In general.--Except as provided in paragraph (2), 
        the term ``bank'' means any of the following:
                  (A) * * *
          * * * * * * *
                  (C) A wholesale financial institution.
          * * * * * * *
  [(i) Thrift Institution.--For purposes of this Act, the term 
``thrift institution'' means--
          [(1) any domestic building and loan or savings and 
        loan association;
          [(2) any cooperative bank without capital stock 
        organized and operated for mutual purposes and without 
        profit;
          [(3) any Federal savings bank; and
          [(4) any State-chartered savings bank the holding 
        company of which is registered pursuant to section 408 
        of the National Housing Act.
  [(j) Definition of Savings Associations and Related Term.--
The term ``savings association'' or ``insured institution'' 
means--
          [(1) any Federal savings association or Federal 
        savings bank;
          [(2) any building and loan association, savings and 
        loan association, homestead association, or cooperative 
        bank if such association or cooperative bank is a 
        member of the Savings Association Insurance Fund; and
          [(3) any savings bank or cooperative bank which is 
        deemed by the Director of the Office of Thrift 
        Supervision to be a savings association under section 
        10(l) of the Home Owners' Loan Act.]
  (i) [Repealed.]
  (j) [Repealed.]
          * * * * * * *
  (n) Incorporated Definitions.--For purposes of this Act, the 
terms ``insured depository institution'', ``appropriate Federal 
banking agency'', ``default'', ``in danger of default'', 
``insured bank'', and ``State bank supervisor'' have the same 
meanings as in section 3 of the Federal Deposit Insurance Act.
  (o) Other Definitions.--For purposes of this Act, the 
following definitions shall apply:
          (1) * * *
          * * * * * * *
          (8) Antitrust agencies.--The term ``antitrust 
        agencies'' means the Attorney General and the Federal 
        Trade Commission.
          (9) Appropriate antitrust agency.--With respect to a 
        particular transaction, the term ``appropriate 
        antitrust agency'' means the antitrust agency engaged 
        in reviewing the competitive effects of such 
        transaction.
  (p) Wholesale Financial Institution.--The term ``wholesale 
financial institution'' means a wholesale financial institution 
subject to section 9B of the Federal Reserve Act.
  (q) Commission.--The term ``Commission'' means the Securities 
and Exchange Commission.
  (r) Depository Institution.--The term ``depository 
institution''--
          (1) has the meaning given to such term in section 3 
        of the Federal Deposit Insurance Act; and
          (2) includes a wholesale financial institution.

                  acquisition of bank shares or assets

  Sec. 3. (a) * * *
  (b)(1) * * *
          * * * * * * *
          (3) Requirement to file information with antitrust 
        agencies.--Any applicant seeking prior approval of the 
        Board to engage in an acquisition transaction under 
        this section must file simultaneously with the Attorney 
        General and, if the transaction also involves an 
        acquisition under section 4 or 6, the Federal Trade 
        Commission copies of any documents regarding the 
        proposed transaction required by the Board.
          * * * * * * *
  (c) Factors for Consideration by Board.--
          [(1) Competitive factors.--The Board shall not 
        approve--
          [(A) any acquisition or merger or consolidation under 
        this section which would result in a monopoly, or which 
        would be in furtherance of any combination or 
        conspiracy to monopolize or to attempt to monopolize 
        the business of banking in any part of the United 
        States, or
          [(B) any other proposed acquisition or merger or 
        consolidation under this section whose effect in any 
        section of the country may be substantially to lessen 
        competition, or to tend to create a monopoly, or which 
        in any other manner would be in restraint or trade, 
        unless it finds that the anticompetitive effects of the 
        proposed transaction are clearly outweighed in the 
        public interest by the probable effect of the 
        transaction in meeting the convenience and needs of the 
        community to be served.]
          [(2)] (1) Banking and community factors.--In every 
        case, the Board shall take into consideration the 
        financial and managerial resources and future prospects 
        of the company or companies and the banks concerned, 
        and the convenience and needs of the community to be 
        served.
          [(3)] (2) Supervisory factors.--The Board shall 
        disapprove any application under this section by any 
        company if--
                  (A) * * *
          * * * * * * *
          [(4)] (3) Treatment of certain bank stock loans.--
        Notwithstanding any other provision of law, the Board 
        shall not follow any practice or policy in the 
        consideration of any application for the formation of a 
        one-bank holding company if following such practice or 
        policy would result in the rejection of such 
        application solely because the transaction to form such 
        one-bank holding company involves a bank stock loan 
        which is for a period of not more than twenty-five 
        years. The previous sentence shall not be construed to 
        prohibit the Board from rejecting any application 
        solely because the other financial arrangements are 
        considered unsatisfactory. The Board shall consider 
        transactions involving bank stock loans for the 
        formation of a one-bank holding company having a 
        maturity of twelve years or more on a case by case 
        basis and no such transaction shall be approved if the 
        Board believes the safety or soundness of the bank may 
        be jeopardized.
          [(5)] (4) Managerial resources.--Consideration of the 
        managerial resources of a company or bank under 
        paragraph (2) shall include consideration of the 
        competence, experience, and integrity of the officers, 
        directors, and principal shareholders of the company or 
        bank.
          * * * * * * *
  (e) Every bank that is a holding company and every bank that 
is a subsidiary of such company shall become and remain an 
insured depository institution as such term is defined in 
section 3 of the Federal Deposit Insurance Act. This subsection 
shall not apply to a wholesale financial institution.
          * * * * * * *
  (g) Mutual Bank Holding Company.--
          (1) * * *
          [(2) Regulation.--A corporation organized as a 
        holding company under this subsection shall be 
        regulated on the same terms and be subject to the same 
        limitations as any other holding company which controls 
        a savings bank.]
          (2) Regulations.--A bank holding company organized as 
        a mutual holding company shall be regulated on terms, 
        and shall be subject to limitations, comparable to 
        those applicable to any other bank holding company.
  (h) Savings and Loan Holding Company Powers Grandfathered.--
          (1) In general.--A company that qualifies under 
        paragraph (2) may--
                  (A) maintain or enter into any nonbank 
                affiliation that the company was permitted 
                pursuant to section 10 of the Home Owners' Loan 
                Act to maintain or enter into prior to becoming 
                a bank holding company pursuant to paragraph 
                (2)(C); and
                  (B) engage in any activity, including holding 
                any asset, in which the company or any 
                affiliate described in subparagraph (A) was 
                permitted pursuant to section 10 of the Home 
                Owners' Loan Act to engage before becoming a 
                bank holding company in a manner described in 
                paragraph (2)(C).
          (2) Qualified grandfathered companies.--
                  (A) Grandfathered companies defined.--A 
                company qualifies under this paragraph for 
                purposes of paragraph (1) if--
                          (i) as of September 16, 1997, the 
                        company (or any affiliated company)--
                                  (I) was a savings and loan 
                                holding company (as defined in 
                                section 10 of the Home Owners' 
                                Loan Act, as in effect on that 
                                date); or
                                  (II) had filed an application 
                                to become a savings and loan 
                                holding company; and
                          (ii) the company--
                                  (I) becomes a bank holding 
                                company by operation of law; or
                                  (II) was exempt from section 
                                4 (as in effect on the date of 
                                enactment of the Thrift Charter 
                                Transition Act of 1997) under 
                                an order issued by the Board 
                                under section 4(d) (as in 
                                effect on the date of enactment 
                                of the Thrift Charter 
                                Transition Act of 1997).
                  (B) Holding companies with identical 
                shareholders.--A company also qualifies under 
                this paragraph for purposes of paragraph (1) if 
                the company--
                          (i) is formed by a company qualified 
                        under subparagraph (A); and
                          (ii) the shareholders of such company 
                        are identical to the shareholders of 
                        the company referred to in (i).
                  (C) Operation of law defined.--For purposes 
                of this subsection, a savings and loan holding 
                company becomes a bank holding company by 
                operation of law if a savings association 
                controlled by the company is converted to a 
                bank or is treated as a bank under an amendment 
                made by the Thrift Charter Transition Act of 
                1997.
          (3) Requirements to retain grandfathered powers.--
                  (A) In general.--Paragraph (1) shall cease to 
                apply to a company if the company does not 
                comply with this paragraph.
                  (B) Acquisition of banks.--
                          (i) In general.--The company may not 
                        acquire (by any form of business 
                        combination) control of a bank after 
                        the date of enactment of the Thrift 
                        Charter Transition Act of 1997.
                          (ii) Exceptions to prohibition.--
                        Clause (i) shall not apply to the 
                        acquisition of--
                                  (I) a bank, during the period 
                                ending on the date 2 years 
                                after the date of enactment of 
                                the Thrift Charter Transition 
                                Act of 1997, if the acquisition 
                                results from the conversion of 
                                a savings association or the 
                                treatment of a savings 
                                association as a bank under 
                                amendments made by the Thrift 
                                Charter Transition Act of 1997;
                                  (II) shares held as a bona 
                                fide fiduciary (whether with or 
                                without the sole discretion to 
                                vote such shares);
                                  (III) shares held by any 
                                person as a bona fide fiduciary 
                                solely for the benefit of 
                                employees of either the company 
                                or any subsidiary of the 
                                company and the beneficiaries 
                                of those employees;
                                  (IV) an entity described in 
                                section 2(c)(2);
                                  (V) shares held temporarily 
                                pursuant to an underwriting 
                                commitment in the normal course 
                                of an underwriting business;
                                  (VI) shares held in an 
                                account solely for trading 
                                purposes;
                                  (VII) shares over which no 
                                control is held other than 
                                control of voting rights 
                                acquired in the normal course 
                                of a proxy solicitation;
                                  (VIII) shares or assets 
                                acquired in securing or 
                                collecting a debt previously 
                                contracted in good faith, 
                                during the 2-year period 
                                beginning on the date of such 
                                acquisition or for such 
                                additional time (not exceeding 
                                3 years) as the Board may 
                                permit if the Board determines 
                                that such an extension will not 
                                be detrimental to the public 
                                interest;
                                  (X) a bank from the Federal 
                                Deposit Insurance Corporation, 
                                in any capacity; and
                                  (XI) a bank in an acquisition 
                                in which the bank has been 
                                found to be in danger of 
                                default by the appropriate 
                                Federal or State authority.
                  (C) The company may not control a savings 
                association or a national bank resulting from 
                the conversion of a savings association to a 
                national bank pursuant to section 411 if such 
                savings association or national bank fails to 
                comply with the requirements of section 5(c)(2) 
                and section 10(m) of the Home Owners' Loan Act 
                as in effect on the day before the date of the 
                enactment of the Thrift Charter Transition Act 
                of 1997.
          (4) Grandfathered powers nontransferable.--
                  (A) In general.--Paragraph (1) shall not 
                apply with respect to any company if after the 
                date of the enactment of the Thrift Charter 
                Transition Act of 1997--
                          (i) any company (other than a company 
                        qualified under paragraph (2)) not 
                        under common control with such company 
                        as of that date acquires, directly, or 
                        indirectly, control of the company; or
                          (ii) the company is the subject of 
                        any merger, consolidation, or other 
                        type of business combination as a 
                        result of which a company (other than a 
                        company qualified under paragraph (2)) 
                        not under common control with such 
                        company acquires, directly or 
                        indirectly, control of such company.
                  (B) Anti-evasion.--The appropriate Federal 
                banking agency may issue interpretations, 
                regulations, or orders that it deems necessary 
                to administer and carry out the purpose, and 
                prevent evasions, of this paragraph, including 
                determining that (notwithstanding the form of a 
                transaction) the transaction would in substance 
                effect a change in control.
          (5) Transactions with nonfinancial affiliates.--An 
        insured depository institution controlled by a company 
        that qualifies under paragraph (2) may not engage in a 
        covered transaction (as defined by section 23A(b)(7) of 
        the Federal Reserve Act) with--
                  (A) any affiliate unless the affiliate is 
                engaged only in activities authorized for a 
                financial holding company pursuant to section 6 
                (other than subsection (f) or (g) of such 
                section); or
                  (B) any company controlled by an affiliate 
                pursuant to subparagraphs (H) or (I) of 
                subsection (c)(3) of such section.
          (6) Savings and loan holding companies that become 
        bank holding companies.--
                  (A) Exclusion from application requirement.--
                A company that qualifies under subparagraph (B) 
                shall not be required to obtain the approval of 
                the Board under subsection (a) to become a bank 
                holding company if such company becomes a bank 
                holding company after the date of enactment of 
                the Thrift Charter Transition Act of 1997 as a 
                result of the conversion of a savings 
                association subsidiary to a bank or by virtue 
                of the treatment of a savings association 
                subsidiary as a bank under an amendment made by 
                this Act.
                  (B) Companies excluded from application 
                requirement.--A company qualifies for purposes 
                of subparagraph (A) if the company, as of the 
                date of the enactment of the Thrift Charter 
                Transition Act of 1997, was a savings and loan 
                holding company (as defined in section 10(a) of 
                the Home Owners' Loan Act as in effect on that 
                date) or has filed an application to become a 
                savings and loan holding company.
                  (C) Supervision and regulation of companies 
                that were previously savings and loan holding 
                companies.--
                          (i) In general.--Any company that 
                        qualifies under paragraph (2) and 
                        complies with paragraph (3) and was 
                        registered and regulated under section 
                        10 of the Home Owners' Loan Act on the 
                        day before becoming a bank holding 
                        company described in paragraphs (2) and 
                        (3) shall continue to be regulated, for 
                        a period of 3 years after becoming such 
                        holding company, under the terms of 
                        section 10 of the Home Owners' Loan Act 
                        in the same manner and to the same 
                        extent and subject to the same 
                        requirements as by the Office of Thrift 
                        Supervision before the date of the 
                        enactment of the Thrift Charter 
                        Transition Act of 1997.
                          (ii) Holding company capital 
                        exception.--With regard to holding 
                        company capital, any company that 
                        qualifies under paragraph (2) and 
                        complies with paragraph (3) and was 
                        registered and regulated under section 
                        10 of the Home Owners' Loan Act before 
                        June 19, 1997, or had an application 
                        pending to do so on such date, shall 
                        continue to be regulated under the 
                        terms of section 10 of the Home Owners' 
                        Loan Act in the same manner and to the 
                        same extent and subject to the same 
                        requirements as by the Office of Thrift 
                        Supervision before the date of the 
                        enactment of the Thrift Charter 
                        Transition Act of 1997.
                          (iii) Submissions to regulators.--A 
                        company shall provide for a period of 3 
                        years after becoming a bank holding 
                        company described in paragraphs (2) and 
                        (3) the appropriate Federal banking 
                        agency with--
                                  (I) notice of acquisition of 
                                any company not controlled or 
                                affiliated on the date of 
                                enactment of the Thrift Charter 
                                Transition Act of 1997 that is 
                                engaged in nonbanking 
                                activities within 15 days after 
                                completion of any such 
                                transaction; and
                                  (II) copies of such quarterly 
                                and annual reports as it is 
                                otherwise required to file with 
                                any other governmental agency.
                          (iv) Reporting requirements.--The 
                        appropriate Federal banking agency may 
                        adopt, for a period of 3 years after a 
                        company becomes a bank holding company 
                        described in paragraphs (2) and (3), 
                        reporting requirements substantially 
                        similar to and no more burdensome than 
                        required by the Office of Thrift 
                        Supervision as of January 1, 1997.
                          (v) Regulatory authority.--The 
                        appropriate Federal banking agency 
                        shall, for a period of 3 years after a 
                        company becomes a bank holding company 
                        described in paragraphs (2) and (3)--
                                  (I) have the same authority 
                                to examine a company or any 
                                subsidiary or affiliate thereof 
                                only to the same extent as the 
                                Office of Thrift Supervision 
                                had as of January 1, 1997; and
                                  (II) conduct only the same 
                                type of examination and with 
                                the same frequency as the 
                                Office of Thrift Supervision 
                                prior to January 1, 1997, 
                                unless required to prevent an 
                                unsafe or unsound activity or 
                                course of conduct of the 
                                savings institution converted 
                                to a bank pursuant to the 
                                Thrift Charter Transition Act 
                                of 1997.
          (7) Overdrafts prohibited.--A depository institution 
        controlled by a company described in paragraph (2) may 
        not permit any overdraft (including any intraday 
        overdraft) on behalf of any affiliate (as defined in 
        section 2 of the Bank Holding Company Act of 1956), or 
        incur any such overdraft in such institution's account 
        at a Federal reserve bank or Federal home loan bank on 
        behalf of any affiliate.

                 interests in nonbanking organizations

  Sec. 4. (a) * * *
          * * * * * * *
  (c) The prohibitions in this section shall not apply to (i) 
any company that was on January 4, 1977, both a bank holding 
company and a labor, agricultural, or horticultural 
organization exempt from taxation under section 501 of the 
Internal Revenue Code of 1954, or to any labor, agricultural, 
or horticultural organization to which all or substantially all 
of the assets of such company are hereafter transferred, or 
(ii) a company covered in 1970 more than 85 per centum of the 
voting stock of which was collectively owned on June 30, 1968, 
and continuously thereafter, directly or indirectly, by or for 
members of the same family, or their spouses, who are lineal 
descendants of common ancestors; and such prohibitions shall 
not, with respect to any other bank holding company, apply to--
          (1)  * * *
          * * * * * * *
          (8) shares of any company the activities of which had 
        been determined by the Board by regulation under this 
        paragraph as of the day before the date of the 
        enactment of the Financial Services Act of 1997, to be 
        so closely related to banking as to be a proper 
        incident thereto (subject to such terms and conditions 
        contained in such regulation, unless modified by the 
        Board);
          * * * * * * *
  (f) Certain Companies Not Treated as Bank Holding 
Companies.--
          (1)  * * *
          * * * * * * *
          (2) Loss of exemption.--Paragraph (1) shall cease to 
        apply to any company described in such paragraph if--
                  (A) such company directly or indirectly--
                          (i)  * * *
                          (ii) acquires control of more than 5 
                        percent of the shares or assets of an 
                        additional bank or a savings 
                        association other than--
                                  (I)  * * *
          * * * * * * *
                                  (IX) shares of a savings 
                                association held by any 
                                insurance company, as defined 
                                in section 2(a)(17) of the 
                                Investment Company Act of 1940, 
                                except as provided in paragraph 
                                (11); [and]
                                  (X) shares issued in a 
                                qualified stock insuance under 
                                section 10(q) of the Home 
                                Owners' Loan Act; and
                                  (XI) assets that are derived 
                                from, or are incidental to, 
                                activities in which 
                                institutions described in 
                                section 2(c)(2)(F) are 
                                permitted to engage,
          * * * * * * *
                  [(B) any bank subsidiary of such company 
                fails to comply with the restrictions contained 
                in paragraph (3)(B).]
                  (B) any bank subsidiary of such company 
                engages in any activity in which the bank was 
                not lawfully engaged as of March 5, 1987, 
                unless the bank is well managed and well 
                capitalized;
                  (C) any bank subsidiary of such company 
                both--
                          (i) accepts demand deposits or 
                        deposits that the depositor may 
                        withdraw by check or similar means for 
                        payment to third parties; and
                          (ii) engages in the business of 
                        making commercial loans (and, for 
                        purposes of this clause, loans made in 
                        the ordinary course of a credit card 
                        operation shall not be treated as 
                        commercial loans); or
                  (D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any 
                bank subsidiary of such company permits any 
                overdraft (including any intraday overdraft), 
                or incurs any such overdraft in such bank's 
                account at a Federal reserve bank, on behalf of 
                an affiliate, other than an overdraft described 
                in paragraph (3).
          [(3) Limitation on banks controlled by paragraph (1) 
        companies.--
                  [(A) Findings.--The Congress finds that banks 
                controlled by companies referred to in 
                paragraph (1) may, because of relationships 
                with affiliates, be involved in conflicts of 
                interest, concentration of resources, or other 
                effects adverse to bank safety and soundness, 
                and may also be able to compete unfairly 
                against banks controlled by bank holding 
                companies by combining banking services with 
                financial services not permissible for bank 
                holding companies. The purpose of this 
                paragraph is to minimize any such potential 
                adverse effects or inequities by temporarily 
                restricting the activities of banks controlled 
                by companies referred to in paragraph (1) until 
                such time as the Congress has enacted proposals 
                to allow, with appropriate safeguards, all 
                banks or bank holding companies to compete on a 
                more equal basis with banks controlled by 
                companies referred to in paragraph (1) or, 
                alternatively, proposals to permanently 
                restrict the activities of banks controlled by 
                companies referred to in paragraph (1).
                  [(B) Limitations.--Until such time as the 
                Congress has taken action pursuant to 
                subparagraph (A), a bank controlled by a 
                company described in paragraph (1) shall not--
                          [(i) engage in any activity in which 
                        such bank was not lawfully engaged as 
                        of March 5, 1987;
                          [(ii) offer or market products or 
                        services of an affiliate that are not 
                        permissible for bank holding companies 
                        to provide under subsection (c)(8), or 
                        permit its products or services to be 
                        offered or marketed in connection with 
                        products and services of an affiliate, 
                        unless--
                                  [(I) the Board, by 
                                regulation, has determined such 
                                products and services are 
                                permissible for bank holding 
                                companies to provide under 
                                subsection (c)(8);
                                  [(II) such products and 
                                services are described in 
                                section 20 of the Banking Act 
                                of 1933 and the Board, by 
                                regulation, has permitted bank 
                                holding companies to offer or 
                                market such products or 
                                services, but has prohibited 
                                bank holding companies and 
                                their affiliates from 
                                principally engaging in the 
                                offering or marketing of such 
                                products or services; or
                                  [(III) such products or 
                                services were being so offered 
                                or marketed as of March 5, 
                                1987, and then only in the same 
                                manner in which they were being 
                                offered or marketed as of that 
                                date; or
                          [(iii) after the date of the 
                        enactment of the Competitive Equality 
                        Amendments of 1987, permit any 
                        overdraft (including an intraday 
                        overdraft), or incur any such overdraft 
                        in such bank''s account at a Federal 
                        Reserve bank, on behalf of an 
                        affiliate, other than an overdraft 
                        described in subparagraph (C).
                  [(C) Permissible overdrafts described.--For 
                purposes of subparagraph (B)(iii), an overdraft 
                is described in this subparagraph if--
                          [(i) such overdraft results from an 
                        inadvertent computer or accounting 
                        error that is beyond the control of 
                        both the bank and the affiliate; or
                          [(ii) such overdraft--
                                  [(I) is permitted or incurred 
                                on behalf of an affiliate which 
                                is monitored by, reports to, 
                                and is recognized as a primary 
                                dealer by the Federal Reserve 
                                Bank of New York; and
                                  [(II) is fully secured, as 
                                required by the Board, by 
                                bonds, notes, or other 
                                obligations which are direct 
                                obligations of the United 
                                States or on which the 
                                principal and interest are 
                                fully guaranteed by the United 
                                States or by securities and 
                                obligations eligible for 
                                settlement on the Federal 
                                Reserve book entry system.
          [(4) Divestiture in case of loss of exemption.--If 
        any company described in paragraph (1) loses the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such company shall divest control of 
        each bank it controls within 180 days after such 
        company becomes a bank holding company due to the loss 
        of such exemption.]
          (3) Permissible overdrafts described.--For purposes 
        of paragraph (2)(D), an overdraft is described in this 
        paragraph if--
                  (A) such overdraft results from an 
                inadvertent computer or accounting error that 
                is beyond the control of both the bank and the 
                affiliate; or
                  (B) such overdraft--
                          (i) is permitted or incurred on 
                        behalf of an affiliate which is 
                        monitored by, reports to, and is 
                        recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                          (ii) is fully secured, as required by 
                        the Board, by bonds, notes, or other 
                        obligations which are direct 
                        obligations of the United States or on 
                        which the principal and interest are 
                        fully guaranteed by the United States 
                        or by securities and obligations 
                        eligible for settlement on the Federal 
                        Reserve book entry system.
          (4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for 
        the exemption provided under such paragraph by 
        operation of paragraph (2), such exemption shall cease 
        to apply to such company and such company shall divest 
        control of each bank it controls before the end of the 
        180-day period beginning on the date that the company 
        receives notice from the Board that the company has 
        failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the 
        company has--
                  (A) corrected the condition or ceased the 
                activity that caused the company to fail to 
                continue to qualify for the exemption; and
                  (B) implemented procedures that are 
                reasonably adapted to avoid the reoccurrence of 
                such condition or activity.
          * * * * * * *

                             administration

  Sec. 5. (a) Within one hundred and eighty days after the date 
of enactment of this Act, or within one hundred and eighty days 
after becoming a bank holding company, whichever is later, each 
bank holding company shall register with the Board on forms 
prescribed by the Board, which shall include such information 
with respect to the financial condition and operations, 
management, and intercompany relationships of the bank holding 
company and its subsidiaries, and related matters, as the Board 
may deem necessary or appropriate to carry about the purposes 
of this Act. The Board may, in its discretion, extend the time 
within which a bank holding company shall register and file the 
requisite information.A declaration filed in accordance with 
section 6(b)(1)(D) shall satisfy the requirements of this subsection 
with regard to the registration of a bank holding company but not any 
requirement to file an application to acquire a bank pursuant to 
section 3.
          * * * * * * *
  [(c) The Board from time to time may require reports under 
oath to keep it informed as to whether the provisions of this 
Act and such regulations and orders issued thereunder have been 
complied with; and the Board may make examinations of each bank 
holding company and each subsidiary thereof, the cost of which 
shall be assessed against, and paid by, such holding company. 
The Board shall, as far as possible, use the reports of 
examinations made by the Comptroller of the Currency, the 
Federal Deposit Insurance Corporation, or the appropriate State 
bank supervisory authority for the purposes of this section.]
  (c) Reports and Examinations.--
          (1) Reports.--
                  (A) In general.--The Board from time to time 
                may require any bank holding company and any 
                subsidiary of such company to submit reports 
                under oath to keep the Board informed as to--
                          (i) its financial condition, systems 
                        for monitoring and controlling 
                        financial and operating risks, and 
                        transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          (ii) compliance by the company or 
                        subsidiary with applicable provisions 
                        of this Act.
                  (B) Use of existing reports.--
                          (i) In general.--The Board shall, to 
                        the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraph that a bank holding company 
                        or any subsidiary of such company has 
                        provided or been required to provide to 
                        other Federal and State supervisors or 
                        to appropriate self-regulatory 
                        organizations.
                          (ii) Availability.--A bank holding 
                        company or a subsidiary of such company 
                        shall provide to the Board, at the 
                        request of the Board, a report referred 
                        to in clause (i).
                          (iii) Required use of publicly 
                        reported information.--The Board shall, 
                        to the fullest extent possible, accept 
                        in fulfillment of any reporting or 
                        recordkeeping requirements under this 
                        Act information that is otherwise 
                        required to be reported publicly and 
                        externally audited financial 
                        statements.
                          (iv) Reports filed with other 
                        agencies.--In the event the Board 
                        requires a report from a functionally 
                        regulated nondepository institution 
                        subsidiary of a bank holding company of 
                        a kind that is not required by another 
                        Federal or State regulator or 
                        appropriate self-regulatory 
                        organization, the Board shall request 
                        that the appropriate regulator or self-
                        regulatory organization obtain such 
                        report. If the report is not made 
                        available to the Board, and the report 
                        is necessary to assess a material risk 
                        to the bank holding company or its 
                        subsidiary depository institution or 
                        compliance with this Act, the Board may 
                        require such subsidiary to provide such 
                        a report to the Board.
                  (C) Definition.--For purposes of this 
                subsection, the term ``functionally regulated 
                nondepository institution'' means--
                          (i) a broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934;
                          (ii) an investment adviser registered 
                        under the Investment Advisers Act of 
                        1940, with respect to the investment 
                        advisory activities of such investment 
                        adviser and activities incidental to 
                        such investment advisory activities;
                          (iii) an insurance company subject to 
                        supervision by a State insurance 
                        commission, agency, or similar 
                        authority; and
                          (iv) an entity subject to regulation 
                        by the Commodity Futures Trading 
                        Commission, with respect to the 
                        commodities activities of such entity 
                        and activities incidental to such 
                        commodities activities.
          (2) Examinations.--
                  (A) Examination authority.--
                          (i) In general.--The Board may make 
                        examinations of each bank holding 
                        company and each subsidiary of a bank 
                        holding company.
                          (ii) Functionally regulated 
                        nondepository institution 
                        subsidiaries.--Notwithstanding clause 
                        (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank 
                        holding company only if--
                                  (I) the Board has reasonable 
                                cause to believe that such 
                                subsidiary is engaged in 
                                activities that pose a material 
                                risk to an affiliated 
                                depository institution, or
                                  (II) based on reports and 
                                other available information, 
                                the Board has reasonable cause 
                                to believe that a subsidiary is 
                                not in compliance with this Act 
                                or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the 
                                Board cannot make such 
                                determination through 
                                examination of the affiliated 
                                depository institution or bank 
                                holding company.
                  (B) Limitations on examination authority for 
                bank holding companies and subsidiaries.--
                Subject to subparagraph (A)(ii), the Board may 
                make examinations under subparagraph (A)(i) of 
                each bank holding company and each subsidiary 
                of such holding company in order to--
                          (i) inform the Board of the nature of 
                        the operations and financial condition 
                        of the holding company and such 
                        subsidiaries;
                          (ii) inform the Board of--
                                  (I) the financial and 
                                operational risks within the 
                                holding company system that may 
                                pose a threat to the safety and 
                                soundness of any subsidiary 
                                depository institution of such 
                                holding company; and
                                  (II) the systems for 
                                monitoring and controlling such 
                                risks; and
                          (iii) monitor compliance with the 
                        provisions of this Act and those 
                        governing transactions and 
                        relationships between any subsidiary 
                        depository institution and its 
                        affiliates.
                  (C) Restricted focus of examinations.--The 
                Board shall, to the fullest extent possible, 
                limit the focus and scope of any examination of 
                a bank holding company to--
                          (i) the bank holding company; and
                          (ii) any subsidiary of the holding 
                        company that, because of--
                                  (I) the size, condition, or 
                                activities of the subsidiary;
                                  (II) the nature or size of 
                                transactions between such 
                                subsidiary and any depository 
                                institution which is also a 
                                subsidiary of such holding 
                                company; or
                                  (III) the centralization of 
                                functions within the holding 
                                company system,
                        could have a materially adverse effect 
                        on the safety and soundness of any 
                        depository institution affiliate of the 
                        holding company.
                  (D) Deference to bank examinations.--The 
                Board shall, to the fullest extent possible, 
                use, for the purposes of this paragraph, the 
                reports of examinations of depository 
                institutions made by the appropriate Federal 
                and State depository institution supervisory 
                authority.
                  (E) Deference to other examinations.--The 
                Board shall, to the fullest extent possible, 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and instead 
                reviewing the reports of examination made of--
                          (i) any registered broker or dealer 
                        or registered investment adviser by or 
                        on behalf of the Securities and 
                        Exchange Commission;
                          (ii) any licensed insurance company 
                        by or on behalf of any state regulatory 
                        authority responsible for the 
                        supervision of insurance companies; and
                          (iii) any other subsidiary that the 
                        Board finds to be comprehensively 
                        supervised by a Federal or State 
                        authority.
          (3) Capital.--
                  (A) In general.--The Board shall not, by 
                regulation, guideline, order or otherwise, 
                prescribe or impose any capital or capital 
                adequacy rules, guidelines, standards, or 
                requirements on any subsidiary of a financial 
                holding company that is not a depository 
                institution and--
                          (i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the 
                        Securities and Exchange Commission) or 
                        State insurance authority; or
                          (ii) is registered as an investment 
                        adviser under the Investment Advisers 
                        Act of 1940.
                  (B) Rule of construction.--Subparagraph (A) 
                shall not be construed as preventing the Board 
                from imposing capital or capital adequacy 
                rules, guidelines, standards, or requirements 
                with respect to activities of a registered 
                investment adviser other than investment 
                advisory activities or activities incidental to 
                investment advisory activities.
          (4) Transfer of board authority to appropriate 
        federal banking agency.--
                  (A) In general.--In the case of any bank 
                holding company which is not significantly 
                engaged in nonbanking activities, the Board, in 
                consultation with the appropriate Federal 
                banking agency, may designate the appropriate 
                Federal banking agency of the lead insured 
                depository institution subsidiary of such 
                holding company as the appropriate Federal 
                banking agency for the bank holding company.
                  (B) Authority transferred.--An agency 
                designated by the Board under subparagraph (A) 
                shall have the same authority as the Board 
                under this Act to--
                          (i) examine and require reports from 
                        the bank holding company and any 
                        affiliate of such company (other than a 
                        depository institution) under section 
                        5;
                          (ii) approve or disapprove 
                        applications or transactions under 
                        section 3;
                          (iii) take actions and impose 
                        penalties under subsections (e) and (f) 
                        of section 5 and section 8; and
                          (iv) take actions regarding the 
                        holding company, any affiliate of the 
                        holding company (other than a 
                        depository institution), or any 
                        institution-affiliated party of such 
                        company or affiliate under the Federal 
                        Deposit Insurance Act and any other 
                        statute which the Board may designate.
                  (C) Agency orders.--Section 9 (of this Act) 
                and section 105 of the Bank Holding Company Act 
                Amendments of 1970 shall apply to orders issued 
                by an agency designated under subparagraph (A) 
                in the same manner such sections apply to 
                orders issued by the Board.
          (5) Functional regulation of securities and insurance 
        activities.--The Board shall defer to--
                  (A) the Securities and Exchange Commission 
                with regard to all interpretations of, and the 
                enforcement of, applicable Federal securities 
                laws relating to the activities, conduct, and 
                operations of registered brokers, dealers, 
                investment advisers, and investment companies; 
                and
                  (B) the relevant State insurance authorities 
                with regard to all interpretations of, and the 
                enforcement of, applicable State insurance laws 
                relating to the activities, conduct, and 
                operations of insurance companies and insurance 
                agents.
          * * * * * * *
  (e)(1) Notwithstanding any other provision of this Act, the 
Board may, whenever it has reasonable cause to believe that the 
continuation by a bank holding company of any activity or of 
ownership or control of any of its nonbank subsidiaries, other 
than a nonbank subsidiary of a bank, constitutes a serious risk 
to the financial safety, soundness, or stability of a bank 
holding company subsidiary bank and is inconsistent with sound 
banking principles or with the purposes of this Act or with the 
[Financial Institutions Supervisory Act of 1966, order] 
Financial Institutions Supervisory Act of 1966, at the election 
of the bank holding company--
          (A) order the bank holding company or any such 
        nonbank subsidiaries, after due notice and opportunity 
        for hearing, and after considering the views of the 
        bank's primary supervisor, which shall be the 
        Comptroller of the Currency in the case of a national 
        bank or the Federal Deposit Insurance Corporation and 
        the appropriate State supervisory authority in the case 
        of an insured nonmember bank, to terminate such 
        activities or to terminate (within one hundred and 
        twenty days or such longer period as the Board may 
        direct in unusual circumstances) its ownership or 
        control of any such subsidiary either by sale or by 
        distribution of the shares of the subsidiary to the 
        [shareholders of the bank holding company. Such 
        distribution] shareholders of the bank holding company; 
        or
          (B) order the bank holding company, after due notice 
        and opportunity for hearing, and after consultation 
        with the bank's primary supervisor, which shall be the 
        Comptroller of the Currency in the case of a national 
        bank, and the Federal Deposit Insurance Corporation and 
        the appropriate State supervisor in the case of an 
        insured nonmember bank, to terminate (within 120 days 
        or such longer period as the Board may direct) the 
        ownership or control of any such bank by such company.
The distribution referred to in subparagraph (A) shall be pro 
rata with respect to all of the shareholders of the 
distributing bank holding company, and the holding company 
shall not make any charge to its shareholders arising out of 
such a distribution.
          * * * * * * *
  (g) Authority of State Insurance Regulator and the Securities 
and Exchange Commission.--
          (1) In general.--Notwithstanding any other provision 
        of law, any regulation, order, or other action of the 
        Board which requires a bank holding company to provide 
        funds or other assets to a subsidiary insured 
        depository institution shall not be effective nor 
        enforceable if--
                  (A) such funds or assets are to be provided 
                by--
                          (i) a bank holding company that is an 
                        insurance company or is a broker or 
                        dealer registered under the Securities 
                        Exchange Act of 1934; or
                          (ii) an affiliate of the depository 
                        institution which is an insurance 
                        company or a broker or dealer 
                        registered under such Act; and
                  (B) the State insurance authority for the 
                insurance company or the Securities and 
                Exchange Commission for the registered broker 
                or dealer, as the case may be, determines in 
                writing sent to the holding company and the 
                Board that the holding company shall not 
                provide such funds or assets because such 
                action would have a material adverse effect on 
                the financial condition of the insurance 
                company or the broker or dealer, as the case 
                may be.
          (2) Notice to state insurance authority or sec 
        required.--If the Board requires a bank holding 
        company, or an affiliate of a bank holding company, 
        which is an insurance company or a broker or dealer 
        described in paragraph (1)(A) to provide funds or 
        assets to an insured depository institution subsidiary 
        of the holding company pursuant to any regulation, 
        order, or other action of the Board referred to in 
        paragraph (1), the Board shall promptly notify the 
        State insurance authority for the insurance company or 
        the Securities and Exchange Commission, as the case may 
        be, of such requirement.
          (3) Divestiture in lieu of other action.--If the 
        Board receives a notice described in paragraph (1)(B) 
        from a State insurance authority or the Securities and 
        Exchange Commission with regard to a bank holding 
        company or affiliate referred to in such paragraph, the 
        Board may order the bank holding company to divest the 
        insured depository institution within 180 days of 
        receiving notice or such longer period as the Board 
        determines consistent with the safe and sound operation 
        of the insured depository institution.
          (4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by 
        the Board under paragraph (3) to a bank holding company 
        and ending on the date the divestiture is completed, 
        the Board may impose any conditions or restrictions on 
        the holding company's ownership or operation of the 
        insured depository institution, including restricting 
        or prohibiting transactions between the insured 
        depository institution and any affiliate of the 
        institution, as are appropriate under the 
        circumstances.
  (h) Prudential Safeguards.--
          (1) In general.--The Board may, by regulation or 
        order, impose restrictions or requirements on 
        relationships or transactions between a depository 
        institution subsidiary of a bank holding company and 
        any affiliate of such depository institution (other 
        than a subsidiary of such institution) which the Board 
        finds is consistent with the public interest, the 
        purposes of this Act, the Financial Services Act of 
        1997, the Federal Reserve Act, and other Federal law 
        applicable to depository institution subsidiaries of 
        bank holding companies and the standards in paragraph 
        (2).
          (2) Standards.--The Board may exercise authority 
        under paragraph (1) if the Board finds that such action 
        will have any of the following effects:
                  (A) Avoid any significant risk to the safety 
                and soundness of depository institutions or any 
                Federal deposit insurance fund.
                  (B) Enhance the financial stability of bank 
                holding companies.
                  (C) Avoid conflicts of interest or other 
                abuses.
                  (D) Enhance the privacy of customers of 
                depository institutions.
                  (E) Promote the application of national 
                treatment and equality of competitive 
                opportunity between nonbank affiliates owned or 
                controlled by domestic bank holding companies 
                and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
          (3) Review.--The Board shall regularly--
                  (A) review all restrictions or requirements 
                established pursuant to paragraph (1) to 
                determine whether there is a continuing need 
                for any such restriction or requirement to 
                carry out the purposes of the Act, including 
                any purpose described in paragraph (2); and
                  (B) modify or eliminate any restriction or 
                requirement the Board finds is no longer 
                required for such purposes.

SEC. 6. FINANCIAL HOLDING COMPANIES.

  (a) Financial Holding Company Defined.--For purposes of this 
section, the term ``financial holding company'' means a bank 
holding company which meets the requirements of subsection (b).
  (b) Eligibility Requirements for Financial Holding 
Companies.--
          (1) In general.--No bank holding company may engage 
        in any activity or directly or indirectly acquire or 
        retain shares of any company under this section unless 
        the bank holding company meets the following 
        requirements:
                  (A) All of the subsidiary depository 
                institutions of the bank holding company are 
                well capitalized.
                  (B) All of the subsidiary depository 
                institutions of the bank holding company are 
                well managed.
                  (C) All of the subsidiary depository 
                institutions of the bank holding company have 
                achieved a rating of ``satisfactory record of 
                meeting community credit needs'', or better, at 
                the most recent examination of each such 
                institution under the Community Reinvestment 
                Act of 1977.
                  (D) The company has filed with the Board a 
                declaration that the company elects to be a 
                financial holding company and certifying that 
                the company meets the requirements of 
                subparagraphs (A) through (C).
          (2) Foreign banks and companies.--For purposes of 
        paragraph (1), the Board shall establish and apply 
        comparable capital standards to a foreign bank that 
        operates a branch or agency or owns or controls a bank 
        or commercial lending company in the United States, and 
        any company that owns or controls such foreign bank, 
        giving due regard to the principle of national 
        treatment and equality of competitive opportunity.
          (3) Limited exclusions from community needs 
        requirements for newly acquired depository 
        institutions.--
                  (A) In general.--If the requirements of 
                subparagraph (B) are met, any depository 
                institution acquired by a bank holding company 
                during the 24-month period preceding the 
                submission of a declaration under paragraph 
                (1)(D) and any depository institution acquired 
                after the submission of such declaration may be 
                excluded for purposes of paragraph (1)(C) until 
                the later of--
                          (i) the end of the 24-month period 
                        beginning on the date the acquisition 
                        of the depository institution by such 
                        company is consummated; or
                          (ii) the date of completion of the 
                        1st examination of such depository 
                        institution under the Community 
                        Reinvestment Act of 1977 which is 
                        conducted after the date of the 
                        acquisition of the depository 
                        institution.
                  (B) Requirements.--The requirements of this 
                subparagraph are met with respect to any bank 
                holding company referred to in subparagraph (A) 
                if--
                          (i) the bank holding company has 
                        submitted an affirmative plan to the 
                        appropriate Federal banking agency to 
                        take such action as may be necessary in 
                        order for such institution to achieve a 
                        rating of ``satisfactory record of 
                        meeting community credit needs'', or 
                        better, at the next examination of the 
                        institution under the Community 
                        Reinvestment Act of 1977; and
                          (ii) the plan has been approved by 
                        such agency.
  (c) Engaging in Activities Financial in Nature.--
          (1) In general.--Notwithstanding section 4(a), a 
        financial holding company and a Board supervised 
        investment bank holding company may engage in any 
        activity and acquire and retain the shares of any 
        company the activities of which the Board has 
        determined (by regulation or order) to be financial in 
        nature or incidental to such financial activities.
          (2) Factors to be considered.--In determining whether 
        an activity is financial in nature or incidental to 
        financial activities, the Board shall take into 
        account--
                  (A) the purposes of this Act and the 
                Financial Services Act of 1997;
                  (B) changes or reasonably expected changes in 
                the marketplace in which bank holding companies 
                compete;
                  (C) changes or reasonably expected changes in 
                the technology for delivering financial 
                services; and
                  (D) whether such activity is necessary or 
                appropriate to allow a bank holding company and 
                the affiliates of a bank holding company to--
                          (i) compete effectively with any 
                        company seeking to provide financial 
                        services in the United States;
                          (ii) use any available or emerging 
                        technological means, including any 
                        application necessary to protect the 
                        security or efficacy of systems for the 
                        transmission of data or financial 
                        transactions, in providing financial 
                        services; and
                          (iii) offer customers any available 
                        or emerging technological means for 
                        using financial services.
          (3) Activities that are financial in nature.--The 
        following activities shall be considered to be 
        financial in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding money or 
                securities.
                  (B) Insuring, guaranteeing, or indemnifying 
                against loss, harm, damage, illness, 
                disability, or death, or providing and issuing 
                annuities, and acting as principal, agent, or 
                broker for purposes of the foregoing.
                  (C) Providing financial, investment, or 
                economic advisory services, including advising 
                an investment company (as defined in section 3 
                of the Investment Company Act of 1940).
                  (D) Issuing or selling instruments 
                representing interests in pools of assets 
                permissible for a bank to hold directly.
                  (E) Underwriting, dealing in, or making a 
                market in securities.
                  (F) Engaging in any activity that the Board 
                has determined, by order or regulation that is 
                in effect on the date of enactment of the 
                Financial Services Act of 1997, to be so 
                closely related to banking or managing or 
                controlling banks as to be a proper incident 
                thereto (subject to the same terms and 
                conditions contained in such order or 
                regulation, unless modified by the Board).
                  (G) Engaging, in the United States, in any 
                activity that--
                          (i) a bank holding company may engage 
                        in outside the United States; and
                          (ii) the Board has determined, under 
                        regulations issued pursuant to section 
                        4(c)(13) of this Act (as in effect on 
                        the day before the date of enactment of 
                        the Financial Services Act of 1997) to 
                        be usual in connection with the 
                        transaction of banking or other 
                        financial operations abroad.
                  (H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 
                1 or more entities (including entities, other 
                than a depository institution or subsidiary of 
                a depository institution, that the bank holding 
                company controls) or otherwise, shares, assets, 
                or ownership interests (including without 
                limitation debt or equity securities, 
                partnership interests, trust certificates or 
                other instruments representing ownership) of a 
                company or other entity, whether or not 
                constituting control of such company or entity, 
                engaged in any activity not authorized pursuant 
                to this section if--
                          (i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or subsidiary of 
                        a depository institution;
                          (ii) such shares, assets, or 
                        ownership interests are acquired and 
                        held by a securities affiliate or an 
                        affiliate thereof as part of a bona 
                        fide underwriting or merchant banking 
                        activity, including investment 
                        activities engaged in for the purpose 
                        of appreciation and ultimate resale or 
                        disposition of the investment;
                          (iii) such shares, assets, or 
                        ownership interests, are held only for 
                        such a period of time as will permit 
                        the sale or disposition thereof on a 
                        reasonable basis consistent with the 
                        nature of the activities described in 
                        clause (ii); and
                          (iv) during the period such shares, 
                        assets, or ownership interests are 
                        held, the bank holding company does not 
                        actively participate in the day to day 
                        management or operation of such company 
                        or entity, except insofar as necessary 
                        to achieve the objectives of clause 
                        (ii).
                  (I) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 
                1 or more entities (including entities, other 
                than a depository institution or subsidiary of 
                a depository institution, that the bank holding 
                company controls) or otherwise, shares, assets, 
                or ownership interests (including without 
                limitation debt or equity securities, 
                partnership interests, trust certificates or 
                other instruments representing ownership) of a 
                company or other entity, whether or not 
                constituting control of such company or entity, 
                engaged in any activity not authorized pursuant 
                to this section if--
                          (i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or a subsidiary 
                        of a depository institution;
                          (ii) such shares, assets, or 
                        ownership interests are acquired and 
                        held by an insurance company that is 
                        predominantly engaged in underwriting 
                        life, accident and health, or property 
                        and casualty insurance (other than 
                        credit-related insurance);
                          (iii) such shares, assets, or 
                        ownership interests represent an 
                        investment made in the ordinary course 
                        of business of such insurance company 
                        in accordance with relevant State law 
                        governing such investments; and
                          (iv) during the period such shares, 
                        assets, or ownership interests are 
                        held, the bank holding company does not 
                        directly or indirectly participate in 
                        the day-to-day management or operation 
                        of the company or entity except insofar 
                        as necessary to achieve the objectives 
                        of clauses (ii) and (iii).
          (4) Actions required.--The Board shall, by regulation 
        or order, define, consistent with the purposes of this 
        Act, the following activities as, and the extent to 
        which such activities are, financial in nature or 
        incidental to activities which are financial in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding financial 
                assets other than money or securities.
                  (B) Providing any device or other 
                instrumentality for transferring money or other 
                financial assets;
                  (C) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
          (5) Post consummation notification.--
                  (A) In general.--A financial holding company 
                and a Board supervised investment bank holding 
                company that acquires any company, or commences 
                any activity, pursuant to this subsection shall 
                provide written notice to the Board describing 
                the activity commenced or conducted by the 
                company acquired no later than 30 calendar days 
                after commencing the activity or consummating 
                the acquisition.
                  (B) Approval not required for certain 
                financial activities.--Except as provided in 
                section 4(j) with regard to the acquisition of 
                a savings association, a financial holding 
                company and a Board supervised investment bank 
                holding company may commence any activity, or 
                acquire any company, pursuant to paragraph (3) 
                or any regulation prescribed or order issued 
                under paragraph (4), without prior approval of 
                the Board.
  (d) Provisions Applicable to Financial Holding Companies That 
Fail To Meet Requirements.--
          (1) In general.--If the Board finds that a financial 
        holding company is not in compliance with the 
        requirements of subparagraph (A), (B), or (C) of 
        subsection (b)(1), the Board shall give notice of such 
        finding to the company.
          (2) Agreement to correct conditions required.--Within 
        45 days of receipt by a financial holding company of a 
        notice given under paragraph (1) (or such additional 
        period as the Board may permit), the company shall 
        execute an agreement acceptable to the Board to comply 
        with the requirements applicable to a financial holding 
        company.
          (3) Board may impose limitations.--Until the 
        conditions described in a notice to a financial holding 
        company under paragraph (1) are corrected, the Board 
        may impose such limitations on the conduct or 
        activities of the company or any affiliate of the 
        company as the Board determines to be appropriate under 
        the circumstances.
          (4) Failure to correct.--If, after receiving a notice 
        under paragraph (1), a financial holding company does 
        not--
                  (A) execute and implement an agreement in 
                accordance with paragraph (2);
                  (B) comply with any limitations imposed under 
                paragraph (3);
                  (C) in the case of a notice of failure to 
                comply with subsection (b)(1)(A), restore each 
                depository institution subsidiary to well 
                capitalized status before the end of the 180-
                day period beginning on the date such notice is 
                received by the company (or such other period 
                permitted by the Board); or
                  (D) in the case of a notice of failure to 
                comply with subparagraph (B) or (C) of 
                subsection (b)(1), restore compliance with any 
                such subparagraph by the date the next 
                examination of the depository institution 
                subsidiary is completed or by the end of such 
                other period as the Board determines to be 
                appropriate,
        the Board may require such company, under such terms 
        and conditions as may be imposed by the Board and 
        subject to such extension of time as may be granted in 
        the Board's discretion, to divest control of any 
        depository institution subsidiary or, at the election 
        of the financial holding company, instead to cease to 
        engage in any activity conducted by such company or its 
        subsidiaries pursuant to this section.
          (5) Consultation.--In taking any action under this 
        subsection, the Board shall consult with all relevant 
        Federal and State regulatory agencies.
  (e) Safeguards for Bank Subsidiaries.--A financial holding 
company shall assure that--
          (1) the procedures of the holding company for 
        identifying and managing financial and operational 
        risks within the company, and the subsidiaries of such 
        company, adequately protect the subsidiaries of such 
        company which are insured depository institutions from 
        such risks;
          (2) the holding company has reasonable policies and 
        procedures to preserve the separate corporate identity 
        and limited liability of such company and the 
        subsidiaries of such company, for the protection of the 
        company's subsidiary insured depository institutions; 
        and
          (3) the holding company complies with this section.
  (f) Nonfinancial Activities.--
          (1) In general.--Notwithstanding section 4(a), a 
        financial holding company may engage in activities 
        which are not (or have not been determined to be) 
        financial in nature or incidental to activities which 
        are financial in nature, or acquire and retain 
        ownership and control of the shares of a company 
        engaged in such activities, if--
                  (A) the aggregate annual gross revenues 
                derived from all such activities and all such 
                companies does not exceed the lesser of--
                          (i) 5 percent of the consolidated 
                        annual gross revenues of the financial 
                        holding company; or
                          (ii) $500,000,000;
                  (B) the consolidated total assets of any 
                company the shares of which are acquired by the 
                financial holding company pursuant to this 
                paragraph are less than $750,000,000 at the 
                time the shares are acquired by the holding 
                company; and
                  (C) the holding company provides notice to 
                the Board within 30 days of commencing the 
                activity or acquiring the ownership or control.
          (2) Inclusion of grandfathered activities.--For 
        purposes of determining the limits contained in 
        paragraph (1)(A), the gross revenues derived from all 
        activities conducted, and companies the shares of which 
        are held, under subsection (g) shall be considered to 
        be derived or held under this subsection.
          (3) Foreign banks.--In lieu of the limitation 
        contained in paragraph (1)(A) in the case of a foreign 
        bank or a company that owns or controls a foreign bank 
        which engages in any activity or acquires or retains 
        ownership or control of shares of any company pursuant 
        to paragraph (1), the aggregate annual gross revenues 
        derived from all such activities and all such companies 
        in the United States shall not exceed the lesser of--
                  (A) 5 percent of the consolidated annual 
                gross revenues of the foreign bank or company 
                in the United States derived from any branch, 
                agency, commercial lending company, or 
                depository institution controlled by the 
                foreign bank or company and any subsidiary 
                engaged in the United States in activities 
                permissible under section 4 or 6; or
                  (B) $500,000,000.
          (4) Indexing revenue test.--After December 31, 1998, 
        the Board shall annually adjust the dollar amount 
        contained in paragraphs (1)(A) and (3) by the annual 
        percentage increase in the Consumer Price Index for 
        Urban Wage Earners and Clerical Workers published by 
        the Bureau of Labor Statistics.
          (5) Nonapplicability of other exemption.--Any foreign 
        bank or company that owns or controls a foreign bank 
        which engages in any activity or acquires or retains 
        ownership or control of shares of any company pursuant 
        to this subsection shall not be eligible for any 
        exception described in section 2(h).
  (g) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
          (1) In general.--Notwithstanding subsection (f)(1) 
        and section 4(a), a company that is not a bank holding 
        company or a foreign bank (as defined in section 
        1(b)(7) of the International Banking Act of 1978) and 
        becomes a financial holding company after the date of 
        the enactment of the Financial Services Act of 1997 may 
        continue to engage in any activity and retain direct or 
        indirect ownership or control of shares of a company 
        engaged in any activity if--
                  (A) the holding company lawfully was engaged 
                in the activity or held the shares of such 
                company on September 30, 1997;
                  (B) the holding company is predominantly 
                engaged in financial activities as defined in 
                paragraph (2); and
                  (C) the company engaged in such activity 
                continues to engage only in the same activities 
                that such company conducted on September 30, 
                1997, and other activities permissible under 
                this Act.
          (2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in 
        financial activities if, as of the day before the 
        company becomes a financial holding company, the annual 
        gross revenues derived by the holding company and all 
        subsidiaries of the holding company, on a consolidated 
        basis, from engaging in activities that are financial 
        in nature or are incidental to activities that are 
        financial in nature under subsection (c) represent at 
        least 85 percent of the consolidated annual gross 
        revenues of the company.
          (3) No expansion of grandfathered commercial 
        activities through merger or consolidation.--A 
        financial holding company that engages in activities or 
        holds shares pursuant to this subsection, or a 
        subsidiary of such financial holding company, may not 
        acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which 
        is engaged in any activity which the Board has not 
        determined to be financial in nature or incidental to 
        activities that are financial in nature under 
        subsection (c).
          (4) Cross marketing restrictions applicable to 
        commercial activities.--A depository institution 
        controlled by a financial holding company shall not--
                  (A) offer or market, directly or through any 
                arrangement, any product or service of a 
                company whose activities are conducted or whose 
                shares are owned or controlled by the financial 
                holding company pursuant to this subsection, 
                subsection (f), or subparagraph (H) or (I) of 
                subsection (c)(3); or
                  (B) permit any of its products or services to 
                be offered or marketed, directly or through any 
                arrangement, by or through any company 
                described in subparagraph (A).
          (5) Transactions with nonfinancial affiliates.--An 
        insured depository institution controlled by a 
        financial holding company may not engage in a covered 
        transaction (as defined by section 23A(b)(7) of the 
        Federal Reserve Act) with any affiliate controlled by 
        the company pursuant to this subsection or subparagraph 
        (H) or (I) of subsection (c)(3).
  (h) Developing Activities.--A financial holding company and a 
Board supervised investment bank holding company may engage, or 
directly or indirectly or acquire shares of any company 
engaged, in any activity that the Board has not determined to 
be financial in nature or incidental to financial activities 
under subsection (c) if--
          (1) the holding company reasonably concludes that the 
        activity is financial in nature or incidental to 
        financial activities;
          (2) the gross revenues from all activities conducted 
        under this subsection represent less than 5 percent of 
        the consolidated gross revenues of the holding company;
          (3) the aggregate total assets of all companies the 
        shares of which are held under this subsection do not 
        exceed 5 percent of the holding company's consolidated 
        total assets;
          (4) the total capital invested in activities 
        conducted under this subsection represents less than 5 
        percent of the consolidated total capital of the 
        holding company;
          (5) the Board has not previously determined that the 
        activity is not financial in nature or incidental to 
        financial activities under subsection (c); and
          (6) the holding company provides written notification 
        to the Board describing the activity commenced or 
        conducted by the company acquired no later than 10 
        business days after commencing the activity or 
        consummating the acquisition.

                    reservation of rights to states

  Sec. 7. (a) In General.--[No provision] Except as provided in 
subsection (c), no provision of this Act shall be construed as 
preventing any State from exercising such powers and 
jurisdiction which it now has or may hereafter have with 
respect to companies, banks, bank holding companies, and 
subsidiaries thereof.
          * * * * * * *
  (c) Preemption of Certain State Restrictions.--
          (1) Affiliations.--No State may by law, regulation, 
        order, interpretation, or otherwise, prevent or 
        restrict an insured depository institution or a 
        wholesale financial institution from being affiliated 
        with an entity (including an entity engaged in 
        insurance activities) as authorized by this Act or 
        section 17(i) of the Securities Exchange Act of 1934.
          (2) Certain activities conducted in conjunction with 
        affiliates.--No State may by law, regulation, order, 
        interpretation, or otherwise, prevent a national bank 
        or a wholesale financial institution from engaging, or 
        significantly interfere with the ability of such 
        national bank or wholesale financial institution to 
        engage, directly or indirectly, or in conjunction with 
        an affiliate referred to in paragraph (1), in any 
        activity as authorized under section 6 or 10 of this 
        Act or section 17(i) of the Securities Exchange Act of 
        1934.

              [amendments to internal revenue code of 1954

  [Sec. 10. (a) Subchapter O of chapter 1 of the Internal 
Revenue Code of 1954 is amended by adding at the end thereof 
the following new part:
          * * * * * * *
  [(c) The amendments made by this section shall apply with 
respect to taxable years ending after the date of the enactment 
of this Act.]

SEC. 10. INVESTMENT BANK HOLDING COMPANIES.

  (a) Companies That Control Wholesale Financial 
Institutions.--
          (1) In general.--Any company shall be supervised in 
        accordance with this section if the company--
                  (A) either--
                          (i) is substantially engaged in the 
                        securities business, as provided in 
                        paragraph (2); or
                          (ii) was, as of the date of the 
                        enactment of the Financial Services Act 
                        of 1997, a bank holding company;
                  (B) controls 1 or more wholesale financial 
                institutions;
                  (C) does not control--
                          (i) a bank other than a wholesale 
                        financial institution;
                          (ii) an insured bank other than an 
                        institution permitted under 
                        subparagraph (D), (F), or (G) of 
                        section 2(c)(2); or
                          (iii) a savings association; and
                  (D) is not a foreign bank (as defined in 
                section 1(b)(7) of the International Banking 
                Act of 1978).
          (2) Substantially engaged in securities business.--A 
        company shall be treated as being substantially engaged 
        in the securities business for purposes of this section 
        if--
                  (A) the company controls 1 or more registered 
                securities brokers or dealers; and
                  (B) either--
                          (i) the annual total consolidated net 
                        revenues derived by the company and its 
                        subsidiaries from effecting 
                        transactions in or buying and selling 
                        securities as a broker or dealer 
                        represent at least 35 percent of the 
                        annual total consolidated net revenues 
                        of the company; or
                          (ii) the registered brokers or 
                        dealers controlled by the company have 
                        in the aggregate total consolidated 
                        equity capital and qualifying 
                        subordinated debt (based on an average 
                        for the 4 preceding calendar quarters) 
                        of more than $750,000,000 and such 
                        total equity capital and qualifying 
                        subordinated debt does not fall 
below$500,000,000 (based on an average for the 4 preceding calendar 
quarters).
          (3) Savings association transition period.--
        Notwithstanding paragraph (1)(C)(iii), the Board may 
        permit a company that controls a savings association 
        and that otherwise meets the requirements of paragraph 
        (1) to become supervised under paragraph (1), if the 
        company divests control of any such savings association 
        within such period not to exceed 5 years after becoming 
        supervised under paragraph (1) as permitted by the 
        Board.
  (b) Companies Supervised by Securities and Exchange 
Commission.--
          (1) In general.--Except as provided in paragraph (3), 
        any company that is described in subsection (a)(1) 
        shall be subject to supervision by the Commission under 
        section 17(i) of the Securities Exchange Act of 1934 
        and not by the Board and shall, for purposes of this 
        Act, be treated as an SEC supervised investment bank 
        holding company, if the company--
                  (A) is substantially engaged in the 
                securities business, as provided in subsection 
                (a)(2); and
                  (B) controls 1 or more wholesale financial 
                institutions that in the aggregate have--
                          (i) consolidated risk-weighted assets 
                        that on an annual basis are less than 
                        $15,000,000,000; and
                          (ii) annual gross revenues that 
                        represent less than 25 percent of the 
                        consolidated annual gross revenues of 
                        the company.
          (2) Dollar amount.--
                  (A) Risk-weighted assets.--For purposes of 
                paragraph (1)(A), the consolidated risk-
                weighted assets of a wholesale financial 
                institution shall--
                          (i) be based on the average 
                        consolidated risk-weighted assets of 
                        the institution for the four previous 
                        calendar quarters; and
                          (ii) include risk-weighted claims on 
                        affiliates only to the extent such 
                        claims, in the aggregate, exceed the 
                        aggregate risk--weighted claims of 
                        affiliates on the wholesale financial 
                        institution.
                  (B) Treatment of subsidiaries.--For purposes 
                of subparagraph (A)(ii), the term 
                ``affiliates'' shall not include any subsidiary 
                of the wholesale financial institution.
                  (C) Indexed growth.--The dollar amount 
                contained in paragraph (1)(A) shall be adjusted 
                annually after December 31, 1998, by the annual 
                percentage increase in the Consumer Price Index 
                for Urban Wage Earners and Clerical Workers 
                published by the Bureau of Labor Statistics.
          (3) Election.--
                  (A) Filing.--An SEC supervised investment 
                bank holding company may elect to be supervised 
                by the Board and not the Commission by filing 
                with the Board the notice of withdrawal 
                described in section 17(i)(3)(B) of the 
                Securities Exchange Act of 1934.
                  (B) Effective date of transfer of 
                authority.--If a company files an election 
                under subparagraph (A), the Board shall, 
                subject to any conditions, restrictions or 
                limitations as the Board deems necessary or 
                appropriate after consultation with the 
                Commission, assume full supervisory authority 
                and responsibility for the company under this 
                Act immediately upon the effectiveness of the 
                company's notice of withdrawal under section 
                17(i) of the Securities Exchange Act of 1934.
                  (C) Retention of jurisdiction.--The filing of 
                a notice under subparagraph (A) or under 
                section 17(i) of the Securities Exchange Act of 
                1934 shall not affect the jurisdiction and 
                authority of the Commission to take any action 
                authorized by this section or the Federal 
                securities laws against any person with respect 
                to any action (or failure to act) that occurs 
                before the transfer of supervisory authority to 
                the Board.
          (4) Revocation of election.--
                  (A) Filing.--
                          (i) In general.--An investment bank 
                        holding company that--
                                  (I) has filed an election 
                                under paragraph (3)(A):
                                  (II) meets the requirements 
                                of paragraph (1); and
                                  (III) is substantially 
                                engaged in the securities 
                                business, as provided in 
                                subsection (a)(2),
                        may revoke its election to be 
                        supervised by the Board and thereby 
                        become supervised by the Commission by 
                        filing with the Board and the 
                        Commission a notice of revocation in 
                        such form as the Board may prescribe.
                          (ii) Conditions.--Any revocation 
                        filed under clause (i) shall be subject 
                        to any conditions, restrictions or 
                        limitations as the Board finds to be 
                        necessary or appropriate after 
                        consultation with the Commission.
                  (B) Effective date of transfer of 
                authority.--If the investment bank holding 
                company files a notice under subparagraph (A), 
                the Board shall discontinue supervision of the 
                investment bank holding company on the later 
                of--
                          (i) the end of the 45-day period 
                        beginning on the date of receipt by the 
                        Board and the Commission of the notice 
                        of revocation; or
                          (ii) such shorter or longer period as 
                        the Board shall determine, after 
                        consultation with the Commission, is 
                        necessary or appropriate to prevent 
                        evasion of the purposes of this Act.
                  (C) Retention of jurisdiction.--The filing of 
                a notice under subparagraph (A) shall not 
                affect the jurisdiction and authority of the 
                Board to take any action authorized by this 
                section against any person with respect to any 
                action (or failure to act) that occurs before 
                the transfer of supervisory authority to the 
                Commission.
                  (D) Limitation on revocations.--Without the 
                consent of the Board and the Commission, an 
                investment bank holding company may file a 
                revocation of election under subparagraph (A) 
                only once during any 5-year period.
          (5) Limited treatment as bank holding companies.--
        Notwithstanding section 2(a), an SEC supervised 
        investment bank holding company shall not be a bank 
        holding company except for purposes of--
                  (A) section 2(g), section 3, section 5(f), 
                section 7, section 8, and section 11 of this 
                Act;
                  (B) section 3, section 7(j) and subsections 
                (b) through (n), (s), (u) and (v) of section 8 
                of the Federal Deposit Insurance Act; and
                  (C) section 106 of the 1970 Amendments to the 
                Bank Holding Company Act.
  (c) Companies Supervised by the Board.--
          (1) Board supervision.--Any company described in 
        subsection (a)(1) that is not supervised by the 
        Commission under section 17(i) of the Securities 
        Exchange Act of 1934 shall be supervised by the Board 
        and shall, for purposes of this Act, be a Board 
        supervised investment bank holding company.
          (2) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital 
        requirements of Board supervised investment bank 
        holding companies.
          (3) Reports.--
                  (A) In general.--The Board from time to time 
                may require any Board supervised investment 
                bank holding company and any subsidiary of such 
                company to submit reports under oath to keep 
                the Board informed as to--
                          (i) the company's or subsidiary's 
                        activities, financial condition, 
                        policies, systems for monitoring and 
                        controlling financial and operational 
                        risks, and transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          (ii) the extent to which the company 
                        or subsidiary has complied with the 
                        provisions of this Act and regulations 
                        prescribed and orders issued under this 
                        Act.
                  (B) Use of existing reports.--
                          (i) In general.--The Board shall, to 
                        the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraph that the investment bank 
                        holding company or any subsidiary of 
                        such company has provided or been 
                        required to provide to other Federal 
                        and State supervisors or to appropriate 
                        self-regulatory organizations.
                          (ii) Availability.--An investment 
                        bank holding company or a subsidiary of 
                        such company shall provide to the 
                        Board, at the request of the Board, a 
                        report referred to in clause (i).
                  (C) Exemptions from reporting requirements.--
                          (i) In general.--The Board may, by 
                        regulation or order, exempt any company 
                        or class of companies, under such terms 
                        and conditions and for such periods as 
                        the Board shall provide in such 
                        regulation or order, from the 
                        provisions of this paragraph and any 
                        regulation prescribed under this 
                        paragraph.
                          (ii) Criteria for consideration.--In 
                        making any determination under clause 
                        (i) with regard to any exemption under 
                        such clause, the Board shall consider, 
                        among such other factors as the Board 
                        may determine to be appropriate, the 
                        following factors:
                                  (I) Whether information of 
                                the type required under this 
                                paragraph is available from a 
                                supervisory agency (as defined 
                                in section 1101(7) of the Right 
                                to Financial Privacy Act of 
                                1978) or a foreign regulatory 
                                authority of a similar type.
                                  (II) The primary business of 
                                the company.
                                  (III) The nature and extent 
                                of the domestic and foreign 
                                regulation of the activities of 
                                the company.
          (4) Examinations.--
                  (A) Limited use of examination authority.--
                The Board may make examinations of each Board 
                supervised investment bank holding company and 
                each subsidiary of such company in order to--
                          (i) inform the Board regarding the 
                        nature of the operations and financial 
                        condition of the investment bank 
                        holding company and its subsidiaries;
                          (ii) inform the Board regarding--
                                  (I) the financial and 
                                operational risks within the 
                                investment bank holding company 
                                system that may affect any 
                                depository institution owned by 
                                such holding company; and
                                  (II) the systems of the 
                                holding company and its 
                                subsidiaries for monitoring and 
                                controlling those risks; and
                          (iii) monitor compliance with the 
                        provisions of this Act and those 
                        governing transactions and 
                        relationships between any depository 
                        institution controlled by the 
                        investment bank holding company and any 
                        of the company's other subsidiaries.
                  (B) Restricted focus of examinations.--The 
                Board shall, to the fullest extent possible, 
                limit the focus and scope of any examination of 
                an investment bank holding company under this 
                paragraph to--
                          (i) the holding company; and
                          (ii) any subsidiary (other than an 
                        insured depository institution 
                        subsidiary) of the holding company 
                        that, because of the size, condition, 
                        or activities of the subsidiary, the 
                        nature or size of transactions between 
                        such subsidiary and any affiliated 
                        depository institution, or the 
                        centralization of functions within the 
                        holding company system, could have a 
                        materially adverse effect on the safety 
                        and soundness of any depository 
                        institution affiliate of the holding 
                        company.
                  (C) Deference to bank examinations.--The 
                Board shall, to the fullest extent possible, 
                use the reports of examination of depository 
                institutions made by the Comptroller of the 
                Currency, the Federal Deposit Insurance 
                Corporation, the Director of the Office of 
                Thrift Supervision or the appropriate State 
                depository institution supervisory authority 
                for the purposes of this section.
                  (D) Deference to other examinations.--The 
                Board shall, to the fullest extent possible, 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and by instead 
                reviewing the reports of examination made of--
                          (i) any registered broker or dealer 
                        or any registered investment adviser by 
                        or on behalf of the Commission; and
                          (ii) any licensed insurance company 
                        by or on behalf of any State government 
                        insurance agency responsible for the 
                        supervision of the insurance company.
                  (E) Confidentiality of reported 
                information.--
                          (i) In general.--Notwithstanding any 
                        other provision of law, the Board shall 
                        not be compelled to disclose any 
                        nonpublic information required to be 
                        reported under this paragraph, or any 
                        information supplied to the Board by 
                        any domestic or foreign regulatory 
                        agency, that relates to the financial 
                        or operational condition of any 
                        investment bank holding company or any 
                        subsidiary of such company.
                          (ii) Compliance with requests for 
                        information.--No provision of this 
                        subparagraph shall be construed as 
                        authorizing the Board to withhold 
                        information from the Congress, or 
                        preventing the Board from complying 
                        with a request for information from any 
                        other Federal department or agency for 
                        purposes within the scope of such 
                        department's or agency's jurisdiction, 
                        or from complying with any order of a 
                        court of competent jurisdiction in an 
                        action brought by the United States or 
                        the Board.
                          (iii) Coordination with other law.--
                        For purposes of section 552 of title 5, 
                        United States Code, this subparagraph 
                        shall be considered to be a statute 
                        described in subsection (b)(3)(B) of 
                        such section.
                          (iv) Designation of confidential 
                        information.--In prescribing 
                        regulations to carry out the 
                        requirements of this subsection, the 
                        Board shall designate information 
                        described in or obtained pursuant to 
                        this paragraph as confidential 
                        information.
                  (F) Costs.--The cost of any examination 
                conducted by the Board under this section may 
                be assessed against, and made payable by, the 
                investment bank holding company.
          (5) Capital adequacy guidelines.--
                  (A) Capital adequacy provisions.--Subject to 
                the requirements of, and solely in accordance 
                with, the terms of this paragraph, the Board 
                may adopt capital adequacy rules or guidelines 
                for Board supervised investment bank holding 
                companies.
                  (B) Method of calculation.--In developing 
                rules or guidelines under this paragraph, the 
                following provisions shall apply:
                          (i) Focus on double leverage.--The 
                        Board shall focus on the use by 
                        investment bank holding companies of 
                        debt and other liabilities to fund 
                        capital investments in subsidiaries.
                          (ii) No unweighted capital ratio.--
                        The Board shall not, by regulation, 
                        guideline, order, or otherwise, impose 
                        under this section a capital ratio that 
                        is not based on appropriate risk-
                        weighting considerations.
                          (iii) No capital requirement on 
                        regulated entities.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any 
                        capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that--
                                  (I) is not a depository 
                                institution; and
                                  (II) is in compliance with 
                                applicable capital requirements 
                                of another Federal regulatory 
                                authority (including the 
                                Securities and Exchange 
                                Commission) or State insurance 
                                authority.
                          (iv) Limitation.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any 
                        capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that is not a 
                        depository institution and that is 
                        registered as an investment adviser 
                        under the Investment Advisers Act of 
                        1940, except that this clause shall not 
                        be construed as preventing the Board 
                        from imposing capital or capital 
                        adequacy rules, guidelines, standards, 
                        or requirements with respect to 
                        activities of a registered investment 
                        adviser other than investment advisory 
                        activities or activities incidental to 
                        investment advisory activities.
                          (v) Appropriate exclusions.--The 
                        Board shall take full account of--
                                  (I) the capital requirements 
                                made applicable to any 
                                subsidiary that is not a 
                                depository institution by 
                                another Federal regulatory 
                                authority or State insurance 
                                authority; and
                                  (II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                          (vi) Internal risk management 
                        models.--The Board may incorporate 
                        internal risk management models of 
                        investment bank holding companies into 
                        its capital adequacy guidelines or 
                        rules and may take account of the 
                        extent to which resources of a 
                        subsidiary depository institution may 
                        be used to service the debt or other 
                        liabilities of the investment bank 
                        holding company.
  (d) Nonfinancial Activities and Investments.--
          (1) Authority for limited amounts of new activities 
        and investments.--
                  (A) In general.--Notwithstanding section 
                4(a), a Board supervised investment bank 
                holding company may engage in activities which 
                are not (or have not been determined to be) 
                financial in nature or incidental to activities 
                which are financial in nature, or acquire and 
                retain ownership and control of the shares of a 
                company engaged in such activities if--
                          (i) the aggregate annual gross 
                        revenues derived from all such 
                        activities and of all such companies 
                        does not exceed 5 percent of the 
                        consolidated annual gross revenues of 
                        the investment bank holding company or, 
                        in the case of a foreign bank or any 
                        company that owns or controls a foreign 
                        bank, the aggregate annual gross 
                        revenues derived from any such 
                        activities in the United States does 
                        not exceed 5 percent of the 
                        consolidated annual gross revenues of 
                        the foreign bank or company in the 
                        United States derived from any branch, 
                        agency, commercial lending company, or 
                        depository institution controlled by 
                        the foreign bank or company and any 
                        subsidiary engaged in the United States 
                        in activities permissible under section 
                        4 or 6 or this subsection;
                          (ii) the consolidated total assets of 
                        any company the shares of which are 
                        acquired pursuant to this subsection 
                        are less than $750,000,000 at the time 
                        the shares are acquired by the 
                        investment bank holding company; and
                          (iii) such company provides notice to 
                        the Board within 30 days of commencing 
                        the activity or acquiring the ownership 
                        or control.
                  (B) Inclusion of grandfathered activities.--
                For purposes of determining compliance with the 
                limits contained in subparagraph (A), the gross 
                revenues derived from all activities conducted 
                and companies the shares of which are held 
                under paragraph (2) shall be considered to be 
                derived or held under this paragraph.
                  (C) Report.--No later than 5 years after the 
                date of enactment of the Financial Services Act 
                of 1997, the Board shall submit to the Congress 
                a report regarding the activities conducted and 
                companies held pursuant to this paragraph or 
                section 17(i)(7)(C) of the Securities Exchange 
                Act of 1934 and the effect, if any, that 
                affiliations permitted under those provisions 
                have had on affiliated depository institutions. 
                The report shall include recommendations 
                regarding the appropriateness of retaining, 
                increasing, or decreasing the limits contained 
                in those provisions. In preparing the report, 
                the Board shall consult with and incorporate 
                the views of the Commission.
          (2) Grandfathered activities.--
                  (A) In general.--Notwithstanding paragraph 
                (1)(A) and section 4(a), a company that becomes 
                an investment bank holding company may continue 
                to engage, directly or indirectly, in any 
                activity and may retain ownership and control 
                of shares of a company engaged in any activity 
                if--
                          (i) on the date of the enactment of 
                        the Financial Services Act of 1997, 
                        such investment bank holding company 
                        was lawfully engaged in that 
                        nonfinancial activity, held the shares 
                        of such company, or had entered into a 
                        contract to acquire shares of any 
                        company engaged in such activity; and
                          (ii) the company engaged in such 
                        activity continues to engage only in 
                        the same activities that such company 
                        conducted on the date of the enactment 
                        of the Financial Services Act of 1997, 
                        and other activities permissible under 
                        this Act.
                  (B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--An 
                investment bank holding company that engages in 
                activities or holds shares pursuant to this 
                paragraph, or a subsidiary of such investment 
                bank holding company, may not acquire, in any 
                merger, consolidation, or other type of 
                business combination, assets of any other 
                company which is engaged in any activity which 
                the Board has not determined to be financial in 
                nature or incidental to activities that are 
                financial in nature under section 6(c).
                  (C) Limitation to single exemption.--No 
                company that engages in any activity or 
                controls any shares under subsection (f) or (g) 
                of section 6 may engage in any activity or own 
                any shares pursuant to this paragraph or 
                paragraph (1).
          (3) Commodities.--
                  (A) In general.--Notwithstanding section 
                4(a), an investment bank holding company which 
                was predominately engaged as of January 1, 
                1997, in securities activities in the United 
                States (or any successor to any such company) 
                may engage in, or directly or indirectly own or 
                control shares of a company engaged in, 
                activities related to the trading, sale, or 
                investment in commodities and underlying 
                physical properties that were not permissible 
                for bank holding companies to conduct in the 
                United States as of January 1, 1997, if such 
                investment bank holding company, or any 
                subsidiary of such holding company, was engaged 
                directly, indirectly, or through any such 
                company in any of such activities as of January 
                1, 1997, in the United States.
                  (B) Limitation.--Notwithstanding paragraph 
                (1)(A)(i), the attributed aggregate investment 
                by an investment bank holding company in 
                activities permitted under this paragraph and 
                not otherwise permitted for all bank holding 
                companies under this Act may not exceed 5 
                percent of the capital of the investment bank 
                holding company, except that the Board may 
                increase such percentage of capital by such 
                amounts and under such circumstances as the 
                Board considers appropriate, consistent with 
                the purposes of this Act.
                  (C) Attributed investment amount.--For 
                purposes of subparagraph (B), the amount of the 
                investment by an investment bank holding 
                company which are attributable to activities 
                described in such subparagraph shall be 
                determined pursuant to regulations issued by 
                the Board which attribute capital on the basis 
                of such activities in relation to all 
                activities of the company.
          (4) Cross marketing restrictions.--A Board supervised 
        investment bank holding company shall not permit--
                  (A) any company whose shares it owns or 
                controls pursuant to paragraph (1), (2), or (3) 
                to offer or market anyproduct or service of an 
affiliated wholesale financial institution; or
                  (B) any affiliated wholesale financial 
                institution to offer or market any product or 
                service of any company whose shares are owned 
                or controlled by such investment bank holding 
                company pursuant to such paragraphs.
  (e) Qualification of Foreign Bank as Investment Bank Holding 
Company.--
          (1) In general.--Any foreign bank, or any company 
        that owns or controls a foreign bank, that--
                  (A) operates a branch, agency, or commercial 
                lending company in the United States, including 
                a foreign bank or company that owns or controls 
                a wholesale financial institution; and
                  (B) owns, controls or is affiliated with a 
                security affiliate that engages in underwriting 
                corporate equity securities,
        may request a determination from the Board that such 
        bank or company be treated as a Board supervised 
        investment bank holding company for purposes of 
        subsection (d).
          (2) Conditions for treatment as an investment bank 
        holding company.--A foreign bank and a company that 
        owns or controls a foreign bank may not be treated as 
        an investment bank holding company unless the bank and 
        company meet and continue to meet the following 
        criteria:
                  (A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an 
                affiliate are insured under the Federal Deposit 
                Insurance Act.
                  (B) Capital standards.--The foreign bank 
                meets risk-based capital standards comparable 
                to the capital standards required for a 
                wholesale financial institution, giving due 
                regard to the principle of national treatment 
                and equality of competitive opportunity.
                  (C) Transaction with affiliates.--
                Transactions between a branch, agency, or 
                commercial lending company subsidiary of the 
                foreign bank in the United States, and any 
                securities affiliate or company in which the 
                foreign bank (or any company that owns or 
                controls such foreign bank) has invested 
                pursuant to subsection (d) comply with the 
                provisions of sections 23A and 23B of the 
                Federal Reserve Act in the same manner and to 
                the same extent as such transactions would be 
                required to comply with such sections if the 
                bank were a member bank.
          (3) Treatment as a wholesale financial institution.--
        Any foreign bank which is, or is affiliated with a 
        company which is, treated as an investment bank holding 
        company under this subsection shall be treated as a 
        wholesale financial institution for purposes of 
        subsection (d)(4) of this section and subsections 
        (c)(1)(C) and (c)(3) of section 9B of the Federal 
        Reserve Act, and any such foreign bank or company shall 
        be subject to paragraphs (3), (4), and (5) of section 
        9B(d) of the Federal Reserve Act, except that the Board 
        may adopt such modifications, conditions, or exemptions 
        as the Board deems appropriate, giving due regard to 
        the principle of national treatment and equality of 
        competitive opportunity.
          (4) Nonapplicability of other exemption.--Any foreign 
        bank or company which is treated as an investment bank 
        holding company under this subsection shall not be 
        eligible for any exception described in section 2(h).
          (5) Supervision of foreign bank which maintains no 
        banking presence other than control of a wholesale 
        financial institution.--A foreign bank that owns or 
        controls a wholesale financial institution but does not 
        operate a branch, agency, or commercial lending company 
        in the United States (and any company that owns or 
        controls such foreign bank) may request a determination 
        from the Board that such bank or company be treated as 
        a Board supervised investment bank holding company for 
        purposes of subsection (d), except that such bank or 
        company shall be subject to the restrictions of 
        paragraph (4) of this subsection.
          (6) No effect on other provisions.--This section 
        shall not be construed as limiting the authority of the 
        Board under the International Banking Act of 1978 with 
        respect to the regulation, supervision, or examination 
        of foreign banks and their offices and affiliates in 
        the United States.
          (7) Applicability of community reinvestment act of 
        1977.--The branches in the United States of a foreign 
        bank that is, or is affiliated with a company that is, 
        treated as a Board supervised investment bank holding 
        company shall be subject to section 9B(b)(11) of the 
        Federal Reserve Act as if the foreign bank were a 
        wholesale financial institution under such section. The 
        Board and the Comptroller of the Currency shall apply 
        the provisions of sections 803(2), 804, and 807(1) of 
        the Community Reinvestment Act of 1977 to branches of 
        foreign banks which receive only such deposits as are 
        permissible for receipt by a corporation organized 
        under section 25A of the Federal Reserve Act, in the 
        same manner and to the same extent such sections apply 
        to such a corporation.
  (f) Board Backup Enforcement and Examination Authority.--
          (1) Enforcement authority.--
                  (A) In general.--The Board may take any 
                action or initiate any investigation or 
                proceeding under this Act or the Federal 
                Deposit Insurance Act involving any SEC 
                supervised investment bank holding company, any 
                subsidiary of such a company, or any 
                institution-affiliated party of such a company 
                or subsidiary for the purpose of enforcing 
                compliance with the applicable provisions of 
                this Act, the 1970 Amendments to the Bank 
                Holding Company Act of 1956, section 17(i) of 
                the Securities Exchange Act of 1934, the 
                Federal Deposit Insurance Act, or the Federal 
                Reserve Act.
                  (B) Prior consultation and opportunity to 
                correct.--
                          (i) Notice of proposed action.--At 
                        least 30 days before initiating any 
                        action, investigation, or proceeding 
                        under this subsection (or such shorter 
                        period as the Board and Commission may 
                        agree), the Board shall provide the 
                        Commission with notice of the Board's 
                        proposed action, an explanation of the 
                        basis for such proposed action, and a 
                        recommendation for Commission action.
                          (ii) Board action.--If, after receipt 
                        of notice under clause (i), the 
                        Commission does not take the actions 
                        recommended by the Board or other 
                        actions deemed appropriate by the 
                        Board, the Board may initiate an 
                        action, investigation or proceeding 
                        under this subsection.
                          (iii) Exigent circumstances.--The 
                        Board may exercise its authority under 
                        paragraph (1)(A) without regard to the 
                        time period set forth in clause (i) if 
                        the Board finds that such action is 
                        necessary or appropriate in light of 
                        exigent circumstances.
          (2) Backup examination.--
                  (A) In general.--In circumstances where 
                examinations of Board supervised bank holding 
                companies and subsidiaries of such holding 
                companies by the Board are permissible under 
                subparagraphs (A) and (B) of section 5(c)(2), 
                the Board may make examinations of any SEC 
                supervised investment bank holding company and 
                any subsidiary of such company for the purpose 
                of monitoring and enforcing compliance by the 
                company or any subsidiary of such company with 
                the laws described in subparagraph (E).
                  (B) Restricted focus.--The Board shall limit 
                the focus and scope of any examination 
                permitted under subparagraph (A) to those 
                transactions, policies, procedures, systems, or 
                records that are reasonably necessary to 
                monitor and enforce compliance by the company 
                or any subsidiary of the company with the laws 
                described in subparagraph (E).
                  (C) Deference to other examinations.--To the 
                fullest extent possible, the Board shall 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and instead 
                reviewing the reports of examinations made of--
                          (i) any registered broker or dealer 
                        or registered investment adviser by or 
                        on behalf of the Commission; and
                          (ii) any licensed insurance company 
                        by or on behalf of any State government 
                        insurance agency responsible for the 
                        supervision of the insurance company.
                  (D) Notification.--To the fullest extent 
                possible, the Board shall notify the Commission 
                before conducting any examination of a SEC 
                supervised investment bank holding company.
                  (E) Definition.--For purposes of this 
                subsection, the laws described in this 
                subparagraph are this Act, section 17(i) of the 
                Securities Exchange Act of 1934, and all 
                Federal laws for which the Board has 
                enforcement authority with respect to State 
                member banks or bank holding companies or their 
                subsidiaries.
  (g) Information Sharing.--The Board and the Comptroller of 
the Currency (in the case of a national wholesale financial 
institution) shall, upon request by the Commission, provide to 
the Commission such reports, records, or other information, 
including reports of examination or other confidential 
supervisory information, that the Board or the Comptroller has 
available concerning a wholesale financial institution (or any 
subsidiary of a wholesale financial institution) that is 
controlled by a SEC supervised investment bank holding company 
to assist the Commission in carrying out its responsibilities 
under this Act or the Federal securities laws.
  (h) Deference to Commission.--The Board shall defer to the 
Commission with regard to all interpretations of, and the 
enforcement of, applicable Federal securities laws relating to 
the activities, conduct and operations of registered brokers, 
dealers, investment advisers, and investment companies.
  (i) Consultation.--The Board shall consult with the 
Commission concerning the exercise of the Board's authority and 
responsibility under section 6(c) to assure, to the fullest 
extent possible, the consistency of interpretation and the 
maintenance of competitive equality.

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

  (a) Limitation on Direct Action.--
          (1) In general.--The Board may not prescribe 
        regulations, issue or seek entry of orders, impose 
        restraints, restrictions, guidelines, requirements, 
        safeguards, or standards, or otherwise take any action 
        under or pursuant to any provision of this Act or 
        section 8 of the Federal Deposit Insurance Act against 
        or with respect to a regulated subsidiary of a bank 
        holding company unless the action is necessary to 
        prevent or redress an unsafe or unsound practice or 
        breach of fiduciary duty by such subsidiary that poses 
        a material risk to--
                  (A) the financial safety, soundness, or 
                stability of an affiliated depository 
                institution; or
                  (B) the domestic or international payment 
                system.
          (2) Criteria for board action.--The Board shall not 
        take action otherwise permitted under paragraph (1) 
        unless the Board finds that it is not reasonably 
        possible to effectively protect against the material 
        risk at issue through action directed at or against the 
        affiliated depository institution or against depository 
        institutions generally.
  (b) Limitation on Indirect Action.--The Board may not 
prescribe regulations, issue or seek entry of orders, impose 
restraints, restrictions, guidelines, requirements, safeguards, 
or standards, or otherwise take any action under or pursuant to 
any provision of this Act or section 8 of the Federal Deposit 
Insurance Act against or with respect to a financial holding 
company or an investment bank holding company where the purpose 
or effect of doing so would be to take action indirectly 
against or with respect to a regulated subsidiary that may not 
be taken directly against or with respect to such subsidiary in 
accordance with subsection (a).
  (c) Actions Specifically Authorized.--Notwithstanding 
subsection (a), the Board may take action under this Act or 
section 8 of the Federal Deposit Insurance Act to enforce 
compliance by a regulated subsidiary with Federal law that the 
Board has specific jurisdiction to enforce against such 
subsidiary.
  (d) Regulated Subsidiary Defined.--For purposes of this 
section, the term ``regulated subsidiary'' means any company 
that is not a bank holding company and is--
          (1) a broker or dealer registered under the 
        Securities Exchange Act of 1934;
          (2) an investment adviser registered under the 
        Investment Advisers Act of 1940, with respect to the 
        investment advisory activities of such investment 
        adviser and activities incidental to such investment 
        advisory activities;
          (3) an investment company registered under the 
        Investment Company Act of 1940;
          (4) an insurance company or an insurance agency 
        subject to supervision by a State insurance commission, 
        agency, or similar authority; or
          (5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the 
        commodities activities of such entity and activities 
        incidental to such commodities activities.

                            saving provision

  Sec. 11. (a) * * *
  (b) Antitrust Review.--
          (1) In general.--The Board shall immediately notify 
        the Attorney General of any approval by it pursuant to 
        section 3 of a proposed acquisition, merger, or 
        consolidation transaction. If the Board has found that 
        it must act immediately in order to prevent the 
        probable failure of a bank or bank holding company 
        involved in any such transaction, the transaction may 
        be consummated immediately upon approval by the Board. 
        If the Board has advised the Comptroller of the 
        Currency or the State supervisory authority, as the 
        case may be, of the existence of an emergency requiring 
        expeditious action and has required the submission of 
        views and recommendations within ten days, the 
        transaction may not be consummated before the fifth 
        calendar day after the date of approval by the Board. 
        In all other cases, the transaction may not be 
        consummated before the thirtieth calendar day after the 
        date of approval by the Board or[, if the Board has not 
        received any adverse comment from the Attorney General 
        of the United States relating to competitive factors,] 
        such shorter period of time [as may be prescribed by 
        the Board with the concurrence of the Attorney General, 
        but in no event less than 15 calendar days after the 
        date of approval.] as may be prescribed by the 
        appropriate antitrust agency. Any action brought under 
        the antitrust laws arising out of an acquisition, 
        merger, or consolidation transaction approved under 
        section 3 shall be commenced prior to the earliest time 
        under this subsection at which the transaction approval 
        under section 3 might be consummated. The commencement 
        of such an action shall stay the effectiveness of the 
        Board's approval unless the court shall otherwise 
        specifically order. [In any such action, the court 
        shall review de novo the issues presented. In any 
        judicial proceeding attacking any acquisition, merger, 
        or consolidation transaction approved pursuant to 
        section 3 on the ground that such transaction alone and 
        of itself constituted a violation of any antitrust laws 
        other than section 2 of the Act of July 2, 1890 
        (section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), 
        the standards applied by the court shall be identical 
        with those that the Board is directed to apply under 
        section 3 of this Act.] Upon the consummation of an 
        acquisition, merger, or consolidation transaction 
        approved under section 3 in compliance with this Act 
        and after the termination of any antitrust litigation 
        commenced within the period prescribed in this section, 
        or upon the termination of such period if no such 
        litigation is commenced therein, the transaction may 
        not thereafter be attacked in any judicial proceeding 
        on the ground that it alone and of itself constituted a 
        violation of any antitrust laws other than section 2 of 
        the Act of July 2, 1890 (section 2 of the Sherman 
        Antitrust Act, 15 U.S.C. 2), but nothing in this Act 
        shall exempt any bank holding company involved in such 
        a transaction from complying with the antitrust laws 
        after the consummation of such transaction.
          * * * * * * *
  [(c) In any action brought under the antitrust laws arising 
out of any acquisition, merger, or consolidation transaction 
approved by the Board under section 3 of this Act, the Board 
and any State banking supervisory agency having jurisdiction 
within the State involved, may appear as a party of its own 
motion and as of right, and be represented by its counsel.]
  [(d)] (c) Any acquisition, merger, or consolidation of the 
kind described in section 3(a) of this Act which was 
consummated at any time prior or subsequent to May 9, 1956, and 
as to which no litigation was initiated by the Attorney General 
prior to the date of enactment of this amendment, shall be 
conclusively presumed not to have been in violation of any 
antitrust laws other than section 2 of the Act of July 2, 1890 
(section 2 of the Sherman Antitrust Act, 15 U.S.C. 2).
  [(e) Any court having pending before it on or after the date 
of enactment of this amendment any litigation initiated under 
the antitrust laws by the Attorney General with respect to any 
acquisition, merger, or consolidation of the kind described in 
section 3(a) of this Act shall apply the substantive rule of 
law set forth in section 3 of this Act.]
  [(f)] (d) For the purposes of this section, the term 
``antitrust laws'' means the Act of July 2, 1890 (the Sherman 
Antitrust Act, 15 U.S.C. 1-7), the Act of October 15, 1914 (the 
Clayton Act, 15 U.S.C. 12-27), and any other Acts in pari 
materia.
          * * * * * * *
                              ----------                              


              BANK HOLDING COMPANY ACT AMENDMENTS OF 1970

          * * * * * * *

                    TITLE I--BANK HOLDING COMPANIES

          * * * * * * *
  Sec. 105. With respect to any proceeding before the Federal 
Reserve Board wherein an applicant seeks authority to acquire a 
subsidiary which is a bank under section 3 of the Bank Holding 
Company Act of 1956[, to engage directly or indirectly in a 
nonbanking activity pursuant to section 4 of such Act,] or to 
engage in an activity otherwise prohibited under section 106 of 
this Act, a party who would become a competitor of the 
applicant or subsidiary thereof by virtue of the applicant's or 
its subsidiary's acquisition, entry into the business involved, 
or activity, shall have the right to be a party in interest in 
the proceeding and, in the event of an adverse order of the 
Board, shall have the right as an aggrieved party to obtain 
judicial review thereof as provided in section 9 of such Act of 
1956 or as otherwise provided by law.
  Sec. 106. (a) As used in this section, the terms ``bank'', 
``bank holding company'', ``subsidiary'', and ``Board'' have 
the meaning ascribed to such terms in section 2 of the Bank 
Holding Company Act of 1956. For purposes of this section only, 
the term ``company'', as used in section 2 of the Bank Holding 
Company Act of 1956, means any person, estate, trust, 
partnership, corporation, association, or similar organization, 
but does not include any corporation the majority of the shares 
of which are owned by the United States or by any State. The 
term ``trust service'' means any service customarily performed 
by a bank trust department. For purposes of this section, a 
subsidiary of a national bank which engages in activities as an 
agent pursuant to section 5136A(a)(2) shall be deemed to be a 
subsidiary of a bank holding company, and not a subsidiary of a 
bank.
          * * * * * * *
                              ----------                              


               SECTION 4 OF THE BANK SERVICE COMPANY ACT

          * * * * * * *

     permissible bank service company activities for other persons

  Sec. 4. (a) * * *
          * * * * * * *
  (f) Notwithstanding the other provisions of this section or 
any other provision of law, other than the provisions of 
Federal and State branching law regulating the geographic 
location of banks to the extent that those laws are applicable 
to an activity authorized by this subsection, a bank service 
company may perform at any geographic location any service, 
other than deposit taking, that the Board has determined, by 
regulation, to be permissible for a bank holding company under 
section 4(c)(8) of the Bank Holding Company Act[.] as of the 
day before the date of enactment of the Financial Services Act 
of 1997.
                              ----------                              


    SECTION 109 OF THE RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING 
                         EFFICIENCY ACT OF 1994

SEC. 109. PROHIBITION AGAINST DEPOSIT PRODUCTION OFFICES.

  (a) * * *
          * * * * * * *
  (d) Application.--This section shall apply with respect to 
any interstate branch established or acquired in a host State 
pursuant to this title, the Financial Services Act of 1997, or 
any amendment made by this title or such Act to any other 
provision of law.
  (e) Definitions.--For the purposes of this section, the 
following definitions shall apply:
          (1) * * *
          * * * * * * *
          (4) Interstate branch.--The term ``interstate 
        branch'' means a branch established pursuant to this 
        title or any amendment made by this title to any other 
        provision of law and any branch of a bank controlled by 
        an out-of-State bank holding company (as defined in 
        section 2(o)(7) of the Bank Holding Company Act of 
        1956).
          * * * * * * *
                              ----------                              


                     FEDERAL DEPOSIT INSURANCE ACT

SECTION 1. FEDERAL DEPOSIT INSURANCE CORPORATION.

  (a) Establishment of Corporation.--There is hereby 
established a Federal Deposit Insurance Corporation 
(hereinafter referred to as the ``Corporation'') which shall 
insure, as hereinafter provided, the deposits of all banks [and 
savings associations] which are entitled to the benefits of 
insurance under this Act, and which shall have the powers 
hereinafter granted.
          * * * * * * *

SEC. 2. MANAGEMENT.

  (a) Board of Directors.--
          [(1) In general.--The management of the Corporation 
        shall be vested in a Board of Directors consisting of 5 
        members--
                  [(A) 1 of whom shall be the Comptroller of 
                the Currency;
                  [(B) 1 of whom shall be the Director of the 
                Office of Thrift Supervision; and
                  [(C) 3 of whom shall be appointed by the 
                President, by and with the advice and consent 
                of the Senate, from among individuals who are 
                citizens of the United States, 1 of whom shall 
                have State bank supervisory experience.]
          (1) In general.--The management of the Corporation 
        shall be vested in a Board of Directors consisting of 5 
        members--
                  (A) 1 of whom shall be the Comptroller of the 
                Currency; and
                  (B) 4 of whom shall be appointed by the 
                President, and with the advice and consent of 
                the Senate, from among individuals who are 
                citizens of the United States, 1 of whom shall 
                have State bank supervisory experience.
          * * * * * * *
  (d) Vacancy.--
          (1) In general.--Any vacancy on the Board of 
        Directors shall be filled in the manner in which the 
        original appointment was made.
          (2) Acting officials may serve.--In the event of a 
        vacancy in the office of the Comptroller of the 
        Currency [or the office of Director of the Office of 
        Thrift Supervision] and pending the appointment of a 
        successor, or during the absence or disability of the 
        Comptroller [or such Director], the acting Comptroller 
        of the Currency [or the acting Director of the Office 
        of Thrift Supervision, as the case may be], shall be a 
        member of the Board of Directors in the place of the 
        Comptroller [or Director].
          * * * * * * *
  (f) Status of Employees.--
          (1) * * *
          (2) Definition.--For purposes of this subsection, the 
        term ``employee of the Corporation'' includes any 
        employee of the Office of the Comptroller of the 
        Currency [or of the Office of Thrift Supervision] who 
        serves as a deputy or assistant to a member of the 
        Board of Directors of the Corporation in connection 
        with activities of the Corporation.
          * * * * * * *
  Sec. 3. As used in this Act--
  (a) Definitions of Bank and Related Terms.--
          (1) * * *
          [(2) State bank.--The term ``State bank'' means any 
        bank, banking association, trust company, savings bank, 
        industrial bank (or similar depository institution 
        which the Board of Directors finds to be operating 
        substantially in the same manner as an industrial 
        bank), or other banking institution which--
                  [(A) is engaged in the business of receiving 
                deposits, other than trust funds (as defined in 
                this section); and
                  [(B) is incorporated under the laws of any 
                State or which is operating under the Code of 
                Law for the District of Columbia (except a 
                national bank),
        including any cooperative bank or other unincorporated 
        bank the deposits of which were insured by the 
        Corporation on the day before the date of the enactment 
        of the Financial Institutions Reform, Recovery, and 
        Enforcement Act of 1989.]
          (2) State bank.--
                  (A) In general.--The term ``State bank'' 
                means any bank, banking association, trust 
                company, savings bank, industrial bank (or 
                similar depository institution which the Board 
                of Directors finds to be operating in 
                substantially the same manner as an industrial 
                bank), building and loan association, savings 
                and loan association, homestead association, 
                cooperative bank, or other banking 
                institution--
                          (i) which is engaged in the business 
                        of receiving deposits, other than trust 
                        funds (as defined in this section); and
                          (ii) which--
                                  (I) is incorporated under the 
                                laws of any State;
                                  (II) is organized and 
                                operating according to the laws 
                                of the State in which such 
                                institution is chartered or 
                                organized; or
                                  (III) is operating under the 
                                Code of Law for the District of 
                                Columbia (except a national 
                                bank).
                  (B) Certain insured banks included.--The term 
                ``State bank'' includes any cooperative bank or 
                other unincorporated bank the deposits of which 
                were insured by the Corporation on the day 
                before the date of enactment of the Financial 
                Institutions Reform, Recovery, and Enforcement 
                Act of 1989.
                  (C) Certain uninsured banks excluded.--The 
                term ``State bank'' shall not include any 
                cooperative bank or other unincorporated bank 
                the deposits of which were not insured by the 
                Corporation on the day before the date of 
                enactment of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989.
          * * * * * * *
  (b) Definition of Savings Associations and Related Terms.--
          (1) Savings association.--The term ``savings 
        association'' means--
                  [(A) any Federal savings association;]
                  [(B)] (A) any State savings association; and
                  [(C)] (B) any corporation (other than a bank) 
                that the Board of Directors [and the Director 
                of the Office of Thrift Supervision jointly 
                determine] determines to be operating in 
                substantially the same manner as a savings 
                association.
          [(2) Federal savings association.--The term ``Federal 
        savings association'' means any Federal savings 
        association or Federal savings bank which is chartered 
        under section 5 of the Home Owners' Loan Act.]
          [(3)] (2) State savings association.--The term 
        ``State savings association'' means--
                  (A) any building and loan association, 
                savings and loan association, or homestead 
                association; or
                  (B) any cooperative bank (other than a 
                cooperative bank which is a State bank as 
                defined in subsection (a)(2)),
        which is organized and operating according to the laws 
        of the State (as defined in subsection (a)(3)) in which 
        it is chartered or organized.
          * * * * * * *
  (l) The term ``deposit'' means--
          (1) * * *
          * * * * * * *
          (5) such other obligations of a bank [or savings 
        association] as the Board of Directors, after 
        consultation with the Comptroller of the Currency, 
        [Director of the Office of Thrift Supervision], and the 
        Board of Governors of the Federal Reserve System, shall 
        find and prescribe by regulation to be deposit 
        liabilities by general usage, except that the following 
        shall not be a deposit for any of the purposes of this 
        Act or be included as part of the total deposits or of 
        an insured deposit:
                  (A) any obligation of a depository 
                institution which is carried on the books and 
                records of an office of such bank [or savings 
                association] located outside of any State, 
                unless--
                          (i) * * *
          * * * * * * *
  (q) Appropriate Federal Banking Agency.--The term 
``appropriate Federal banking agency'' means--
          [(1) the Comptroller of the Currency, in the case of 
        any national banking association, any District bank, or 
        any Federal branch or agency of a foreign bank;]
          (1) The Comptroller of the Currency in the case of--
                  (A) any national banking association, any 
                District bank, or any Federal branch or agency 
                of a foreign bank; and
                  (B) supervisory or regulatory proceedings 
                arising from the authority given to the 
                Comptroller under section 5133B of the Revised 
                Statutes of the United States.
          (2) the Board of Governors of the Federal Reserve 
        System, in the case of--
                  [(A) any State member insured bank (except a 
                District bank),]
                  (A) any State member insured bank (except a 
                District bank) and any wholesale financial 
                institution as authorized pursuant to section 
                9B of the Federal Reserve Act;
          * * * * * * *
                  (F) any bank holding company and any 
                subsidiary of a bank holding company (other 
                than a bank); and
          (3) the Federal Deposit Insurance Corporation in the 
        case of a State nonmember insured bank (except a 
        District bank), or a foreign bank having an insured 
        branch[; and].
          [(4) the Director of the Office of Thrift Supervision 
        in the case of any savings association or any savings 
        and loan holding company.]
Under the rule set forth in this subsection, more than one 
agency may be an appropriate Federal banking agency with 
respect to any given institution.
          * * * * * * *
  Sec. 4. (a) Continuation of Insurance.--
          [(1) Banks.--] Each bank, which is an insured 
        depository institution on the effective date of this 
        amendment, shall be and continue to be, without 
        application or approval, an insured depository 
        institution and shall be subject to the provisions of 
        this Act.
          [(2) Savings associations.--Each savings association 
        the accounts of which were insured by the Federal 
        Savings and Loan Insurance Corporation on the day 
        before the date of the enactment of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 
        1989, shall be, without application or approval, an 
        insured depository institution.]
          * * * * * * *
  Sec. 7. (a)(1) * * *
  (2)(A) The Corporation and, with respect to any State 
depository institution, any appropriate State bank supervisor 
for such institution, shall have access to reports of 
examination made by, and reports of condition made to, the 
Comptroller of the Currency, [the Director of the Office of 
Thrift Supervision,] the Federal Housing Finance Board, any 
Federal home loan bank, or any Federal Reserve bank and to all 
revisions of reports of condition made to any of them, and they 
shall promptly advise the Corporation of any revisons or 
changes in respect to deposit liabilities made or required to 
be made in any report of condition. The Corporation may accept 
any report made by or to any commission, board, or authority 
having supervision of a depository institution, and may furnish 
to the Comptroller of the Currency, the Director of the Office 
of Thrift Supervision, the Federal Housing Finance Board, any 
Federal home loan bank, to any Federal Reserve bank, and to any 
such commission, board, or authority, reports of examinations 
made on behalf of, and reports of condition made to, the 
Corporation.
    (B) Additional reports.--The Board of Directors may from 
time to time require any insured depository institution to file 
such additional reports as the Corporation, after agreement 
with the Comptroller of the Currency, and the Board of 
Governors of the Federal Reserve System, [and the Director of 
the Office of Thrift Supervision,] as appropriate, may deem 
advisable for insurance purposes.
  (3) Each insured depository institution shall make to the 
appropriate Federal banking agency 4 reports of condition 
annually upon dates which shall be selected by the Chairman of 
the Board of Directors, the Comptroller of the Currency, and 
the Chairman of the Board of Governors of the Federal Reserve 
System[, and the Director of the Office of Thrift Supervision]. 
The dates selected shall be the same for all insured depository 
institutions, except that when any of said reporting dates is a 
nonbusiness day for any depository institution, the preceding 
business day shall be its reporting date. Two dates shall be 
selected within the semiannual period of January to June 
inclusive, and the reports on such dates shall be the basis for 
the certified statement to be filed in July pursuant to 
subsection (c) of this section, and two dates shall be selected 
within the semiannual period of July to December inclusive, and 
the reports on such dates shall be the basis for the certified 
statement to be filed in January pursuant to subsection (c) of 
this section. The deposit liabilities shall be reported in said 
reports of condition in accordance with and pursuant to 
paragraphs (4) and (5) of this subsection, and such other 
information shall be reported therein as may be required by the 
respective agencies. Each said report of condition shall 
contain a declaration by the president, a vice president, the 
cashier or the treasurer, or by any other officer designated by 
the board of directors or trustees of the reporting depository 
institution to make such declaration, that the report is true 
and correct to the best of his knowledge and belief. The 
correctness of said report of conditions shall be attested by 
the signatures of at least two directors or trustees of the 
reporting depository institution other than the officer making 
such declaration, with a declaration that the report has been 
examined by them and to be the best of their knowledge and 
belief is true and correct. At the time of making said reports 
of condition each insured depository institution shall furnish 
to the Corporation a copy thereof containing such signed 
declaration and attestations. Nothing herein shall preclude any 
of the foregoing agencies from requiring the banks or savings 
associations under its jurisdiction to make additional reports 
of condition at any time.
          * * * * * * *
  (7) The Board of Directors, after consultation with the 
Comptroller of the Currency, [the Director of the Office of 
Thrift Supervision,] and the Board of Governors of the Federal 
Reserve System, may by regulation define the terms ``cash 
items'' and ``process of collection'', and shall classify 
deposits as ``time,'' ``savings,'' and ``demand'' deposits, for 
the purposes of this section.
          * * * * * * *
  [(n) Collections on Behalf of the Director of the Office of 
Thrift Supervision.--When requested by the Director of the 
Office of Thrift Supervision, the Corporation shall collect on 
behalf of the Director assessments on savings associations 
levied by the Director under section 9 of the Home Owners' Loan 
Act. The Corporation shall be reimbursed for its actual costs 
for the collection of such assessments. Any such assessments by 
the Director shall be in addition to any amounts assessed by 
the Corporation, the Financing Corporation, and the Resolution 
Funding Corporation.]
  Sec. 8. (a) Termination of Insurance.--
          [(1) Voluntary termination.--Any insured depository 
        institution which is not--
                  [(A) a national member bank;
                  [(B) a State member bank;
                  [(C) a Federal branch;
                  [(D) a Federal savings association; or
                  [(E) an insured branch which is required to 
                be insured under subsection (a) or (b) of 
                section 6 of the International Banking Act of 
                1978,
        may terminate such depository institution's status as 
        an insured depository institution if such insured 
        institution provides written notice to the Corporation 
        of the institution's intent to terminate such status 
        not less than 90 days before the effective date of such 
        termination.]
          [(2)] (1) Involuntary termination.--
                  (A) Notice to primary regulator.--If the 
                Board of Directors determines that--
                          (i) * * *
          * * * * * * *
          [(3)] (2) Hearing; termination.--If, on the basis of 
        the evidence presented at a hearing before the Board of 
        Directors (or any person designated by the Board for 
        such purpose), in which all issues shall be determined 
        on the record pursuant to section 554 of title 5, 
        United States Code, and the written findings of the 
        Board of Directors (or such person) with respect to 
        such evidence (which shall be conclusive), the Board of 
        Directors finds that any unsafe or unsound practice or 
        condition or any violation specified in the notice to 
        an insured depository institution under paragraph 
        (2)(B) or subsection (w) has been established, the 
        Board of Directors may issue an order terminating the 
        insured status of such depository institution effective 
        as of a date subsequent to such finding.
          [(4)] (3) Appearance; consent to termination.--Unless 
        the depository institution shall appear at the hearing 
        by a duly authorized representative, it shall be deemed 
        to have consented to the termination of its status as 
        an insured depository institution and termination of 
        such status thereupon may be ordered.
          [(5)] (4) Judicial review.--Any insured depository 
        institution whose insured status has been terminated by 
        order of the Board of Directors under this subsection 
        shall have the right of judicial review of such order 
        only to the same extent as provided for the review of 
        orders under subsection (h) of this section.
          [(6)] (5) Publication of notice of termination.--The 
        Corporation may publish notice of such termination and 
        the depository institution shall give notice of such 
        termination to each of its depositors at his last 
        address of record on the books of the depository 
        institution, in such manner and at such time as the 
        Board of Directors may find to be necessary and may 
        order for the protection of depositors.
          [(7)] (6) Temporary insurance of deposits insured as 
        of termination.--After the termination of the insured 
        status of any depository institution under the 
        provisions of this subsection, the insured deposits of 
        each depositor in the depository institution on the 
        date of such termination, less all subsequent 
        withdrawals from any deposits of such depositor, shall 
        continue for a period of at least 6 months or up to 2 
        years, within the discretion of the Board of Directors, 
        to be insured, and the depository institution shall 
        continue to pay to the Corporation assessments as in 
        the case of an insured depository institution during 
        such period. No additions to any such deposits and no 
        new deposits in such depository institution made after 
        the date of such termination shall be insured by the 
        Corporation, and the depository institution shall not 
        advertise or hold itself out as having insured deposits 
        unless in the same connection it shall also state with 
        equal prominence that such additions to deposits and 
        new deposits made after such date are not so insured. 
        Such depository institution shall, in all other 
        respects, be subject to the duties and obligations of 
        an insured depository institution for the period 
        referred to in the 1st sentence from the date of such 
        termination, and in the event that such depository 
        institution shall be closed on account of inability to 
        meet the demands of its depositors within such period, 
        the Corporation shall have the same powers and rights 
        with respect to such depository institution as in case 
        of an insured depository institution.
          [(8)] (7) Temporary suspension of insurance.--
                  (A) In general.--If the Board of Directors 
                initiates a termination proceeding under 
                paragraph (2), and the Board of Directors, 
                after consultation with the appropriate Federal 
                banking agency, finds that an insured 
                depository institution (other than a savings 
                association to which subparagraph (B) applies) 
                has no tangible capital under the capital 
                guidelines or regulations of the appropriate 
                Federal banking agency, the Corporation may 
                issue a temporary order suspending deposit 
                insurance on all deposits received by the 
                institution.
                  [(B) Special rule for certain savings 
                institutions.--
                          [(i) Certain goodwill included in 
                        tangible capital.--In determining the 
                        tangible capital of a savings 
                        association for purposes of this 
                        paragraph, the Board of Directors shall 
                        include goodwill to the extent it is 
                        considered a component of capital under 
                        section 5(t) of the Home Owners' Loan 
                        Act. Any savings association which 
                        would be subject to a suspension order 
                        under subparagraph (A) but for the 
                        operation of this subparagraph, shall 
                        be considered by the Corporation to be 
                        a ``special supervisory association''.
                          [(ii) Suspension order.--The 
                        Corporation may issue a temporary order 
                        suspending deposit insurance on all 
                        deposits received by a special 
                        supervisory association whenever the 
                        Board of Directors determines that--
                                  [(I) the capital of such 
                                association, as computed 
                                utilizing applicable accounting 
                                standards, has suffered a 
                                material decline;
                                  [(II) that such association 
                                (or its directors or officers) 
                                is engaging in an unsafe or 
                                unsound practice in conducting 
                                the business of the 
                                association;
                                  [(III) that such association 
                                is in an unsafe or unsound 
                                condition to continue operating 
                                as an insured association; or
                                  [(IV) that such association 
                                (or its directors or officers) 
                                has violated any applicable 
                                law, rule, regulation, or 
                                order, or any condition imposed 
                                in writing by a Federal banking 
                                agency, or any written 
                                agreement including a capital 
                                improvement plan entered into 
                                with any Federal banking 
                                agency, or that the association 
                                has failed to enter into a 
                                capital improvement plan which 
                                is acceptable to the 
                                Corporation within the time 
                                period set forth in section 
                                5(t) of the Home Owners' Loan 
                                Act.
                        Nothing in this paragraph limits the 
                        right of the Corporation or the 
                        Director of the Office of Thrift 
                        Supervision to enforce a contractual 
                        provision which authorizes the 
                        Corporation or the Director of the 
                        Office of Thrift Supervision, as a 
                        successor to the Federal Savings and 
                        Loan Insurance Corporation or the 
                        Federal Home Loan Bank Board, to 
                        require a savings association to write 
                        down or amortize goodwill at a faster 
                        rate than otherwise required under this 
                        Act or under applicable accounting 
                        standards.]
                  [(C)] (B) Effective period of temporary 
                order.--Any order issued under subparagraph (A) 
                shall become effective not earlier than 10 days 
                from the date of service upon the institution 
                and, unless set aside, limited, or suspended by 
                a court in proceedings authorized hereunder, 
                such temporary order shall remain effective and 
                enforceable until an order of the Board under 
                paragraph (3) becomes final or until the 
                Corporation dismisses the proceedings under 
                paragraph (3).
                  [(D)] (C) Judicial review.--Before the close 
                of the 10-day period beginning on the date any 
                temporary order has been served upon an insured 
                depository institution under subparagraph (A), 
                such institution may apply to the United States 
                District Court for the District of Columbia, or 
                the United States district court for the 
                judicial district in which the home office of 
                the institution is located, for an injunction 
                setting aside, limiting, or suspending the 
                enforcement, operation, or effectiveness of 
                such order, and such court shall have 
                jurisdiction to issue such injunction.
                  [(E)] (D) Continuation of insurance for prior 
                deposits.--The insured deposits of each 
                depositor in such depository institution on the 
                effective date of the order issued under this 
                paragraph, minus all subsequent withdrawals 
                from any deposits of such depositor, shall 
                continue to be insured, subject to the 
                administrative proceedings as provided in this 
                Act.
                  [(F)] (E) Publication of order.--The 
                depository institution shall give notice of 
                such order to each of its depositors in such 
                manner and at such times as the Board of 
                Directors may find to be necessary and may 
                order for the protection of depositors.
                  [(G)] (F) Notice by corporation.--If the 
                Corporation determines that the depository 
                institution has not substantially complied with 
                the notice to depositors required by the Board 
                of Directors, the Corporation may provide such 
                notice in such manner as the Board of Directors 
                may find to be necessary and appropriate.
                  [(H)] (G) Lack of notice.--Notwithstanding 
                subparagraph (A), any deposit made after the 
                effective date of a suspension order issued 
                under this paragraph shall remain insured to 
                the extent that the depositor establishes 
                that--
                          (i) such deposit consists of 
                        additions made by automatic deposit the 
                        depositor was unable to prevent; or
                          (ii) such depositor did not have 
                        actual knowledge of the suspension of 
                        insurance.
          [(9)] (8) Final decisions to terminate insurance.--
        Any decision by the Board of Directors to--
                  (A) issue a temporary order terminating 
                deposit insurance; or
                  (B) issue a final order terminating deposit 
                insurance (other than under subsection (p) or 
                (q));
        shall be made by the Board of Directors and may not be 
        delegated.
          [(10)] (9) Low- to moderate-income housing lender.--
        In making any determination regarding the termination 
        of insurance of a solvent savings association, the 
        Corporation may consider the extent of the 
        association's low- to moderate-income housing loans.
  (b)(1) * * *
          * * * * * * *
          [(9) Expansion of authority to savings and loan 
        affiliates and entities.--Subsections (a) through (s) 
        and subsection (u) shall apply to any savings and loan 
        holding company and to any subsidiary (other than a 
        bank or subsidiary of that bank) of a savings and loan 
        holding company, to any service corporation of a 
        savings association and to any subsidiary of such 
        service corporation, whether wholly or partly owned, in 
        the same manner as such subsections apply to a savings 
        association.]
          [(10)] (9) Standard for certain orders.--No authority 
        under this subsection or subsection (c) to prohibit any 
        institution-affiliated party from withdrawing, 
        transferring, removing, dissipating, or disposing of 
        any funds, assets, or other property may be exercised 
        unless the appropriate Federal banking agency meets the 
        standards of Rule 65 of the Federal Rules of Civil 
        Procedure, without regard to the requirement of such 
        rule that the applicant show that the injury, loss, or 
        damage is irreparable and immediate.
          * * * * * * *
  (o) Whenever the insured status of a State member bank shall 
be terminated by action of the Board of Directors, the Board of 
Governors of the Federal Reserve System shall terminate its 
membership in the Federal Reserve System in accordance with the 
provisions of section 9 of the Federal Reserve Act, and 
whenever the insured status of a national member bank shall be 
so terminated the Comptroller of the Currency shall appoint a 
receiver for the bank, which shall be the Corporation. Except 
as provided in subsection (d) of section 4, whenever a member 
bank shall cease to be a member of the Federal Reserve System, 
its status as an insured depository institution shall, without 
notice or other action by the Board of Directors, terminate on 
the date the bank shall cease to be a member of the Federal 
Reserve System, with like effect as if its insured status had 
been terminated on said date by the Board of Directors after 
proceedings under subsection (a) of this section. [Whenever the 
insured status of an insured Federal savings bank shall be 
terminated by action of the Board of Directors, the Director of 
the Office of Thrift Supervision shall appoint a receiver for 
the bank, which shall be the Corporation.]
          * * * * * * *
  (w) Termination of Insurance for Money Laundering or Cash 
Transaction Reporting Offenses.--
          (1) * * *
          * * * * * * *
          (3) Notice to state banking supervisor and public.--
        When the order to terminate insured status initiated 
        pursuant to this subsection is final, the Board of 
        Directors shall--
                  (A) notify the State banking supervisor of 
                any State depository institution described in 
                paragraph (1) [and the Office of Thrift 
                Supervision, where appropriate], at least 10 
                days prior to the effective date of the order 
                of termination of the insured status of such 
                depository institution, including a State 
                branch of a foreign bank; and
          * * * * * * *

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

  (a) In General.--Except as provided in subsection (b), an 
insured State bank or a national bank may voluntarily terminate 
such bank's status as an insured depository institution in 
accordance with regulations of the Corporation if--
          (1) the bank provides written notice of the bank's 
        intent to terminate such insured status--
                  (A) to the Corporation and the Board of 
                Governors of the Federal Reserve System not 
                less than 6 months before the effective date of 
                such termination; and
                  (B) to all depositors at such bank, not less 
                than 6 months before the effective date of the 
                termination of such status; and
          (2) either--
                  (A) the deposit insurance fund of which such 
                bank is a member equals or exceeds the fund's 
                designated reserve ratio as of the date the 
                bank provides a written notice under paragraph 
                (1) and the Corporation determines that the 
                fund will equal or exceed the applicable 
                designated reserve ratio for the 2 semiannual 
                assessment periods immediately following such 
                date; or
                  (B) the Corporation and the Board of 
                Governors of the Federal Reserve System 
                approved the termination of the bank's insured 
                status and the bank pays an exit fee in 
                accordance with subsection (e).
  (b) Exception.--Subsection (a) shall not apply with respect 
to--
          (1) an insured savings association; or
          (2) an insured branch that is required to be insured 
        under subsection (a) or (b) of section 6 of the 
        International Banking Act of 1978.
  (c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any 
deposits or any assistance authorized under this Act after the 
period specified in subsection (f)(1).
  (d) Institution Must Become Wholesale Financial Institution 
or Terminate Deposit-Taking Activities.--Any depository 
institution which voluntarily terminates such institution's 
status as an insured depository institution under this section 
may not, upon termination of insurance, accept any deposits 
unless the institution is a wholesale financial institution 
subject to section 9B of the Federal Reserve Act.
  (e) Exit Fees.--
          (1) In general.--Any bank that voluntarily terminates 
        such bank's status as an insured depository institution 
        under this section shall pay an exit fee in an amount 
        that the Corporation determines is sufficient to 
        account for the institution's pro rata share of the 
        amount (if any) which would be required to restore the 
        relevant deposit insurance fund to the fund's 
        designated reserve ratio as of the date the bank 
        provides a written notice under subsection (a)(1).
          (2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under 
        this subsection.
  (f) Temporary Insurance of Deposits Insured as of 
Termination.--
          (1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the 
        effective date of the voluntary termination of the 
        bank's insured status, less all subsequent withdrawals 
        from any deposits of such depositor, shall continue to 
        be insured for a period of not less than 6 months and 
        not more than 2 years, as determined by the 
        Corporation. During such period, no additions to any 
        such deposits, and no new deposits in the depository 
        institution made after the effective date of such 
        termination shall be insured by the Corporation.
          (2) Temporary assessments; obligations and duties.--
        During the period specified in paragraph (1) with 
        respect to any bank, the bank shall continue to pay 
        assessments under section 7 as if the bank were an 
        insured depository institution. The bank shall, in all 
        other respects, be subject to the authority of the 
        Corporation and the duties and obligations of an 
        insured depository institution under this Act during 
        such period, and in the event that the bank is closed 
        due to an inability to meet the demands of the bank's 
        depositors during such period, the Corporation shall 
        have the same powers and rights with respect to such 
        bank as in the case of an insured depository 
        institution.
  (g) Advertisements.--
          (1) In general.--A bank that voluntarily terminates 
        the bank's insured status under this section shall not 
        advertise or hold itself out as having insured 
        deposits, except that the bank may advertise the 
        temporary insurance of deposits under subsection (f) 
        if, in connection with any such advertisement, the 
        advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the 
        effective date of the termination are not insured.
          (2) Certificates of deposit, obligations, and 
        securities.--Any certificate of deposit or other 
        obligation or security issued by a State bank or a 
        national bank after the effective date of the voluntary 
        termination of the bank's insured status under this 
        section shall be accompanied by a conspicuous, 
        prominently displayed notice that such certificate of 
        deposit or other obligation or security is not insured 
        under this Act.
  (h) Notice Requirements.--
          (1) Notice to the corporation.--The notice required 
        under subsection (a)(1)(A) shall be in such form as the 
        Corporation may require.
          (2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                  (A) sent to each depositor's last address of 
                record with the bank; and
                  (B) in such manner and form as the 
                Corporation finds to be necessary and 
                appropriate for the protection of depositors.
  (i) Voluntary Termination of Deposit Insurance.--The 
provisions on voluntary termination of insurance in this 
section shall apply to an insured branch of a foreign bank 
(including a Federal branch) in the same manner and to the same 
extent as they apply to an insured State bank or a national 
bank.
          * * * * * * *
  Sec. 10. (a) * * *
          * * * * * * *
  (c) In connection with examinations of insured depository 
institutions and any State nonmember bank, [savings 
association,] or other institution making application to become 
insured depository institutions, and affiliates thereof, or 
with other types of investigations to determine compliance with 
applicable law and regulations, the appropriate Federal banking 
agency, or its designated representatives, are authorized to 
administer oaths and affirmations, and to examine and to take 
and preserve testimony under oath as to any matter in respect 
to the affairs or ownership of any such bank or institution or 
affiliate thereof, and to exercise such other powers as are set 
forth in section 8(n) of this Act.
          * * * * * * *
  Sec. 11. (a) * * *
          * * * * * * *
  (c) Appointment of Corporation as Conservator or Receiver.--
          (1) * * *
          * * * * * * *
          [(6) Appointment by director of the office of thrift 
        supervision.--
                  [(A) Conservator.--The Corporation or the 
                Resolution Trust Corporation may, at the 
                discretion of the Director of the Office of 
                Thrift Supervision, be appointed conservator 
                and the Corporation may accept any such 
                appointment.
                  [(B) Receiver.--Whenever the Director of the 
                Office of Thrift Supervision appoints a 
                receiver under the provisions of subparagraph 
                (A) or (C) of section 5(d)(2) of the Home 
                Owners' Loan Act for the purpose of liquidation 
                or winding up any savings association's 
                affairs--
                          [(i) before such date as is 
                        determined by the Chairperson of the 
                        Thrift Depositor Protection Oversight 
                        Board under section 21A(b)(3)(A)(ii) of 
                        the Federal Home Loan Bank Act, the 
                        Resolution Trust Corporation shall be 
                        appointed;
                          [(ii) on or after the date determined 
                        by the Chairperson of the Thrift 
                        Depositor Protection Oversight Board 
                        under section 21A(b)(3)(A)(ii) of the 
                        Federal Home Loan Bank Act, the 
                        Resolution Trust Corporation shall be 
                        appointed if the Resolution Trust 
                        Corporation had been placed in control 
                        of the depository institution at any 
                        time before such date; and
                          [(iii) on or after the date 
                        determined by the Chairperson of the 
                        Thrift Depositor Protection Oversight 
                        Board under section 21A(b)(3)(A)(ii) of 
                        the Federal Home Loan Bank Act, the 
                        Corporation shall be appointed unless 
                        the Resolution Trust Corporation is 
                        required to be appointed under clause 
                        (ii).]
          [(7)] (6) Judicial review.--If the Corporation 
        appoints itself as conservator or receiver under 
        paragraph (4), the insured State depository institution 
        may, within 30 days thereafter, bring an action in the 
        United States district court for the judicial district 
        in which the home office of such institution is 
        located, or in the United States District Court for the 
        District of Columbia, for an order requiring the 
        Corporation to remove itself as such conservator or 
        receiver, and the court shall, upon the merits, dismiss 
        such action or direct the Corporation to remove itself 
        as such conservator or receiver.
          [(8)] (7) Replacement of conservator of state 
        depository institution.--
                  (A) In general.--In the case of any insured 
                State depository institution for which the 
                Corporation appointed itself as conservator 
                pursuant to paragraph (4), the Corporation may, 
                without any requirement of notice, hearing, or 
                other action, replace itself as conservator 
                with itself as receiver of such institution.
                  (B) Replacement treated as removal of 
                incumbent.--The replacement of a conservator 
                with a receiver under subparagraph (A) shall be 
                treated as the removal of the Corporation as 
                conservator.
                  (C) Right of review of original appointment 
                not affected.--The replacement of a conservator 
                with a receiver under subparagraph (A) shall 
                not affect any right of the insured State 
                depository institution to obtain review, 
                pursuant to paragraph (7), of the original 
                appointment of the conservator.
          [(9)] (8) Appropriate federal banking agency may 
        appoint corporation as conservator or receiver for 
        insured state depository institution to carry out 
        section 38.--
                  (A) In general.--The appropriate Federal 
                banking agency may appoint the Corporation as 
                sole receiver (or, subject to paragraph (11), 
                sole conservator) of any insured State 
                depository institution, after consultation with 
                the appropriate State supervisor, if the 
                appropriate Federal banking agency determines 
                that--
                          (i) 1 or more of the grounds 
                        specified in subparagraphs (K) and (L) 
                        of paragraph (5) exist with respect to 
                        that institution; and
                          (ii) the appointment is necessary to 
                        carry out the purpose of section 38.
                  (B) Nondelegation.--The appropriate Federal 
                banking agency shall not delegate any action 
                under subparagraph (A).
          [(10)] (9) Corporation may appoint itself as 
        conservator or receiver for insured depository 
        institution to prevent loss to deposit insurance 
        fund.--The Board of Directors may appoint the 
        Corporation as sole conservator or receiver of an 
        insured depository institution, after consultation with 
        the appropriate Federal banking agency and the 
        appropriate State supervisor (if any), if the Board of 
        Directors determines that--
                  (A) 1 or more of the grounds specified in any 
                subparagraph of paragraph (5) exist with 
                respect to the institution; and
                  (B) the appointment is necessary to reduce--
                          (i) the risk that the deposit 
                        insurance fund would incur a loss with 
                        respect to the insured depository 
                        institution, or
                          (ii) any loss that the deposit 
                        insurance fund is expected to incur 
                        with respect to that institution.
          [(11)] (10) Appropriate federal banking agency shall 
        not appoint conservator under certain provisions 
        without giving corporation opportunity to appoint 
        receiver.--The appropriate Federal banking agency shall 
        not appoint a conservator for an insured depository 
        institution under subparagraph (K) or (L) of paragraph 
        (5) without the Corporation's consent unless the agency 
        has given the Corporation 48 hours notice of the 
        agency's intention to appoint the conservator and the 
        grounds for the appointment.
          [(12)] (11) Directors not liable for acquiescing in 
        appointment of conservator or receiver.--The members of 
        the board of directors of an insured depository 
        institution shall not be liable to the institution's 
        shareholders or creditors for acquiescing in or 
        consenting in good faith to--
                  (A) the appointment of the Corporation or the 
                Resolution Trust Corporation as conservator or 
                receiver for that institution; or
                  (B) an acquisition or combination under 
                section 38(f)(2)(A)(iii).
          [(13)] (12) Additional powers.--In any case in which 
        the Corporation is appointed conservator or receiver 
        under paragraph (4), (6), (9), or (10) for any insured 
        State depository institution--
                  (A) this section shall apply to the 
                Corporation as conservator or receiver in the 
                same manner and to the same extent as if that 
                institution were a Federal depository 
                institution for which the Corporation had been 
                appointed conservator or receiver; and
                  (B) the Corporation as receiver of the 
                institution may--
                          (i) liquidate the institution in an 
                        orderly manner; and
                          (ii) make any other disposition of 
                        any matter concerning the institution, 
                        as the Corporation determines is in the 
                        best interests of the institution, the 
                        depositors of the institution, and the 
                        Corporation.
  (d) Powers and Duties of Corporation as Conservator or 
Receiver.--
          (1) Rulemaking authority of corporation.--The 
        Corporation may prescribe such regulations as the 
        Corporation determines to be appropriate regarding the 
        conduct of conservatorships or receiverships.
          (2) General powers.--
                  (A) * * *
          * * * * * * *
                  (F) Organization of new institutions.--The 
                Corporation may, as [receiver--
                          [(i) with respect to savings 
                        associations and by application to the 
                        Director of the Office of Thrift 
                        Supervision, organize a new Federal 
                        savings association to take over such 
                        assets or such liabilities as the 
                        Corporation may determine to be 
                        appropriate; and
                          [(ii) with] receiver with respect to 
                        any insured bank, organize a new 
                        national bank under subsection (m) or a 
                        bridge bank under subsection (n).
          * * * * * * *
          (17) Fraudulent transfers.--
                  (A) In general.--The Corporation, as 
                conservator or receiver for any insured 
                depository institution, and any conservator 
                appointed by the Comptroller of the Currency 
                [or the Director of the Office of Thrift 
                Supervision] may avoid a transfer of any 
                interest of an institution-affiliated party, or 
                any person who the Corporation or conservator 
                determines is a debtor of the institution, in 
                property, or any obligation incurred by such 
                party or person, that was made within 5 years 
                of the date on which the Corporation or 
                conservator was appointed conservator or 
                receiver if such party or person voluntarily or 
                involuntarily made such transfer or incurred 
                such liability with the intent to hinder, 
                delay, or defraud the insured depository 
                institution, the Corporation or other 
                conservator, or any other appropriate Federal 
                banking agency.
          * * * * * * *
          (18) Attachment of assets and other injunctive 
        relief.--Subject to paragraph (19), any court of 
        competent jurisdiction may, at the request of--
                  (A) * * *
                  (B) any conservator appointed by the 
                Comptroller of the Currency [or the Director of 
                the Office of Thrift Supervision],
        issue an order in accordance with Rule 65 of the 
        Federal Rules of Civil Procedure, including an order 
        placing the assets of any person designated by the 
        Corporation or such conservator under the control of 
        the court and appointing a trustee to hold such assets.
          * * * * * * *
  Sec. 13. (a) * * *
          * * * * * * *
  [(k) Emergency Acquisitions.--
          [(1) In general.--
                  [(A) Acquisitions authorized.--
                          [(i) Transactions described.--
                        Notwithstanding any provision of State 
                        law, upon determining that severe 
                        financial conditions threaten the 
                        stability of a significant number of 
                        savings associations, or of savings 
                        associations possessing significant 
                        financial resources, the Corporation, 
                        in its discretion and if it determines 
                        such authorization would lessen the 
                        risk to the Corporation, may 
                        authorize--
                                  [(I) a savings association 
                                that is eligible for assistance 
                                pursuant to subsection (c) to 
                                merge or consolidate with, or 
                                to transfer its assets and 
                                liabilities to, any other 
                                savings association or any 
                                insured bank,
                                  [(II) any other savings 
                                association to acquire control 
                                of such savings association, or
                                  [(III) any company to acquire 
                                control of such savings 
                                association or to acquire the 
                                assets or assume the 
                                liabilities thereof.
                        The Corporation may not authorize any 
                        transaction under this subsection 
                        unless the Corporation determines that 
                        the authorization will not present a 
                        substantial risk to the safety or 
                        soundness of the savings association to 
                        be acquired or any acquiring entity.
                          [(ii) Terms of transactions.--
                        Mergers, consolidations, transfers, and 
                        acquisitions under this subsection 
                        shall be on such terms as the 
                        Corporation shall provide.
                          [(iii) Approval by appropriate 
                        agency.--Where otherwise required by 
                        law, transactions under this subsection 
                        must be approved by the appropriate 
                        Federal banking agency of every party 
                        thereto.
                          [(iv) Acquisitions by savings 
                        associations.--Any Federal savings 
                        association that acquires another 
                        savings association pursuant to clause 
                        (i) may, with the concurrence of the 
                        Director of the Office of Thrift 
                        Supervision, hold that savings 
                        association as a subsidiary 
                        notwithstanding the percentage 
                        limitations of section 5(c)(4)(B) of 
                        the Home Owners' Loan Act.
                          [(v) Dual service.--Dual service by a 
                        management official that would 
                        otherwise be prohibited under the 
                        Depository Institution Management 
                        Interlocks Act may, with the approval 
                        of the Corporation, continue for up to 
                        10 years.
                          [(vi) Continued applicability of 
                        certain state restrictions.--Nothing in 
                        this subsection overrides or supersedes 
                        State laws restricting or limiting the 
                        activities of a savings association on 
                        behalf of another entity.
                  [(B) Consultation with state official.--
                          [(i) Consultation required.--Before 
                        making a determination to take any 
                        action under subparagraph (A), the 
                        Corporation shall consult the State 
                        official having jurisdiction of the 
                        acquired institution.
                          [(ii) Period for state response.--The 
                        official shall be given a reasonable 
                        opportunity, and in no event less than 
                        48 hours, to object to the use of the 
                        provisions of this paragraph. Such 
                        notice may be provided by the 
                        Corporation prior to its appointment as 
                        receiver, but in anticipation of an 
                        impending appointment.
                          [(iii) Approval over objection of 
                        state official.--If the official 
                        objects during such period, the 
                        Corporation may use the authority of 
                        this paragraph only by a vote of 75 
                        percent or more of the voting members 
                        of the Board of Directors. The 
                        Corporation shall provide to the 
                        official, as soon as practicable, a 
                        written certification of its 
                        determination.
          [(2) Solicitation of offers.--
                  [(A) In general.--In considering 
                authorizations under this subsection, the 
                Corporation may solicit such offers or 
                proposals as are practicable from any 
                prospective purchasers or merger partners it 
                determines, in its sole discretion, are both 
                qualified and capable of acquiring the assets 
                and liabilities of the savings association.
                  [(B) Minority-controlled institutions.--In 
                the case of a minority-controlled depository 
                institution, the Corporation shall seek an 
                offer from other minority-controlled depository 
                institutions before seeking an offer from other 
                persons or entities.
          [(3) Determination of costs.--In determining the cost 
        of offers under this subsection, the Corporation's 
        calculations and estimations shall be determinative. 
        The Corporation may set reasonable time limits on 
        offers.
          [(4) Branching provisions.--
                  [(A) In general.--If a merger, consolidation, 
                transfer, or acquisition under this subsection 
                involves a savings association eligible for 
                assistance and a bank or bank holding company, 
                a savings association may retain and operate 
                any existing branch or branches or any other 
                existing facilities. If the savings association 
                continues to exist as a separate entity, it may 
                establish and operate new branches to the same 
                extent as any savings association that is not 
                affiliated with a bank holding company and the 
                home office of which is located in the same 
                State.
                  [(B) Restrictions.--
                          [(i) In general.--Notwithstanding 
                        subparagraph (A), if--
                                  [(I) a savings association 
                                described in such subparagraph 
                                does not have its home office 
                                in the State of the bank 
                                holding company bank 
                                subsidiary, and
                                  [(II) such association does 
                                not qualify as a domestic 
                                building and loan association 
                                under section 7701(a)(19) of 
                                the Internal Revenue Code of 
                                1986, or does not meet the 
                                asset composition test imposed 
                                by subparagraph (C) of that 
                                section on institutions seeking 
                                so to qualify,
                        such savings association shall be 
                        subject to the conditions upon which a 
                        bank may retain, operate, and establish 
                        branches in the State in which the 
                        Savings Association Insurance Fund 
                        member is located.
                          [(ii) Transition period.--The 
                        Corporation, for good cause shown, may 
                        allow a savings association up to 2 
                        years to comply with the requirements 
                        of clause (i).
          [(5) Assistance before appointment of conservator or 
        receiver.--
                  [(A) Assistance proposals.--The Corporation 
                shall consider proposals by Savings Association 
                Insurance Fund members for assistance pursuant 
                to subsection (c) before grounds exist for 
                appointment of a conservator or receiver for 
                such member under the following circumstances:
                          [(i) Troubled condition criteria.--
                        The Corporation determines--
                                  [(I) that grounds for 
                                appointment of a conservator or 
                                receiver exist or likely will 
                                exist in the future unless the 
                                member's tangible capital is 
                                increased;
                                  [(II) that it is unlikely 
                                that the member can achieve 
                                positive tangible capital 
                                without assistance; and
                                  [(III) that providing 
                                assistance pursuant to the 
                                member's proposal would be 
                                likely to lessen the risk to 
                                the Corporation.
                          [(ii) Other criteria.--The member 
                        meets the following criteria:
                                  [(I) Before enactment of the 
                                Financial Institutions Reform, 
                                Recovery, and Enforcement Act 
                                of 1989, the member was solvent 
                                under applicable regulatory 
                                accounting principles but had 
                                negative tangible capital.
                                  [(II) The member's negative 
                                tangible capital position is 
                                substantially attributable to 
                                its participation in 
                                acquisition and merger 
                                transactions that were 
                                instituted by the Federal Home 
                                Loan Bank Board or the Federal 
                                Savings and Loan Insurance 
                                Corporation for supervisory 
                                reasons.
                                  [(III) The member is a 
                                qualified thrift lender (as 
                                defined in section 10(m) of the 
                                Home Owners' Loan Act) or would 
                                be a qualified thrift lender if 
                                commercial real estate owned 
                                and nonperforming commercial 
                                loans acquired in acquisition 
                                and merger transactions that 
                                were instituted by the Federal 
                                Home Loan Bank Board or the 
                                Federal Savings and Loan 
                                Insurance Corporation for 
                                supervisory reasons were 
                                excluded from the member's 
                                total assets.
                                  [(IV) The appropriate Federal 
                                banking agency has determined 
                                that the member's management is 
                                competent and has complied with 
                                applicable laws, rules, and 
                                supervisory directives and 
                                orders.
                                  [(V) The member's management 
                                did not engage in insider 
                                dealing or speculative 
                                practices or other activities 
                                that jeopardized the member's 
                                safety and soundness or 
                                contributed to its impaired 
                                capital position.
                                  [(VI) The member's offices 
                                are located in an economically 
                                depressed region.
                  [(B) Corporation consideration of assistance 
                proposal.--If a member meets the requirements 
                of clauses (i) and (ii) of subparagraph (A), 
                the Corporation shall consider providing direct 
                financial assistance.
                  [(C) Economically depressed region defined.--
                For purposes of this paragraph, the term 
                ``economically depressed region'' means any 
                geographical region which the Corporation 
                determines by regulation to be a region within 
                which real estate values have suffered serious 
                decline due to severe economic conditions, such 
                as a decline in energy or agricultural values 
                or prices.]
          * * * * * * *
  Sec. 18. (a) * * *
          * * * * * * *
  (c)(1) * * *
  (2) No insured depository institution shall merge or 
consolidate with any other insured depository institution or, 
either directly or indirectly, acquire the assets of, or assume 
liability to pay any deposits made in, any other insured 
depository institution except with the prior written approval 
of the responsible agency, which shall be--
          (A) the Comptroller of the Currency if the acquiring, 
        assuming, or resulting bank is to be a national bank or 
        a District bank;
          (B) the Board of Governors of the Federal Reserve 
        System if the acquiring, assuming, or resulting bank is 
        to be a State member bank (except a District bank); and
          (C) the Corporation if the acquiring, assuming, or 
        resulting bank is to be a State nonmember insured bank 
        [(except a District bank or a savings bank supervised 
        by the Director of the Office of Thrift Supervision); 
        and] (except a District bank).
          [(D) the Director of the Office of Thrift Supervision 
        if the acquiring, assuming, or resulting institution is 
        to be a savings association.]
  (3) Notice of any proposed transaction for which approval is 
required under paragraph (1) or (2) (referred to hereafter in 
this subsection as a ``merger transaction'') shall, unless the 
responsible agency finds that it must act immediately in order 
to prevent the probable default of one of the banks or savings 
associations involved, be published--
          (A) prior to the granting of approval of such 
        transaction,
          (B) in a form approved by the responsible agency,
          (C) at appropriate intervals [during a period at 
        least as long as the period allowed for furnishing 
        reports under paragraph (4) of this subsection], and
          (D) in a newspaper of general circulation in the 
        community or communities where the main offices of the 
        banks or savings associations involved are located, or, 
        if there is no such newspaper in any such community, 
        then in the newspaper of general circulation published 
        nearest thereto.
  [(4) In the interests of uniform standards, before acting on 
any application for approval of a merger transaction, the 
responsible agency, unless it finds that it must act 
immediately in order to prevent the probable failure of one of 
the banks or savings associations involved, shall request 
reports on the competitive factors involved from the Attorney 
General and the other Federal banking agencies referred to in 
this subsection. The reports shall be furnished within thirty 
calendar days of the date on which they are requested, or 
within ten calendar days of such date if the requesting agency 
advises the Attorney General and the other Federal banking 
agencies that an emergency exists requiring expeditious action. 
Notwithstanding the preceding sentence, a banking agency shall 
not be required to file a report requested by the responsible 
agency under this paragraph if such banking agency advises the 
responsible agency by the applicable date under the preceding 
sentence that the report is not necessary because none of the 
effects described in paragraph (5) are likely to occur as a 
result of the transaction.
  [(5) The responsible agency shall not approve--
          [(A) any proposed merger transaction which would 
        result in a monopoly, or which would be in furtherance 
        of any combination or conspiracy to monopolize or to 
        attempt to monopolize the business of banking in any 
        part of the United States, or
          [(B) any other proposed merger transaction whose 
        effect in any section of the country may be 
        substantially to lessen competition, or to tend to 
        create a monopoly, or which in any other manner would 
        be in restraint of trade, unless it finds that the 
        anticompetitive effects of the proposed transaction are 
        clearly outweighed in the public interest by the 
        probable effect of the transaction in meeting the 
        convenience and needs of the community to be served.
In every case, the responsible agency shall take into 
consideration the financial and managerial resources and future 
prospects of the existing and proposed institutions, and the 
convenience and needs of the community to be served.
  [(6) The responsible agency shall immediately notify the 
Attorney General of any approval by it pursuant to this 
subsection of a proposed merger transaction. If the agency has 
found that it must act immediately to prevent the probable 
failure of one of the banks or savings associations involved 
and reports on the competitive factors have been dispensed 
with, the transaction may be consummated immediately upon 
approval by the agency. If the agency has advised the Attorney 
General and the other Federal banking agencies of the existence 
of an emergency requiring expeditious action and has requested 
reports on the competitive factors within ten days, the 
transaction may not be consummated before the fifth calendar 
day after the date of approval by the agency. In all other 
cases, the transaction may not be consummated before the 
thirtieth calendar day after the date of approval by the agency 
or, if the agency has not received any adverse comment from the 
Attorney General of the United States relating to competitive 
factors, such shorter period of time as may be prescribed by 
the agency with the concurrence of the Attorney General, but in 
no event less than 15 calendar days after the date of 
approval.]
    (4) Factors to be considered.--In determining whether to 
approve a transaction, the responsible agency shall in every 
case take into consideration the financial and managerial 
resources and future prospects of the existing and proposed 
institutions, and the convenience and needs of the community to 
be served.
    (5) Notice to attorney general.--The responsible agency 
shall immediately notify the Attorney General of any approval 
by it pursuant to this subsection of a proposed merger 
transaction. If the responsible agency has found that it must 
act immediately in order to prevent the probable failure of one 
of the banks involved, the transaction may be consummated 
immediately upon approval by the agency. If the responsible 
agency has notified the other Federal banking agencies referred 
to in this section of the existence of an emergency requiring 
expeditious action and has required the submission of views and 
recommendations within 10 days, the transaction may not be 
consummated before the 5th calendar day after the date of 
approval of the responsible agency. In all other cases, the 
transaction may not be consummated before the 30th calendar day 
after the date of approval by the agency, or such shorter 
period of time as may be prescribed by the Attorney General.
  [(7)] (6)(A) Any action brought under the antitrust laws 
arising out of a merger transaction shall be commenced prior to 
the earliest time under paragraph [(6)] (5) at which a merger 
transaction approved under paragraph [(5)] (4) might be 
consummated. The commencement of such an action shall stay the 
effectiveness of the agency's approval unless the court shall 
otherwise specifically order. [In any such action, the court 
shall review de novo the issues presented.]
  [(B) In any judicial proceeding attacking a merger 
transaction approved under paragraph (5) on the ground that the 
merger transaction alone and of itself constituted a violation 
of any antitrust laws other than section 2 of the Act of July 
2, 1890 (section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), 
the standards applied by the court shall be identical with 
those that the banking agencies are directed to apply under 
paragraph (5).]
  [(C)] (B) Upon the consummation of a merger transaction in 
compliance with this subsection and after the termination of 
any antitrust litigation commenced within the period prescribed 
in this paragraph, or upon the termination of such period if no 
such litigation is commenced therein, the transaction may not 
thereafter be attacked in any judicial proceeding on the ground 
that it alone and of itself constituted a violation of any 
antitrust laws other than section 2 of the Act of July 2, 1890 
(section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), but 
nothing in this subsection shall exempt any bank or savings 
association resulting from a merger transaction from complying 
with the antitrust laws after the consummation of such 
transaction.
  [(D) In any action brought under the antitrust laws arising 
out of a merger transaction approved by a Federal supervisory 
agency pursuant to this subsection, such agency, and any State 
banking supervisory agency having jurisdiction within the State 
involved, may appear as a party of its own motion and as of 
right, and be represented by its counsel.]
  [(8)] (7) For the purposes of this subsection, the term 
``antitrust laws'' means the Act of July 2, 1890 (the Sherman 
Antitrust Act, 15 U.S.C. 1-7), the Act of October 15, 1914 (the 
Clayton Act, 15 U.S.C. 12-27), and any other Acts in pari 
materia.
  [(9)] (8) Each of the responsible agencies shall include in 
its annual report to the Congress a description of each merger 
transaction approved by it during the period covered by the 
report, along with--
          (A) the name and total resources of each bank or 
        savings association involved; and
          [(B) whether a report was submitted by the Attorney 
        General under paragraph (4), and, if so, a summary by 
        the Attorney General of the substance of such report; 
        and]
          [(C)] (B) a statement by the responsible agency of 
        the basis for its approval.
  [(10)] (9) Until June 30, 1976, the responsible agency shall 
not grant any approval required by law which has the practical 
effect of permitting a conversion from the mutual to the stock 
form of organization, including approval of any application 
pending on the date of enactment of this subsection, except 
that this sentence shall not be deemed to limit now or 
hereafter the authority of the responsible agency to grant 
approvals in cases where the responsible agency finds that it 
must act in order to maintain the safety, soundness, and 
stability of an insured depository institution. The responsible 
agency may by rule, regulation, or otherwise and under such 
civil penalties (which shall be cumulative to any other 
remedies) as it may prescribe take whatever action it deems 
necessary or appropriate to implement or enforce this 
subsection.
  [(11)] (10) The provisions of this subsection do not apply to 
any merger transaction involving a foreign bank if no party to 
the transaction is principally engaged in business in the 
United States.
    (11) Requirement to file information with attorney 
general.--Any applicant seeking prior written approval of the 
responsible Federal banking agency to engage in a merger 
transaction under this subsection shall file simultaneously 
with the Attorney General copies of any documents regarding the 
proposed transaction required by the Federal banking agency.
          * * * * * * *
  (g)(1) The Board of Directors shall by regulation prohibit 
the payment of interest or dividends on demand deposits in 
insured nonmember banks and in insured branches of foreign 
banks and for such purpose it may define the term ``demand 
deposits''; but such exceptions from this prohibition shall be 
made as are now or may hereafter be prescribed with respect to 
deposits payable on demand in member banks by section 19 of the 
Federal Reserve Act, as amended, or by regulation of the Board 
of Governors of the Federal Reserve System. The Board of 
Directors may from time to time, after consulting with the 
Board of Governors of the Federal Reserve System [and the 
Director of the Office of Thrift Supervision], prescribe rules 
governing the advertisement of interest or dividends on 
deposits, including limitations on the rates of interest or 
dividends that may be paid by insured nonmember banks 
(including insured mutual savings banks) on time and savings 
deposits. The Board of Directors is authorized for the purposes 
of this subsection to define the terms ``time deposits'' and 
``savings deposits'', to determine what shall be deemed a 
payment of interest, and to prescribe such regulations as it 
may deem necessary to effectuate the purposes of this 
subsection and to prevent evasions thereof. The provisions of 
this subsection and of regulations issued thereunder shall also 
apply, in the discretion of the Board of Directors, to 
obligations other than deposits that are undertaken by insured 
nonmember banks or their affiliates. As used in this 
subsection, the term ``affiliate'' has the same meaning as when 
used in section 2(b) of the Banking Act of 1933, as amended (12 
U.S.C. 221a(b)), except that the term ``member bank'', as used 
in such section 2(b), shall be deemed to refer to an insured 
nonmember bank. For each violation of any provision of this 
subsection or any lawful provision of such regulations relating 
to the payment of interest or dividends on deposits or to 
withdrawal of deposits, the offending bank shall be subject to 
a penalty of not more than $100, which the Corporation may 
recover for its use. During the period commencing on October 
15, 1962, and ending on October 15, 1968, the provisions of 
this subsection shall not apply to the rate of interest which 
may be paid by insured nonmember banks on time deposits of 
foreign governments, monetary and financial authorities of 
foreign governments when acting as such, or international 
financial institutions of which the United States is a member. 
The authority conferred by this subsection shall also apply to 
noninsured banks in any State if the total amount of time and 
savings deposits held in all such banks in the State, plus the 
total amount of deposits, shares, and withdrawable accounts 
held in all building and loan, savings and loan, and homestead 
associations (including cooperative banks) in the State which 
are not members of a Federal home loan bank, is more than 20 
per centum of the total amount of such deposits, shares, and 
withdrawable accounts held in all banks, and building and loan, 
savings and loan, and homestead associations (including 
cooperative banks) in the State. Such authority shall only be 
exercised by the Board of Directors with respect to such 
noninsured banks prior to July 31, 1970, to limit the rates of 
interest or dividends which such banks may pay on time and 
savings deposits to maximum rates not lower than 5\1/2\ per 
centum per annum. Whenever it shall appear to the Board of 
Directors that any noninsured bank or any affiliate thereof is 
engaged or has engaged or is about to engage in any acts or 
practices which constitute or will constitute a violation of 
the provisions of this subsection or of any regulations 
thereunder, the Board of Directors may, in its discretion, 
bring an action in the United States district court for the 
judicial district in which the principal office of the 
noninsured bank or affiliate thereof is located to enjoin such 
acts or practices, to enforce compliance with this subsection 
or any regulations thereunder, or for a combination of the 
foregoing, and such courts shall have jurisdiction of such 
actions, and, upon a proper showing, an injunction, restraining 
order, or other appropriate order may be granted without bond.
          * * * * * * *
  (i)(1) * * *
  (2) No insured Federal depository institution shall convert 
into an insured State depository institution if its capital 
stock or its surplus will be less than the capital stock or 
surplus, respectively, of the converting bank at the time of 
the shareholder's meeting approving such conversion, without 
the prior written consent of--
          (A) the Comptroller of the Currency if the resulting 
        bank is to be a District bank;
          (B) the Board of Governors of the Federal Reserve 
        System if the resulting bank is to be a State member 
        bank (except a District bank); and
          (C) the Corporation if the resulting bank is to be a 
        State nonmember insured bank (except a District bank)[; 
        and].
          [(D) the Director of the Office of Thrift Supervision 
        if the resulting institution is to be an insured State 
        savings association.]
          * * * * * * *
  [(m) Activities of Savings Associations and Their 
Subsidiaries.--
          [(1) Procedures.--When an insured savings association 
        establishes or acquires a subsidiary or when an insured 
        savings association elects to conduct any new activity 
        through a subsidiary that the insured savings 
        association controls, the insured savings association--
                  [(A) shall notify the Corporation and the 
                Director of the Office of Thrift Supervision 
                not less than 30 days prior to the 
                establishment, or acquisition, of any such 
                subsidiary, and not less than 30 days prior to 
                the commencement of any such activity, and in 
                either case shall provide at that time such 
                information as each such agency may, by 
                regulation, require; and
                  [(B) shall conduct the activities of the 
                subsidiary in accordance with regulations and 
                orders of the Director of the Office of Thrift 
                Supervision.
          [(2) Enforcement powers.--With respect to any 
        subsidiary of an insured savings association:
                  [(A) the Corporation and the Director of the 
                Office of Thrift Supervision shall each have, 
                with respect to such subsidiary, the respective 
                powers that each has with respect to the 
                insured savings association pursuant to this 
                section or section 8; and
                  [(B) the Director of the Office of Thrift 
                Supervision may determine, after notice and 
                opportunity for hearing, that the continuation 
                by the insured savings association of its 
                ownership or control of, or its relationship 
                to, the subsidiary--
                          [(i) constitutes a serious risk to 
                        the safety, soundness, or stability of 
                        the insured savings association, or
                          [(ii) is inconsistent with sound 
                        banking principles or with the purposes 
                        of this Act.
                Upon making any such determination, the 
                Corporation or the Director of the Office of 
                Thrift Supervision shall have authority to 
                order the insured savings association to divest 
                itself of control of the subsidiary. The 
                Director of the Office of Thrift Supervision 
                may take any other corrective measures with 
                respect to the subsidiary, including the 
                authority to require the subsidiary to 
                terminate the activities or operations posing 
                such risks, as the Director may deem 
                appropriate.
          [(3) Activities incompatible with deposit 
        insurance.--
                  [(A) In general.--The Corporation may 
                determine by regulation or order that any 
                specific activity poses a serious threat to the 
                Savings Association Insurance Fund. Prior to 
                adopting any such regulation, the Corporation 
                shall consult with the Director of the Office 
                of Thrift Supervision and shall provide 
                appropriate State supervisors the opportunity 
                to comment thereon, and the Corporation shall 
                specifically take such comments into 
                consideration. Any such regulation shall be 
                issued in accordance with section 553 of title 
                5, United States Code. If the Board of 
                Directors makes such a determination with 
                respect to an activity, the Corporation shall 
                have authority to order that no Savings 
                Association Insurance Fund member may engage in 
                the activity directly.
                  [(B) Authority of director.--This section 
                does not limit the authority of the Office of 
                Thrift Supervision to issue regulations to 
                promote safety and soundness or to enforce 
                compliance with other applicable laws.
                  [(C) Additional authority of fdic to prevent 
                serious risks to insurance fund.--
                Notwithstanding subparagraph (A), the 
                Corporation may prescribe and enforce such 
                regulations and issue such orders as the 
                Corporation determines to be necessary to 
                prevent actions or practicesof savings 
associations that pose a serious threat to the Savings Association 
Insurance Fund or the Bank Insurance Fund.
          [(4) ``Subsidiary'' defined.--As used in this 
        subsection, the term ``subsidiary'' does not include an 
        insured depository institution.
          [(5) Applicability to certain savings banks.--
        Subparagraphs (A) and (B) of paragraph (1) of this 
        subsection do not apply to--
                  [(A) any Federal savings bank that was 
                chartered prior to October 15, 1982, as a 
                savings bank under State law, or
                  [(B) a savings association that acquired its 
                principal assets from an institution that was 
                chartered prior to October 15, 1982, as a 
                savings bank under State law.]
          * * * * * * *
  (s) Grievance Process With Respect to Securities 
Activities.--
          (1) Procedures required.--The appropriate Federal 
        banking agencies shall jointly establish procedures and 
        facilities for receiving and expeditiously processing 
        complaints against any bank or employee of a bank 
        arising in connection with the purchase or sale of a 
        security by a customer. The use of any such procedures 
        and facilities by such a customer shall be at the 
        election of the customer.
          (2) Required actions.--The actions required by the 
        Federal banking agencies under paragraph (1) shall 
        include the following:
                  (A) establishing a group, unit, or bureau 
                within each such agency to receive such 
                complaints;
                  (B) developing and establishing procedures 
                for investigating such complaints;
                  (C) developing and establishing procedures 
                for informing customers of the rights they may 
                have in connection with such complaints; and
                  (D) developing and establishing procedures 
                for resolving such complaints, including 
                procedures for the recovery of losses to the 
                extent appropriate.
          (3) Procedures in addition to other remedies.--The 
        procedures and remedies provided under this subsection 
        shall be in addition to, and not in lieu of, any other 
        remedies available under law.
          (4) Definition.--As used in this subsection, the term 
        ``security'' has the meaning provided in section 
        3(a)(10) of the Securities Exchange Act of 1934.
  (t) Recordkeeping Requirements.--
          (1) Requirements.--Each appropriate Federal banking 
        agency, after consultation with and consideration of 
        the views of the Commission, shall establish 
        recordkeeping requirements for banks relying on 
        exceptions contained in paragraphs (4) and (5) of 
        section 3(a) of the Securities Exchange Act of 1934. 
        Such recordkeeping requirements shall be sufficient to 
        demonstrate compliance with the terms of such 
        exceptions and be designed to facilitate compliance 
        with such exceptions. Each appropriate Federal banking 
        agency shall make any such information available to the 
        Commission upon request.
          (2) Definitions.--As used in this subsection the term 
        ``Commission'' means the Securities and Exchange 
        Commission.
          * * * * * * *

SEC. 22. NONDISCRIMINATION.

  [It is not] (a) In General.--It is not the purpose of this 
Act to discriminate in any manner against State nonmember banks 
[or State savings associations and in favor of national or 
member banks or Federal savings associations, respectively] and 
in favor of national or member banks. It is the purpose of this 
Act to provide all banks [and savings associations] with the 
same opportunity to obtain and enjoy the benefits of this Act.
  (b) Programs for Promoting Housing Finance.--
          (1) Findings.--The Congress finds that it is in the 
        national interest to protect and promote housing 
        finance in the process of converting savings 
        associations to banks and eliminating the separate 
        Federal regulation of savings associations.
          (2) Programs required.--In furtherance of paragraph 
        (1), each appropriate Federal banking agency shall--
                  (A) develop and implement a program designed 
                to--
                          (i) facilitate the conversion of 
                        savings associations to banks and the 
                        treatment of State savings associations 
                        as State banks; and
                          (ii) promote housing finance by 
                        assuring that insured depository 
                        institutions may, at their own 
                        election, specialize in acquisition, 
                        development, residential mortgage 
                        finance, and residential mortgage and 
                        housing production lending; and
                  (B) develop guidelines and procedures for 
                assuring that insured depository institutions 
                are not subject to supervisory criticism or 
                sanction for prudently concentrating in 
                acquisition, development, residential mortgage 
                finance, and residential mortgage and housing 
                production lending.
          * * * * * * *

[SEC. 28. ACTIVITIES OF SAVINGS ASSOCIATIONS.

  [(a) In General.--On and after January 1, 1990, a savings 
association chartered under State law may not engage as 
principal in any type of activity, or in any activity in an 
amount, that is not permissible for a Federal savings 
association unless--
          [(1) the Corporation has determined that the activity 
        would pose no significant risk to the affected deposit 
        insurance fund; and
          [(2) the savings association is and continues to be 
        in compliance with the fully phased-in capital 
        standards prescribed under section 5(t) of the Home 
        Owners' Loan Act.
  [(b) Differences of Magnitude Between State and Federal 
Powers.--Notwithstanding subsection (a)(1), if an activity 
(other than an activity described in section 5(c)(2)(B) of the 
Home Owners' Loan Act) is permissible for a Federal savings 
association, a savings association chartered under State law 
may engage asprincipal in that activity in an amount greater 
than the amount permissible for a Federal savings association if--
          [(1) the Corporation has not determined that engaging 
        in that amount of the activity poses any significant 
        risk to the affected deposit insurance fund; and
          [(2) the savings association chartered under State 
        law is and continues to be in compliance with the fully 
        phased-in capital standards prescribed under section 
        5(t) of the Home Owners' Loan Act.
  [(c) Equity Investments by State Savings Associations.--
          [(1) In general.--Notwithstanding subsections (a) and 
        (b), a savings association chartered under State law 
        may not directly acquire or retain any equity 
        investment of a type or in an amount that is not 
        permissible for a Federal savings association.
          [(2) Exception for service corporations.--Paragraph 
        (1) does not prohibit a savings association from 
        acquiring or retaining shares of one or more service 
        corporations if--
                  [(A) the Corporation has determined that no 
                significant risk to the affected deposit 
                insurance fund is posed by--
                          [(i) the amount that the association 
                        proposes to acquire or retain; or
                          [(ii) the activities in which the 
                        service corporation engages; and
                  [(B) the savings association is and continues 
                to be in compliance with the fully phased-in 
                capital standards prescribed under section 5(t) 
                of the Home Owners' Loan Act.
          [(3) Transition rule.--
                  [(A) In general.--The Corporation shall 
                require any savings association to divest any 
                equity investment the retention of which is not 
                permissible under paragraph (1) or (2) as 
                quickly as can be prudently done, and in any 
                event not later than July 1, 1994.
                  [(B) Treatment of noncompliance during 
                divestment.--With respect to any equity 
                investment held by any savings association on 
                May 1, 1989, the savings association shall be 
                deemed not to be in violation of the 
                prohibition in paragraph (1) or (2) on 
                retaining such investment so long as the 
                savings association complies with any 
                applicable requirement established by the 
                Corporation pursuant to subparagraph (A) for 
                divesting such investments.
  [(d) Corporate Debt Securities Not of Investment Grade.--
          [(1) In general.--No savings association may, 
        directly or through a subsidiary, acquire or retain any 
        corporate debt security not of investment grade.
          [(2) Exception for securities held by qualified 
        affiliate.--Paragraph (1) shall not apply with respect 
        to any corporate debt security not of investment grade 
        which is acquired and retained by any qualified 
        affiliate of a savings association.
          [(3) Transition rule.--
                  [(A) In general.--The Corporation shall 
                require any savings association or any 
                subsidiary of any savings association to divest 
                any corporate debt security not of investment 
                grade the retention of which is not permissible 
                under paragraph (1) as quickly as can be 
                prudently done, and in any event not later than 
                July 1, 1994.
                  [(B) Treatment of noncompliance during 
                divestment.--With respect to any corporate debt 
                security not of investment grade held by any 
                savings association or subsidiary on the date 
                of enactment of the Financial Institutions 
                Reform, Recovery, and Enforcement Act of 1989, 
                the savings association or subsidiary shall be 
                deemed not to be in violation of the 
                prohibition in paragraph (1) on retaining such 
                investment so long as the association or 
                subsidiary complies with any applicable 
                requirement established by the Corporation 
                pursuant to subparagraph (A) for divesting such 
                securities.
          [(4) Definitions.--For purposes of this section--
                  [(A) Investment grade.--Any corporate debt 
                security is not of ``investment grade'' unless 
                that security, when acquired by the savings 
                association or subsidiary, was rated in one of 
                the 4 highest rating categories by at least one 
                nationally recognized statistical rating 
                organization.
                  [(B) Qualified affiliate.--The term 
                ``qualified affiliate'' means--
                          [(i) in the case of a stock savings 
                        association, an affiliate other than a 
                        subsidiary or an insured depository 
                        institution; and
                          [(ii) in the case of a mutual savings 
                        association, a subsidiary other than an 
                        insured depository institution, so long 
                        as all of the savings association's 
                        investments in and extensions of credit 
                        to the subsidiary are deducted from the 
                        savings association's capital.
                  [(C) Certain securities not included.--The 
                term ``corporate debt security not of 
                investment grade'' does not include any 
                obligation issued or guaranteed by a 
                corporation that may be held by a Federal 
                savings association without limitation as to 
                percentage of assets under subparagraph (D), 
                (E), or (F) of section 5(c)(1) of the Home 
                Owners' Loan Act.
  [(e) Transfer of Corporate Debt Security Not of Investment 
Grade in Exchange for a Qualified Note.--
          [(1) Acquisition of note.--Notwithstanding 
        subsections (a), (b), and (c) of section 5 of the Home 
        Owners' Loan Act and any other provision of Federal or 
        State law governing extensions of credit by savings 
        associations, any insured savings association, and any 
        subsidiary of any insured savings association, that, on 
        the date of the enactment of the Financial Institutions 
        Reform, Recovery, and Enforcement Act of 1989, holds 
        any corporate debt security not of investment grade may 
        acquire a qualified note in exchange for the transfer 
        of such security to--
                  [(A) any holding company which controls 80 
                percent or more of the shares of such insured 
                savings association; or
                  [(B) any company other than an insured 
                savings association, or any subsidiary of any 
                insured savings association, 80 percent or more 
                of the shares of which are controlled by such 
                holding company,
        if the conditions of paragraph (2) are met.
          [(2) Conditions for exchange of security for 
        qualified note.--The conditions of this paragraph are 
        met if--
                  [(A) the insured savings association was in 
                compliance with applicable capital requirements 
                on December 31, 1988, and the insured savings 
                association after such date--
                          [(i) remains in compliance with 
                        applicable capital requirements; or
                          [(ii) adopts and complies with a 
                        capital plan acceptable to the Director 
                        of the Office of Thrift Supervision;
                  [(B) the company to which the corporate debt 
                security not of investment grade is transferred 
                is not a bank holding company, an insured 
                savings association, or a direct or indirect 
                subsidiary of such holding company or insured 
                savings association;
                  [(C) before the end of the 90-day period 
                beginning on the date of the enactment of the 
                Financial Institutions Reform, Recovery, and 
                Enforcement Act of 1989, the insured savings 
                association notifies the Director of the Office 
                of Thrift Supervision of such association's 
                intention to transfer the corporate debt 
                security not of investment grade to the savings 
                and loan holding company or the subsidiary of 
                such holding company;
                  [(D) the transfer of the corporate debt 
                security not of investment grade is completed--
                          [(i) before the end of the 1-year 
                        period beginning on the date of the 
                        enactment of the Financial Institutions 
                        Reform, Recovery, and Enforcement Act 
                        of 1989, in the case of an insured 
                        savings association that, as of such 
                        date, is controlled by a savings and 
                        loan holding company; or
                          [(ii) before the end of the 2-year 
                        period beginning on such date, in the 
                        case of a savings association that is 
                        not, as of such date, a subsidiary of a 
                        savings and loan holding company;
                  [(E) the insured savings association receives 
                in exchange for the corporate debt security not 
                of investment grade the fair market value of 
                such security;
                  [(F) the Director of the Office of Thrift 
                Supervision has--
                          [(i) approved the transaction; and
                          [(ii) determined that the transfer 
                        represents a complete and effective 
                        divestiture of the corporate debt 
                        security not of investment grade and is 
                        in compliance with the provisions of 
                        this subsection; and
                  [(G) any gain on the sale of the corporate 
                debt security not of investment grade is 
                recognized, and included for applicable 
                regulatory capital requirements, by the insured 
                savings association only at such time and to 
                the extent that the insured savings association 
                receives payment of principal on the note in 
                cash in excess of the fair market value of the 
                transferred corporate debt security not of 
                investment grade as carried on the accounts of 
                the insured savings association immediately 
                prior to the transfer.
          [(3) Qualified note defined.--The term ``qualified 
        note'' means any note that--
                  [(A) is at all times fully secured by the 
                corporate debt security not of investment grade 
                transferred in exchange for the note, or by 
                other collateral of at least equivalent value 
                that is acceptable to the Director of the 
                Office of Thrift Supervision;
                  [(B) contains provisions acceptable to the 
                Director of the Office of Thrift Supervision 
                that would--
                          [(i) prevent any action to encumber 
                        or impair the value of the collateral 
                        referred to in subparagraph (A); and
                          [(ii) allow the sale of the corporate 
                        debt security not of investment grade 
                        if the proceeds of the sale are 
                        reinvested in assets of equivalent 
                        value;
                  [(C) is on market terms, including interest 
                rate, which must in all cases be above the 
                insured savings association's borrowing rate 
                for similar term funds;
                  [(D) is fully repayable over a period of time 
                not to exceed 5 years from the date of 
                transfer;
                  [(E) is repaid with annual principal payments 
                at least as large as would be necessary to 
                repay the note within 5 years if it were on a 
                level payment amortization schedule and the 
                interest rate for the first year of repayment 
                were fixed throughout the amortization period;
                  [(F) is fully guaranteed by each holding 
                company of the insured savings association that 
                acquires such note; and
                  [(G) is repaid in full in cash in accordance 
                with its terms and this subsection.
          [(4) Failure to repay on schedule.--The exemption 
        provided by this subsection from subsections (a), (b), 
        and (c) of section 11 of the Home Owners' Loan Act and 
        any other applicable provision of Federal or State law 
        shall terminate immediately if the insured savings 
        association or any affiliate of such association fails 
        to comply with the terms of the qualified note or this 
        subsection.
  [(f) Determinations.--The Corporation shall make 
determinations under this section by regulation or order.
  [(g) Activity Defined.--For purposes of subsections (a) and 
(b)--
          [(1) In general.--The term ``activity'' includes 
        acquiring or retaining any investment.
          [(2) Divestiture of certain assets.-- Notwithstanding 
        paragraph (1), subsections (a) and (b) shall not be 
        construed to require a savings association to divest 
        itself of any assets acquired before the date of 
        enactment of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989.
  [(h) Other Authority Not Affected.--This section may not be 
construed as limiting--
          [(1) any other authority of the Corporation; or
          [(2) any authority of the Director of the Office of 
        Thrift Supervision or of a State to impose more 
        stringent restrictions.]
          * * * * * * *

SEC. 33. DEPOSITORY INSTITUTION EMPLOYEE PROTECTION REMEDY.

  (a) * * *
          * * * * * * *
  (e) Federal Banking Agency Defined.--For purposes of 
subsections (a) and (c), the term ``Federal banking agency'' 
means the Corporation, the Board of Governors of the Federal 
Reserve System, the Federal Housing Finance Board, and the 
Comptroller of the Currency[, and the Director of the Office of 
Thrift Supervision].
          * * * * * * *

SEC. 38.  PROMPT CORRECTIVE ACTION.

  (a) * * *
          * * * * * * *
  [(o) Transition Rules for Savings Associations.--
          [(1) RTC's role does not diminish care required of 
        ots.--
                  [(A) In general.--In implementing this 
                section, the appropriate Federal banking agency 
                (and, to the extent applicable, the 
                Corporation) shall exercise the same care as if 
                the Savings Association Insurance Fund (rather 
                than the Resolution Trust Corporation) bore the 
                cost of resolving the problems of insured 
                savings associations described in clauses (i) 
                and (ii)(II) of section 21A(b)(3)(A) of the 
                Federal Home Loan Bank Act.
                  [(B) Reports.--Subparagraph (A) does not 
                require reports under subsection (k).
          [(2) Additional flexibility for certain savings 
        associations.--Subsections (e)(2), (f), and (h) shall 
        not apply before July 1, 1994, to any insured savings 
        association if--
                  [(A) before the date of enactment of the 
                Federal Deposit Insurance Corporation 
                Improvement Act of 1991--
                          [(i) the savings association had 
                        submitted a plan meeting the 
                        requirements of section 5(t)(6)(A)(ii) 
                        of the Home Owners' Loan Act; and
                          [(ii) the Director of the Office of 
                        Thrift Supervision had accepted the 
                        plan;
                  [(B) the plan remains in effect; and
                  [(C) the savings association remains in 
                compliance with the plan or is operating under 
                a written agreement with the appropriate 
                Federal banking agency.]
          * * * * * * *

SEC. 42.  NOTICE OF BRANCH CLOSURE.

  (a) * * *
          * * * * * * *
  (d) Branch Closures in Interstate Banking or Branching 
Operations.--
          (1) * * *
          * * * * * * *
          (4) Definitions.--For purposes of this subsection, 
        the following definitions shall apply:
                  (A) Interstate bank defined.--The term 
                ``interstate bank'' means a bank which 
                maintains branches in more than 1 State and any 
                bank controlled by an out-of-State bank holding 
                company (as defined in section 2(o)(7) of the 
                Bank Holding Company Act of 1956).
          * * * * * * *
                              ----------                              


                 REVISED STATUTES OF THE UNITED STATES

          * * * * * * *

                           T I T L E   V I I.

                     THE DEPARTMENT OF THE TREASURY

          * * * * * * *

                        C H A P T E R  N I N E.

                    THE COMPTROLLER OF THE CURRENCY.

          * * * * * * *
  Sec. 324. There shall be in the Department of the Treasury a 
bureau charged with the execution of all laws passed by 
Congress relating to the issue and regulation of national 
currency secured by United States bonds and, under the general 
supervision of the Federal Reserve Board, of all Federal 
Reserve notes, except for the cancellation and destruction, and 
accounting with respect to such cancellation and destruction, 
of Federal reserve notes unfit for circulation, of notes the 
chief officer of which bureau shall be called the Comptroller 
of the Currency and shall perform his duties under the general 
directions of the Secretary of the Treasury. [The Comptroller 
of the Currency shall have the same authority over matters 
within the jurisdiction of the Comptroller as the Director of 
the Office of Thrift Supervision has over matters within the 
Director's jurisdiction under section 3(b)(3) of the Home 
Owners' Loan Act] The Secretary of the Treasury may not 
intervene in any matter or proceeding before the Comptroller of 
the Currency (including agency enforcement actions) unless 
otherwise specifically provided by law. The Secretary of the 
Treasury may not delay or prevent the issuance of any rule or 
the promulgation of any regulation by the Comptroller of the 
Currency.
          * * * * * * *

                          T I T L E  L X I I.

                            NATIONAL BANKS.

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                         C H A P T E R  O N E.

                        ORGANIZATION AND POWERS.

Sec.
5133.  Formation of national banking associations.
5133A. Mutual national banks.
5133B. Federal mutual bank holding companies.
5134.  Requisites of organization certificate.
5135.  How certificate shall be acknowledged and filed.
5136.  Corporate powers of associations.
5136A. Subsidiaries of national banks.
5136B. National wholesale financial institutions.
[5136A.] 5136C. Participation in lotteries prohibited.
5137.  Power to hold real property.
          * * * * * * *

SEC. 5133A. MUTUAL NATIONAL BANKS.

  (a) In General.--The Comptroller of the Currency may charter 
national banking associations as mutual national banks, either 
de novo or through the conversion of an insured depository 
institution, in accordance with this section and such 
regulations as the Comptroller may prescribe.
  (b) Applicable Law.--Unless otherwise provided by this 
section or by the Comptroller of the Currency because of the 
mutual form of the institution, a mutual national bank--
          (1) shall be subject to the same laws, requirements, 
        duties, and obligations that apply to a national 
        banking association operating in stock form;
          (2) shall have the same powers and privileges as, and 
        may engage in the same activities subject to the same 
        restrictions and limitations that apply to, a national 
        banking association operating in stock form; and
          (3) shall be supervised and examined by the 
        Comptroller in the same manner and to the same extent 
        as a national banking association operating in stock 
        form.
  (c) Conversions.--Subject to any requirements imposed by the 
Comptroller--
          (1) a mutual national bank may convert to, or acquire 
        and retain all or substantially all of the assets and 
        liabilities of, a national banking association 
        operating in stock form; and
          (2) a national banking association operating in stock 
        form may convert to a mutual national bank.
  (d) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Insured depository institution.--The term 
        ``insured depository institution'' has the same meaning 
        as in section 3 of the Federal Deposit Insurance Act.
          (2) Mutual national bank.--The term ``mutual national 
        bank'' means a national banking association that 
        operates in mutual form and is chartered by the 
        Comptroller under this section.
  (e) Conforming References.--Unless otherwise provided by the 
Comptroller--
          (1) any reference in any Federal law to a national 
        bank, including a reference to the term ``national 
        banking association'', ``member bank'', ``national 
        bank'', ``national association'', ``bank'', ``insured 
        bank'', ``insured depository institution'', or 
        ``depository institution'', shall be deemed to refer 
        also to a ``mutual national bank'';
          (2) any reference in any Federal law to the term 
        ``shareholder'', ``shareholders'', ``stockholder'', or 
        ``stockholders'' of a national bank shall be deemed to 
        refer also to any member or members of a mutual 
        national bank;
          (3) any reference in any Federal law to the term 
        ``board of directors'', ``director'', or ``directors'' 
        of a national bank shall be deemed to refer also to the 
        board of trustees, trustee, or trustees, respectively, 
        of a mutual national bank; and
          (4) any terms in Federal law that may apply only to a 
        national bank operating in stock form, including the 
        terms ``stock'', ``shares'', ``shares of stock'', 
        ``capital stock'', ``common stock'', ``stock 
        certificate'', ``stock certificates'', ``certificate 
        representing shares of stock'', ``stock dividend'', 
        ``transferable stock'', ``each class of stock'', 
        ``cumulate such shares'', ``par value'', ``preferred 
        stock'', ``body corporate'', ``corporation'', 
        ``corporate powers'', ``incorporated'', ``articles of 
        association'', and ``corporate existence'', shall not 
        apply to a mutual national bank, unless the Comptroller 
        determines that the context requires otherwise.

SEC. 5133B. FEDERAL MUTUAL BANK HOLDING COMPANIES.

  (a) Reorganization of Mutual National Bank as a Holding 
Company.--
          (1) In general.--Subject to approval under the Bank 
        Holding Company Act of 1956, a mutual national bank may 
        reorganize so as to become a Federal mutual bank 
        holding company by submitting a reorganization plan to 
        the Comptroller of the Currency for the Comptroller's 
        approval.
          (2) Plan approval.--Upon the approval of the 
        reorganization plan by the Comptroller of the Currency 
        and the issuance of the appropriate charters--
                  (A) the substantial part of the mutual 
                national bank's assets and liabilities, 
                including all of the bank's insured 
                liabilities, shall be transferred to a national 
                banking association, the stock of which is 
                owned (except as otherwise provided by this 
                section) by the mutual national bank; and
                  (B) the mutual national bank shall become a 
                Federal mutual bank holding company.
  (b) Directors and Certain Account Holders' Approval of Plan 
Required.--This subsection does not authorize a reorganization 
unless--
          (1) a majority of the mutual national bank's board of 
        directors has approved the plan providing for such 
        reorganization; and
          (2) in the case of a mutual national bank in which 
        holders of accounts and obligors exercise voting 
        rights, a majority of such individuals has approved the 
        plan at a meeting held at the call of the directors 
        under the procedures prescribed by the bank's charter 
        and bylaws.
  (c) Retention of Capital.--In connection with a transaction 
described in subsection (a), a mutual national bank may, 
subject to the Comptroller's approval, retain capital at the 
holding company level to the extent that the capital retained 
at the holding company level exceeds the amount of capital 
required for the national banking association chartered as a 
part of a transaction described in subsection (a) to meet all 
relevant capital standards established by the Comptroller for 
national banking associations.
  (d) Ownership.--
          (1) In general.--Persons having ownership rights in 
        the mutual national bank under Federal or State law 
        shall have the same ownership rights with respect to 
        the Federal mutual bank holding company.
          (2) Holders of certain accounts.--Holders of savings, 
        demand, or other accounts in the following institutions 
        shall have the same ownership rights with respect to 
        the Federal mutual bank holding company as persons 
        described in paragraph (1):
                  (A) A national bank chartered as part of a 
                transaction described in subsection (a).
                  (B) A mutual bank acquired through the merger 
                of the mutual bank into a national bank 
                subsidiary of the holding company or an interim 
                national bank subsidiary of the holding 
                company.
  (e) Regulation.--A Federal mutual bank holding company shall 
be--
          (1) chartered by the Comptroller of the Currency and 
        shall be subject to such regulations as the Comptroller 
        shall prescribe; and
          (2) regulated under the Bank Holding Company Act of 
        1956 on the same terms and subject to the same 
        limitations as any other company that controls a bank.
  (f) Capital Improvement.--
          (1) Pledge of stock of national bank subsidiary.--
        This section shall not prohibit a Federal mutual bank 
        holding company from pledging all or a portion of the 
        stock of a national banking association chartered as 
        part of a transaction described in subsection (a) to 
        raise capital for such bank.
          (2) Issuance of nonvoting shares.--This section shall 
        not prohibit a national banking association chartered 
        as part of a transaction described in subsection (a) 
        from issuing any nonvoting shares, or less than 50 
        percent of the voting shares of such bank, to any 
        person other than the Federal mutual bank holding 
        company.
  (g) Insolvency and Liquidation.--
          (1) In general.--Notwithstanding any other provision 
        of law, the Comptroller of the Currency may file a 
        petition under chapter 7 of title 11, United States 
        Code, with respect to a Federal mutual bank holding 
        company upon--
                  (A) the default of any national bank--
                          (i) the stock of which is owned by 
                        the Federal mutual bank holding 
                        company; and
                          (ii) that was chartered in a 
                        transaction described in subsection 
                        (a); or
                  (B) a foreclosure on a pledge by the Federal 
                mutual bank holding company described in 
                subsection (f)(1).
          (2) Distribution of net proceeds.--Except as provided 
        in paragraph (3), the net proceeds of any liquidation 
        of any Federal mutual bank holding company under 
        paragraph (1) shall be transferred to persons who hold 
        ownership interests in such Federal mutual bank holding 
        company.
          (3) Recovery by fdic.--If the Federal Deposit 
        Insurance Corporation incurs a loss as a result of the 
        default of any insured bank subsidiary of a Federal 
        mutual bank holding company that is liquidated under 
        paragraph (1), the Federal Deposit Insurance 
        Corporation shall succeed to the ownership interests of 
        the depositors of the bank in the Federal mutual bank 
        holding company, to the extent of the Federal Deposit 
        Insurance Corporation's loss.
  (h) Definitions.--
          (1) Federal mutual bank holding company.--The term 
        ``Federal mutual bank holding company'' means a 
        corporation chartered under this section.
          (2) Default.--With respect to a national bank, the 
        term ``default'' means an adjudication or other 
        official determination by any court of competent 
        jurisdiction, the Comptroller, or other public 
        authority pursuant to which a conservator, receiver, or 
        other legal custodian is appointed for the national 
        bank.
          * * * * * * *

SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.

  (a) Subsidiaries of National Banks Authorized To Engage in 
Financial Activities.--
          (1) Exclusive authority.--No provision of section 
        5136 or any other provision of this title LXII of the 
        Revised Statutes shall be construed as authorizing a 
        subsidiary of a national bank to engage in, or own any 
        share of any company engaged in, any activity that--
                  (A) is not permissible for a national bank to 
                engage in directly; or
                  (B) is conducted under terms or conditions 
                other than those that would govern the conduct 
                of such activity by a national bank,
        unless a national bank is specifically authorized by 
        the express terms of a Federal statute and not by 
        implication or interpretation to acquire shares of or 
        control such subsidiary, such as by paragraph (2) of 
        this subsection and section 25A of the Federal Reserve 
        Act.
          (2) Specific authorization to conduct insurance 
        agency activities.--A national bank may control a 
        company engaged in general insurance agency activities 
        if--
                  (A) the national bank is well capitalized and 
                well managed, and has achieved a rating of 
                satisfactory or better at the most recent 
                examination of the bank under the Community 
                Reinvestment Act of 1977;
                  (B) all depository institution affiliates of 
                the national bank are well capitalized and well 
                managed, and have achieved a rating of 
                satisfactory or better at the most recent 
                examination of each such depository institution 
                under the Community Reinvestment Act of 1977; 
                and
                  (C) the bank has received the approval of the 
                Comptroller of the Currency.
          (3) Definitions.--
                  (A) Company; control; subsidiary.--The terms 
                ``company'', ``control'', and ``subsidiary'' 
                have the meanings given to such terms in 
                section 2 of the Bank Holding Company Act of 
                1956.
                  (B) Well capitalized.--The term ``well 
                capitalized'' has the same meaning as in 
                section 38 of the Federal Deposit Insurance Act 
                and, for purposes of this section, the 
                Comptroller shall have exclusive jurisdiction 
                to determine whether a national bank is well 
                capitalized.
                  (C) Well managed.--The term ``well managed'' 
                means--
                          (i) in the case of a bank that has 
                        been examined, unless otherwise 
                        determined in writing by the 
                        Comptroller--
                                  (I) the achievement of a 
                                composite rating of 1 or 2 
                                under the Uniform Financial 
                                Institutions Rating System (or 
                                an equivalent rating under an 
                                equivalent rating system) in 
                                connection with the most recent 
                                examination or subsequent 
                                review of the bank; and
                                  (II) at least a rating of 2 
                                for management, if that rating 
                                is given; or
                          (ii) in the case of any national bank 
                        that has not been examined, the 
                        existence and use of managerial 
                        resources that the Comptroller 
                        determines are satisfactory.
  (b) Limited Exclusions From Community Needs Requirements for 
Newly Acquired Depository Institutions.--Any depository 
institution which becomes affiliated with a national bank 
during the 24-month period preceding the submission of an 
application to acquire a subsidiary under subsection (a)(2), 
and any depository institution which becomes so affiliated 
after the approval of such application, may be excluded for 
purposes of subsection (a)(2)(B) during the 24-month period 
beginning on the date of such acquisition if--
          (1) the depository institution has submitted an 
        affirmative plan to the appropriate Federal banking 
        agency (as defined in section 3 of the Federal Deposit 
        Insurance Act) to take such action as may be necessary 
        in order for such institution to achieve a 
        ``satisfactory record of meeting community credit 
        needs'', or better, at the next examination of the 
        institution under the Community Reinvestment Act of 
        1977; and
          (2) the plan has been approved by the appropriate 
        Federal banking agency.

SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.

  (a) Authorization of the Comptroller Required.--A national 
bank may apply to the Comptroller on such forms and in 
accordance with such regulations as the Comptroller may 
prescribe, for permission to operate as a national wholesale 
financial institution.
  (b) Regulation.--A national wholesale financial institution 
may exercise, in accordance with such institution's articles of 
incorporation and regulations issued by the Comptroller, all 
the powers and privileges of a national bank formed in 
accordance with section 5133 of the Revised Statutes of the 
United States, subject to section 9B of the Federal Reserve Act 
and the limitations and restrictions contained therein.
  (c) Community Reinvestment Act of 1977.--A national wholesale 
financial institution shall be subject to the Community 
Reinvestment Act of 1977.
  (d) Examination Reports.--The Comptroller of the Currency 
shall, to the fullest extent possible, use the report of 
examinations made by the Board of Governors of the Federal 
Reserve System of a wholesale financial institution.
  Sec. [5136A.] 5136C. (a) A national bank may not--
          (1) deal in lottery tickets;
          (2) deal in bets used as a means or substitute for 
        participation in a lottery;
          (3) announce, advertise, or publicize the existence 
        of any lottery;
          (4) announce, advertise, or publicize the existence 
        or identity of any participant or winner, as such, in a 
        lottery.
  (b) A national bank may not permit--
          (1) the use of any part of any of its banking offices 
        by any person for any purpose forbidden to the bank 
        under subsection (a), or
          (2) direct access by the public from any of its 
        banking offices to any premises used by any person for 
        any purpose forbidden to the bank under subsection (a).
  (c) As used in this section--
          (1) The term ``deal in'' includes making, taking, 
        buying, selling, redeeming, or collecting.
          (2) The term ``lottery'' includes any arrangement 
        whereby three or more persons (the ``participants'') 
        advance money or credit to another in exchange for the 
        possibility or expectation that one or more but not all 
        of the participants (the ``winners'') will receive by 
        reason of their advances more than the amounts they 
        have advanced, the identity of the winners being 
        determined by any means which includes--
                  (A) a random selection;
                  (B) a game, race, or contest; or
                  (C) any record or tabulation of the result of 
                one or more events in which any participant has 
                no interest except for its bearing upon the 
                possibility that he may become a winner.
          (3) The term ``lottery ticket'' includes any right, 
        privilege, or possibility (and any ticket, receipt, 
        record, or other evidence of any such right, privilege, 
        or possibility) of becoming a winner in a lottery.
  (d) Nothing contained in this section prohibits a national 
bank from accepting deposits or cashing or otherwise handling 
checks or other negotiable instruments, or performing other 
lawful banking services for a State operating a lottery, or for 
an officer or employee of that State who is charged with the 
administration of the lottery.
  (e) The Comptroller of the Currency shall issue such 
regulations as may be necessary to the strict enforcement of 
this section and the prevention of evasions thereof.
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                          FEDERAL RESERVE ACT

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                        state banks as members.

  Sec. 9. Any bank incorporated by special law of any State, or 
organized under the general laws of any State or of the United 
States, including Morris Plan banks and other incorporated 
banking institutions engaged in similar business, desiring to 
become a member of the Federal Reserve System, may make 
application to the Board of Governors of the Federal Reserve 
System, under such rules and regulations as it may prescribe, 
for the right to subscribe to the stock of the Federal reserve 
bank organized within the district in which the applying bank 
is located. Such application shall be for the same amount of 
stock that the applying bank would be required to subscribe to 
as a national bank. For the purposes of membership of any such 
bank the terms ``capital'' and ``capital stock'' shall include 
the amount of outstanding capital notes and debentures legally 
issued by the applying bank and purchased by the Reconstruction 
Finance Corporation. The Board of Governors of the Federal 
Reserve System, subject to the provisions of this Act and to 
such conditions as it may prescribe pursuant thereto may permit 
the applying bank to become a stockholder of such Federal 
reserve bank.
          * * * * * * *
  Whenever the directors of the Federal reserve bank shall 
approve the examinations made by the State authorities, such 
examinations and the reports thereof may be accepted in lieu of 
examinations made by examiners selected or approved by the 
Board of Governors of the Federal Reserve System: Provided, 
however, That when it deems it necessary the board may order 
special examinations by examiners of its own selection and 
shall in all cases approve the form of the report. The expenses 
of all examinations, other than those made by State 
authorities, may, in the discretion of the Board of Governors 
of the Federal Reserve System, be assessed against the banks 
examined and, when so assessed, shall be paid by the banks 
examined. [Copies of the reports of such examinations may in 
the discretion of the Board of Governors of the Federal Reserve 
System, be furnished to the State authorities having 
supervision of such banks, to officers, directors, or receivers 
of such banks, and to any other proper persons.] The Board of 
Governors of the Federal Reserve System, at its discretion, may 
furnish reports of examination or other confidential 
supervisory information concerning State member banks or any 
other entities examined under any other authority of the Board 
to any Federal or State authorities with supervisory or 
regulatory authority over the examined entity, to officers, 
directors, or receivers of the examined entity, and to any 
other person that the Board determines to be proper.
          * * * * * * *
          (24) Enforcement authority over uninsured state 
        member banks.--Section 3(u) of the Federal Deposit 
        Insurance Act, subsections (j) and (k) of section 7 of 
        such Act, and subsections (b) through (n), (s), (u), 
        and (v) of section 8 of such Act shall apply to an 
        uninsured State member bank in the same manner and to 
        the same extent such provisions apply to an insured 
        State member bank and any reference in any such 
        provision to ``insured depository institution'' shall 
        be deemed to be a reference to ``uninsured State member 
        bank'' for purposes of this paragraph.
          * * * * * * *

SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

  (a) Application for Membership as Wholesale Financial 
Institution.--
          (1) Application required.--
                  (A) In general.--Any bank may apply to the 
                Board of Governors of the Federal Reserve 
                System to become a wholesale financial 
                institution and, as a wholesale financial 
                institution, to subscribe to the stock of the 
                Federal reserve bank organized within the 
                district where the applying bank is located.
                  (B) Treatment as member bank.--Any 
                application under subparagraph (A) shall be 
                treated as an application under, and shall be 
                subject to the provisions of, section 9.
          (2) Insurance termination.--No bank the deposits of 
        which are insured under the Federal Deposit Insurance 
        Act may become a wholesale financial institution unless 
        it has met all requirements under that Act for 
        voluntary termination of deposit insurance.
  (b) General Requirements Applicable to Wholesale Financial 
Institutions.--
          (1) Federal reserve act.--Except as otherwise 
        provided in this section, wholesale financial 
        institutions shall be member banks and shall be subject 
        to the provisions of this Act that apply to member 
        banks to the same extent and in the same manner as 
        State member insured banks, except that a wholesale 
        financial institution may terminate membership under 
        this Act only with the prior written approval of the 
        Board and on terms and conditions that the Board 
        determines are appropriate to carry out the purposes of 
        this Act.
          (2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal 
        Deposit Insurance Act except that--
                  (A) the relevant capital levels and capital 
                measures for each capital category shall be the 
                levels specified by the Board for wholesale 
                financial institutions; and
                  (B) all references to the appropriate Federal 
                banking agency or to the Corporation in that 
                section shall be deemed to be references to the 
                Board.
          (3) Enforcement authority.--Subsections (j) and (k) 
        of section 7, subsections (b) through (n), (s), and (v) 
        of section 8, and section 19 of the Federal Deposit 
        Insurance Act shall apply to a wholesale financial 
        institution in the same manner and to the same extent 
        as such provisions apply to State member insured banks 
        and any reference in such sections to an insured 
        depository institution shall be deemed to include a 
        reference to a wholesale financial institution.
          (4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate 
        Federal banking agency for such bank and all such 
        bank's affiliates, for purposes of the International 
        Lending Supervision Act.
          (5) Bank merger act.--A wholesale financial 
        institution shall be subject to sections 18(c) and 44 
        of the Federal Deposit Insurance Act in the same manner 
        and to the same extent the wholesale financial 
        institution would be subject to such sections if the 
        institution were a State member insured bank.
          (6) Branching.--Notwithstanding any other provision 
        of law, a wholesale financial institution may establish 
        and operate a branch at any location on such terms and 
        conditions as established by the Board and, in the case 
        of a State-chartered wholesale financial institution, 
        with the approval of the Board, and, in the case of a 
        national bank wholesale financial institution, with the 
        approval of the Comptroller of the Currency.
          (7) Activities of out-of-state branches of wholesale 
        financial institutions.--
                  (A) General.--A State-chartered wholesale 
                financial institution shall be deemed a State 
                bank and an insured State bank and a national 
                wholesale financial institution shall be deemed 
                a national bank for purposes of paragraphs (1), 
                (2), and (3) of section 24(j) of the Federal 
                Deposit Insurance Act.
                  (B) Definitions.--The following definitions 
                shall apply solely for purposes of applying 
                paragraph (1):
                          (i) Home state.--The term ``home 
                        State'' means--
                                  (I) with respect to a 
                                national wholesale financial 
                                institution, the State in which 
                                the main office of the 
                                institution is located; and
                                  (II) with respect to a State-
                                chartered wholesale financial 
                                institution, the State by which 
                                the institution is chartered.
                          (ii) Host state.--The term ``host 
                        State'' means a State, other than the 
                        home State of the wholesale financial 
                        institution, in which the institution 
                        maintains, or seeks to establish and 
                        maintain, a branch.
                          (iii) Out-of-state bank.--The term 
                        ``out-of-State bank'' means, with 
                        respect to any State, a wholesale 
                        financial institution whose home State 
                        is another State.
          (8) Discrimination regarding interest rates.--Section 
        27 of the Federal Deposit Insurance Act (12 U.S.C. 
        1831d) shall apply to State-chartered wholesale 
        financial institutions in the same manner and to the 
        same extent as such provisions apply to State member 
        insured banks and any reference in such section to a 
        State-chartered insured depository institution shall be 
        deemed to include a reference to a State-chartered 
        wholesale financial institution.
          (9) Preemption of state laws requiring deposit 
        insurance for wholesale financial institutions.--The 
        appropriate State banking authority may grant a charter 
        to a wholesale financial institution notwithstanding 
        any State constitution or statute requiring that the 
        institution obtain insurance of its deposits and any 
        such State constitution or statute is hereby preempted 
        solely for purposes of this paragraph.
          (10) Parity for wholesale financial institutions.--A 
        State bank that is a wholesale financial institution 
        under this section shall have all of the rights, 
        powers, privileges, and immunities (including those 
        derived from status as a federally chartered 
        institution) of and as if it were a national bank, 
        subject to such terms and conditions as established by 
        the Board.
          (11) Community reinvestment act of 1977.--A State 
        wholesale financial institution shall be subject to the 
        Community Reinvestment Act of 1977.
  (c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
          (1) Limitations on deposits.--
                  (A) Minimum amount.--
                          (i) In general.--No wholesale 
                        financial institution may receive 
                        initial deposits of $100,000 or less, 
                        other than on an incidental and 
                        occasional basis.
                          (ii) Limitation on deposits of less 
                        than $100,000.--No wholesale financial 
                        institution may receive initial 
                        deposits of $100,000 or less if such 
                        deposits constitute more than 5 percent 
                        of the institution's total deposits.
                  (B) No deposit insurance.--No deposits held 
                by a wholesale financial institution shall be 
                insured deposits under the Federal Deposit 
                Insurance Act.
                  (C) Advertising and disclosure.--The Board 
                shall prescribe regulations pertaining to 
                advertising and disclosure by wholesale 
                financial institutions to ensure that each 
                depositor is notified that deposits at the 
                wholesale financial institution are not 
                federally insured or otherwise guaranteed by 
                the United States Government.
          (2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by 
        regulation, adopt capital requirements for wholesale 
        financial institutions--
                  (A) to account for the status of wholesale 
                financial institutions as institutions that 
                accept deposits that are not insured under the 
                Federal Deposit Insurance Act; and
                  (B) to provide for the safe and sound 
                operation of the wholesale financial 
                institution without undue risk to creditors or 
                other persons, including Federal reserve banks, 
                engaged in transactions with the bank.
          (3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or 
        order, upon wholesale financial institutions--
                  (A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                          (i) the transfer of risk to the 
                        deposit insurance funds; or
                          (ii) an affiliate from gaining access 
                        to, or the benefits of, credit from a 
                        Federal reserve bank, including 
                        overdrafts at a Federal reserve bank;
                  (B) special clearing balance requirements; 
                and
                  (C) any additional requirements that the 
                Board determines to be appropriate or necessary 
                to--
                          (i) promote the safety and soundness 
                        of the wholesale financial institution 
                        or any insured depository institution 
                        affiliate of the wholesale financial 
                        institution;
                          (ii) prevent the transfer of risk to 
                        the deposit insurance funds; or
                          (iii) protect creditors and other 
                        persons, including Federal reserve 
                        banks, engaged in transactions with the 
                        wholesale financial institution.
          (4) Exemptions for wholesale financial 
        institutions.--The Board may, by regulation or order, 
        exempt any wholesale financial institution from any 
        provision applicable to a member bank that is not a 
        wholesale financial institution, if the Board finds 
        that such exemption is not inconsistent with--
                  (A) the promotion of the safety and soundness 
                of the wholesale financial institution or any 
                insured depository institution affiliate of the 
                wholesale financial institution;
                  (B) the protection of the deposit insurance 
                funds; and
                  (C) the protection of creditors and other 
                persons, including Federal reserve banks, 
                engaged in transactions with the wholesale 
                financial institution.
          (5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For 
        purposes of section 23A(d)(1) of the Federal Reserve 
        Act, a wholesale financial institution that is 
        affiliated with an insured bank shall not be a bank.
          (6) No effect on other provisions.--This section 
        shall not be construed as limiting the Board's 
        authority over member banks under any other provision 
        of law, or to create any obligation for any Federal 
        reserve bank to make, increase, renew, or extend any 
        advance or discount under this Act to any member bank 
        or other depository institution.
  (d) Capital and Managerial Requirements.--
          (1) In general.--A wholesale financial institution 
        controlled by a company that is subject to section 
        17(i) of the Securities Exchange Act of 1934 or section 
        10 of the Bank Holding Company Act of 1956 must be well 
        capitalized and well managed.
          (2) Notice to company.--The Board shall promptly 
        provide notice to a company described in paragraph (1) 
        whenever any wholesale financial institution controlled 
        by such company is not well capitalized or well 
        managed.
          (3) Agreement to restore institution.--Within 45 days 
        of receipt of a notice under paragraph (2) (or such 
        additional period not to exceed 90 days as the Board 
        may permit), the company shall execute an agreement 
        acceptable to the Board to restore the wholesale 
        financial institution to compliance with all of the 
        requirements of paragraph (1).
          (4) Limitations until institution restored.--Until 
        the wholesale financial institution is restored to 
        compliance with all of the requirements of paragraph 
        (1), the Board may impose such limitations on the 
        conduct or activities of the company or any affiliate 
        of the company as the Board determines to be 
        appropriate under the circumstances.
          (5) Failure to restore.--If the company does not 
        execute and implement an agreement in accordance with 
        paragraph (3), comply with any limitation imposed under 
        paragraph (4), restore the wholesale financial 
        institution to well capitalized status within 180 days 
        after receipt by the company of the notice described in 
        paragraph (2), or restore the wholesale financial 
        institution to well managed status within such period 
        as the Board may permit, the company shall, under such 
        terms and conditions as may be imposed by the Board and 
        subject to such extension of time as may be granted in 
        the Board's discretion, divest control of its 
        subsidiary depository institutions.
          (6) Notice to commission regarding divestitures.--The 
        Board shall notify the Commission if (A) a wholesale 
        financial institution controlled by a company subject 
        to section 17(i) of the Securities Exchange Act of 1934 
        is not well capitalized or well managed, or (B) such a 
        company is required to divest control of a subsidiary 
        wholesale financial institution under this subsection.
          (7) Definitions.--For purposes of this subsection, 
        the following definitions shall apply:
                  (A) Well managed.--The term ``well managed'' 
                has the same meaning as in section 2 of the 
                Bank Holding Company Act of 1956.
                  (B) Commission.--The term ``Commission'' 
                means the Securities and Exchange Commission.
  (e) Conservatorship Authority.--
          (1) In general.--The Board may appoint a conservator 
        to take possession and control of a wholesale financial 
        institution to the same extent and in the same manner 
        as the Comptroller of the Currency may appoint a 
        conservator for a national bank under section 203 of 
        the Bank Conservation Act, and the conservator shall 
        exercise the same powers, functions, and duties, 
        subject to the same limitations, as are provided under 
        such Act for conservators of national banks.
          (2) Board authority.--The Board shall have the same 
        authority with respect to any conservator appointed 
        under paragraph (1) and the wholesale financial 
        institution for which such conservator has been 
        appointed as the Comptroller of the Currency has under 
        the Bank Conservation Act with respect to a conservator 
        appointed under such Act and a national bank for which 
        the conservator has been appointed.
  (f) Exclusive Jurisdiction.--Subsections (c) and (e) of 
section 43 of the Federal Deposit Insurance Act shall not apply 
to any wholesale financial institution.
          * * * * * * *
  Sec. 11. The Board of Governors of the Federal Reserve System 
shall be authorized and empowered:
  (a)(1) * * *
  (2) To require any depository institution specified in this 
paragraph to make, at such intervals as the Board may 
prescribe, such reports of its liabilities and assets as the 
Board may determine to be necessary or desirable to enable the 
Board to discharge its responsibility to monitor and control 
monetary and credit aggregates. Such reports shall be made (A) 
directly to the Board in the case of member banks and in the 
case of other depository institutions whose reserve 
requirements under section 19 of this Act exceed zero, and (B) 
for all other reports to the Board through the (i) Federal 
Deposit Insurance Corporation in the case of insured State 
nonmember banks, savings banks, and mutual savings banks, (ii) 
National Credit Union Administration Board in the case of 
insured credit unions, [(iii) the Director of the Office of 
Thrift Supervision in the case of any savings association which 
is an insured depository institution (as defined in section 3 
of the Federal Deposit Insurance Act) or which is a member as 
defined in section 2 of the Federal Home Loan Bank Act, and 
(iv)] and (iii) such State officer or agency as the Board may 
designate in the case of any other type of bank, savings and 
loan association, or credit union. The Board shall endeavor to 
avoid the imposition of unnecessary burdens on reporting 
institutions and the duplication of other reporting 
requirements. Except as otherwise required by law, any data 
provided to any department, agency, or instrumentality of the 
United States pursuant to other reporting requirements shall be 
made available to the Board. The Board may classify depository 
institutions for the purposes of this paragraph and may impose 
different requirements on each such class.
          * * * * * * *
  [(m) Upon the affirmative vote of not less than six of its 
members the Board of Governors of the Federal Reserve System 
shall have power to fix from time to time for each Federal 
reserve district the percentage of individual bank capital and 
surplus which may be represented by loans secured by stock or 
bond collateral made by member banks within such district, but 
no such loan shall be made by any such bank to any person in an 
amount in excess of 15 percent of the unimpaired capital and 
surplus of such bank: Provided, That with respect to loans 
represented by obligations secured by not less than a like 
amount of bonds or notes of the United States issued since 
April 24, 1917, certificates of indebtedness of the United 
States, Treasury bills of the United States, or obligations 
fully guaranteed both as to principal and interest by the 
United States, such limitation of 15 percent on loans to any 
person shall not apply, but State member banks shall be subject 
to the same limitations and conditions as are applicable in the 
case of national banks under section 5200(c)(4) of the Revised 
Statutes. Any percentage so fixed by the Board of Governors of 
the Federal Reserve System shall be subject to change from time 
to time upon ten days' notice, and it shall be the duty of the 
Board to establish such percentages with a view to preventing 
the undue use of bank loans for the speculative carrying of 
securities. The Board of Governors of the Federal Reserve 
System shall have power to direct any member bank to refrain 
from further increase of its loans secured by stock or bond 
collateral for any period up to one year under penalty of 
suspension of all rediscount privileges at Federal reserve 
banks.]
  (m) [Repealed].
          * * * * * * *
  Sec. 19. (a) * * *
  (b) Reserve Requirements.--
          (1) Definitions.--The following definitions and rules 
        apply to this subsection, subsection (c), section 11A, 
        the first paragraph of section 13, and the second, 
        thirteenth, and fourteenth paragraphs of section 16:
                  (A) The term ``depository institution'' 
                means--
                          (i) any insured bank as defined in 
                        section 3 of the Federal Deposit 
                        Insurance Act or any bank which is 
                        eligible to make application to become 
                        an insured bank under section 5 of such 
                        Act, or any wholesale financial 
                        institution subject to section 9B of 
                        this Act;
          * * * * * * *
                          (v) any member as defined in section 
                        2 of the Federal Home Loan Bank Act; 
                        and
                          [(vi) any savings association (as 
                        defined in section 3 of the Federal 
                        Deposit Insurance Act) which is an 
                        insured depository institution (as 
                        defined in such Act) or is eligible to 
                        apply to become an insured depository 
                        institution under the Federal Deposit 
                        Insurance Act; and]
                          [(vii)] (vi) for the purpose of 
                        section 13 and the fourteenth paragraph 
                        of section 16, any association or 
                        entity which is wholly owned by or 
                        which consists only of institutions 
                        referred to in clauses (i) through 
                        (vi).
          * * * * * * *
                  (F) In order to prevent evasions of the 
                reserve requirements imposed by this 
                subsection, after consultation with the Board 
                of Directors of the Federal Deposit Insurance 
                Corporation, [the Director of the Office of 
                Thrift Supervision,] and the National Credit 
                Union Administration Board, the Board of 
                Governors of the Federal Reserve System is 
                authorized to determine, by regulation or 
                order, that an account or deposit is a 
                transaction account if such account or deposit 
                may be used to provide funds directly or 
                indirectly for the purpose of making payments 
                or transfers to third persons or others.
          * * * * * * *
          (4) Supplemental reserves.--(A) * * *
          (B) The Board may require the supplemental reserve 
        authorized under subparagraph (A) only after 
        consultation with the Board of Directors of the Federal 
        Deposit Insurance Corporation, [the Director of the 
        Office of Thrift Supervision,] and the National Credit 
        Union Administration Board. The Board shall promptly 
        transmit to the Congress a report with respect to any 
        exercise of its authority to require supplemental 
        reserves under subparagraph (A) and such report shall 
        state the basis for the determination to exercise such 
        authority.
          * * * * * * *

              restrictions on transactions with affiliates

  Sec. 23B. (a) In General.--
          (1) * * *
          * * * * * * *
          (4) Insurance subsidiary of national bank.--For 
        purposes of this section, a subsidiary of a national 
        bank which engages in activities as an agent pursuant 
        to section 5136A(a)(2) shall be deemed to be an 
        affiliate of the national bank and not a subsidiary of 
        the bank.
          * * * * * * *
                              ----------                              


                      TITLE 18, UNITED STATES CODE

          * * * * * * *

                 CHAPTER 47--FRAUD AND FALSE STATEMENTS

          * * * * * * *
Sec.
1001.  Statements or entries generally.
     * * * * * * *
1008. Misrepresentations regarding financial institution liability for 
          obligations of affiliates.
     * * * * * * *

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

  (a) In General.--No institution-affiliated party of an 
insured depository institution or institution-affiliated party 
of a subsidiary or affiliate of an insured depository 
institution shall fraudulently represent that the institution 
is or will be liable for any obligation of a subsidiary or 
other affiliate of the institution.
  (b) Criminal Penalty.--Whoever violates subsection (a) shall 
be fined under this title, imprisoned for not more than 1 year, 
or both.
  (c) Institution-Affiliated Party Defined.--For purposes of 
this section, the term ``institution-affiliated party'' with 
respect to a subsidiary or affiliate has the same meaning as in 
section 3 except references to an insured depository 
institution shall be deemed to be references to a subsidiary or 
affiliate of an insured depository institution.
  (d) Other Definitions.--For purposes of this section, the 
terms ``affiliate'', ``insured depository institution'', and 
``subsidiary'' have same meanings as in section 3 of the 
Federal Deposit Insurance Act.
          * * * * * * *
                              ----------                              


       SECTION 1101 OF THE RIGHT TO FINANCIAL PRIVACY ACT OF 1978

                              definitions

      Sec. 1101. For the purpose of this title, the term--
          (1) * * *
          * * * * * * *
          (6) ``holding company'' means--
                  (A) any bank holding company (as defined in 
                section 2 of the Bank Holding Company Act of 
                1956); and
                  (B) any company described in section 4(f)(1) 
                of the Bank Holding Company Act of 1956[; and].
                  [(C) any savings and loan holding company (as 
                defined in the Home Owners' Loan Act);]
          (7) ``supervisory agency'' means with respect to any 
        particular financial institution, holding company, or 
        any subsidiary of a financial institution or holding 
        company, any of the following which has statutory 
        authority to examine the financial condition, business 
        operations, or records or transactions of that 
        institution, holding company, or subsidiary--
                  (A) the Federal Deposit Insurance 
                Corporation;
                  [(B) Director, Office of Thrift Supervision;]
                  [(C)] (B) the National Credit Union 
                Administration;
                  [(D)] (C) the Board of Governors of the 
                Federal Reserve System;
                  [(E)] (D) the Comptroller of the Currency;
                  [(F)] (E) the Securities and Exchange 
                Commission;
                  [(G)] (F) the Secretary of the Treasury, with 
                respect to the Bank Secrecy Act and the 
                Currency and Foreign Transactions Reporting Act 
                (Public Law 91-508, title I and II); or
                  (G) the Commodity Futures Trading Commission; 
                or
                  (H) any State banking or securities 
                department or agency; and
          * * * * * * *

                           use of information

    Sec. 1112. (a) * * *
          * * * * * * *
    (e) Notwithstanding section 1101(6) or any other provision 
of [this title] law, the exchange of financial records, 
examination reports or other information with respect to a 
financial institution, holding company, or a subsidiary of a 
depository institution or holding company, among and between 
the five member supervisory agencies of the Federal Financial 
Institutions Examination Council [and the Securities and 
Exchange Commission], the Securities and Exchange Commission, 
and the Commodity Futures Trading Commission is permitted.
          * * * * * * *
                              ----------                              


                   INTERNATIONAL BANKING ACT OF 1978

          * * * * * * *

                         nonbanking activities

  Sec. 8. (a) * * *
          * * * * * * *
  (c)(1) * * *
          * * * * * * *
          (3) Termination of grandfathered rights.--
                  (A) In general.--If any foreign bank or 
                foreign company files a declaration under 
                section 6(b)(1)(D) or which receives a 
                determination under section 10(e)(1) of the 
                Bank Holding Company Act of 1956, any authority 
                conferred by this subsection on any foreign 
                bank or company to engage in any activity which 
                the Board has determined to be permissible for 
                financial holding companies under section 6 of 
                such Act shall terminate immediately.
                  (B) Restrictions and requirements 
                authorized.--If a foreign bank or company that 
                engages, directly or through an affiliate 
                pursuant to paragraph (1), in an activity which 
                the Board has determined to be permissible for 
                financial holding companies under section 6 of 
                the Bank Holding Company Act of 1956 has not 
                filed a declaration with the Board of its 
                status as a financial holding company under 
                such section or received a determination under 
                section 10(e)(1) by the end of the 2-year 
                period beginning on the date of enactment of 
                the Financial Services Act of 1997, the Board, 
                giving due regard to the principle of national 
                treatment and equality of competitive 
                opportunity, may impose such restrictions and 
                requirements on the conduct of such activities 
                by such foreign bank or company as are 
                comparable to those imposed on a financial 
                holding company organized under the laws of the 
                United States, including a requirement to 
                conduct such activities in compliance with any 
                prudential safeguards established under section 
                5(h) of the Bank Holding Company Act of 1956.
          * * * * * * *

SEC. 15. COOPERATION WITH FOREIGN SUPERVISORS.

  (a) Disclosure of Supervisory Information to Foreign 
Supervisors.--Notwithstanding any other provision of law, the 
Board, Comptroller of the Currency, [Federal Deposit Insurance 
Corporation, and Director of the Office of Thrift Supervision] 
and Federal Deposit Insurance Corporation may disclose 
information obtained in the course of exercising supervisory or 
examination authority to any foreign bank regulatory or 
supervisory authority if the Board, Comptroller, Corporation, 
or Director determines that such disclosure is appropriate and 
will not prejudice the interests of the United States.
  (b) Requirement of Confidentiality.--Before making any 
disclosure of any information to a foreign authority, the 
Board, Comptroller of the Currency, [Federal Deposit Insurance 
Corporation, and Director of the Office of Thrift Supervision] 
and Federal Deposit Insurance Corporation shall obtain, to the 
extent necessary, the agreement of such foreign authority to 
maintain the confidentiality of such information to the extent 
possible under applicable law.
          * * * * * * *
                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

              TITLE I--REGULATION OF SECURITIES EXCHANGES

          * * * * * * *

                  definitions and application of title

  Sec. 3. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *
          * * * * * * *
          [(4) The term ``broker'' means any person engaged in 
        the business of effecting transactions in securities 
        for the account of others, but does not include a bank.
          [(5) The term ``dealer'' means any person engaged in 
        the business of buying and selling securities for his 
        own account, through a broker or otherwise, but does 
        not include a bank, or any person insofar as he buys or 
        sells securities for his own account, either 
        individually or in some fiduciary capacity, but not as 
        a part of a regular business.]
          (4) Broker.--
                  (A) In general.--The term ``broker'' means 
                any person engaged in the business of effecting 
                transactions in securities for the account of 
                others.
                  (B) Exception for certain bank activities.--A 
                bank shall not be considered to be a broker 
                because the bank engages in any of the 
                following activities under the conditions 
                described:
                          (i) Third party brokerage 
                        arrangements.--The bank enters into a 
                        contractual or other arrangement with a 
                        broker or dealer registered under this 
                        title under which the broker or dealer 
                        offers brokerage services on or off the 
                        premises of the bank if--
                                  (I) such broker or dealer is 
                                clearly identified as the 
                                person performing the brokerage 
                                services;
                                  (II) the broker or dealer 
                                performs brokerage services in 
                                an area that is clearly marked 
                                and, to the extent practicable, 
                                physically separate from the 
                                routine deposit-taking 
                                activities of the bank;
                                  (III) any materials used by 
                                the bank to advertise or 
                                promote generally the 
                                availability of brokerage 
                                services under the contractual 
                                or other arrangement clearly 
                                indicate that the brokerage 
                                services are being provided by 
                                the broker or dealer and not by 
                                the bank;
                                  (IV) any materials used by 
                                the bank to advertise or 
                                promote generally the 
                                availability of brokerage 
                                services under the contractual 
                                or other arrangement are in 
                                compliance with the Federal 
                                securities laws before 
                                distribution;
                                  (V) bank employees (other 
                                than associated persons of a 
                                broker or dealer who are 
                                qualified pursuant to the rules 
                                of a self-regulatory 
                                organization) perform only 
                                clerical or ministerial 
                                functions in connection with 
                                brokerage transactions 
                                including scheduling 
                                appointments with the 
                                associated persons of a broker 
                                or dealer, except that bank 
                                employees may forward customer 
                                funds or securities and may 
                                describe in general terms the 
                                range of investment vehicles 
                                available from the bank and the 
                                broker or dealer under the 
                                contractual or other 
                                arrangement;
                                  (VI) bank employees do not 
                                directly receive incentive 
                                compensation for any brokerage 
                                transaction unless such 
                                employees are associated 
                                persons of a broker or dealer 
                                and are qualified pursuant to 
                                the rules of a self-regulatory 
                                organization, except that the 
                                bank employees may receive 
                                compensation for the referral 
                                of any customer if the 
                                compensation is a nominal one-
                                time cash fee of a fixed dollar 
                                amount and the payment of the 
                                fee is not contingent on 
                                whether the referral results in 
                                a transaction;
                                  (VII) such services are 
                                provided by the broker or 
                                dealer on a basis in which all 
                                customers which receive any 
                                services are fully disclosed to 
                                the broker or dealer;
                                  (VIII) the bank does not 
                                carry a securities account of 
                                the customer except in a 
                                customary custodian or trustee 
                                capacity; and
                                  (IX) the bank, broker, or 
                                dealer informs each customer 
                                that the brokerage services are 
                                provided by the broker or 
                                dealer and not by the bank and 
                                that the securities are not 
                                deposits or other obligations 
                                of the bank, are not guaranteed 
                                by the bank, and are not 
                                insured by the Federal Deposit 
                                Insurance Corporation.
                          (ii) Trust activities.--The bank--
                                  (I) effects transactions in a 
                                trustee capacity and is 
                                primarily compensated based on 
                                a percentage of assets under 
                                management; or
                                  (II) is an insured bank and--
                                          (aa) effects 
                                        transactions in a 
                                        fiduciary capacity in 
                                        its trust department in 
                                        connection with the 
                                        provision of investment 
                                        advice or the exercise 
                                        of investment 
                                        discretion;
                                          (bb) is primarily 
                                        compensated based on a 
                                        percentage of assets 
                                        under management, and 
                                        does not receive 
                                        incentive compensation 
                                        for such brokerage 
                                        activities;
                                          (cc) does not 
                                        publicly solicit 
                                        brokerage business, 
                                        other than by 
                                        advertising that it 
                                        effects transactions in 
                                        securities in 
                                        conjunction with 
                                        advertising its other 
                                        trust activities; and
                                          (dd) such services 
                                        are not provided by an 
                                        employee of the bank 
                                        who is also an employee 
                                        of a broker or dealer.
                          (iii) Permissible securities 
                        transactions.--The bank effects 
                        transactions in--
                                  (I) commercial paper, bankers 
                                acceptances, or commercial 
                                bills;
                                  (II) exempted securities, 
                                other than transactions in 
                                municipal revenue bonds that a 
                                national bank is not explicitly 
                                authorized to buy or sell for 
                                its own account by the Seventh 
                                paragraph of section 5136 of 
                                the Revised Statutes of the 
                                United States (as in effect on 
                                September 1, 1997) without 
                                percentage limitation on the 
                                amount of the investment for 
                                its own account;
                                  (III) qualified Canadian 
                                government obligations as 
                                defined in section 5136 of the 
                                Revised Statutes, in conformity 
                                with section 15C of this title 
                                and the rules and regulations 
                                thereunder, or obligations of 
                                the North American Development 
                                Bank; or
                                  (IV) any standardized, credit 
                                enhanced debt security issued 
                                by a foreign government 
                                pursuant to the March 1989 plan 
                                of then Secretary of the 
                                Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank 
                                loans.
                          (iv) Employee and shareholder benefit 
                        plans.--The bank effects transactions 
                        in--
                                  (I) the securities of an 
                                issuer as part of any pension, 
                                retirement, profit-sharing, 
                                bonus, thrift, savings, 
                                incentive, or other similar 
                                benefit plan for the employees 
                                of that issuer or its 
                                subsidiaries, if the bank does 
                                not--
                                          (aa) solicit 
                                        transactions; or
                                          (bb) receive any 
                                        compensation directly 
                                        or indirectly from 
                                        employees for effecting 
                                        such transactions, 
                                        other than a flat per 
                                        order processing fee 
                                        that does not exceed 
                                        the bank's incremental 
                                        costs directly 
                                        attributable to 
                                        effecting such 
                                        transactions; or
                                  (II) the securities of an 
                                issuer as part of that issuer's 
                                dividend reinvestment and stock 
                                purchase plan for its 
                                shareholders, if the bank does 
                                not--
                                          (aa) solicit 
                                        transactions;
                                          (bb) receive any 
                                        compensation directly 
                                        or indirectly from 
                                        shareholders for 
                                        effecting such 
                                        transactions, other 
                                        than a flat per order 
                                        processing fee that 
                                        does not exceed the 
                                        bank's incremental 
                                        costs directly 
                                        attributable to 
                                        effecting such 
                                        transactions; or
                                          (cc) net 
                                        shareholders' buy and 
                                        sell orders.
                          (v) Sweep accounts.--The bank effects 
                        transactions as part of a program for 
                        the investment or reinvestment of bank 
                        deposit funds into any no-load, open-
                        end management investment company 
                        registered under the Investment Company 
                        Act of 1940 that holds itself out as a 
                        money market fund.
                          (vi) Affiliate transactions.--The 
                        bank effects transactions for the 
                        account of any affiliate of the bank 
                        (as defined in section 2 of the Bank 
                        Holding Company Act of 1956) other 
                        than--
                                  (I) a registered broker or 
                                dealer; or
                                  (II) an affiliate that is 
                                engaged in merchant banking, as 
                                described in section 
                                17(i)(7)(B)(ii)(VIII) of this 
                                title.
                          (vii) Private securities offerings.--
                        The bank--
                                  (I) effects sales as part of 
                                a primary offering of 
                                securities not involving a 
                                public offering, pursuant to 
                                section 3(b), 4(2), or 4(6) of 
                                the Securities Act of 1933 or 
                                the rules and regulations 
                                issued thereunder;
                                  (II) at any time after one 
                                year after the date of 
                                enactment of the Financial 
                                Services Act of 1997, is not 
                                affiliated with a broker or 
                                dealer that has been registered 
                                for more than one year; and
                                  (III) effects transactions 
                                exclusively with qualified 
                                investors.
                          (viii) Safekeeping and custody 
                        services.--The bank--
                                  (I) provides safekeeping or 
                                custody services with respect 
                                to securities that are pledged 
                                by one customer to another 
                                customer in connection with a 
                                repurchase agreement or similar 
                                financing arrangement;
                                  (II) facilitates the transfer 
                                of funds or securities, as a 
                                custodian or a clearing agency, 
                                in connection with the 
                                clearance and settlement of its 
                                customers' transactions in 
                                securities; or
                                  (III) effects or facilitates 
                                the lending or borrowing of 
                                securities with or on behalf of 
                                its customers as part of 
                                services provided to those 
                                customers pursuant to subclause 
                                (I) or (II).
                          (ix) Banking products.--The bank 
                        effects transactions in banking 
                        products, as defined in paragraph (54) 
                        of this subsection.
                          (x) De minimis exception.--The bank 
                        effects, other than in transactions 
                        referred to in clauses (i) through 
                        (ix), not more than 500 transactions in 
                        securities in any calendar year, and 
                        such transactions are not effected by 
                        an employee of the bank who is also an 
                        employee of a broker or dealer.
                  (C) Exception for entities subject to section 
                15(e).--The term ``broker'' does not include a 
                bank that--
                          (i) was, immediately prior to the 
                        enactment of the Financial Services Act 
                        of 1997, subject to section 15(e); and
                          (ii) is subject to such restrictions 
                        and requirements as the Commission 
                        considers appropriate.
          (5) Dealer.--
                  (A) In general.--The term ``dealer'' means 
                any person engaged in the business of buying 
                and selling securities for such person's own 
                account through a broker or otherwise.
                  (B) Exception for person not engaged in the 
                business of dealing.--The term ``dealer'' does 
                not include a person that buys or sells 
                securities for such person's own account, 
                either individually or in a fiduciary capacity, 
                but not as a part of a regular business.
                  (C) Exception for certain bank activities.--A 
                bank shall not be considered to be a dealer 
                because the bank engages in any of the 
                following activities under the conditions 
                described:
                          (i) Permissible securities 
                        transactions.--The bank buys or sells--
                                  (I) commercial paper, bankers 
                                acceptances, or commercial 
                                bills;
                                  (II) exempted securities, 
                                other than purchases and sales 
                                of municipal revenue bonds that 
                                a national bank is not 
                                explicitly authorized to buy or 
                                sell for its own account by the 
                                Seventh paragraph of section 
                                5136 of the Revised Statutes of 
                                the United States (as in effect 
                                on September 1, 1997) without 
                                percentage limitation on the 
                                amount of the investment for 
                                its own account;
                                  (III) qualified Canadian 
                                government obligations as 
                                defined in section 5136 of the 
                                Revised Statutes of the United 
                                States, in conformity with 
                                section 15C of this title and 
                                the rules and regulations 
                                thereunder, or obligations of 
                                the North American Development 
                                Bank; or
                                  (IV) any standardized, credit 
                                enhanced debt security issued 
                                by a foreign government 
                                pursuant to the March 1989 plan 
                                of then Secretary of the 
                                Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank 
                                loans.
                          (ii) Investment, trustee, and 
                        fiduciary transactions.--The bank buys 
                        or sells securities for investment 
                        purposes--
                                  (I) for the bank; or
                                  (II) for accounts for which 
                                the bank acts as a trustee or 
                                fiduciary.
                          (iii) Asset-backed transactions.--The 
                        bank engages in the issuance or sale to 
                        qualified investors, through a grantor 
                        trust or otherwise, of securities 
                        backed by or representing an interest 
                        in notes, drafts, acceptances, loans, 
                        leases, receivables, other obligations, 
                        or pools of any such obligations 
                        predominantly originated by the bank, 
                        or a syndicate of banks of which the 
                        bank is a member, or an affiliate of 
                        any such bank other than a broker or 
                        dealer.
                          (iv) Transactions in banking 
                        products.--The bank buys or sells 
                        banking products, as defined in 
                        paragraph (54) of this subsection.
                          (v) Derivative instruments.--The bank 
                        issues, buys, or sells any derivative 
                        instrument to which the bank is a 
                        party--
                                  (I) to or from a corporation, 
                                limited liability company, or 
                                partnership that owns and 
                                invests on a discretionary 
                                basis, not less than 
                                $10,000,000 in investments, or 
                                to or from a qualified 
                                investor, except that if the 
                                instrument provides for the 
                                delivery of one or more 
                                securities (other than a 
                                derivative instrument or 
                                government security), the 
                                transaction shall be effected 
                                with or through a registered 
                                broker or dealer; or
                                  (II) to or from other 
                                persons, except that if the 
                                derivative instrument provides 
                                for the delivery of one or more 
                                securities (other than a 
                                derivative instrument or 
                                government security), or is a 
                                security (other than a 
                                government security), the 
                                transaction shall be effected 
                                with or through a registered 
                                broker or dealer; or
                                  (III) to or from any person 
                                if the instrument is neither a 
                                security nor provides for the 
                                delivery of one or more 
                                securities (other than a 
                                derivative instrument).
          * * * * * * *
          (12)(A) The term ``exempted security'' or ``exempted 
        securities'' includes--
                  (i) government securities, as defined in 
                paragraph (42) of this subsection;
                  (ii) municipal securities, as defined in 
                paragraph (29) of this subsection;
                  [(iii) any interest or participation in any 
                common trust fund or similar fund maintained by 
                a bank exclusively for the collective 
                investment and reinvestment of assets 
                contributed thereto by such bank in its 
                capacity as trustee, executor, administrator, 
                or guardian;]
                  (iii) any interest or participation in any 
                common trust fund or similar fund that is 
                excluded from the definition of the term 
                ``investment company'' under section 3(c)(3) of 
                the Investment Company Act of 1940;
          * * * * * * *
          (18) The term ``person associated with a broker or 
        dealer'' or ``associated person of a broker or dealer'' 
        means any partner, officer, director, or branch manager 
        of such broker or dealer (or any person occupying a 
        similar status or performing similar functions), any 
        person directly or indirectly controlling, controlled 
        by, or under common control with such broker or dealer 
        (including an investment bank holding company, 
        wholesale financial institution, or institution 
        described in subparagraph (D), (F), or (G) of section 
        2(c)(2) of the Bank Holding Company Act of 1956 that is 
        affiliated with an investment bank holding company), or 
        any employee of such broker or dealer, except that any 
        person associated with a broker or dealer whose 
        functions are solely clerical or ministerial shall not 
        be included in the meaning of such term for purposes of 
        section 15(b) of this title (other than paragraph (6) 
        thereof).
          * * * * * * *
          (21) The term ``persons associated with a member'' or 
        ``associated person of a member'' when used with 
        respect to a member of a national securities exchange 
        or registered securities association means any partner, 
        officer, director, or branch manager of such member (or 
        any person occupying a similar status or performing 
        similar functions), any person directly or indirectly 
        controlling, controlled by, or under common control 
        with such member (including an investment bank holding 
        company, wholesale financial institution or institution 
        described in subparagraph (D), (F), or (G) of section 
        2(c)(2) of the Bank Holding Company Act of 1956 that is 
        affiliated with an investment bank holding company), or 
        any employee of such member.
          * * * * * * *
          (34) The term ``appropriate regulatory agency'' 
        means--
                  (A) * * *
          * * * * * * *
                  (H) When used with respect to a wholesale 
                financial institution--
                          (i) the Board of Governors of the 
                        Federal Reserve System, in the case of 
                        a wholesale financial institution that 
                        has a national bank charter, a State 
                        bank charter, or is operating under the 
                        Code of Law for the District of 
                        Columbia; and
                          (ii) the Comptroller of the Currency, 
                        in the case of a wholesale financial 
                        institution that has a national bank 
                        charter or is operating under the Code 
                        of Law for the District of Columbia.
                  (I) When used with respect to an institution 
                described in subparagraph (D), (F), or (G) of 
                section 2(c)(2) of the Bank Holding Company Act 
                of 1956--
                          (i) the Comptroller of the Currency, 
                        in the case of a national bank or a 
                        bank in the District of Columbia 
                        examined by the Comptroller of the 
                        Currency;
                          (ii) the Board of Governors of the 
                        Federal Reserve System, in the case of 
                        a State member bank of the Federal 
                        Reserve System or any corporation 
                        chartered under section 25A of the 
                        Federal Reserve Act;
                          (iii) the Federal Deposit Insurance 
                        Corporation, in the case of any other 
                        bank the deposits of which are insured 
                        in accordance with the Federal Deposit 
                        Insurance Act; or
                          (iv) the Commission in the case of 
                        all other such institutions.
          * * * * * * *
          (42) The term ``government securities'' means--
                  (A) * * *
          * * * * * * *
                  (C) securities issued or guaranteed as to 
                principal or interest by any corporation the 
                securities of which are designated, by statute 
                specifically naming such corporation, to 
                constitute exempt securities within the meaning 
                of the laws administered by the Commission; 
                [or]
                  (D) for purposes of sections 15C and 17A, any 
                put, call, straddle, option, or privilege on a 
                security described in subparagraph (A), (B), or 
                (C) other than a put, call, straddle, option, 
                or privilege--
                          (i) that is traded on one or more 
                        national securities exchanges; or
                          (ii) for which quotations are 
                        disseminated through an automated 
                        quotation system operated by a 
                        registered securities association[.]; 
                        or
                  (E) for purposes of section 15C as applied to 
                a bank, a qualified Canadian government 
                obligation as defined in section 5136 of the 
                Revised Statutes.
          * * * * * * *
          (54) Banking product.--
                  (A) Definition.--The term ``banking product'' 
                means--
                          (i) a deposit account, savings 
                        account, certificate of deposit, or 
                        other deposit instrument issued by a 
                        bank;
                          (ii) a banker's acceptance;
                          (iii) a letter of credit issued or 
                        loan made by a bank;
                          (iv) a debit account at a bank 
                        arising from a credit card or similar 
                        arrangement;
                          (v) a participation in a loan which 
                        the bank or an affiliate of the bank 
                        (other than a broker or dealer) funds, 
                        participates in, or owns that is sold--
                                  (I) to qualified investors; 
                                or
                                  (II) by an employee of a bank 
                                who is not also an employee of 
                                a broker or dealer to other 
                                persons that--
                                          (aa) have the 
                                        opportunity to review 
                                        and assess any material 
                                        information, including 
                                        information regarding 
                                        the borrower's 
                                        creditworthiness; and
                                          (bb) based on such 
                                        factors as financial 
                                        sophistication, net 
                                        worth, and knowledge 
                                        and experience in 
                                        financial matters, have 
                                        the capability to 
                                        evaluate the 
                                        information available; 
                                        or
                          (vi) any derivative instrument, 
                        whether or not individually negotiated, 
                        involving or relating to foreign 
                        currencies, except options on foreign 
                        currencies that trade on a national 
                        securities exchange.
                  (B) Classification limited.--Classification 
                of a particular product as a banking product 
                pursuant to this paragraph shall not be 
                construed as finding or implying that such 
                product is or is not a security for any purpose 
                under the securities laws, or is or is not an 
                account, agreement, contract, or transaction 
                for any purpose under the Commodity Exchange 
                Act.
          (55) Derivative instrument.--
                  (A) Definition.--The term ``derivative 
                instrument'' means any individually negotiated 
                contract, agreement, warrant, note, or option 
                that is based, in whole or in part, on the 
                value of, any interest in, or any quantitative 
                measure or the occurrence of any event relating 
                to, one or more commodities, securities, 
                currencies, interest or other rates, indices, 
                or other assets, but does not include a banking 
                product.
                  (B) Classification limited.-- Classification 
                of a particular contract as a derivative 
                instrument pursuant to this paragraph shall not 
                be construed as finding or implying that such 
                instrument is or is not a security for any 
                purpose under the securities laws, or is or is 
                not an account, agreement, contract, or 
                transaction for any purpose under the Commodity 
                Exchange Act.
          (56) Qualified investor.--
                  (A) Definition.--The term ``qualified 
                investor'' means--
                          (i) any investment company registered 
                        with the Commission under section 8 of 
                        the Investment Company Act of 1940;
                          (ii) any issuer eligible for an 
                        exclusion from the definition of 
                        investment company pursuant to section 
                        3(c)(7) of the Investment Company Act 
                        of 1940;
                          (iii) any bank (as defined in 
                        paragraph (6) of this subsection), 
                        savings and loan association (as 
                        defined in section 3(b) of the Federal 
                        Deposit Insurance Act), broker, dealer, 
                        insurance company (as defined in 
                        section 2(a)(13) of the Securities Act 
                        of 1933), or business development 
                        company (as defined in section 2(a)(48) 
                        of the Investment Company Act of 1940);
                          (iv) any small business investment 
                        company licensed by the United States 
                        Small Business Administration under 
                        section 301(c) or (d) of the Small 
                        Business Investment Act of 1958;
                          (v) any State sponsored employee 
                        benefit plan, or any other employee 
                        benefit plan, within the meaning of the 
                        Employee Retirement Income Security Act 
                        of 1974, other than an individual 
                        retirement account, if the investment 
                        decisions are made by a plan fiduciary, 
                        as defined in section 3(21) of that 
                        Act, which is either a bank, savings 
                        and loan association, insurance 
                        company, or registered investment 
                        adviser;
                          (vi) any trust whose purchases of 
                        securities are directed by a person 
                        described in clauses (i) through (v) of 
                        this subparagraph;
                          (vii) any market intermediary exempt 
                        under section 3(c)(2) of the Investment 
                        Company Act of 1940;
                          (viii) any associated person of a 
                        broker or dealer other than a natural 
                        person; or
                          (ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International 
                        Banking Act of 1978).
                  (B) Additional authority.--The Commission 
                may, by rule or order, define a ``qualified 
                investor'' as any other person, other than a 
                natural person, taking into consideration such 
                factors as the person's financial 
                sophistication, net worth, and knowledge and 
                experience in financial matters.
          * * * * * * *

           registration and regulation of brokers and dealers

  Sec. 15. (a) * * *
  (b)(1) * * *
          * * * * * * *
  (6)(A) With respect to any person who is associated, 
including an investment bank holding company, a wholesale 
financial institution, or institution described in subparagraph 
(D), (F), or (G) of section 2(c)(2) of the Bank Holding Company 
Act of 1956, who is seeking to become associated, or, at the 
time of the alleged misconduct, who was associated or was 
seeking to become associated with a broker or dealer, or any 
person participating, or, at the time of the alleged 
misconduct, who was participating, in an offering of anypenny 
stock, the Commission, by order, shall censure, place limitations on 
the activities or functions of such person, or suspend for a period not 
exceeding 12 months, or bar such person from being associated with a 
broker or dealer, or from participating in an offering of penny stock, 
if the Commission finds, on the record after notice and opportunity for 
a hearing, that such censure, placing of limitations, suspension, or 
bar is in the public interest and that such person--
          (i) * * *
          * * * * * * *

                   registered securities associations

  Sec. 15A. (a) * * *
          * * * * * * *
  (j) Registration for Sales of Private Securities Offerings.--
A registered securities association shall create a limited 
qualification category for any associated person of a member 
who effects sales as part of a primary offering of securities 
not involving a public offering, pursuant to section 3(b), 
4(2), or 4(6) of the Securities Act of 1933 and the rules and 
regulations thereunder, and shall deem qualified in such 
limited qualification category, without testing, any bank 
employee who, in the six month period preceding the date of 
enactment of this Act, engaged in effecting such sales.
          * * * * * * *

  accounts and records, examinations of exchanges, members, and others

  Sec. 17. (a) * * *
          * * * * * * *
  (i) Investment Bank Holding Companies.--
          (1) Mandatory supervision of any investment bank 
        holding company substantially engaged in the securities 
        business, having an affiliate that is a wholesale 
        financial institution.--
                  (A) Mandatory supervision.--An investment 
                bank holding company that--
                          (i) is substantially engaged in the 
                        securities business;
                          (ii) controls one or more wholesale 
                        financial institutions that, in the 
                        aggregate, have--
                                  (I) consolidated risk-
                                weighted assets that are less 
                                than $15,000,000,000; and
                                  (II) annual gross revenues 
                                that represent less than 25 
                                percent of the consolidated 
                                annual gross revenues of the 
                                company;
                          (iii) does not control--
                                  (I) a bank other than a 
                                wholesale financial 
                                institution;
                                  (II) an insured bank other 
                                than an institution permitted 
                                under subparagraph (D), (F), or 
                                (G) of section 2(c)(2) of the 
                                Bank Holding Company Act of 
                                1956; or
                                  (III) a savings association;
                          (iv) is not a foreign bank; and
                          (v) has not elected to be supervised 
                        by the Board of Governors of the 
                        Federal Reserve System,
                shall be regulated by the Commission as a 
                supervised investment bank holding company in 
                accordance with this section and comply with 
                the rules promulgated by the Commission 
                applicable to supervised investment bank 
                holding companies.
                  (B) Method of calculation.--
                          (i) Risk-weighted assets.--For 
                        purposes of subparagraph (A)(ii)(I), 
                        the consolidated risk-weighted assets 
                        of a wholesale financial institution 
                        shall--
                                  (I) be based on the average 
                                consolidated risk-weighted 
                                assets of the institution for 
                                the four previous calendar 
                                quarters; and
                                  (II) include risk-weighted 
                                claims on affiliates only to 
                                the extent such claims, in the 
                                aggregate, exceed the aggregate 
                                risk-weighted claims of 
                                affiliates on the wholesale 
                                financial institution.
                        For purposes of this clause, the term 
                        ``affiliates'' shall not include any 
                        subsidiary of the wholesale financial 
                        institution.
                          (ii) Indexed growth.--The dollar 
                        amount contained in subparagraph 
                        (A)(ii)(I) shall be adjusted annually 
                        after December 31, 1998, by the annual 
                        percentage increase in the Consumer 
                        Price Index for Urban Wage Earners and 
                        Clerical Workers published by the 
                        Bureau of Labor Statistics.
          (2) Elective supervision of an investment bank 
        holding company not having a bank or savings 
        association affiliate.--
                  (A) In general.--An investment bank holding 
                company that is not--
                          (i) an affiliate of a wholesale 
                        financial institution, an insured bank 
                        (other than an institution described in 
                        paragraph (1)(A)(iii)(II)), or a 
                        savings association,
                          (ii) a foreign bank, foreign company, 
                        or company that is described in section 
                        8(a) of the International Banking Act 
                        of 1978, or
                          (iii) a foreign bank that controls, 
                        directly or indirectly, a corporation 
                        chartered under section 25A of the 
                        Federal Reserve Act,
                may elect to become supervised by filing with 
                the Commission a notice of intention to become 
                supervised, pursuant to subparagraph (B) of 
                this paragraph. Any investment bank holding 
                company filing such a notice shall be 
                supervised in accordance with this section and 
                comply with the rules promulgated by the 
                Commission applicable to supervised investment 
                bank holding companies.
                  (B) Notification of status as a supervised 
                investment bank holding company.--An investment 
                bank holding company that elects under 
                subparagraph (A) to become supervised by the 
                Commission shall file with the Commission a 
                written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents 
                concerning such investment bank holding company 
                as the Commission, by rule, may prescribe as 
                necessary or appropriate in furtherance of the 
                purposes of this section. Unless the Commission 
                finds that such supervision is not necessary or 
                appropriate in furtherance of the purposes of 
                this section, such supervision shall become 
                effective 45 days after receipt of such written 
                notice by the Commission or within such shorter 
                time period as the Commission, by rule or 
                order, may determine.
          (3) Withdrawal from supervision by the commission as 
        an investment bank holding company for companies that 
        must continue to be supervised.--
                  (A) Mandatory withdrawal.--A supervised 
                investment bank holding company that owns or 
                controls one or more wholesale financial 
                institutions, and ceases to meet any 
                requirements of paragraph (1), shall--
                          (i) file a written notice of 
                        withdrawal from Commission supervision 
                        upon such terms and conditions as the 
                        Commission, after consultation with the 
                        Board of Governors of the Federal 
                        Reserve System, deems necessary or 
                        appropriate;
                          (ii) provide a copy of such notice to 
                        the Board of Governors of the Federal 
                        Reserve System; and
                          (iii) be supervised by the Board of 
                        Governors of the Federal Reserve System 
                        under applicable provisions of the Bank 
                        Holding Company Act of 1956.
                  (B) Voluntary withdrawal.--A supervised 
                investment bank holding company described in 
                paragraph (1)(A), upon such terms and 
                conditions as the Commission deems necessary or 
                appropriate after consultation with the Board 
                of Governors of the Federal Reserve System, may 
                elect not to be supervised by the Commission by 
                filing with the Commission a written notice of 
                withdrawal from Commission supervision, and 
                shall provide a copy of such notice to the 
                Board of Governors of the Federal Reserve 
                System.
                  (C) Effective date of withdrawal.--A written 
                notice of withdrawal from Commission 
                supervision pursuant to this paragraph shall 
                become effective 45 days after receipt by the 
                Commission or such shorter or longer period as 
                the Commission, by order, deems necessary or 
                appropriate to prevent evasion of the purposes 
                of this section.
                  (D) Required procedures..--The Commission, 
                after consultation with the Board of Governors 
                of the Federal Reserve System, shall, by rule, 
                establish standards and procedures to require 
                or permit, as appropriate, supervised 
                investment bank holding companies described in 
                paragraph (1)(A) to withdraw from Commission 
                supervision pursuant to this paragraph.
          (4) Election not to be supervised by the commission 
        as an investment bank holding company for companies 
        that are voluntarily regulated.--
                  (A) Voluntary withdrawal.--A supervised 
                investment bank holding company that is 
                supervised pursuant to paragraph (2) may, upon 
                such terms and conditions as the Commission 
                deems necessary or appropriate, elect not to be 
                supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become 
                effective until one year after receipt by the 
                Commission, or such shorter or longer period as 
                the Commission deems necessary or appropriate 
                to ensure effective supervision of the material 
                risks to the supervised investment bank holding 
                company and to the affiliated broker or dealer, 
                or to prevent evasion of the purposes of this 
                section.
                  (B) Discontinuation of commission supervision 
                for companies that are voluntarily regulated.--
                If the Commission finds that any supervised 
                investment bank holding company that is 
                supervised pursuant to paragraph (2) is no 
                longer in existence or has ceased to be an 
                investment bank holding company, or if the 
                Commission finds that continued supervision of 
                such a supervised investment bank holding 
                company is not consistent with the purposes of 
                this section, the Commission may discontinue 
                the supervision pursuant to a rule or order, if 
                any, promulgated by the Commission under this 
                section.
          (5) Supervision of investment bank holding 
        companies.--
                  (A) Recordkeeping and reporting.--
                          (i) In general.--Every supervised 
                        investment bank holding company and 
                        each affiliate thereof shall make and 
                        keep for prescribed periods such 
                        records, furnish copies thereof, and 
                        make such reports, as the Commission 
                        may require by rule, in order to keep 
                        the Commission informed as to--
                                  (I) the company's or 
                                affiliate's activities, 
                                financial condition, policies, 
                                systems for monitoring and 
                                controlling financial and 
                                operational risks, and 
                                transactions and relationships 
                                between any broker, dealer, or 
                                wholesale financial institution 
                                affiliate of the supervised 
                                investment bank holding 
                                company; and
                                  (II) the extent to which the 
                                company or affiliate has 
                                complied with the provisions of 
                                this Act and regulations 
                                prescribed and orders issued 
                                under this Act.
                          (ii) Form and contents.--Such records 
                        and reports shall be prepared in such 
                        form and according to such 
                        specifications (including certification 
                        by an independent public accountant), 
                        as the Commission may require and shall 
                        be provided promptly at any time upon 
                        request by the Commission. Such records 
                        and reports may include--
                                  (I) a balance sheet and 
                                income statement;
                                  (II) an assessment of the 
                                consolidated capital of the 
                                supervised investment bank 
                                holding company;
                                  (III) an independent 
                                auditor's report attesting to 
                                the supervised investment bank 
                                holding company's compliance 
                                with its internal risk 
                                management and internal control 
                                objectives; and
                                  (IV) reports concerning the 
                                extent to which the company or 
                                affiliate has complied with the 
                                provisions of this title and 
                                any regulations prescribed and 
                                orders issued under this title.
                  (B) Use of existing reports.--
                          (i) In general.--The Commission 
                        shall, to the fullest extent possible, 
                        accept reports in fulfillment of the 
                        requirements under this paragraph that 
                        the supervised investment bank holding 
                        company or its affiliates have been 
                        required to provide to another 
                        appropriate regulatory agency or self-
                        regulatory organization.
                          (ii) Availability.--A supervised 
                        investment bank holding company or an 
                        affiliate of such company shall provide 
                        to the Commission, at the request of 
                        the Commission, any report referred to 
                        in clause (i).
                  (C) Examination authority.--
                          (i) Focus of examination authority.--
                        The Commission may make examinations of 
                        any supervised investment bank holding 
                        company and any affiliate of such 
                        company in order to--
                                  (I) inform the Commission 
                                regarding--
                                          (aa) the nature of 
                                        the operations and 
                                        financial condition of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates;
                                          (bb) the financial 
                                        and operational risks 
                                        within the supervised 
                                        investment bank holding 
                                        company that may affect 
                                        any broker, dealer, or 
                                        wholesale financial 
                                        institution controlled 
                                        by such supervised 
                                        investment bank holding 
                                        company; and
                                          (cc) the systems of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates for 
                                        monitoring and 
                                        controlling those 
                                        risks; and
                                  (II) monitor compliance with 
                                the provisions of this 
                                subsection, provisions 
                                governing transactions and 
                                relationships between any 
                                broker or dealer or wholesale 
                                financial institution 
                                affiliated with the supervised 
                                investment bank holding company 
                                and any of the company's other 
                                affiliates, and applicable 
                                provisions of subchapter II of 
                                chapter 53, title 31, United 
                                States Code (commonly referred 
                                to as the ``Bank Secrecy Act'') 
                                and regulations thereunder.
                          (ii) Restricted focus of 
                        examinations.--The Commission shall 
                        limit the focus and scope of any 
                        examination of a supervised investment 
                        bank holding company to--
                                  (I) the company;
                                  (II) any affiliate of the 
                                company (other than a wholesale 
                                financial institution) that, 
                                because of its size, condition, 
                                or activities, the nature or 
                                size of the transactions 
                                between such affiliate and any 
                                affiliated broker, dealer, or 
                                wholesale financial 
                                institution, or the 
                                centralization of functions 
                                within the holding company 
                                system, could, in the 
                                discretion of the Commission, 
                                have a materially adverse 
                                effect on the operational or 
                                financial condition of the 
                                broker or dealer or any 
                                affiliated wholesale financial 
                                institution; and
                                  (III) any wholesale financial 
                                institution affiliate of an 
                                investment bank holding 
                                company, for the purpose of 
                                monitoring and enforcing 
                                compliance by such a wholesale 
                                financial institution or any of 
                                its affiliates with the Federal 
                                securities laws.
                          (iii) Notice.--To the fullest extent 
                        possible, the Commission shall notify 
                        the appropriate regulatory agency prior 
                        to conducting an examination of a 
                        wholesale financial institution.
                          (iv) Deference to other 
                        examinations.--For purposes of this 
                        subparagraph, the Commission shall, to 
                        the fullest extent possible, use the 
                        reports of examination of a wholesale 
                        financial institution or an institution 
                        described in subparagraph (D), (F), or 
                        (G) of section 2(c)(2) of the Bank 
                        Holding Company Act of 1956 made by the 
                        appropriate regulatory agency, or of a 
                        licensed insurance company made by the 
                        appropriate State insurance regulator.
                  (D) Information sharing.--The Commission 
                shall, upon request, provide to the appropriate 
                regulatory agency such reports, records, or 
                other information as the Commission has 
                available concerning any supervised investment 
                bank holding company described in paragraph (1) 
                or any of its affiliates to assist the 
                appropriate regulatory agency in carrying out 
                its responsibilities under the Federal banking 
                laws.
          (6) Holding company capital.--
                  (A) Authority.--If the Commission finds that 
                it is necessary to adequately supervise 
                investment bank holding companies and their 
                broker, dealer, or wholesale financial 
                institution affiliates consistent with the 
                purposes of this subsection, the Commission may 
                adopt capital adequacy rules for supervised 
                investment bank holding companies.
                  (B) Method of calculation.--In developing 
                rules under this paragraph:
                          (i) Double leverage.--The Commission 
                        shall consider the use by the 
                        supervised investment bank holding 
                        company of debt and other liabilities 
                        to fund capital investments in 
                        affiliates.
                          (ii) No unweighted capital ratio.--
                        The Commission shall not impose under 
                        this section a capital ratio that is 
                        not based on appropriate risk-weighting 
                        considerations.
                          (iii) No capital requirement on 
                        regulated entities.--The Commission 
                        shall not, by rule, regulation, 
                        guideline, order or otherwise, impose 
                        any capital adequacy provision on a 
                        nonbanking affiliate (other than a 
                        broker or dealer) that is in compliance 
                        with applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance authority.
                          (iv) Appropriate exclusions.--The 
                        Commission shall take full account of 
                        the applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance regulator.
                  (C) Internal risk management models.--The 
                Commission may incorporate internal risk 
                management models into its capital adequacy 
                rules for supervised investment bank holding 
                companies.
                  (D) Consultation with the board.--The 
                Commission shall consult with the Board of 
                Governors of the Federal Reserve System in 
                developing capital adequacy requirements for 
                investment bank holding companies described in 
                paragraph (1).
          (7) Activities and investments.--
                  (A) In general.--Supervised investment bank 
                holding companies described in paragraph (1) 
                may acquire and own the shares of a wholesale 
                financial institution in accordance with 
                section 3 of the Bank Holding Company Act of 
                1956 and of any institution described in 
                subparagraph (D), (F), and (G) of section 
                2(c)(2) of such Act. Such companies may also 
                engage in activities, and may acquire or retain 
                ownership or control of shares of any company 
                engaged in any activities, to the extent 
                authorized by subparagraphs (B), (C), (D), (E), 
                and (G). Such investment bank holding companies 
                may not otherwise engage directly or indirectly 
                in activities or acquire and retain ownership 
                or control of the shares of companies.
                  (B) Permissible financial activities and 
                investments.--
                          (i) In general.--A supervised 
                        investment bank holding company 
                        described in paragraph (1) may engage 
                        in any activity, and may directly or 
                        indirectly acquire and retain ownership 
                        and control of shares of any company 
                        engaged in any activity--
                                  (I) that is permissible for a 
                                bank holding company under 
                                section 4(c)(1) through (14) of 
                                the Bank Holding Company Act of 
                                1956; or
                                  (II) that are financial in 
                                nature or incidental to such 
                                financial activities, as 
                                determined under clause (ii), 
                                or that the Commission 
                                determines by rule, regulation, 
                                or order pursuant to clause 
                                (iii) to be financial in nature 
                                or incidental to such financial 
                                activities.
                          (ii) Activities that are financial in 
                        nature.--The following activities shall 
                        be considered to be financial in 
                        nature:
                                  (I) Lending, exchanging, 
                                transferring, investing for 
                                others, or safeguarding money 
                                or securities.
                                  (II) Insuring, guaranteeing, 
                                or indemnifying against loss, 
                                harm, damage, illness, 
                                disability, or death, or 
                                providing and issuing 
                                annuities, and acting as 
                                principal, agent, or broker for 
                                purposes of the foregoing.
                                  (III) Providing financial, 
                                investment, or economic 
                                advisory services, including 
                                advising an investment company 
                                (as defined in section 3 of the 
                                Investment Company Act of 
                                1940).
                                  (IV) Issuing or selling 
                                instruments representing 
                                interests in pools of assets 
                                permissible for a bank to hold 
                                directly.
                                  (V) Underwriting, dealing in, 
                                or making a market in 
                                securities.
                                  (VI) Engaging in any activity 
                                that the Board of Governors of 
                                the Federal Reserve System has 
                                determined, by order or 
                                regulation that is in effect on 
                                the date of enactment of the 
                                Financial Services Act of 1997, 
                                to be so closely related to 
                                banking or managing or 
                                controlling banks as to be a 
                                proper incident thereto 
                                (subject to the same terms and 
                                conditions contained in such 
                                order or regulation, unless 
                                modified by the Board).
                                  (VII) Engaging, in the United 
                                States, in any activity that--
                                          (aa) a bank holding 
                                        company may engage in 
                                        outside the United 
                                        States; and
                                          (bb) the Board of 
                                        Governors of the 
                                        Federal Reserve System 
                                        has determined, under 
                                        regulations issued 
                                        pursuant to section 
                                        4(c)(13) of Bank 
                                        Holding Company Act (as 
                                        in effect on the day 
                                        before the date of 
                                        enactment of the 
                                        Financial Services Act 
                                        of 1997) to be usual in 
                                        connection with the 
                                        transaction of banking 
                                        or other financial 
                                        operations abroad.
                                  (VIII) Directly or indirectly 
                                acquiring or controlling, 
                                whether as principal, on behalf 
                                of 1 or more entities 
                                (including entities, other than 
                                a depository institution or 
                                subsidiary of a depository 
                                institution, that the 
                                investment bank holding company 
                                controls) or otherwise, shares, 
                                assets, or ownership interests 
                                (including without limitation 
                                debt or equity securities, 
                                partnership interests, trust 
                                certificates or other 
                                instruments representing 
                                ownership) of a company or 
                                other entity, whether or not 
                                constituting control of such 
                                company or entity, engaged in 
                                any activity not authorized 
                                pursuant to this section if--
                                          (aa) the shares, 
                                        assets, or ownership 
                                        interests are not 
                                        acquired or held by a 
                                        depository institution 
                                        or subsidiary of a 
                                        depository institution;
                                          (bb) such shares, 
                                        assets, or ownership 
                                        interests are acquired 
                                        and held by a 
                                        securities affiliate or 
                                        an affiliate thereof as 
                                        part of a bona fide 
                                        underwriting or 
                                        merchant banking 
                                        activity, including 
                                        investment activities 
                                        engaged in for the 
                                        purpose of appreciation 
                                        and ultimate resale or 
                                        disposition of the 
                                        investment;
                                          (cc) such shares, 
                                        assets, or ownership 
                                        interests, are held 
                                        only for such a period 
                                        of time as will permit 
                                        the sale or disposition 
                                        thereof on a reasonable 
                                        basis consistent with 
                                        the nature of the 
                                        activities described in 
                                        division (bb); and
                                          (dd) during the 
                                        period such shares, 
                                        assets, or ownership 
                                        interests are held, the 
                                        investment bank holding 
                                        company does not 
                                        actively participate in 
                                        the day to day 
                                        management or operation 
                                        of such company or 
                                        entity, except insofar 
                                        as necessary to achieve 
                                        the objectives of 
                                        division (bb).
                                  (IX) Directly or indirectly 
                                acquiring or controlling, 
                                whether as principal, on behalf 
                                of 1 or more entities 
                                (including entities, other than 
                                a depository institution or 
                                subsidiary of a depository 
                                institution, that the 
                                investment bank holding company 
                                controls) or otherwise, shares, 
                                assets, or ownership interests 
                                (including without limitation 
                                debt or equity securities, 
                                partnership interests, trust 
                                certificates or other 
                                instruments representing 
                                ownership) of a company or 
                                other entity, whether or not 
                                constituting control of such 
                                company or entity, engaged in 
                                any activity not authorized 
                                pursuant to this section if--
                                          (aa) the shares, 
                                        assets, or ownership 
                                        interests are not 
                                        acquired or held by a 
                                        depository institution 
                                        or a subsidiary of a 
                                        depository institution;
                                          (bb) such shares, 
                                        assets, or ownership 
                                        interests are acquired 
                                        and held by an 
                                        insurance company that 
                                        is predominantly 
                                        engaged in underwriting 
                                        life, accident and 
                                        health, or property and 
                                        casualty insurance 
                                        (other than credit-
                                        related insurance);
                                          (cc) such shares, 
                                        assets, or ownership 
                                        interests represent an 
                                        investment made in the 
                                        ordinary course of 
                                        business of such 
                                        insurance company in 
                                        accordance with 
                                        relevant State law 
                                        governing such 
                                        investments; and
                                          (dd) during the 
                                        period such shares, 
                                        assets, or ownership 
                                        interests are held, the 
                                        investment bank holding 
                                        company does not 
                                        directly or indirectly 
                                        participate in the day-
                                        to-day management or 
                                        operation of the 
                                        company or entity 
                                        except insofar as 
                                        necessary to achieve 
                                        the objectives of 
                                        divisions (bb) and 
                                        (cc).
                          (iii) Actions required.--The 
                        Commission shall, by regulation or 
                        order, define, consistent with the 
                        purposes of this Act, the following 
                        activities as, and the extent to which 
                        such activities are, financial in 
                        nature or incidental to activities 
                        which are financial in nature:
                                  (A) Lending, exchanging, 
                                transferring, investing for 
                                others, or safeguarding 
                                financial assets other than 
                                money or securities.
                                  (B) Providing any device or 
                                other instrumentality for 
                                transferring money or other 
                                financial assets;
                                  (C) Arranging, effecting, or 
                                facilitating financial 
                                transactions for the account of 
                                third parties.
                          (iv) Consistency of interpretation.--
                        The Commission shall consult with the 
                        Board of Governors of the Federal 
                        Reserve System concerning the exercise 
                        of its authority and responsibility 
                        under this subparagraph with respect to 
                        investment bank holding companies to 
                        assure, to the fullest extent possible, 
                        the consistency of interpretation and 
                        the maintenance of competitive 
                        equality.
                  (C) Permissible nonfinancial activities and 
                investments.--
                          (i) In general.--A supervised 
                        investment bank holding company 
                        described in paragraph (1) may engage 
                        in any activity not permitted under 
                        subparagraph (B) (hereinafter in this 
                        subparagraph and subparagraph (D) 
                        referred to as ``nonfinancial 
                        activities''), and acquire and retain 
                        ownership and control of shares of any 
                        company engaged in any such 
                        nonfinancial activity, if--
                                  (I) the aggregate annual 
                                gross revenues derived from all 
                                such activities and of all such 
                                companies does not exceed 5 
                                percent of the consolidated 
                                annual gross revenues of the 
                                supervised investment bank 
                                holding company;
                                  (II) the consolidated total 
                                assets of any company the 
                                shares of which are acquired by 
                                such investment bank holding 
                                company pursuant to this 
                                subparagraph are less than 
                                $750,000,000 at the time such 
                                shares are acquired; and
                                  (III) such company provides 
                                notice to the Commission within 
                                30 days of commencing the 
                                activity or acquiring the 
                                ownership or control.
                          (ii) Inclusion of grandfathered 
                        activities.--For purposes of 
                        determining compliance with the limits 
                        contained in clause (i) of this 
                        subparagraph, the gross revenues 
                        derived from all activities conducted, 
                        and companies the shares of which are 
                        held, under subparagraph (D) shall be 
                        considered to be derived or held under 
                        this subparagraph.
                  (D) Grandfathered activities.--
                          (i) In general.--Notwithstanding 
                        subparagraph (C)(i), a company that 
                        becomes a supervised investment bank 
                        holding company described in paragraph 
                        (1) may continue to engage, directly or 
                        indirectly, in any nonfinancial 
                        activity and may retain ownership and 
                        control of shares of a company engaged 
                        in any nonfinancial activity, if--
                                  (I) on the date of enactment 
                                of the Financial Services Act 
                                of 1997, such investment bank 
                                holding company was lawfully 
                                engaged in that nonfinancial 
                                activity, held the shares of 
                                such company, or had entered 
                                into a contract to acquire 
                                shares of any company engaged 
                                in such activity; and
                                  (II) the company engaged in 
                                such nonfinancial activity 
                                continues to engage only in the 
                                same activities that such 
                                company conducted on the date 
                                of enactment of the Financial 
                                Services Act of 1997, and other 
                                activities permissible under 
                                this subsection.
                          (ii) No expansion of grandfathered 
                        commercial activities through merger or 
                        consolidation.--An investment bank 
                        holding company described in paragraph 
                        (1) that engages in activities or holds 
                        shares pursuant to this paragraph, or a 
                        subsidiary of such investment bank 
                        holding company, may not acquire, in 
                        any merger, consolidation, or other 
                        type of business combination, assets of 
                        any other company which is engaged in 
                        any activity which the Commission has 
                        not determined to be financial in 
                        nature or incidental to activities that 
                        are financial in nature under 
                        subparagraph (B).
                          (iii) Limitation to single 
                        exemption.--No company that engages in 
                        any activity or controls any shares 
                        under subsection (f) or (g) of section 
                        6 of the Bank Holding Company Act of 
                        1956 may engage in any activity or own 
                        any shares pursuant to this 
                        subparagraph or subparagraph (C).
                  (E) Commodities.--
                          (i) In general.--An investment bank 
                        holding company which was predominately 
                        engaged as of January 1, 1997, in 
                        securities activities in the United 
                        States (or any successor to any such 
                        company) may engage in, or directly or 
                        indirectly own or control shares of a 
                        company engaged in, activities related 
                        to the trading, sale, or investment in 
                        commodities and underlying physical 
                        properties that were not permissible 
                        for bank holding companies to conduct 
                        in the United States as of January 1, 
                        1997, if such investment bank holding 
                        company, or any subsidiary of such 
                        holding company, was engaged directly, 
                        indirectly, or through any such company 
                        in any of such activities as of January 
                        1, 1997, in the United States.
                          (ii) Limitation.--Notwithstanding 
                        subparagraph (C)(i)(I), the attributed 
                        aggregate investment by an investment 
                        bank holding company in activities 
                        permitted under this subparagraph and 
                        not otherwise permitted for all 
                        investment bank holding companies under 
                        this subsection may not exceed 5 
                        percent of the capital of the 
                        investment bank holding company, except 
                        that the Commission may increase such 
                        percentage of capital by such amounts 
                        and under such circumstances as the 
                        Commission considers appropriate, 
                        consistent with the purposes of this 
                        Act.
                          (iii) Attributed investment amount.--
                        For purposes of clause (ii), the amount 
                        of the investment by an investment bank 
                        holding company which are attributable 
                        to activities described in such clause 
                        shall be determined pursuant to 
                        regulations issued by the Commission 
                        which attribute capital on the basis of 
                        such activities in relation to all 
                        activities of the company.
                  (F) Cross marketing restrictions.--A 
                supervised investment bank holding company 
                described in paragraph (1) shall not permit--
                          (i) any company whose shares it owns 
                        or controls pursuant to subparagraph 
                        (C), (D), or (E) to offer or market any 
                        product or service of an affiliated 
                        wholesale financial institution; or
                          (ii) any affiliated wholesale 
                        financial institution to offer or 
                        market any product or service of any 
                        company whose shares are owned or 
                        controlled by such investment bank 
                        holding company pursuant to such 
                        subparagraphs.
                  (G) Developing Activities.--An investment 
                bank holding company described in paragraph (1) 
                may engage, or directly or indirectly acquire 
                shares of any company engaged, in any activity 
                that the Commission has not determined to be 
                financial in nature or incidental to financial 
                activities under subparagraph (B) if--
                          (i) the holding company reasonably 
                        concludes that the activity is 
                        financial in nature or incidental to 
                        financial activities;
                          (ii) the gross revenues from all 
                        activities conducted under this 
                        subparagraph represent less than 5 
                        percent of the consolidated gross 
                        revenues of the holding company;
                          (iii) the aggregate total assets of 
                        all companies the shares of which are 
                        held under this subparagraph do not 
                        exceed 5 percent of the holding 
                        company's consolidated total assets;
                          (iv) the total capital invested in 
                        activities conducted under this 
                        subparagraph represents less than 
5percent of the consolidated total capital of the holding company;
                          (v) the Commission has not previously 
                        determined that the activity is not 
                        financial in nature or incidental to 
                        financial activities under subparagraph 
                        (B); and
                          (vi) the holding company provides 
                        written notification to the Commission 
                        describing the activity commenced or 
                        conducted by the company acquired no 
                        later than 10 business days after 
                        commencing the activity or consummating 
                        the acquisition.
          (8) Functional regulation of banking and insurance 
        activities of supervised investment bank holding 
        companies.--The Commission shall defer to--
                  (A) the appropriate regulatory agency with 
                regard to all interpretations of, and the 
                enforcement of, applicable banking laws 
                relating to the activities, conduct, ownership, 
                and operations of banks, wholesale financial 
                institutions, and institutions described in 
                subparagraph (D), (F), and (G) of section 
                2(c)(2) of the Bank Holding Company Act of 
                1956; and
                  (B) the appropriate State insurance 
                regulators with regard to all interpretations 
                of, and the enforcement of, applicable State 
                insurance laws relating to the activities, 
                conduct, and operations of insurance companies 
                and insurance agents.
          (9) Reference to board backup examination and 
        enforcement authority.--The Board of Governors of the 
        Federal Reserve System has backup authority, pursuant 
        to section 10(e) of the Bank Holding Company Act of 
        1956, with respect to supervised investment bank 
        holding companies described in paragraph (1).
          (10) Definitions.--For purposes of this subsection 
        and subsection (j)--
                  (A) The term ``investment bank holding 
                company'' means--
                          (i) any person other than a natural 
                        person that owns or controls one or 
                        more brokers or dealers; and
                          (ii) the associated persons of the 
                        investment bank holding company.
                  (B) The term ``supervised investment bank 
                holding company'' means any investment bank 
                holding company that is supervised by the 
                Commission pursuant to paragraph (1) or (2) of 
                this section.
                  (C) Any investment bank holding company is 
                ``substantially engaged in the securities 
                business'' if--
                          (i) the annual total consolidated net 
                        revenues derived by the holding company 
                        from effecting transactions in or 
                        buying and selling securities as a 
                        broker or dealer represent at least 35 
                        percent of the annual total 
                        consolidated net revenues of the 
                        company; or
                          (ii) the company controls one or more 
                        brokers or dealers that in the 
                        aggregate have total equity capital and 
                        qualifying subordinated debt (based on 
                        an average of the four preceding 
                        calendar quarters) in excess of 
                        $750,000,000 and such total equity 
                        capital and qualifying subordinated 
                        debt does not fall below $500,000,000 
                        (based on an average for the four 
                        preceding calendar quarters).
                  (D) The term ``wholesale financial 
                institution'' means a wholesale financial 
                institution subject to section 9B of the 
                Federal Reserve Act.
                  (E) The terms ``affiliate,'' ``bank,'' ``bank 
                holding company,'' ``company,'' ``control,'' 
                ``savings association,'' ``well capitalized,'' 
                and ``well managed'' have the meanings given to 
                those terms in section 2 of the Bank Holding 
                Company Act of 1956 (12 U.S.C. 1841).
                  (F) The term ``insured bank'' has the meaning 
                given to that term in section 3 of the Federal 
                Deposit Insurance Act.
                  (G) The term ``foreign bank'' has the meaning 
                given to that term in section 1(b)(7) of the 
                International Banking Act of 1978.
                  (H) The terms ``person associated with an 
                investment bank holding company'' and 
                ``associated person of an investment bank 
                holding company'' means any person directly or 
                indirectly controlling, controlled by, or under 
                common control with, an investment bank holding 
                company.
  (j) Commission Backup Authority.--
          (1) Inspection authority for investment bank holding 
        companies that are not supervised investment bank 
        holding companies.--
                  (A) Authority.--The Commission may make 
                inspections of any investment bank holding 
                company that--
                          (i) controls a wholesale financial 
                        institution,
                          (ii) is not a foreign bank, and
                          (iii) does not control an insured 
                        bank (other than an institution 
                        permitted under subparagraph (D), (F), 
                        or (G) of section 2(c)(2) of the Bank 
                        Holding Company Act of 1956) or a 
                        savings association,
                and any affiliate of such company, for the 
                purpose of monitoring and enforcing compliance 
                by the investment bank holding company with the 
                Federal securities laws.
                  (B) Limitation.--The Commission shall limit 
                the focus and scope of any inspection under 
                subparagraph (A) to those transactions, 
                policies, procedures, or records that are 
                reasonably necessary to monitor and enforce 
                compliance by the investment bank holding 
                company or any affiliate with the Federal 
                securities laws.
                  (C) Deference to examinations.--To the 
                fullest extent possible, the Commission shall 
                use, for the purposes of this subsection, the 
                reports of examinations--
                          (i) made by the Board of Governors of 
                        the Federal Reserve System of any 
                        investment bank holding company that is 
                        supervised by the Board;
                          (ii) made by or on behalf of any 
                        State regulatory agency responsible for 
                        the supervision of an insurance company 
                        of any licensed insurance company; and
                          (iii) made by any Federal or State 
                        banking agency of any bank or 
                        institution described in subparagraph 
                        (D), (F), or (G) of section 2(c)(2) of 
                        the Bank Holding Company Act of 1956.
                  (D) Notice.--To the fullest extent possible, 
                the Commission shall notify the appropriate 
                regulatory agency prior to conducting an 
                inspection of a wholesale financial institution 
                or institution described in subparagraph (D), 
                (F), or (G) of section 2(c)(2) of the Bank 
                Holding Company Act of 1956.
  (k) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission 
shall not be compelled to disclose any information required to 
be reported under subsection (h), (i), or (j), or any 
information supplied to the Commission by any domestic or 
foreign regulatory agency that relates to the financial or 
operational condition of any associated person of a broker or 
dealer, investment bank holding company, or any affiliate of an 
investment bank holding company. Nothing in this subsection 
shall authorize the Commission to withhold information from 
Congress, or prevent the Commission from complying with a 
request for information from any other Federal department or 
agency or any self-regulatory organization requesting the 
information for purposes within the scope of its jurisdiction, 
or complying with an order of a court of the United States in 
an action brought by the United States or the Commission. For 
purposes of section 552 of title 5, United States Code, this 
subsection shall be considered a statute described in 
subsection (b)(3)(B) of such section 552. In prescribing 
regulations to carry out the requirements of this subsection, 
the Commission shall designate information described in or 
obtained pursuant to subparagraphs (A), (B), and (C) of 
paragraph (5) of subsection (i), and subsection (j) as 
confidential information for purposes of section 24(b)(2) of 
this title.
  [(i)] (l) Coordination of Examining Authorities.--
          (1) Elimination of duplication.--The Commission and 
        the examining authorities, through cooperation and 
        coordination of examination and oversight activities, 
        shall eliminate any unnecessary and burdensome 
        duplication in the examination process.
          * * * * * * *
                              ----------                              


                     INVESTMENT COMPANY ACT OF 1940

          * * * * * * *

                     TITLE I--INVESTMENT COMPANIES

          * * * * * * *

                          general definitions

  Sec. 2. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *
          * * * * * * *
          (5) ``Bank'' means [(A) a banking institution 
        organized under the laws of the United States] (A) a 
        depository institution (as defined in section 3 of the 
        Federal Deposit Insurance Act) or a branch or agency of 
        a foreign bank (as such terms are defined in section 
        1(b) of the International Banking Act of 1978), (B) a 
        member bank of the Federal Reserve System, (C) any 
        other banking institution or trust company, whether 
        incorporated or not, doing business under the laws of 
        any State or of the United States, a substantial 
        portion of the business of which consists of receiving 
        deposits or exercising fiduciary powers similar to 
        those permitted to national banks under the authority 
        of the Comptroller of the Currency, and which is 
        supervised and examined by State or Federal authority 
        having supervision over banks, and which is not 
        operated for the purpose of evading the provisions of 
        this title, and (D) a receiver, conservator, or other 
        liquidating agent of any institution or firm included 
        in clause (A), (B), or (C) of this paragraph.
          [(6) ``Broker'' means any person engaged in the 
        business of effecting transactions in securities for 
        the account of others, but does not include a bank or 
        any person solely by reason of the fact that such 
        person is an underwriter for one or more investment 
        companies.]
          (6) The term ``broker'' has the same meaning as in 
        the Securities Exchange Act of 1934, except that such 
        term does not include any person solely by reason of 
        the fact that such person is an underwriter for one or 
        more investment companies.
          * * * * * * *
          [(11) ``Dealer'' means any person regularly engaged 
        in the business of buying and selling securities for 
        his own account, through a broker or otherwise, but 
        does not include a bank, insurance company, or 
        investment company, or any person insofar as he is 
        engaged in investing, reinvesting, or trading in 
        securities, or in owning or holding securities, for his 
        own account, either individually or in some fiduciary 
        capacity, but not as a part of a regular business.]
          (11) The term ``dealer'' has the same meaning as in 
        the Securities Exchange Act of 1934, but does not 
        include an insurance company or investment company.
          * * * * * * *
          (19) ``Interested person'' of another person means--
                  (A) when used with respect to an investment 
                company--
                          (i) * * *
          * * * * * * *
                          [(v) any broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934 or any affiliated person of such a 
                        broker or dealer, and]
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) the investment company,
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services, or
                                  (III) any account over which 
                                the investment company's 
                                investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) the investment company,
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services, or
                                  (III) any account for which 
                                the investment company's 
                                investment adviser has 
                                borrowing authority,
                          [(vi)] (vii) any natural person whom 
                        the Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had, at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company, 
                        a material business or professional 
                        relationship with such company or with 
                        the principal executive officer of such 
                        company or with any other investment 
                        company having the same investment 
                        adviser or principal underwriter or 
                        with the principal executive officer of 
                        such other investment company:
                Provided, That no person shall be deemed to be 
                an interested person of an investment company 
                solely by reason of (aa) his being a member of 
                its board of directors or advisory board or an 
                owner of its securities, or (bb) his membership 
                in the immediate family of any person specified 
                in clause (aa) of this proviso; and
                  (B) when used with respect to an investment 
                adviser of or principal underwriter for any 
                investment company--
                          (i) * * *
          * * * * * * *
                          [(v) any broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934 or any affiliated person of such a 
                        broker or dealer, and]
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such,
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such, or
                                  (III) any account over which 
                                the investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such,
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such, or
                                  (III) any account for which 
                                the investment adviser has 
                                borrowing authority,
                          [(vi)] (vii) any natural person whom 
                        the Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company a material business 
                        or professional relationship with such 
                        investment adviser or principal 
                        underwriter or with the principal 
                        executive officer or any controlling 
                        person of such investment adviser or 
                        principal underwriter.
                For the purposes of this paragraph (19), 
                ``member of the immediate family'' means any 
                parent, spouse of a parent, child, spouse of a 
                child, spouse, brother, or sister, and includes 
                step and adoptive relationships. The Commission 
                may modify or revoke any order issued under 
                clause (vi) of subparagaph (A) or (B) of this 
                paragraph whenever it finds that such order is 
                no longer consistent with the facts. No order 
                issued pursuant to clause (vi) of subparagraph 
                (A) or (B) of this paragraph shall become 
                effective until at least sixty days after the 
                entry thereof, and no such order shall affect 
                the status of any person for the purposes of 
                this title or for any other purpose for any 
                period prior to the effective date of such 
                order.
          * * * * * * *

                    definition of investment company

  Sec. 3. (a) * * *
          * * * * * * *
  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) * * *
          * * * * * * *
          (3) Any bank or insurance company; any savings and 
        loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, or any receiver, conservator, liquidator, 
        liquidating agent, or similar official or person 
        thereof or therefor; or any common trust fund or 
        similar fund maintained by a bank exclusively for the 
        collective investment and reinvestment of moneys 
        contributed thereto by the bank in its capacity as a 
        trustee, executor, administrator, or guardian, if--
                  (A) such fund is employed by the bank solely 
                as an aid to the administration of trusts, 
                estates, or other accounts created and 
                maintained for a fiduciary purpose;
                  (B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, 
                interests in such fund are not--
                          (i) advertised; or
                          (ii) offered for sale to the general 
                        public; and
                  (C) fees and expenses charged by such fund 
                are not in contravention of fiduciary 
                principles established under applicable Federal 
                or State law.
          * * * * * * *

                       affiliations of directors

  Sec. 10. (a) * * *
          * * * * * * *
  (c) No registered investment company shall have a majority of 
its board of directors consisting of persons who are officers, 
directors, or employees of any one [bank, except] bank 
(together with its affiliates and subsidiaries) or any one bank 
holding company (together with its affiliates and subsidiaries) 
(as such terms are defined in section 2 of the Bank Holding 
Company Act of 1956), except that, if on March 15, 1940, any 
registered investment company had a majority of its directors 
consisting of persons who are directors, officers, or employees 
of any one bank, such company may continue to have the same 
percentage of its board of directors consisting of persons who 
are directors, officers, or employees of such bank.
          * * * * * * *

             investment advisory and underwriting contracts

  Sec. 15. (a) * * *
          * * * * * * *
  (g) Controlling Interest in Investment Company Prohibited.--
          (1) In general.--If an investment adviser to a 
        registered investment company, or an affiliated person 
        of that investment adviser, holds a controlling 
        interest in that registered investment company in a 
        trustee or fiduciary capacity, such person shall--
                  (A) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any employee 
                benefit plan subject to the Employee Retirement 
                Income Security Act of 1974, transfer the power 
                to vote the shares of the investment company 
                through to another person acting in a fiduciary 
                capacity with respect to the plan who is not an 
                affiliated person of that investment adviser or 
                any affiliated person thereof; or
                  (B) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any person 
                or entity other than an employee benefit plan 
                subject to the Employee Retirement Income 
                Security Act of 1974--
                          (i) transfer the power to vote the 
                        shares of the investment company 
                        through to--
                                  (I) the beneficial owners of 
                                the shares;
                                  (II) another person acting in 
                                a fiduciary capacity who is not 
                                an affiliated person of that 
                                investment adviser or any 
                                affiliated person thereof; or
                                  (III) any person authorized 
                                to receive statements and 
                                information with respect to the 
                                trust who is not an affiliated 
                                person of that investment 
                                adviser or any affiliated 
                                person thereof;
                          (ii) vote the shares of the 
                        investment company held by it in the 
                        same proportion as shares held by all 
                        other shareholders of the investment 
                        company; or
                          (iii) vote the shares of the 
                        investment company as otherwise 
                        permitted under such rules, 
                        regulations, or orders as the 
                        Commission may prescribe or issue 
                        consistent with the protection of 
                        investors.
          (2) Exemption.--Paragraph (1) shall not apply to any 
        investment adviser to a registered investment company, 
        or any affiliated person of that investment adviser, 
        that holds shares of the investment company in a 
        trustee or fiduciary capacity if that registered 
        investment company consists solely of assets held in 
        such capacities.
          (3) Safe harbor.--No investment adviser to a 
        registered investment company or any affiliated person 
        of such investment adviser shall be deemed to have 
        acted unlawfully or to have breached a fiduciary duty 
        under State or Federal law solely by reason of acting 
        in accordance with clause (i), (ii), or (iii) of 
        paragraph (1)(B).
          * * * * * * *

      transactions of certain affiliated persons and underwriters

  Sec. 17. (a) It shall be unlawful for any affiliated person 
or promoter of or principal underwriter for a registered 
investment company (other than a company of the character 
described in section 12(d)(3) (A) and (B)), or any affiliated 
person of such a person, promoter, or principal underwriter, 
acting as principal--
          (1) * * *
          (2) knowingly to purchase from such registered 
        company, or from any company controlled by such 
        registered company, any security or other property 
        (except securities of which the seller is the issuer); 
        [or]
          (3) to borrow money or other property from such 
        registered company or from any company controlled by 
        such registered company (unless the borrower is 
        controlled by the lender) except as permitted in 
        section 21(b)[.]; or
          (4) to loan money or other property to such 
        registered company, or to any company controlled by 
        such registered company, in contravention of such 
        rules, regulations, or orders as the Commission may 
        prescribe or issue consistent with the protection of 
        investors.
          * * * * * * *
  [(f) Every registered] (f) Custody of Securities.--
          (1) Every registered management company shall place 
        and maintain its securities and similar investments in 
        the custody of [(1)] (A) a bank or banks having the 
        qualifications prescribed in paragraph (1) of section 
        26(a) of this title for the trustees of unit investment 
        trusts; or [(2)] (B) a company which is a member of a 
        national securities exchange as defined in the 
        Securities Exchange Act of 1934, subject to such rules 
        and regulations as the Commission may from time to time 
        prescribe for the protection of investors; or [(3)] (C) 
        such registered company, but only in accordance with 
        such rules and regulations or orders as the Commission 
        may from time to time prescribe for the protection of 
        investors.
          (2) Subject to such rules, regulations, and orders as 
        the Commission may adopt as necessary or appropriate 
        for the protection of investors, a registered 
        management company or any such custodian, with the 
        consent of the registered management company for which 
        it acts as custodian, may deposit all or any part of 
        the securities owned by such registered management 
        company in a system for the central handling of 
        securities established by a national securities 
        exchange or national securities association registered 
        with the Commission under the Securities Exchange Act 
        of 1934, or such other person as may be permitted by 
        the Commission, pursuant to which system all securities 
        of any particular class or series of any issuer 
        deposited within the system are treated as fungible and 
        may be transferred or pledged by bookkeeping entry 
        without physical delivery of such securities.
          (3) Rules, regulations, and orders of the Commission 
        under this subsection, among other things, may make 
        appropriate provision with respect to such matters as 
        the earmarking, segregation, and hypothecation of such 
        securities and investments, and may provide for or 
        require periodic or other inspections by any or all of 
        the following: Independent public accountants, 
        employees and agents of the Commission, and such other 
        persons as the Commission may designate.
          (4) No such member which trades in securities for its 
        own account may act as custodian except in accordance 
        with rules and regulations prescribed by the Commission 
        for the protection of investors.
          (5) If a registered company maintains its securities 
        and similar investments in the custody of a qualified 
        bank or banks, the cash proceeds from the sale of such 
        securities and similar investments and other cash 
        assets of the company shall likewise be kept in the 
        custody of such a bank or banks, or in accordance with 
        such rules and regulations or orders as the Commission 
        may from time to time prescribe for the protection of 
        investors, except that such a registered company may 
        maintain a checking account in a bank or banks having 
        the qualifications prescribed in paragraph (1) of 
        section 26(a) of this title for the trustees of unit 
        investment trusts with the balance of such account or 
        the aggregate balances of such accounts at no time in 
        excess of the amount of the fidelity bond, maintained 
        pursuant to section 17(g) of this title, covering the 
        officers or employees authorized to draw on such 
        account or accounts.
          (6) The Commission may adopt rules and regulations, 
        and issue orders, consistent with the protection of 
        investors, prescribing the conditions under which a 
        bank, or an affiliated person of a bank, either of 
        which is an affiliated person, promoter, organizer, or 
        sponsor of, or principal underwriter for, a registered 
        management company may serve as custodian of that 
        registered management company.
          * * * * * * *

                         unit investment trusts

  Sec. 26. (a) * * *
  (b) The Commission may adopt rules and regulations, and issue 
orders, consistent with the protection of investors, 
prescribing the conditions under which a bank, or an affiliated 
person of a bank, either of which is an affiliated person of a 
principal underwriter for, or depositor of, a registered unit 
investment trust, may serve as trustee or custodian under 
subsection (a)(1).
  [(b)] (c) It shall be unlawful for any depositor or trustee 
of a registered unit investment trust holding the security of a 
single issuer to substitute another security for such security 
unless the Commission shall have approved such substitution. 
The Commission shall issue an order approving such substitution 
if the evidence establishes that it is consistent with the 
protection of investors and the purposes fairly intended by the 
policy and provisions of this title.
  [(c)] (d) In the event that a trust indenture, agreement of 
custodianship, or other instrument pursuant to which securities 
of a registered unit investment trust are issued does not 
comply with the requirements of subsection (a) of this section, 
such instrument will be deemed to meet such requirements if a 
written contract or agreement binding on the parties and 
embodying such requirements has been executed by the depositor 
on the one part and the trustee or custodian on the other part, 
and three copies of such contract or agreement have been filed 
with the Commission.
  [(d)] (e) Whenever the Commission has reason to believe that 
a unit investment trust is inactive and that its liquidation is 
in the interest of the security holders of such trust, the 
Commission may file a complaint seeking the liquidation of such 
trust in the district court of the United States in any 
district wherein any trustee of such trust resides or has its 
principal place of business. A copy of such complaint shall be 
served on every trustee of such trust, and notice of the 
proceeding shall be given such other interested persons in such 
manner and at such times as the court may direct. If the court 
determines that such liquidation is in the interest of the 
security holders of such trust, the court shall order such 
liquidation and, after payment of necessary expenses, the 
distribution of the proceeds to the security holders of the 
trust in such manner and on such terms as may to the court 
appear equitable.
  [(e)] (f) Exemption.--
          (1) * * *
          * * * * * * *

                   unlawful representations and names

  Sec. 35. [(a) It shall be unlawful for any person, in issuing 
or selling any security of which a registered investment 
company is the issuer, to represent or imply in any manner 
whatsoever that such security or company has been guaranteed, 
sponsored, recommended, or approved by the United States or any 
agency or officer thereof.]
  (a) Misrepresentation of Guarantees.--
          (1) In general.--It shall be unlawful for any person, 
        issuing or selling any security of which a registered 
        investment company is the issuer, to represent or imply 
        in any manner whatsoever that such security or 
        company--
                  (A) has been guaranteed, sponsored, 
                recommended, or approved by the United States, 
                or any agency, instrumentality or officer of 
                the United States;
                  (B) has been insured by the Federal Deposit 
                Insurance Corporation; or
                  (C) is guaranteed by or is otherwise an 
                obligation of any bank or insured depository 
                institution.
          (2) Disclosures.--Any person issuing or selling the 
        securities of a registered investment company that is 
        advised by, or sold through, a bank shall prominently 
        disclose that an investment in the company is not 
        insured by the Federal Deposit Insurance Corporation or 
        any other government agency. The Commission may adopt 
        rules and regulations, and issue orders, consistent 
        with the protection of investors, prescribing the 
        manner in which the disclosure under this paragraph 
        shall be provided.
          (3) Definitions.--The terms ``insured depository 
        institution'' and ``appropriate Federal banking 
        agency'' have the meaning given to such terms in 
        section 3 of the Federal Deposit Insurance Act.
          * * * * * * *

                        breach of fiduciary duty

  Sec. 36. (a) The Commission is authorized to bring an action 
in the proper district court of the United States, or in the 
United States court of any territory or other place subject to 
the jurisdiction of the United States, alleging that a person 
serving or acting in one or more of the following capacities 
has engaged within five years of the commencement of the action 
or is about to engage in any act or practice constituting a 
breach of fiduciary duty involving personal misconduct in 
respect of any registered investment company for which such 
person so serves or acts--
          (1) as officer, director, member of any advisory 
        board, investment adviser, or depositor; [or]
          (2) as principal underwriter, if such registered 
        company is an open-end company, unit investment trust, 
        or face-amount certificate company[.]; or
          (3) as custodian.
If such allegations are established, the court may enjoin such 
persons from acting in any or all such capacities either 
permanently or temporarily and award such injunctive or other 
relief against such person as may be reasonable and appropriate 
in the circumstances, having due regard to the protection of 
investors and to the effectuation of the policies declared in 
section 1(b) of this title.
          * * * * * * *
                              ----------                              


                    INVESTMENT ADVISERS ACT OF 1940

          * * * * * * *

                     TITLE II--INVESTMENT ADVISERS

          * * * * * * *

                              definitions

  Sec. 202. (a) When used in this title, unless the context 
otherwise requires, the following definitions shall apply:
          (1) * * *
          * * * * * * *
          [(3) ``Broker'' means any person engaged in the 
        business of effecting transactions in securities for 
        the account of others, but does not include a bank.]
          (3) The term ``broker'' has the same meaning as in 
        the Securities Exchange Act of 1934.
          * * * * * * *
          [(7) ``Dealer'' means any person regularly engaged in 
        the business of buying and selling securities for his 
        own account, through a broker or otherwise, but does 
        not include a bank, insurance company, or investment 
        company, or any person insofar as he is engaged in 
        investing, reinvesting or trading in securities, or in 
        owning or holding securities, for his own account, 
        either individually or in some fiduciary capacity, but 
        not as a part of a regular business.]
          (7) The term ``dealer'' has the same meaning as in 
        the Securities Exchange Act of 1934, but does not 
        include an insurance company or investment company.
          * * * * * * *
          (11) ``Investment adviser'' means any person who, for 
        compensation, engages in the business of advising 
        others, either directly or through publications or 
        writings, as to the value of securities or as to the 
        advisability of investing in, purchasing, or selling 
        securities, or who, for compensation and as part of a 
        regular business, issues or promulgates analyses or 
        reports concerning securities; but does not include (A) 
        a bank, or any bank holding company as defined in the 
        Bank Holding Company Act of 1956, which is not an 
        [investment company] investment company, except that 
        the term ``investment adviser'' includes any bank or 
        bank holding company to the extent that such bank or 
        bank holding company serves or acts as an investment 
        adviser to a registered investment company, but if, in 
        the case of a bank, such services or actions are 
        performed through a separately identifiable department 
        or division, the department or division, and not the 
        bank itself, shall be deemed to be the investment 
        adviser; (B) any lawyer, accountant, engineer, or 
        teacher whose performance of such services is solely 
        incidental to the practice of his profession; (C) any 
        broker or dealer whose performance of such services is 
        solely incidental to the conduct of his business as a 
        broker or dealer and who receives no special 
        compensation therefor; (D) the publisher of any bona 
        fide newspaper, news magazine or business or financial 
        publication of general and regular circulation; (E) any 
        person whose advice, analyses, or reports relate to no 
        securities other than securities which are direct 
        obligations of or obligations guaranteed as to 
        principal or interest by the United States, or 
        securities issued or guaranteed by corporations in 
        which the United States has a direct or indirect 
        interest which shall have been designated by the 
        Secretary of the Treasury, pursuant to section 3(a)(12) 
        of the Securities Exchange Act of 1934, as exempted 
        securities for the purposes of that Act; or (F) such 
        other persons not within the intent of this paragraph, 
        as the Commission may designate by rules and 
        regulations or order.
          * * * * * * *
          (26) The term ``separately identifiable department or 
        division'' of a bank means a unit--
                  (A) that is under the direct supervision of 
                an officer or officers designated by the board 
                of directors of the bank as responsible for the 
                day-to-day conduct of the bank's investment 
                adviser activities for one or more investment 
                companies, including the supervision of all 
                bank employees engaged in the performance of 
                such activities; and
                  (B) for which all of the records relating to 
                its investment adviser activities are 
                separately maintained in or extractable from 
                such unit's own facilities or the facilities of 
                the bank, and such records are so maintained or 
                otherwise accessible as to permit independent 
                examination and enforcement by the Commission 
                of this Act or the Investment Company Act of 
                1940 and rules and regulations promulgated 
                under this Act or the Investment Company Act of 
                1940.
          * * * * * * *
  (c) Consideration of Promotion of Efficiency, Competition, 
and Capital Formation.--Whenever pursuant to this title the 
Commission is engaged in rulemaking and is required to consider 
or determine whether an action is necessary or appropriate in 
the public interest, the Commission shall also consider, in 
addition to the protection of investors, whether the action 
will promote efficiency, competition, and capital formation.
          * * * * * * *

SEC. 210A. CONSULTATION.

  (a) Examination Results and Other Information.--
          (1) The appropriate Federal banking agency shall 
        provide the Commission upon request the results of any 
        examination, reports, records, or other information to 
        which such agency may have access with respect to the 
        investment advisory activities--
                  (A) of any--
                          (i) bank holding company,
                          (ii) bank, or
                          (iii) separately identifiable 
                        department or division of a bank,
                that is registered under section 203 of this 
                title; and
                  (B) in the case of a bank holding company or 
                bank that has a subsidiary or a separately 
                identifiable department or division registered 
                under that section, of such bank or bank 
                holding company.
          (2) The Commission shall provide to the appropriate 
        Federal banking agency upon request the results of any 
        examination, reports, records, or other information 
        with respect to the investment advisory activities of 
        any bank holding company, bank, or separately 
        identifiable department or division of a bank, any of 
        which is registered under section 203 of this title.
  (b) Effect on Other Authority.--Nothing in this section shall 
limit in any respect the authority of the appropriate Federal 
banking agency with respect to such bank holding company, bank, 
or department or division under any provision of law.
  (c) Definition.--For purposes of this section, the term 
``appropriate Federal banking agency'' shall have the same 
meaning as in section 3 of the Federal Deposit Insurance Act.
          * * * * * * *
                              ----------                              


                SECTION 3 OF THE SECURITIES ACT OF 1933

                          exempted securities

  Sec. 3. (a) Except as hereinafter expressly provided, the 
provisions of this title shall not apply to any of the 
following classes of securities:
          (1) Reserved.
          (2) Any security issued or guaranteed by the United 
        States or any Territory thereof, or by the District of 
        Columbia, or by any State of the United States, or by 
        any political subdivision of a State or Territory, or 
        by any public instrumentality of one or more States or 
        Territories, or by any person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing; or any security 
        issued or guaranteed by any bank; or any security 
        issued by or representing an interest in or a direct 
        obligation of a Federal Reserve bank; [or any interest 
        or participation in any common trust fund or similar 
        fund maintained by a bank exclusively for the 
        collective investment and reinvestment of assets 
        contributed thereto by such bank in its capacity as 
        trustee, executor, administrator, or guardian] or any 
        interest or participation in any common trust fund or 
        similar fund that is excluded from the definition of 
        the term `investment company' under section 3(c)(3) of 
        the Investment Company Act of 1940; or any security 
        which is an industrial development bond (as defined in 
        section 103(c)(2) of the Internal Revenue Code of 1954) 
        the interest on which is excludable from gross income 
        under section 103(a)(1) of such Code if, by reason of 
        the application of paragraph (4) or (6) of section 
        103(c) of such Code (determined as if paragraphs 
        (4)(A), (5), and (7) were not included in such section 
        103(c)), paragraph (1) of such section 103(c) does not 
        apply to such security; or any interest or 
        participation in a single trust fund, or in a 
        collective trust fund maintained by a bank, or any 
        security arising out of a contract issued by an 
        insurance company, which interest, participation, or 
        security is issued in connection with (A) a stock 
        bonus, pension, or profit-sharing plan which meets the 
        requirements for qualification under section 401 of the 
        Internal Revenue Code of 1954, (B) an annuity plan 
        which meets the requirements for the deduction of the 
        employer's contributions under section 404(a)(2) of 
        such Code, or (C) a governmental plan as defined in 
        section 414(d) of such Code which has been established 
        by an employer for the exclusive benefit of its 
        employees or their beneficiaries for the purpose of 
        distributing to such employees or their beneficiaries 
        the corpus and income of the funds accumulated under 
        such plan, if under such plan it is impossible, prior 
        to the satisfaction of all liabilities with respect to 
        such employees and their beneficiaries, for any part of 
        the corpus or income to be used for, or diverted to, 
        purposes other than the exclusive benefit of such 
        employees or their beneficiaries, other than any plan 
        described in clause (A), (B), or (C) of this paragraph 
        (i) the contributions under which are held in a single 
        trust fund or in a separate account maintained by an 
        insurance company for a single employer and under which 
        an amount in excess of the employer's contribution is 
        allocated to the purchase of securities (other than 
        interests or participations in the trust or separate 
        account itself) issued by the employer or any company 
        directly or indirectly controlling, controlled by, or 
        under common control with the employer, (ii) which 
        covers employees some or all of whom are employees 
        within the meaning of section 401(c)(1) of such Code, 
        or (iii) which is a plan funded by an annuity contract 
        described in section 403(b) of such Code. The 
        Commission, by rules and regulations or order, shall 
        exempt from the provisions of section 5 of this title 
        any interest or participation issued in connection with 
        a stock bonus, pension, profit-sharing, or annuity plan 
        which covers employees some or all of whom are 
        employees within the meaning of section 401(c)(1) of 
        the Internal Revenue Code of 1954, if and to the extent 
        that the Commission determines this to be necessary or 
        appropriate in the public interest and consistent with 
        the protection of investors and the purposes fairly 
        intended by the policy and provisions of this title. 
        For purposes of this paragraph, a security issued or 
        guaranteed by a bank shall not include any interest or 
        participation in any collective trust fund maintained 
        by a bank; and the term ``bank'' means any national 
        bank, or any banking institution organized under the 
        laws of any State, territory, or the District of 
        Columbia, the business of which is substantially 
        confined to banking and is supervised by the State or 
        territorial banking commission or similar official; 
        except that in the case of a common trust fund or 
        similar fund, or a collective trust fund, the term 
        ``bank'' has the same meaning as in the Investment 
        Company Act of 1940;
          * * * * * * *
                              ----------                              


                           ACT OF MAY 1, 1886

 CHAP. 73.--AN ACT to enable national banking associations to increase 
      their capital stock and to change their names or locations.

  Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled,
          * * * * * * *
  Sec. 2. (a) * * *
          * * * * * * *
  (d) Retention of ``Federal'' in Name of Converted Federal 
Savings Association.--
          (1) In general.--Notwithstanding subsection (a) or 
        any other provision of law, any depository institution 
        the charter of which is converted from that of a 
        Federal savings association to a national bank or a 
        State bank after the date of the enactment of the 
        Financial Services Act of 1997 may retain the term 
        ``Federal'' in the name of such institution so long as 
        such depository institution remains an insured 
        depository institution.
          (2) Definitions.--For purposes of this subsection, 
        the terms ``depository institution'', ``insured 
        depository institution'', ``national bank'', and 
        ``State bank'' have the same meanings given to such 
        terms in section 3 of the Federal Deposit Insurance 
        Act.
          * * * * * * *

                         HOME OWNERS' LOAN ACT

   AN ACT To provide emergency relief with respect to home mortgage 
  indebtedness, to refinance home mortgages, to extend relief to the 
 owners of homes occupied by them and who are unable to amortize their 
 debt elsewhere, to amend the Federal Home Loan Bank Act, to increase 
the market for obligations of the United States and for other purposes.

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

[SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  [This Act may be cited as the ``Home Owners' Loan Act''.

                           [TABLE OF CONTENTS

[Sec. 1. Short title and table of contents.
[Sec. 2. Definitions.
[Sec. 3. Director of the Office of Thrift Supervision.
[Sec. 4. Supervision of savings associations.
[Sec. 5. Federal savings associations.
[Sec. 6. Liquid asset requirements.
[Sec. 7. Applicability.
[Sec. 8. District associations.
[Sec. 9. Examination fees.
[Sec. 10. Regulation of holding companies.
[Sec. 11. Transactions with affiliates; extensions of credit to 
          executive officers, directors, and principal shareholders.
[Sec. 12. Advertising.
[Sec. 13. Powers of examiners.
[Sec. 14. Separability provision.

[SEC. 2. DEFINITIONS.

  [For purposes of this Act--
          [(1) Director.--The term ``Director'' means the 
        Director of the Office of Thrift Supervision.
          [(2) Corporation.--The term ``Corporation'' means the 
        Federal Deposit Insurance Corporation.
          [(3) Office.--The term ``Office'' means the Office of 
        Thrift Supervision.
          [(4) Savings association.--The term ``savings 
        association'' means a savings association, as defined 
        in section 3 of the Federal Deposit Insurance Act, the 
        deposits of which are insured by the Corporation.
          [(5) Federal savings association.--The term ``Federal 
        savings association'' means a Federal savings 
        association or a Federal savings bank chartered under 
        section 5 of this Act.
          [(6) National bank.--The term ``national bank'' has 
        the same meaning as in section 3 of the Federal Deposit 
        Insurance Act.
          [(7) Federal banking agencies.--The term ``Federal 
        banking agencies'' means the Office of the Comptroller 
        of the Currency, the Board of Governors of the Federal 
        Reserve System, and the Federal Deposit Insurance 
        Corporation.
          [(8) State.--The term ``State'' has the same meaning 
        as in section 3 of the Federal Deposit Insurance Act.
          [(9) Affiliate.--The term ``affiliate'' means any 
        person that controls, is controlled by, or is under 
        common control with, a savings association, except as 
        provided in section 10.

[SEC. 3. DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION.

  [(a) Establishment of Office.--There is established the 
Office of Thrift Supervision, which shall be an office in the 
Department of the Treasury.
  [(b) Establishment of Position of Director.--
          [(1) In general.--There is established the position 
        of the Director of the Office of Thrift Supervision, 
        who shall be the head of the Office of Thrift 
        Supervision and shall be subject to the general 
        oversight of the Secretary of the Treasury.
          [(2) Authority to prescribe regulations.--The 
        Director may prescribe such regulations and issue such 
        orders as the Director may determine to be necessary 
        for carrying out this Act and all other laws within the 
        Director's jurisdiction.
          [(3) Autonomy of director.--The Secretary of the 
        Treasury may not intervene in any matter or proceeding 
        before the Director (including agency enforcement 
        actions) unless otherwise specifically provided by law.
          [(4) Banking agency rulemaking.--The Secretary of the 
        Treasury may not delay or prevent the issuance of any 
        rule or the promulgation of any regulation by the 
        Director.
  [(c) Appointment; Term.--
          [(1) Appointment.--The Director shall be appointed by 
        the President, by and with the advice and consent of 
        the Senate, from among individuals who are citizens of 
        the United States.
          [(2) Term.--The Director shall be appointed for a 
        term of 5 years.
          [(3) Vacancy.--A vacancy in the position of Director 
        which occurs before the expiration of the term for 
        which a Director was appointed shall be filled in the 
        manner established in paragraph (1) and the Director 
        appointed to fill such vacancy shall be appointed only 
        for the remainder of such term.
          [(4) Service after end of term.--An individual may 
        serve as Director after the expiration of the term for 
        which appointed until a successor Director has been 
        appointed.
          [(5) Transitional provision.--Notwithstanding 
        paragraphs (1) and (2), the Chairman of the Federal 
        Home Loan Bank Board on the date of enactment of the 
        Financial Institutions Reform, Recovery, and 
        Enforcement Act of 1989, shall be the Director until 
        the date on which that individual's term as Chairman of 
        the Federal Home Loan Bank Board would have expired.
  [(d) Prohibition on Financial Interests.--The Director shall 
not have a direct or indirect financial interest in any insured 
depository institution, as defined in section 3 of the Federal 
Deposit Insurance Act.
  [(e) Powers of the Director.--The Director shall have all 
powers which--
          [(1) were vested in the Federal Home Loan Bank Board 
        (in the Board's capacity as such) or the Chairman of 
        such Board on the day before the date of the enactment 
        of the Financial Institutions Reform, Recovery, and 
        Enforcement Act of 1989; and
          [(2) were not--
                  [(A) transferred to the Federal Deposit 
                Insurance Corporation, the Federal Housing 
                Finance Board, the Resolution Trust 
                Corporation, or the Federal Home Loan Mortgage 
                Corporation pursuant to any amendment made by 
                such Act; or
                  [(B) established under any provision of law 
                repealed by such Act.
  [(f) State Homestead Provisions.--No provision of this Act or 
any other provision of law administered by the Director shall 
be construed as superseding any homestead provision of any 
State constitution, including any implementing State statute, 
in effect on the date of enactment of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act of 1994, or any 
subsequent amendment to such a State constitutional or 
statutory provision in effect on such date, that exempts the 
homestead of any person from foreclosure, or forced sale, for 
the payment of all debts, other than a purchase money 
obligation relating to the homestead, taxes due on the 
homestead, or an obligation arising from work and material used 
in constructing improvements on the homestead.
  [(g) Annual Report Required.--The Director shall make an 
annual report to the Congress. Such report shall include--
          [(1) a description of any changes the Director has 
        made or is considering making in the district offices 
        of the Office, including a description of the 
        geographic allocation of the Office's resources and 
        personnel used to carry out examination and supervision 
        functions; and
          [(2) a description of actions taken to carry out 
        section 308 of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989.
  [(h) Staff.--
          [(1) Appointment and compensation.--The Director 
        shall fix the compensation and number of, and appoint 
        and direct, all employees of the Office of Thrift 
        Supervision notwithstanding section 301(f)(1) of title 
        31, United States Code. Such compensation shall be paid 
        without regard to the provisions of other laws 
        applicable to officers or employees of the United 
        States.
          [(2) Rates of basic pay.--Rates of basic pay for 
        employees of the Office may be set and adjusted by the 
        Director without regard to the provisions of chapter 51 
        or subchapter III of chapter 53 of title 5, United 
        States Code.
          [(3) Additional compensation and benefits.--The 
        Director may provide additional compensation and 
        benefits to employees of the Office if the same type of 
        compensation or benefits are then being provided by any 
        Federal banking agency or, if not then being provided, 
        could be provided by such an agency under applicable 
        provisions of law, rule, or regulation. In setting and 
        adjusting the total amount of compensation and benefits 
        for employees of the Office, the Director shall 
        consult, and seek to maintain comparability with, the 
        Federal banking agencies.
          [(4) Delegation authority.--
                  [(A) In general.--The Director may--
                          [(i) designate who shall act as 
                        Director in the Director's absence; and
                          [(ii) delegate to any employee, 
                        representative, or agent any power of 
                        the Director.
                  [(B) Limitations.--Notwithstanding 
                subparagraph (A)(ii), the Director shall not, 
                directly or indirectly--
                          [(i) after October 10, 1989, delegate 
                        to any Federal home loan bank or to any 
                        officer, director, or employee of a 
                        Federal home loan bank, any power 
                        involving examining, supervising, 
                        taking enforcement action with respect 
                        to, or otherwise regulating any savings 
                        association, savings and loan holding 
                        company, or other person subject to 
                        regulation by the Director; or
                          [(ii) delegate the Director's 
                        authority to serve as a member of the 
                        Corporation's Board of Directors.
  [(i) Funding Through Assessments.--The compensation of the 
Director and other employees of the Office and all other 
expenses thereof may be paid from assessments levied under this 
Act.
  [(j) GAO Audit.--The Director shall make available to the 
Comptroller General of the United States all books and records 
necessary to audit all of the activities of the Office of 
Thrift Supervision.

[SEC. 4. SUPERVISION OF SAVINGS ASSOCIATIONS.

  [(a) Federal Savings Associations.--
          [(1) In general.--The Director shall provide for the 
        examination, safe and sound operation, and regulation 
        of savings associations.
          [(2) Regulations.--The Director may issue such 
        regulations as the Director determines to be 
        appropriate to carry out the responsibilities of the 
        Director or the Office.
          [(3) Safe and sound housing credit to be 
        encouraged.--The Director shall exercise all powers 
        granted to the Director under this Act so as to 
        encourage savings associations to provide credit for 
        housing safely and soundly.
  [(b) Accounting and Disclosure.--
          [(1) In general.--The Director shall, by regulation, 
        prescribe uniform accounting and disclosure standards 
        for savings associations, to be used in determining 
        savings associations' compliance with all applicable 
        regulations.
          [(2) Specific requirements for accounting 
        standards.--Subject to section 5(t), the uniform 
        accounting standards prescribed under paragraph (1) 
        shall--
                  [(A) incorporate generally accepted 
                accounting principles to the same degree that 
                such principles are used to determine 
                compliance with regulations prescribed by the 
                Federal banking agencies;
                  [(B) allow for no deviation from full 
                compliance with such standards as are in effect 
                after December 31, 1993; and
                  [(C) prior to January 1, 1994, require full 
                compliance by savings associations with 
                accounting standards in effect at any time 
                before such date not later than provided under 
                the schedule in section 563.23-3 of title 12, 
                Code of Federal Regulations (as in effect on 
                May 1, 1989).
          [(3) Authority to prescribe more stringent accounting 
        standards.--The Director may at any time prescribe 
        accounting standards more stringent than required under 
        paragraph (2) if the Director determines that the more 
        stringent standards are necessary to ensure the safe 
        and sound operation of savings associations.
  [(c) Stringency of Standards.--All regulations and policies 
of the Director governing the safe and sound operation of 
savings associations, including regulations and policies 
governing asset classification and appraisals, shall be no less 
stringent than those established by the Comptroller of the 
Currency for national banks.
  [(d) Investment of Certain Funds in Accounts of Savings 
Associations.--The savings accounts and share accounts of 
savings associations insured by the Corporation shall be lawful 
investments and may be accepted as security for all public 
funds of the United States, fiduciary and trust funds under the 
authority or control of the United States or any officer 
thereof, and for the funds of all corporations organized under 
the laws of the United States (subject to any regulatory 
authority otherwise applicable), regardless of any limitation 
of law upon the investment of any such funds or upon the 
acceptance of security for the investment or deposit of any of 
such funds.
  [(e) Participation by Savings Associations in Lotteries and 
Related Activities.--
          [(1) Participation prohibited.--No savings 
        association may--
                  [(A) deal in lottery tickets;
                  [(B) deal in bets used as a means or 
                substitute for participation in a lottery;
                  [(C) announce, advertise, or publicize the 
                existence of any lottery; or
                  [(D) announce, advertise, or publicize the 
                existence or identity of any participant or 
                winner, as such, in a lottery.
          [(2) Use of facilities prohibited.--No savings 
        association may permit--
                  [(A) the use of any part of any of its own 
                offices by any person for any purpose forbidden 
                to the institution under paragraph (1); or
                  [(B) direct access by the public from any of 
                its own offices to any premises used by any 
                person for any purpose forbidden to the 
                institution under paragraph (1).
          [(3) Definitions.--For purposes of this subsection--
                  [(A) Deal in.--The term ``deal in'' includes 
                making, taking, buying, selling, redeeming, or 
                collecting.
                  [(B) Lottery.--The term ``lottery'' includes 
                any arrangement under which--
                          [(i) 3 or more persons (hereafter in 
                        this subparagraph referred to as the 
                        ``participants'') advance money or 
                        credit to another in exchange for the 
                        possibility or expectation that 1 or 
                        more but not all of the participants 
                        (hereafter in this paragraph referred 
                        to as the ``winners'') will receive by 
                        reason of those participants' advances 
                        more than the amounts those 
                        participants have advanced; and
                          [(ii) the identity of the winners is 
                        determined by any means which 
                        includes--
                                  [(I) a random selection;
                                  [(II) a game, race, or 
                                contest; or
                                  [(III) any record or 
                                tabulation of the result of 1 
                                or more events in which any 
                                participant has no interest 
                                except for the bearing that 
                                event has on the possibility 
                                that the participant may become 
                                a winner.
                  [(C) Lottery ticket.--The term ``lottery 
                ticket'' includes any right, privilege, or 
                possibility (and any ticket, receipt, record, 
                or other evidence of any such right, privilege, 
                or possibility) of becoming a winner in a 
                lottery.
          [(4) Exception for state lotteries.--Paragraphs (1) 
        and (2) shall not apply with respect to any savings 
        association accepting funds from, or performing any 
        lawful services for, any State operating a lottery, or 
        any officer or employee of such a State who is charged 
        with administering the lottery.
          [(5) Regulations.--The Director shall prescribe such 
        regulations as may be necessary to provide for 
        enforcement of this subsection and to prevent any 
        evasion of any provision of this subsection.
  [(f) Federally Related Mortgage Loan Disclosures.--A savings 
association may not make a federally related mortgage loan to 
an agent, trustee, nominee, or other person acting in a 
fiduciary capacity without requiring that the identity of the 
person receiving the beneficial interest of such loan shall at 
all times be revealed to the savings association. At the 
request of the Director, the savings association shall report 
to the Director the identity of such person and the nature and 
amount of the loan.
  [(g) Preemption of State Usury Laws.--(1) Notwithstanding any 
State law, a savings association may charge interest on any 
extension of credit at a rate of not more than 1 percent in 
excess of the discount rate on 90-day commercial paper in 
effect at the Federal Reserve bank in the Federal Reserve 
district in which such savings association is located or at the 
rate allowed by the laws of the State in which such savings 
association is located, whichever is greater.
  [(2) If the rate prescribed in paragraph (1) exceeds the rate 
such savings association would be permitted to charge in the 
absence of this subsection, the receiving or charging a greater 
rate of interest than that prescribed by paragraph (1), when 
knowingly done, shall be deemed a forfeiture of the entire 
interest which the extension of credit carries with it, or 
which has been agreed to be paid thereon. If such greater rate 
of interest has been paid, the person who paid it may recover, 
in a civil action commenced in acourt of appropriate 
jurisdiction not later than 2 years after the date of such payment, an 
amount equal to twice the amount of the interest paid from the savings 
association taking or receiving such interest.
  [(h) Form and Maturity of Securities.--No savings association 
shall--
          [(1) issue securities which guarantee a definite 
        maturity except with the specific approval of the 
        Director, or
          [(2) issue any securities the form of which has not 
        been approved by the Director.

[SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.

  [(a) In General.--In order to provide thrift institutions for 
the deposit of funds and for the extension of credit for homes 
and other goods and services, the Director is authorized, under 
such regulations as the Director may prescribe--
          [(1) to provide for the organization, incorporation, 
        examination, operation, and regulation of associations 
        to be known as Federal savings associations (including 
        Federal savings banks), and
          [(2) to issue charters therefor,
giving primary consideration of the best practices of thrift 
institutions in the United States. The lending and investment 
powers conferred by this section are intended to encourage such 
institutions to provide credit for housing safely and soundly.
  [(b) Deposits and Related Powers.--
          [(1) Deposit accounts.--
                  [(A) Subject to the terms of its charter and 
                regulations of the Director, a Federal savings 
                association may--
                          [(i) raise funds through such 
                        deposit, share, or other accounts, 
                        including demand deposit accounts 
                        (hereafter in this section referred to 
                        as ``accounts''); and
                          [(ii) issue passbooks, certificates, 
                        or other evidence of accounts.
                  [(B) A Federal savings association may not--
                          [(i) pay interest on a demand 
                        account; or
                          [(ii) permit any overdraft (including 
                        an intraday overdraft) on behalf of an 
                        affiliate, or incur any such overdraft 
                        in such savings association's account 
                        at a Federal reserve bank or Federal 
                        home loan bank on behalf of an 
                        affiliate.
                All savings accounts and demand accounts shall 
                have the same priority upon liquidation. 
                Holders of accounts and obligors of a Federal 
                savings association shall, to such extent as 
                may be provided by its charter or by 
                regulations of the Director, be members of the 
                savings association, and shall have such voting 
                rights and such other rights as are thereby 
                provided.
                  [(C) A Federal savings association may 
                require not less than 14 days notice prior to 
                payment of savings accounts if the charter of 
                the savings association or the regulations of 
                the Director so provide.
                  [(D) If a Federal savings association does 
                not pay all withdrawals in full (subject to the 
                right of the association, where applicable, to 
                require notice), the payment of withdrawals 
                from accounts shall be subject to such rules 
                and procedures as may be prescribed by the 
                savings association's charter or by regulation 
                of the Director. Except as authorized in 
                writing by the Director, any Federal savings 
                association that fails to make full payment of 
                any withdrawal when due shall be deemed to be 
                in an unsafe or unsound condition.
                  [(E) Accounts may be subject to check or to 
                withdrawal or transfer on negotiable or 
                transferable or other order or authorization to 
                the Federal savings association, as the 
                Director may by regulation provide.
                  [(F) A Federal savings association may 
                establish remote service units for the purpose 
                of crediting savings or demand accounts, 
                debiting such accounts, crediting payments on 
                loans, and the disposition of related financial 
                transactions, as provided in regulations 
                prescribed by the Director.
          [(2) Other liabilities.--To such extent as the 
        Director may authorize in writing, a Federal savings 
        association may borrow, may give security, may be 
        surety as defined by the Director and may issue such 
        notes, bonds, debentures, or other obligations, or 
        other securities, including capital stock.
          [(3) Loans from state housing finance agencies.--
                  [(A) In general.--Subject to regulation by 
                the Director but without regard to any other 
                provision of this subsection, any Federal 
                savings association that is in compliance with 
                the capital standards in effect under 
                subsection (t) may borrow funds from a State 
                mortgage finance agency of the State in which 
                the head office of such savings association is 
                situated to the same extent as State law 
                authorizes a savings association organized 
                under the laws of such State to borrow from the 
                State mortgage finance agency.
                  [(B) Interest rate.--A Federal savings 
                association may not make any loan of funds 
                borrowed under subparagraph (A) at an interest 
                rate which exceeds by more than 1\3/4\ percent 
                per annum the interest rate paid to the State 
                mortgage finance agency on the obligations 
                issued to obtain the funds so borrowed.
          [(4) Mutual capital certificates.--In accordance with 
        regulations issued by the Director, mutual capital 
        certificates may be issued and sold directly to 
        subscribers or through underwriters. Such certificates 
        may be included in calculating capital for the purpose 
        of subsection (t) to the extent permitted by the 
        Director. The issuance of certificates under this 
        paragraph does not constitute a change of control or 
        ownership under this Act or any other law unless there 
        is in fact a change in control or reorganization. 
        Regulations relating to the issuance and sale of mutual 
        capital certificates shall provide that such 
        certificates--
                  [(A) are subordinate to all savings accounts, 
                savings certificates, and debt obligations;
                  [(B) constitute a claim in liquidation on the 
                general reserves, surplus, and undivided 
                profits of the Federal savings association 
                remaining after the payment in full of all 
                savings accounts, savings certificates, and 
                debt obligations;
                  [(C) are entitled to the payment of 
                dividends; and
                  [(D) may have a fixed or variable dividend 
                rate.
  [(c) Loans and Investments.--To the extent specified in 
regulations of the Director, a Federal savings association may 
invest in, sell, or otherwise deal in the following loans and 
other investments:
          [(1) Loans or investments without percentage of 
        assets limitation.--Without limitation as a percentage 
        of assets, the following are permitted:
                  [(A) Account loans.--Loans on the security of 
                its savings accounts and loans specifically 
                related to transaction accounts.
                  [(B) Residential real property loans.--Loans 
                on the security of liens upon residential real 
                property.
                  [(C) United states government securities.--
                Investments in obligations of, or fully 
                guaranteed as to principal and interest by, the 
                United States.
                  [(D) Federal home loan bank and federal 
                national mortgage association securities.--
                Investments in the stock or bonds of a Federal 
                home loan bank or in the stock of the Federal 
                National Mortgage Association.
                  [(E) Federal home loan mortgage corporation 
                instruments.--Investments in mortgages, 
                obligations, or other securities which are or 
                have been sold by the Federal Home Loan 
                Mortgage Corporation pursuant to section 305 or 
                306 of the Federal Home Loan Mortgage 
                Corporation Act.
                  [(F) Other government securities.--
                Investments in obligations, participations, 
                securities, or other instruments issued by, or 
                fully guaranteed as to principal and interest 
                by, the Federal National Mortgage Association, 
                the Student Loan Marketing Association, the 
                Government National Mortgage Association, or 
                any agency of the United States. A savings 
                association may issue and sell securities which 
                are guaranteed pursuant to section 306(g) of 
                the National Housing Act.
                  [(G) Deposits.--Investments in accounts of 
                any insured depository institution, as defined 
                in section 3 of the Federal Deposit Insurance 
                Act.
                  [(H) State securities.--Investments in 
                obligations issued by any State or political 
                subdivision thereof (including any agency, 
                corporation, or instrumentality of a State or 
                political subdivision). A Federal savings 
                association may not invest more than 10 percent 
                of its capital in obligations of any one 
                issuer, exclusive of investments in general 
                obligations of any issuer.
                  [(I) Purchase of insured loans.--Purchase of 
                loans secured by liens on improved real estate 
                which are insured or guaranteed under the 
                National Housing Act, the Servicemen's 
                Readjustment Act of 1944, or chapter 37 of 
                title 38, United States Code.
                  [(J) Home improvement and manufactured home 
                loans.--Loans made to repair, equip, alter, or 
                improve any residential real property, and 
                loans made for manufactured home financing.
                  [(K) Insured loans to finance the purchase of 
                fee simple.--Loans insured under section 240 of 
                the National Housing Act.
                  [(L) Loans to financial institutions, 
                brokers, and dealers.--Loans to--
                          [(i) financial institutions with 
                        respect to which the United States or 
                        an agency or instrumentality thereof 
                        has any function of examination or 
                        supervision, or
                          [(ii) any broker or dealer registered 
                        with the Securities and Exchange 
                        Commission,
                which are secured by loans, obligations, or 
                investments in which the Federal savings 
                association has the statutory authority to 
                invest directly.
                  [(M) Liquidity investments.--Investments 
                which, when made, are of a type that may be 
                used to satisfy any liquidity requirement 
                imposed by the Director pursuant to section 6.
                  [(N) Investment in the national housing 
                partnership corporation, partnerships, and 
                joint ventures.--Investments in shares of stock 
                issued by a corporation authorized to be 
                created pursuant to title IX of the Housing and 
                Urban Development Act of 1968, and investments 
                in any partnership, limited partnership, or 
                joint venture formed pursuant to section 907(a) 
                or 907(c) of such Act.
                  [(O) Certain hud insured or guaranteed 
                investments.--Loans that are secured by 
                mortgages--
                          [(i) insured under title X of the 
                        National Housing Act, or
                          [(ii) guaranteed under title IV of 
                        the Housing and Urban Development Act 
                        of 1968, under part B of the National 
                        Urban Policy and New Community 
                        Development Act of 1970, or under 
                        section 802 of the Housing and 
                        Community Development Act of 1974.
                  [(P) State housing corporation investments.--
                Obligations of and loans to any State housing 
                corporation, if--
                          [(i) such obligations or loans are 
                        secured directly, or indirectly through 
                        an agent or fiduciary, by a first lien 
                        on improved real estate which is 
                        insured under the provisions of the 
                        National Housing Act, and
                          [(ii) in the event of default, the 
                        holder of the obligations or loans has 
                        the right directly, or indirectly 
                        through an agent or fiduciary, to cause 
                        to be subject to the satisfaction of 
                        such obligations or loans the real 
                        estate described in the first lien or 
                        the insurance proceeds under the 
                        National Housing Act.
                  [(Q) Investment companies.--A Federal savings 
                association may invest in, redeem, or hold 
                shares or certificates issued by any open-end 
                management investment company which--
                          [(i) is registered with the 
                        Securities and Exchange Commission 
                        under the Investment Company Act of 
                        1940, and
                          [(ii) the portfolio of which is 
                        restricted by such management company's 
                        investment policy (changeable only if 
                        authorized by shareholder vote) solely 
                        to investments that a Federal savings 
                        association by law or regulation may, 
                        without limitation as to percentage of 
                        assets, invest in, sell, redeem, hold, 
                        or otherwise deal in.
                  [(R) Mortgage-backed securities.--Investments 
                in securities that--
                          [(i) are offered and sold pursuant to 
                        section 4(5) of the Securities Act of 
                        1933; or
                          [(ii) are mortgage related securities 
                        (as defined in section 3(a)(41) of the 
                        Securities Exchange Act of 1934),
                subject to such regulations as the Director may 
                prescribe, including regulations prescribing 
                minimum size of the issue (at the time of 
                initial distribution) or minimum aggregate 
                sales price, or both.
                  [(S) Small business related securities.--
                Investments in small business related 
                securities (as defined in section 3(a)(53) of 
                the Securities Exchange Act of 1934), subject 
                to such regulations as the Director may 
                prescribe, including regulations concerning the 
                minimum size of the issue (at the time of the 
                initial distribution), the minimum aggregate 
                sales price, or both.
                  [(T) Credit card loans.--Loans made through 
                credit cards or credit card accounts.
                  [(U) Educational loans.--Loans made for the 
                payment of educational expenses.
          [(2) Loans or investments limited to a percentage of 
        assets or capital.--The following loans or investments 
        are permitted, but only to the extent specified:
                  [(A) Commercial and other loans.--Secured or 
                unsecured loans for commercial, corporate, 
                business, or agricultural purposes. The 
                aggregate amount of loans made under this 
                subparagraph may not exceed 20 percent of the 
                total assets of the Federal savings 
                association, and amounts in excess of 10 
                percent of such total assets may be used under 
                this subparagraph only for small business 
                loans, as that term is defined by the Director.
                  [(B) Nonresidential real property loans.--
                          [(i) In general.--Loans on the 
                        security of liens upon nonresidential 
                        real property. Except as provided in 
                        clause (ii), the aggregate amount of 
                        such loans shall not exceed 400 percent 
                        of the Federal savings association's 
                        capital, as determined under subsection 
                        (t).
                          [(ii) Exception.--The Director may 
                        permit a savings association to exceed 
                        the limitation set forth inclause (i) 
if the Director determines that the increased authority--
                                  [(I) poses no significant 
                                risk to the safe and sound 
                                operation of the association, 
                                and
                                  [(II) is consistent with 
                                prudent operating practices.
                          [(iii) Monitoring.--If the Director 
                        permits any increased authority 
                        pursuant to clause (ii), the Director 
                        shall closely monitor the Federal 
                        savings association's condition and 
                        lending activities to ensure that the 
                        savings association carries out all 
                        authority under this paragraph in a 
                        safe and sound manner and complies with 
                        this subparagraph and all relevant laws 
                        and regulations.
                  [(C) Investments in personal property.--
                Investments in tangible personal property, 
                including vehicles, manufactured homes, 
                machinery, equipment, or furniture, for rental 
                or sale. Investments under this subparagraph 
                may not exceed 10 percent of the assets of the 
                Federal savings association.
                  [(D) Consumer loans and certain securities.--
                A Federal savings association may make loans 
                for personal, family, or household purposes, 
                including loans reasonably incident to 
                providing such credit, and may invest in, sell, 
                or hold commercial paper and corporate debt 
                securities, as defined and approved by the 
                Director. Loans and other investments under 
                this subparagraph may not exceed 35 percent of 
                the assets of the Federal savings association, 
                except that amounts in excess of 30 percent of 
                the assets may be invested only in loans which 
                are made by the association directly to the 
                original obligor and with respect to which the 
                association does not pay any finder, referral, 
                or other fee, directly or indirectly, to any 
                third party.
          [(3) Loans or investments limited to 5 percent of 
        assets.--The following loans or investments are 
        permitted, but not to exceed 5 percent of assets of a 
        Federal savings association for each subparagraph:
                  [(A) Community development investments.--
                Investments in real property and obligations 
                secured by liens on real property located 
                within a geographic area or neighborhood 
                receiving concentrated development assistance 
                by a local government under title I of the 
                Housing and Community Development Act of 1974. 
                No investment under this subparagraph in such 
                real property may exceed an aggregate of 2 
                percent of the assets of the Federal savings 
                association.
                  [(B) Nonconforming loans.--Loans upon the 
                security of or respecting real property or 
                interests therein used for primarily 
                residential or farm purposes that do not comply 
                with the limitations of this subsection.
                  [(C) Construction loans without security.--
                Loans--
                          [(i) the principal purpose of which 
                        is to provide financing with respect to 
                        what is or is expected to become 
                        primarily residential real estate; and
                          [(ii) with respect to which the 
                        association--
                                  [(I) relies substantially on 
                                the borrower's general credit 
                                standing and projected future 
                                income for repayment, without 
                                other security; or
                                  [(II) relies on other 
                                assurances for repayment, 
                                including a guarantee or 
                                similar obligation of a third 
                                party.
                The aggregate amount of such investments shall 
                not exceed the greater of the Federal savings 
                association's capital or 5 percent of its 
                assets.
          [(4) Other loans and investments.--The following 
        additional loans and other investments to the extent 
        authorized below:
                  [(A) Business development credit 
                corporations.--A Federal savings association 
                that is in compliance with the capital 
                standards prescribed under subsection (t) may 
                invest in, lend to, or to commit itself to lend 
                to, any business development credit corporation 
                incorporated in the State in which the home 
                office of the association is located in the 
                same manner and to the same extent as savings 
                associations chartered by such State are 
                authorized. The aggregate amount of such 
                investments, loans, and commitments of any such 
                Federal savings association shall not exceed 
                one-half of 1 percent of the association's 
                total outstanding loans or $250,000, whichever 
                is less.
                  [(B) Service corporations.--Investments in 
                the capital stock, obligations, or other 
                securities of any corporation organized under 
                the laws of the State in which the Federal 
                savings association's home office is located, 
                if such corporation's entire capital stock is 
                available for purchase only by savings 
                associations of such State and by Federal 
                associations having their home offices in such 
                State. No Federal savings association may make 
                any investment under this subparagraph if the 
                association's aggregate outstanding investment 
                under this subparagraph would exceed 3 percent 
                of the association's assets. Not less than one-
                half of the investment permitted under this 
                subparagraph which exceeds 1 percent of the 
                association's assets shall be used primarily 
                for community, inner-city, and community 
                development purposes.
                  [(C) Foreign assistance investments.--
                Investments in housing project loans having the 
                benefit of any guaranty under section 221 of 
                the Foreign Assistance Act of 1961 or loans 
                having the benefit of any guarantee under 
                section 224 of such Act, or any commitment or 
                agreement with respect to such loans made 
                pursuant to either of such sections and in the 
                share capital and capital reserve of the Inter-
                American Savings and Loan Bank. This authority 
                extends to the acquisition, holding, and 
                disposition of loans guaranteed under section 
                221 or 222 of such Act. Investments under this 
                subparagraph shall not exceed 1 percent of the 
                Federal savings association's assets.
                  [(D) Small business investment companies.--A 
                Federal savings association may invest in 
                stock, obligations, or other securities of any 
                small business investment company formed 
                pursuant to section 301(d) of the Small 
                Business Investment Act of 1958 for the purpose 
                of aiding members of a Federal home loan bank. 
                A Federal savings association may not make any 
                investment under this subparagraph if its 
                aggregate outstanding investment under this 
                subparagraph would exceed 1 percent of the 
                assets of such savings association.
                  [(E) Bankers' banks.--A Federal savings 
                association may purchase for its own account 
                shares of stock of a bankers' bank, described 
                in Paragraph Seventh of section 5136 of the 
                Revised Statutes or in section 5169(b) of the 
                Revised Statutes, on the same terms and 
                conditions as a national bank may purchase such 
                shares.
          [(5) Transition rule for savings associations 
        acquiring banks.--
                  [(A) In general.--If, under section 5(d)(3) 
                of the Federal Deposit Insurance Act, a savings 
                association acquires all or substantially all 
                of the assets of a bank that is a member of the 
                Bank Insurance Fund, the Director may permit 
                the savings association to retain any such 
                asset during the 2-year period beginning on the 
                date of the acquisition.
                  [(B) Extension.--The Director may extend the 
                2-year period described in subparagraph (A) for 
                not more than 1 year at a time and not more 
                than 2 years in the aggregate, if the Director 
                determines that the extension is consistent 
                with the purposes of this Act.
          [(6) Definitions.--As used in this subsection--
                  [(A) Residential property.--The terms 
                ``residential real property'' or ``residential 
                real estate'' mean leaseholds, homes (including 
                condominiums and cooperatives, except that in 
                connection with loans on individual cooperative 
                units, such loans shall be adequately secured 
                as defined by the Director) and, combinations 
                of homes or dwelling units and business 
                property, involving only minor or incidental 
                business use, or property to be improved by 
                construction of such structures.
                  [(B) Loans.--The term ``loans'' includes 
                obligations and extensions or advances of 
                credit; and any reference to a loan or 
                investment includes an interest in such a loan 
                or investment.
  [(d) Regulatory Authority.--
          [(1) In general.--
                  [(A) Enforcement.--The Director shall have 
                power to enforce this section, section 8 of the 
                Federal Deposit Insurance Act, and regulations 
                prescribed hereunder. In enforcing any 
                provision of this section, regulations 
                prescribed under this section, or any other law 
                or regulation, or in any other action, suit, or 
                proceeding to which the Directoris a party or 
in which the Director is interested, and in the administration of 
conservatorships and receiverships, the Director may act in the 
Director's own name and through the Director's own attorneys. Except as 
otherwise provided, the Director shall be subject to suit (other than 
suits on claims for money damages) by any Federal savings association 
or director or officer thereof with respect to any matter under this 
section or any other applicable law, or regulation thereunder, in the 
United States district court for the judicial district in which the 
savings association's home office is located, or in the United States 
District Court for the District of Columbia, and the Director may be 
served with process in the manner prescribed by the Federal Rules of 
Civil Procedure.
                  [(B) Ancillary provisions.--(i) In making 
                examinations of savings associations, examiners 
                appointed by the Director shall have power to 
                make such examinations of the affairs of all 
                affiliates of such savings associations as 
                shall be necessary to disclose fully the 
                relations between such savings associations and 
                their affiliates and the effect of such 
                relations upon such savings associations. For 
                purposes of this subsection, the term 
                ``affiliate'' has the same meaning as in 
                section 2(b) of the Banking Act of 1933, except 
                that the term ``member bank'' in section 2(b) 
                shall be deemed to refer to a savings 
                association.
                  [(ii) In the course of any examination of any 
                savings association, upon request by the 
                Director, prompt and complete access shall be 
                given to all savings association officers, 
                directors, employees, and agents, and to all 
                relevant books, records, or documents of any 
                type.
                  [(iii) Upon request made in the course of 
                supervision or oversight of any savings 
                association, for the purpose of acting on any 
                application or determining the condition of any 
                savings association, including whether 
                operations are being conducted safely, soundly, 
                or in compliance with charters, laws, 
                regulations, directives, written agreements, or 
                conditions imposed in writing in connection 
                with the granting of an application or other 
                request, the Director shall be given prompt and 
                complete access to all savings association 
                officers, directors, employees, and agents, and 
                to all relevant books, records, or documents of 
                any type.
                  [(iv) If prompt and complete access upon 
                request is not given as required in this 
                subsection, the Director may apply to the 
                United States district court for the judicial 
                district (or the United States court in any 
                territory) in which the principal office of the 
                institution is located, or in which the person 
                denying such access resides or carries on 
                business, for an order requiring that such 
                information be promptly provided.
                  [(v) In connection with examinations of 
                savings associations and affiliates thereof, 
                the Director may--
                          [(I) administer oaths and 
                        affirmations and examine and to take 
                        and preserve testimony under oath as to 
                        any matter in respect of the affairs or 
                        ownership of any such savings 
                        association or affiliate, and
                          [(II) issue subpenas and, for the 
                        enforcement thereof, apply to the 
                        United States district court for the 
                        judicial district (or the United States 
                        court in any territory) in which the 
                        principal office of the savings 
                        association or affiliate is located, or 
                        in which the witness resides or carries 
                        on business.
                Such courts shall have jurisdiction and power 
                to order and require compliance with any such 
                subpena.
                  [(vi) In any proceeding under this section, 
                the Director may administer oaths and 
                affirmations, take depositions, and issue 
                subpenas. The Director may prescribe 
                regulations with respect to any such 
                proceedings. The attendance of witnesses and 
                the production of documents provided for in 
                this subsection may be required from any place 
                in any State or in any territory at any 
                designated place where such proceeding is being 
                conducted.
                  [(vii) Any party to a proceeding under this 
                section may apply to the United States District 
                Court for the District of Columbia, or the 
                United States district court for the judicial 
                district (or the United States court in any 
                territory) in which such proceeding is being 
                conducted, or where the witness resides or 
                carries on business, for enforcement of any 
                subpena issued pursuant to this subsection or 
                section 10(c) of the Federal Deposit Insurance 
                Act, and such courts shall have jurisdiction 
                and power to order and require compliance 
                therewith. Witnesses subpenaed under this 
                section shall be paid the same fees and mileage 
                that are paid witnesses in the district courts 
                of the United States. All expenses of the 
                Director in connection with this section shall 
                be considered as nonadministrative expenses. 
                Any court having jurisdiction of any proceeding 
                instituted under this section by a savings 
                association, or a director or officer thereof, 
                may allow to any such party reasonable expenses 
                and attorneys' fees. Such expenses and fees 
                shall be paid by the savings association.
          [(2) Conservatorships and receiverships.--
                  [(A) Grounds for appointing conservator or 
                receiver for insured savings association.--The 
                Director of the Office of Thrift Supervision 
                may appoint a conservator or receiver for any 
                insured savings association if the Director 
                determines, in the Director's discretion, that 
                1 or more of the grounds specified in section 
                11(c)(5) of the Federal Deposit Insurance Act 
                exists.
                  [(B) Power of appointment; judicial review.--
                The Director shall have exclusive power and 
                jurisdiction to appoint a conservator or 
                receiver for a Federal savings association. If, 
                in the opinion of the Director, a ground for 
                the appointment of a conservator or receiver 
                for a savings association exists, the Director 
                is authorized to appoint ex parte and without 
                notice a conservator or receiver for the 
                savings association. In the event of such 
                appointment, the association may, within 30 
                days thereafter, bring an action in the United 
                States district court for the judicial district 
                in which the home office of such association is 
                located, or in the United States District Court 
                for the District of Columbia, for an order 
                requiring the Director to remove such 
                conservator or receiver, and the court shall 
                upon the merits dismiss such action or direct 
                the Director to remove such conservator or 
                receiver. Upon the commencement of such an 
                action, the court having jurisdiction of any 
                other action or proceeding authorized under 
                this subsection to which the association is a 
                party shall stay such action or proceeding 
                during the pendency of the action for removal 
                of the conservator or receiver.
                  [(C) Replacement.--The Director may, without 
                any prior notice, hearing, or other action, 
                replace a conservator with another conservator 
                or with a receiver, but such replacement shall 
                not affect any right which the association may 
                have to obtain judicial review of the original 
                appointment, except that any removal under this 
                subparagraph shall be removal of the 
                conservator or receiver in office at the time 
                of such removal.
                  [(D) Court action.--Except as otherwise 
                provided in this subsection, no court may take 
                any action for or toward the removal of any 
                conservator or receiver or, except at the 
                request of the Director, to restrain or affect 
                the exercise of powers or functions of a 
                conservator or receiver.
                  [(E) Powers.--
                          [(i) In general.--A conservator shall 
                        have all the powers of the members, the 
                        stockholders, the directors, and the 
                        officers of the association and shall 
                        be authorized to operate the 
                        association in its own name or to 
                        conserve its assets in the manner and 
                        to the extent authorized by the 
                        Director.
                          [(ii) FDIC or rtc as conservator or 
                        receiver.--Except as provided in 
                        section 21A of the Federal Home Loan 
                        Bank Act, the Director, at the 
                        Director's discretion, may appoint the 
                        Federal Deposit Insurance Corporation 
                        or the Resolution Trust Corporation, as 
                        appropriate, as conservator for a 
                        savings association. The Director shall 
                        appoint only the Federal Deposit 
                        Insurance Corporation or the Resolution 
                        Trust Corporation, as appropriate, as 
                        receiver for a savings association for 
                        the purpose of liquidation or winding 
                        up the affairs of such savings 
                        association. The conservator or 
                        receiver so appointed shall, as such, 
                        have power to buy at its own sale. The 
                        Federal Deposit Insurance Corporation, 
                        as such conservator or receiver, shall 
                        have all the powers of a conservator or 
                        receiver, as appropriate, granted under 
                        the Federal Deposit Insurance Act, and 
                        (when not inconsistent therewith) any 
                        other rights, powers, and privileges 
                        possessed by conservators or receivers, 
                        as appropriate, of savings associations 
                        under this Act and any other provisions 
                        of law.
                  [(F) Disclosure requirement for those acting 
                on behalf of conservator.--A conservator shall 
                require that any independent contractor, 
                consultant, or counsel employed by the 
                conservator in connection with the 
                conservatorship of a savings association 
                pursuant to this section shall fully disclose 
                to all parties with which such contractor, 
                consultant, or counsel is negotiating, any 
                limitation on the authority of such contractor, 
                consultant, or counsel to make legally binding 
                representations on behalf of the conservator.
          [(3) Regulations.--
                  [(A) In general.--The Director may prescribe 
                regulations for the reorganization, 
                consolidation, liquidation, and dissolution of 
                savings associations, for the merger of insured 
                savings associations with insured savings 
                associations, for savings associations in 
                conservatorship and receivership, and for the 
                conduct of conservatorships and receiverships. 
                The Director may, by regulation or otherwise, 
                provide for the exercise of functions by 
                members, stockholders, directors, or officers 
                of a savings association during conservatorship 
                and receivership.
                  [(B) FDIC or rtc as conservator or 
                receiver.--In any case where the Federal 
                Deposit Insurance Corporation or the Resolution 
                Trust Corporation is the conservator or 
                receiver, any regulations prescribed by the 
                Director shall be consistent with any 
                regulations prescribed by the Federal Deposit 
                Insurance Corporation pursuant to the Federal 
                Deposit Insurance Act.
          [(4) Refusal to comply with demand.--Whenever a 
        conservator or receiver appointed by the Director 
        demands possession of the property, business, and 
        assets of any savings association, or of any part 
        thereof, the refusal by any director, officer, 
        employee, or agent of such association to comply with 
        the demand shall be punishable by a fine of not more 
        than $5,000 or imprisonment for not more than one year, 
        or both.
          [(5) Definitions.--As used in this subsection, the 
        term ``savings association'' includes any savings 
        association or former savings association that retains 
        deposits insured by the Corporation, notwithstanding 
        termination of its status as an institution insured by 
        the Corporation.
          [(6) Compliance with monetary transaction 
        recordkeeping and report requirements.--
                  [(A) Compliance procedures required.--The 
                Director shall prescribe regulations requiring 
                savings associations to establish and maintain 
                procedures reasonably designed to assure and 
                monitor the compliance of such associations 
                with the requirements of subchapter II of 
                chapter 53 of title 31, United States Code.
                  [(B) Examinations of savings associations to 
                include review of compliance procedures.--
                          [(i) In general.--Each examination of 
                        a savings association by the Director 
                        shall include a review of the 
                        procedures required to be established 
                        and maintained under subparagraph (A).
                          [(ii) Exam report requirement.--The 
                        report of examination shall describe 
                        any problem with the procedures 
                        maintained by the association.
                  [(C) Order to comply with requirements.--If 
                the Director determines that a savings 
                association--
                          [(i) has failed to establish and 
                        maintain the procedures described in 
                        subparagraph (A); or
                          [(ii) has failed to correct any 
                        problem with the procedures maintained 
                        by such association which was 
                        previously reported to the association 
                        by the Director,
                the Director shall issue an order under section 
                8 of the Federal Deposit Insurance Act 
                requiring such association to cease and desist 
                from its violation of this paragraph or 
                regulations prescribed under this paragraph.
  [(e) Character and Responsibility.--A charter may be granted 
only--
          [(1) to persons of good character and responsibility,
          [(2) if in the judgment of the Director a necessity 
        exists for such an institution in the community to be 
        served,
          [(3) if there is a reasonable probability of its 
        usefulness and success, and
          [(4) if the association can be established without 
        undue injury to properly conducted existing local 
        thrift and home financing institutions.
  [(f) Federal Home Loan Bank Membership.--Each Federal savings 
association, upon receiving its charter, shall become 
automatically a member of the Federal home loan bank of the 
district in which it is located, or if convenience requires and 
the Director approves, shall become a member of a Federal home 
loan bank of an adjoining district. Such associations shall 
qualify for such membership in the manner provided in the 
Federal Home Loan Bank Act with respect to other members.
  [(h) Discriminatory State and Local Taxation Prohibited.--No 
State, county, municipal, or local taxing authority may impose 
any tax on Federal savings associations or their franchise, 
capital, reserves, surplus, loans, or income greater than that 
imposed by such authority on other similar local mutual or 
cooperative thrift and home financing institutions.
  [(i) Conversions.--
          [(1) In general.--Any savings association which is, 
        or is eligible to become, a member of a Federal home 
        loan bank may convert into a Federal savings 
        association (and in so doing may change directly from 
        the mutual form to the stock form, or from the stock 
        form to the mutual form). Such conversion shall be 
        subject to such regulations as the Director shall 
        prescribe. Thereafter such Federal savings association 
        shall be entitled to all the benefits of this section 
        and shall be subject to examination and regulation to 
        the same extent as other associations incorporated 
        pursuant to this Act.
          [(2) Authority of director.--(A) No savings 
        association may convert from the mutual to the stock 
        form, or from the stock form to the mutual form, except 
        in accordance with the regulations of the Director.
          [(B) Any aggrieved person may obtain review of a 
        final action of the Director which approves or 
        disapproves a plan of conversion pursuant to this 
        subsection only by complying with the provisions of 
        section 10(j) of this Act within the time limit and in 
        the manner therein prescribed, which provisions shall 
        apply in all respects as if such final action were an 
        order the review of which is therein provided for, 
        except that such time limit shall commence upon 
        publication of notice of such final action in the 
        Federal Register or upon the giving of such general 
        notice of such final action as is required by or 
        approved under regulations of the Director, whichever 
        is later.
          [(C) Any Federal savings association may change its 
        designation from a Federal savings association to a 
        Federal savings bank, or the reverse.
          [(3) Conversion to state association.--(A) Any 
        Federal savings association may convert itself into a 
        savings association or savings bank organized pursuant 
        to the laws of the State in which the principal office 
        of such Federal savings association is located if--
                  [(i) the State permits the conversion of any 
                savings association or savings bank of such 
                State into a Federal savings association;
                  [(ii) such conversion of a Federal savings 
                association into such a State savings 
                association is determined--
                          [(I) upon the vote in favor of such 
                        conversion cast in person or by proxy 
                        at a special meeting of members or 
                        stockholders called to consider such 
                        action, specified by the law of the 
                        State in which the home office of the 
                        Federal savings association is located, 
                        as required by such law for a State-
                        chartered institution to convert itself 
                        into a Federal savings association, but 
                        in no event upon a vote of less than 51 
                        percent of all the votes cast at such 
                        meeting, and
                          [(II) upon compliance with other 
                        requirements reciprocally equivalent to 
                        the requirements of such State law for 
                        the conversion of a State-chartered 
                        institution into a Federal savings 
                        association;
                  [(iii) notice of the meeting to vote on 
                conversion shall be given as herein provided 
                and no other notice thereof shall be necessary; 
                the notice shall expressly state that such 
                meeting is called to vote thereon, as well as 
                the time and place thereof; and such notice 
                shall be mailed, postage prepaid, at least 30 
                and not more than 60 days prior to the date of 
                the meeting, to the Director and to each member 
                or stockholder of record of the Federal savings 
                association at the member's or stockholder's 
                last address as shown on the books of the 
                Federal savings association;
                  [(iv) when a mutual savings association is 
                dissolved after conversion, the members or 
                shareholders of the savings association will 
                share on a mutual basis in the assets of the 
                association in exact proportion to their 
                relative share or account credits;
                  [(v) when a stock savings association is 
                dissolved after conversion, the stockholders 
                will share on an equitable basis in the assets 
                of the association; and
                  [(vi) such conversion shall be effective upon 
                the date that all the provisions of this Act 
                shall have been fully complied with and upon 
                the issuance of a new charter by the State 
                wherein the savings association is located.
          [(B)(i) The act of conversion constitutes consent by 
        the institution to be bound by all the requirements 
        that the Director may impose under this Act.
          [(ii) The savings association shall upon conversion 
        and thereafter be authorized to issue securities in any 
        form currently approved at the time of issue by the 
        Director for issuance by similar savings associations 
        in such State.
          [(iii) If the insurance of accounts is terminated in 
        connection with such conversion, the notice and other 
        action shall be taken as provided by law and 
        regulations for the termination of insurance of 
        accounts.
          [(4) Savings bank activities.--(A) To the extent 
        authorized by the Director, but subject to section 
        18(m)(3) of the Federal Deposit Insurance Act--
                  [(i) any Federal savings bank chartered as 
                such prior to October 15, 1982, may continue to 
                make any investment or engage in any activity 
                not otherwise authorized under this section, to 
                the degree it was permitted to do so as a 
                Federal savings bank prior to October 15, 1982; 
                and
                  [(ii) any Federal savings bank in existence 
                on the date of the enactment of the Financial 
                Institutions Reform, Recovery, and Enforcement 
                Act of 1989 and formerly organized as a mutual 
                savings bank under State law may continue to 
                make any investment or engage in any activity 
                not otherwise authorized under this section, to 
                the degree it was authorized to do so as a 
                mutual savings bank under State law.
          [(B) The authority conferred by this paragraph may be 
        utilized by any Federal savings association that 
        acquires, by merger or consolidation, a Federal savings 
        bank enjoying grandfather rights hereunder.
  [(k) Depository of Public Money.--When designated for that 
purpose by the Secretary of the Treasury, a savings association 
the deposits of which are insured by the Corporation shall be a 
depository of public money and may be employed as fiscal agent 
of the Government under such regulations as may be prescribed 
by the Secretary and shall perform all such reasonable duties 
as fiscal agent of the Government as may be required of it. A 
savings association the deposits of which are insured by the 
Corporation may act as agent for any other instrumentality of 
the United States when designated for that purpose by such 
instrumentality, including services in connection with the 
collection of taxes and other obligations owed the United 
States, and the Secretary of the Treasury may deposit public 
money in any such savings association, and shall prescribe such 
regulations as may be necessary to carry out the purposes of 
this subsection.
  [(l) Retirement Accounts.--A Federal savings association is 
authorized to act as trustee of any trust created or organized 
in the United States and forming part of a stock bonus, 
pension, or profit-sharing plan which qualifies or qualified 
for specific tax treatment under section 401(d) of the Internal 
Revenue Code of 1986 and to act as trustee or custodian of an 
individual retirement account within the meaning of section 408 
of such Code if the funds of such trust or account are invested 
only in savings accounts or deposits in such Federal savings 
association or in obligations or securities issued by such 
Federal savings association. All funds held in such fiduciary 
capacity by any Federal savings association may be commingled 
for appropriate purposes of investment, but individual records 
shall be kept by the fiduciary for each participant and shall 
show in proper detail all transactions engaged in under this 
paragraph.
  [(m) Branching.--
          [(1) In general.--
                  [(A) No savings association incorporated 
                under the laws of the District of Columbia or 
                organized in the District or doing business in 
                the District shall establish any branch or move 
                its principal office or any branch without the 
                Director's prior written approval.
                  [(B) No savings association shall establish 
                any branch in the District of Columbia or move 
                its principal office or any branch in the 
                District without the Director's prior written 
                approval.
          [(2) Definition.--For purposes of this subsection the 
        term ``branch'' means any office, place of business, or 
        facility, other than the principal office as defined by 
        the Director, of a savings association at which 
        accounts are opened or payments are received or 
        withdrawals are made, or any other office, place of 
        business, or facility of a savings association defined 
        by the Director as a branch within the meaning of such 
        sentence.
  [(n) Trusts.--
          [(1) Permits.--The Director may grant by special 
        permit to a Federal savings association applying 
        therefor the right to act as trustee, executor, 
        administrator, guardian, or in any other fiduciary 
        capacity in which State banks, trust companies, or 
        other corporations which compete with Federal savings 
        associations are permitted to act under the laws of the 
        State in which the Federal savings association is 
        located. Subject to the regulations of the Director, 
        service corporations may invest in State or federally 
        chartered corporations which are located in the State 
        in which the home office of the Federal savings 
        association is located and which are engaged in trust 
        activities.
          [(2) Segregation of assets.--A Federal savings 
        association exercising any or all of the powers 
        enumerated in this section shall segregate all assets 
        held in any fiduciary capacity from the general assets 
        of the association and shall keep a separate set of 
        books and records showing in proper detail all 
        transactions engaged in under this subsection. The 
        State banking authority involved may have access to 
        reports of examination made by the Director insofar as 
        such reports relate to the trust department of such 
        association but nothing in this subsection shall be 
        construed as authorizing such State banking authority 
        to examine the books, records, and assets of such 
        associations.
          [(3) Prohibitions.--No Federal savings association 
        shall receive in its trust department deposits of 
        current funds subject to check or the deposit of 
        checks, drafts, bills of exchange, or other items for 
        collection or exchange purposes. Funds deposited or 
        held in trust by the association awaiting investment 
        shall be carried in a separate account and shall not be 
        used by the association in the conduct of its business 
        unless it shall first set aside in the trust department 
        United States bonds or other securities approved by the 
        Director.
          [(4) Separate lien.--In the event of the failure of a 
        Federal savings association, the owners of the funds 
        held in trust for investment shall have a lien on the 
        bonds or other securities so set apart in addition to 
        their claim against the estate of the association.
          [(5) Deposits.--Whenever the laws of a State require 
        corporations acting in a fiduciary capacity to deposit 
        securities with the State authorities for the 
        protection of private or court trusts, Federal savings 
        associations so acting shall be required to make 
        similar deposits. Securities so deposited shall be held 
        for the protection of private or court trusts, as 
        provided by the State law. Federal savings associations 
        in such cases shall not be required to execute the bond 
        usually required of individuals if State corporations 
        under similar circumstances are exempt from this 
        requirement. Federal savings associations shall have 
        power to execute such bond when so required by the laws 
        of the State involved.
          [(6) Oaths and affidavits.--In any case in which the 
        laws of a State require that a corporation acting as 
        trustee, executor, administrator, or in any capacity 
        specified in this section, shall take an oath or make 
        an affidavit, the president, vice president, cashier, 
        or trust officer of such association may take the 
        necessary oath or execute the necessary affidavit.
          [(7) Certain loans prohibited.--It shall be unlawful 
        for any Federal savings association to lend any 
        officer, director, or employee any funds held in trust 
        under the powers conferred by this section. Any 
        officer, director, or employee making such loan, or to 
        whom such loan is made, may be fined not more than 
        $50,000 or twice the amount of that person's gain from 
        the loan, whichever is greater, or may be imprisoned 
        not more than 5 years, or may be both fined and 
        imprisoned, in the discretion of the court.
          [(8) Factors to be considered.--In reviewing 
        applications for permission to exercise the powers 
        enumerated in this section, the Director may consider--
                  [(A) the amount of capital of the applying 
                Federal savings association,
                  [(B) whether or not such capital is 
                sufficient under the circumstances of the case,
                  [(C) the needs of the community to be served, 
                and
                  [(D) any other facts and circumstances that 
                seem to it proper.
        The Director may grant or refuse the application 
        accordingly, except that no permit shall be issued to 
        any association having capital less than the capital 
        required by State law of State banks, trust companies, 
        and corporations exercising such powers.
          [(9) Surrender of charter.--(A) Any Federal savings 
        association may surrender its right to exercise the 
        powers granted under this subsection, and have returned 
        to it any securities which it may have deposited with 
        the State authorities, by filing with the Director a 
        certified copy of a resolution of its board of 
        directors indicating its intention to surrender its 
        right.
          [(B) Upon receipt of such resolution, the Director, 
        if satisfied that such Federal savings association has 
        been relieved in accordance with State law of all 
        duties as trustee, executor, administrator, guardian or 
        other fiduciary, may in the Director's discretion, 
        issue to such association a certificate that such 
        association is no longer authorized to exercise the 
        powers granted by this subsection.
          [(C) Upon the issuance of such a certificate by the 
        Director, such Federal savings association (i) shall no 
        longer be subject to the provisions of this section or 
        the regulations of the Director made pursuant thereto, 
        (ii) shall be entitled to have returned to it any 
        securities which it may have deposited with State 
        authorities, and (iii) shall not exercise thereafter 
        any of the powers granted by this section without first 
        applying for and obtaining a new permit to exercise 
        such powers pursuant to the provisions of this section.
          [(D) The Director may prescribe regulations necessary 
        to enforce compliance with the provisions of this 
        subsection.
          [(10) Revocation.--(A) In addition to the authority 
        conferred by other law, if, in the opinion of the 
        Director, a Federal savings association is unlawfully 
        or unsoundly exercising, or has unlawfully or unsoundly 
        exercised, or has failed for a period of 5 consecutive 
        years to exercise, the powers granted by this 
        subsection or otherwise fails or has failed to comply 
        with the requirements of this subsection, the Director 
        may issue and serve upon the association a notice of 
        intent to revoke the authority of the association to 
        exercise the powers granted by this subsection. The 
        notice shall contain a statement of the facts 
        constituting the alleged unlawful or unsound exercise 
        of powers, or failure to exercise powers, or failure to 
        comply, and shall fix a time and place at which a 
        hearing will be held to determine whether an order 
        revoking authority to exercise such powers should issue 
        against the association.
          [(B) Such hearing shall be conducted in accordance 
        with the provisions of subsection (d)(1)(B), and 
        subject to judicial review as therein provided, and 
        shall be fixed for a date not earlier than 30 days and 
        not later than 60 days after service of such notice 
        unless the Director sets an earlier or later date at 
        the request of any Federal savings association so 
        served.
          [(C) Unless the Federal savings association so served 
        shall appear at the hearing by a duly authorized 
        representative, it shall be deemed to have consented to 
        the issuance of the revocation order. In the event of 
        such consent, or if upon the record made at any such 
        hearing, the Director shall find that any allegation 
        specified in the notice of charges has been 
        established, the Director may issue and serve upon the 
        association an order prohibiting it from accepting any 
        new or additional trust accounts and revoking authority 
        to exercise any and all powers granted by this 
        subsection, except that such order shall permit the 
        association to continue to service all previously 
        accepted trust accounts pending their expeditious 
        divestiture or termination.
          [(D) A revocation order shall become effective not 
        earlier than the expiration of 30 days after service of 
        such order upon the association so served (except in 
        the case of a revocation order issued upon consent, 
        which shall become effective at the time specified 
        therein), and shall remain effective and enforceable, 
        except to such extent as it is stayed, modified, 
        terminated, or set aside by action of the Director or a 
        reviewing court.
  [(o) Conversion of State Savings Banks.--(1) Subject to the 
provisions of this subsection and under regulations of the 
Director, the Director may authorize the conversion of a State-
chartered savings bank that is a Bank Insurance Fund member 
into a Federal savings bank, if such conversion is not in 
contravention of State law, and provide for the organization, 
incorporation, operation, examination, and regulation of such 
institution.
  [(2)(A) Any Federal savings bank chartered pursuant to this 
subsection shall continue to be a Bank Insurance Fund member 
until such time as it changes its status to a Savings 
Association Insurance Fund member.
  [(B) The Director shall notify the Corporation of any 
application under this Act for conversion to a Federal charter 
by an institution insured by the Corporation, shall consult 
with the Corporation before disposing of the application, and 
shall notify the Corporation of the Director's determination 
with respect to such application.
  [(C) Notwithstanding any other provision of law, if the 
Corporation determines that conversion into a Federal stock 
savings bank or the chartering of a Federal stock savings bank 
is necessary to prevent the default of a savings bank it 
insures or to reopen a savings bank in default that it insured, 
or if the Corporation determines, with the concurrence of the 
Director, that severe financial conditions exist that threaten 
the stability of a savings bank insured by the Corporation and 
that such a conversion or charter is likely to improve the 
financial condition of such savings bank, the Corporation shall 
provide the Director with a certificate of such determination, 
the reasons therefor in conformance with the requirements of 
this Act, and the bank shall be converted or chartered by the 
Director, pursuant to the regulations thereof, from the time 
the Corporation issues the certificate.
  [(D) A bank may be converted under subparagraph (C) only if 
the board of trustees of the bank--
          [(i) has specified in writing that the bank is in 
        danger of closing or is closed, or that severe 
        financial conditions exist that threaten the stability 
        of the bank and a conversion is likely to improve the 
        financial condition of the bank; and
          [(ii) has requested in writing that the Corporation 
        use the authority of subparagraph (C).
  [(E)(i) Before making a determination under subparagraph (D), 
the Corporation shall consult the State bank supervisor of the 
State in which the bank in danger of closing is chartered. The 
State bank supervisor shall be given a reasonable opportunity, 
and in no event less than 48 hours, to object to the use of the 
provisions of subparagraph (D).
  [(ii) If the State supervisor objects during such period, the 
Corporation may use the authority of subparagraph (D) only by 
an affirmative vote of three-fourths of the Board of Directors. 
The Board of Directors shall provide the State supervisor, as 
soon as practicable, with a written certification of its 
determination.
  [(3) A Federal savings bank chartered under this subsection 
shall have the same authority with respect to investments, 
operations, and activities, and shall be subject to the same 
restrictions, including those applicable to branching and 
discrimination, as would apply to it if it were chartered as a 
Federal savings bank under any other provision of this Act.
  [(p) Conversions.--(1) Notwithstanding any other provision of 
law, and consistent with the purposes of this Act, the Director 
may authorize (or in the case of a Federal savings association, 
require) the conversion of any mutual savings association or 
Federal mutual savings bank that is insured by the Corporation 
into a Federal stock savings association or Federal stock 
savings bank, or charter a Federal stock savings association or 
Federal stock savings bank to acquire the assets of, or merge 
with such a mutual institution under the regulations of the 
Director.
  [(2) Authorizations under this subsection may be made only--
          [(A) if the Director has determined that severe 
        financial conditions exist which threaten the stability 
        of an association and that such authorization is likely 
        to improve the financial condition of the association,
          [(B) when the Corporation has contracted to provide 
        assistance to such association under section 13 of the 
        Federal Deposit Insurance Act, or
          [(C) to assist an institution in receivership.
  [(3) A Federal savings bank chartered under this subsection 
shall have the same authority with respect to investments, 
operations and activities, and shall be subject to the same 
restrictions, including those applicable to branching and 
discrimination, as would apply to it if it were chartered as a 
Federal savings bank under any other provision of this Act, and 
may engage in any investment, activity, or operation that the 
institution it acquired was engaged in if that institution was 
a Federal savings bank, or would have been authorized to engage 
in had that institution converted to a Federal charter.
  [(q) Tying Arrangements.--(1) A savings association may not 
in any manner extend credit, lease, or sell property of any 
kind, or furnish any service, or fix or vary the consideration 
for any of the foregoing, on the condition or requirement--
          [(A) that the customer shall obtain additional 
        credit, property, or service from such savings 
        association, or from anyservice corporation or 
affiliate of such association, other than a loan, discount, deposit, or 
trust service;
          [(B) that the customer provide additional credit, 
        property, or service to such association, or to any 
        service corporation or affiliate of such association, 
        other than those related to and usually provided in 
        connection with a similar loan, discount, deposit, or 
        trust service; and
          [(C) that the customer shall not obtain some other 
        credit, property, or service from a competitor of such 
        association, or from a competitor of any service 
        corporation or affiliate of such association, other 
        than a condition or requirement that such association 
        shall reasonably impose in connection with credit 
        transactions to assure the soundness of credit.
  [(2)(A) Any person may sue for and have injunctive relief, in 
any court of the United States having jurisdiction over the 
parties, against threatened loss or damage by reason of a 
violation of paragraph (1), under the same conditions and 
principles as injunctive relief against threatened conduct that 
will cause loss or damage is granted by courts of equity and 
under the rules governing such proceedings.
  [(B) Upon the execution of proper bond against damages for an 
injunction improvidently granted and a showing that the danger 
of irreparable loss or damage is immediate, a preliminary 
injunction may issue.
  [(3) Any person injured by a violation of paragraph (1) may 
bring an action in any district court of the United States in 
which the defendant resides or is found or has an agent, 
without regard to the amount in controversy, or in any other 
court of competent jurisdiction, and shall be entitled to 
recover three times the amount of the damages sustained, and 
the cost of suit, including a reasonable attorney's fee. Any 
such action shall be brought within 4 years from the date of 
the occurrence of the violation.
  [(4) Nothing contained in this subsection affects in any 
manner the right of the United States or any other party to 
bring an action under any other law of the United States or of 
any State, including any right which may exist in addition to 
specific statutory authority, challenging the legality of any 
act or practice which may be proscribed by this subsection. No 
regulation or order issued by the Director under this 
subsection shall in any manner constitute a defense to such 
action.
  [(5) For purposes of this subsection, the term ``loan'' 
includes obligations and extensions or advances of credit.
    [(6) Exceptions.--The Director may, by regulation or order, 
permit such exceptions to the prohibitions of this subsection 
as the Director considers will not be contrary to the purposes 
of this subsection and which conform to exceptions granted by 
the Board of Governors of the Federal Reserve System pursuant 
to section 106(b) of the Bank Holding Company Act Amendments of 
1970.
  [(r) Out-of-State Branches.--(1) No Federal savings 
association may establish, retain, or operate a branch outside 
the State in which the Federal savings association has its home 
office, unless the association qualifies as a domestic building 
and loan association under section 7701(a)(19) of the Internal 
Revenue Code of 1986 or meets the asset composition test 
imposed by subparagraph (C) of that section on institutions 
seeking so to qualify, or qualifies as a qualified thrift 
lender, as determined under section 10(m) of this Act. No out-
of-State branch so established shall be retained or operated 
unless the total assets of the Federal savings association 
attributable to all branches of the Federal savings association 
in that State would qualify the branches as a whole, were they 
otherwise eligible, for treatment as a domestic building and 
loan association under section 7701(a)(19) or as a qualified 
thrift lender, as determined under section 10(m) of this Act, 
as applicable.
  [(2) The limitations of paragraph (1) shall not apply if--
          [(A) the branch results from a transaction authorized 
        under section 13(k) of the Federal Deposit Insurance 
        Act;
          [(B) the branch was authorized for the Federal 
        savings association prior to October 15, 1982;
          [(C) the law of the State where the branch is 
        located, or is to be located, would permit 
        establishment of the branch if the association was a 
        savings association or savings bank chartered by the 
        State in which its home office is located; or
          [(D) the branch was operated lawfully as a branch 
        under State law prior to the association's conversion 
        to a Federal charter.
  [(3) The Director, for good cause shown, may allow Federal 
savings associations up to 2 years to comply with the 
requirements of this subsection.
  [(s) Minimum Capital Requirements.--
          [(1) In general.--Consistent with the purposes of 
        section 908 of the International Lending Supervision 
        Act of 1983 and the capital requirements established 
        pursuant to such section by the appropriate Federal 
        banking agencies (as defined in section 903(1) of such 
        Act), the Director shall require all savings 
        associations to achieve and maintain adequate capital 
        by--
                  [(A) establishing minimum levels of capital 
                for savings associations; and
                  [(B) using such other methods as the Director 
                determines to be appropriate.
          [(2) Minimum capital levels may be determined by 
        director case-by-case.--The Director may, consistent 
        with subsection (t), establish the minimum level of 
        capital for a savings association at such amount or at 
        such ratio of capital-to-assets as the Director 
        determines to be necessary or appropriate for such 
        association in light of the particular circumstances of 
        the association.
          [(3) Unsafe or unsound practice.--In the Director's 
        discretion, the Director may treat the failure of any 
        savings association to maintain capital at or above the 
        minimum level required by the Director under this 
        subsection or subsection (t) as an unsafe or unsound 
        practice.
          [(4) Directive to increase capital.--
                  [(A) Plan may be required.--In addition to 
                any other action authorized by law, including 
                paragraph (3), the Director may issue a 
                directive requiring any savings association 
                which fails to maintain capital at or above the 
                minimum level required by the Director to 
                submit and adhere to a plan for increasing 
                capital which is acceptable to the Director.
                  [(B) Enforcement of plan.--Any directive 
                issued and plan approved under subparagraph (A) 
                shall be enforceable under section 8 of the 
                Federal Deposit Insurance Act to the same 
                extent and in the same manner as an outstanding 
                order which was issued under section 8 of the 
                Federal Deposit Insurance Act and has become 
                final.
          [(5) Plan taken into account in other proceedings.--
        The Director may--
                  [(A) consider a savings association's 
                progress in adhering to any plan required under 
                paragraph (4) whenever such association or any 
                affiliate of such association (including any 
                company which controls such association) seeks 
                the Director's approval for any proposal which 
                would have the effect of diverting earnings, 
                diminishing capital, or otherwise impeding such 
                association's progress in meeting the minimum 
                level of capital required by the Director; and
                  [(B) disapprove any proposal referred to in 
                subparagraph (A) if the Director determines 
                that the proposal would adversely affect the 
                ability of the association to comply with such 
                plan.
  [(t) Capital Standards.--
          [(1) In general.--
                  [(A) Requirement for standards to be 
                prescribed.--The Director shall, by regulation, 
                prescribe and maintain uniformly applicable 
                capital standards for savings associations. 
                Those standards shall include--
                          [(i) a leverage limit;
                          [(ii) a tangible capital requirement; 
                        and
                          [(iii) a risk-based capital 
                        requirement.
                  [(B) Compliance.--A savings association is 
                not in compliance with capital standards for 
                purposes of this subsection unless it complies 
                with all capital standards prescribed under 
                this paragraph.
                  [(C) Stringency.--The standards prescribed 
                under this paragraph shall be no less stringent 
                than the capital standards applicable to 
                national banks.
                  [(D) Deadline for regulations.--The Director 
                shall promulgate final regulations under this 
                paragraph not later than 90 days after the date 
                of enactment of the Financial Institutions 
                Reform, Recovery, and Enforcement Act of 1989, 
                and those regulations shall become effective 
                not later than 120 days after the date of 
                enactment.
          [(2) Content of standards.--
                  [(A) Leverage limit.--The leverage limit 
                prescribed under paragraph (1) shall require a 
                savings association to maintain core capital in 
                an amount not less than 3 percent of the 
                savings association's total assets.
                  [(B) Tangible capital requirement.--The 
                tangible capital requirement prescribed under 
                paragraph (1) shall require a savings 
                association to maintain tangible capital in an 
                amount not less than 1.5 percent of the savings 
                association's total assets.
                  [(C) Risk-based capital requirement.--
                Notwithstanding paragraph (1)(C), the risk-
                based capital requirement prescribed under 
                paragraph (1) may deviate from the risk-based 
                capital standards applicable to national banks 
                to reflect interest-rate risk or other risks, 
                but such deviations shall not, in the 
                aggregate, result in materially lower levels of 
                capital being required of savings associations 
                under the risk-based capital requirement than 
                would be required under the risk-based capital 
                standards applicable to national banks.
          [(3) Transition rule.--
                  [(A) Certain qualifying supervisory goodwill 
                included in calculating core capital.--
                Notwithstanding paragraph (9)(A), an eligible 
                savings association may include qualifying 
                supervisory goodwill in calculating core 
                capital. The amount of qualifying supervisory 
                goodwill that may be included may not exceed 
                the applicable percentage of total assets set 
                forth in the following table:

          [For the following                              The applicable
          period:                                         percentage is:
          Prior to January 1, 1992......................   1.500 percent
          January 1, 1992-December 31, 1992.............   1.000 percent
          January 1, 1993-December 31, 1993.............   0.750 percent
          January 1, 1994-December 31, 1994.............   0.375 percent
          Thereafter....................................       0 percent

                  [(B) Eligible savings associations.--For 
                purposes of subparagraph (A), a savings 
                association is an eligible savings association 
                so long as the Director determines that--
                          [(i) the savings association's 
                        management is competent;
                          [(ii) the savings association is in 
                        substantial compliance with all 
                        applicable statutes, regulations, 
                        orders, and supervisory agreements and 
                        directives; and
                          [(iii) the savings association's 
                        management has not engaged in insider 
                        dealing, speculative practices, or any 
                        other activities that have jeopardized 
                        the association's safety and soundness 
                        or contributed to impairing the 
                        association's capital.
          [(4) Special rules for purchased mortgage servicing 
        rights.--
                  [(A) In general.--Notwithstanding paragraphs 
                (1)(C) and (9), the standards prescribed under 
                paragraph (1) may permit a savings association 
                to include in calculating capital for the 
                purpose of the leverage limit and risk-based 
                capital requirement prescribed under paragraph 
                (1), on terms no less stringent than under both 
                the capital standards applicable to State 
                nonmember banks and (except as to the amount 
                that may be included in calculating capital) 
                the capital standards applicable to national 
                banks, 90 percent of the fair market value of 
                readily marketable purchased mortgage servicing 
                rights.
                  [(B) Tangible capital requirement.--
                Notwithstanding paragraphs (1)(C) and (9)(C), 
                the standards prescribed under paragraph (1) 
                may permit a savings association to include in 
                calculating capital for the purpose of the 
                tangible capital requirement prescribed under 
                paragraph (1), on terms no less stringent than 
                under both the capital standards applicable to 
                State nonmember banks and (except as to the 
                amount that may be included in calculating 
                capital) the capital standards applicable to 
                national banks, 90 percent of the fair market 
                value of readily marketable purchased mortgage 
                servicing rights.
                  [(C) Percentage limitation prescribed by 
                fdic.--Notwithstanding paragraph (1)(C) and 
                subparagraphs (A) and (B) of this paragraph--
                          [(i) for the purpose of subparagraph 
                        (A), the maximum amount of purchased 
                        mortgage servicing rights that may be 
                        included in calculating capital under 
                        the leverage limit and the risk-based 
                        capital requirement prescribed under 
                        paragraph (1) may not exceed the amount 
                        that could be included if the savings 
                        association were an insured State 
                        nonmember bank; and
                          [(ii) for the purpose of subparagraph 
                        (B), the Corporation shall prescribe a 
                        maximum percentage of the tangible 
                        capital requirement that savings 
                        associations may satisfy by including 
                        purchased mortgage servicing rights in 
                        calculating such capital.
                  [(D) Quarterly valuation.--The fair market 
                value of purchased mortgage servicing rights 
                shall be determined not less often than 
                quarterly.
          [(5) Separate capitalization required for certain 
        subsidiaries.--
                  [(A) In general.--In determining compliance 
                with capital standards prescribed under 
                paragraph (1), all of a savings association's 
                investments in and extensions of credit to any 
                subsidiary engaged in activities not 
                permissible for a national bank shall be 
                deducted from the savings association's 
                capital.
                  [(B) Exception for agency activities.--
                Subparagraph (A) shall not apply with respect 
                to a subsidiary engaged, solely as agent for 
                its customers, in activities not permissible 
                for a national bank unless the Corporation, in 
                its sole discretion, determines that, in the 
                interests of safety and soundness, this 
                subparagraph should cease to apply to that 
                subsidiary.
                  [(C) Other exceptions.--Subparagraph (A) 
                shall not apply with respect to any of the 
                following:
                          [(i) Mortgage banking subsidiaries.--
                        A savings association's investments in 
                        and extensions of credit to a 
                        subsidiary engaged solely in mortgage-
                        banking activities.
                          [(ii) Subsidiary insured depository 
                        institutions.--A savings association's 
                        investments in and extensions of credit 
                        to a subsidiary--
                                  [(I) that is itself an 
                                insured depository institution 
                                or a company the sole 
                                investment of which is an 
                                insured depository institution, 
                                and
                                  [(II) that was acquired by 
                                the parent insured depository 
                                institution prior to May 1, 
                                1989.
                          [(iii) Certain federal savings 
                        banks.--Any Federal savings association 
                        existing as a Federal savings 
                        association on the date of enactment of 
                        the Financial Institutions Reform, 
                        Recovery, and Enforcement Act of 1989--
                                  [(I) that was chartered prior 
                                to October 15, 1982, as a 
                                savings bank or a cooperative 
                                bank under State law; or
                                  [(II) that acquired its 
                                principal assets from an 
                                association that was chartered 
                                prior to October 15, 1982, as a 
                                savings bank or a cooperative 
                                bank under State law.
                  [(D) Transition rule.--
                          [(i) Inclusion in capital.--
                        Notwithstanding subparagraph (A), if a 
                        savings association's subsidiary was, 
                        as of April 12, 1989, engaged in 
                        activities not permissible for a 
                        national bank, the savings association 
                        may include in calculating capital the 
                        applicable percentage (set forth in 
                        clause (ii)) of the lesser of--
                                  [(I) the savings 
                                association's investments in 
                                and extensions of credit to the 
                                subsidiary on April 12, 1989; 
                                or
                                  [(II) the savings 
                                association's investments in 
                                and extensions of credit to the 
                                subsidiary on the date as of 
                                which the savings association's 
                                capital is being determined.
                          [(ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage is as follows:

          [For the following                              The applicable
          period:                                         percentage is:
          Prior to July 1, 1990.........................     100 percent
          July 1, 1990-June 30, 1991....................      90 percent
          July 1, 1991-October 31, 1992.................      75 percent
          November 1, 1992-June 30, 1993................      60 percent
          July 1, 1993-June 30, 1994....................      40 percent
          Thereafter....................................       0 percent

                          [(iii) Agency discretion to prescribe 
                        greater percentage.--Subject to clauses 
                        (iv), (v), and (vi), the Director may 
                        prescribe by order, with respect to a 
                        particular qualified savings 
                        association, an applicable percentage 
                        greater than that provided in clause 
                        (ii) if the Director determines, in the 
                        Director's sole discretion, that the 
                        use of the greater percentage, under 
                        the circumstances--
                                  [(I) would not constitute an 
                                unsafe or unsound practice;
                                  [(II) would not increase the 
                                risk to the affected deposit 
                                insurance fund; and
                                  [(III) would not be likely to 
                                result in the association's 
                                being in an unsafe or unsound 
                                condition.
                          [(iv) Substantial compliance with 
                        approved capital plan.--In the case of 
                        a savings association which is subject 
                        to a plan submitted under paragraph 
                        (7)(D) of this subsection or an order 
                        issued under this subsection, a 
                        directive issued or plan approved under 
                        subsection (s), or a capital 
                        restoration plan approved or order 
                        issued under section 38 or 39 of the 
                        Federal Deposit Insurance Act, an order 
                        issued under clause (iii) with respect 
                        to the association shall be effective 
                        only so long as the association is in 
                        substantial compliance with such plan, 
                        directive, or order.
                          [(v) Limitation on investments taken 
                        into account.--In prescribing the 
                        amount by which an applicable 
                        percentage under clause (iii) may 
                        exceed the applicable percentage under 
                        clause (ii) with respect to a 
                        particular qualified savings 
                        association, the Director may take into 
                        account only the sum of--
                                  [(I) the association's 
                                investments in, and extensions 
                                of credit to, the subsidiary 
                                that were made on or before 
                                April 12, 1989; and
                                  [(II) the association's 
                                investments in, and extensions 
                                of credit to, the subsidiary 
                                that were made after April 12, 
                                1989, and were necessary to 
                                complete projects initiated 
                                before April 12, 1989.
                          [(vi) Limit.--The applicable 
                        percentage limit allowed by the 
                        Director in an order under clause (iii) 
                        shall not exceed the following limits:

          
[For the following period:                                 The limit is:
    Prior to July 1, 1994.....................................75 percent
    July 1, 1994 through June 30, 1995........................60 percent
    July 1, 1995 through June 30, 1996........................40 percent
    After June 30, 1996....................................... 0 percent

                          [(vii) Critically undercapitalized 
                        institution.--In the case of a savings 
                        association that becomes critically 
                        undercapitalized (as defined in section 
                        38 of the Federal Deposit Insurance 
                        Act) as determined under this 
                        subparagraph without applying clause 
                        (iii), clauses (iii) through (v) shall 
                        be applied by substituting 
                        ``Corporation'' for ``Director'' each 
                        place such term appears.
                          [(viii) Qualified savings association 
                        defined.--For purposes of clause (iii), 
                        the term ``qualified savings 
                        association'' means an eligible savings 
                        association (as defined in paragraph 
                        (3)(B)) which is subject to this 
                        paragraph solely because of the real 
                        estate investments or other real estate 
                        activities of the association's 
                        subsidiary, and--
                                  [(I) is adequately 
                                capitalized (as defined in 
                                section 38 of the Federal 
                                Deposit Insurance Act); or
                                  [(II) is in compliance with 
                                an approved capital restoration 
                                plan meeting the requirements 
                                of section 38 of the Federal 
                                Deposit Insurance Act, and is 
                                not critically undercapitalized 
                                (as defined in such section).
                          [(ix) FDIC's discretion to prescribe 
                        lesser percentage.--The Corporation may 
                        prescribe by order, with respect to a 
                        particular savings association, an 
                        applicable percentage less than that 
                        provided in clause (ii) or prescribed 
                        under clause (iii) if the Corporation 
                        determines, in its sole discretion, 
                        that the use of a greater percentage 
                        would, under the circumstances, 
                        constitute an unsafe or unsound 
                        practice or be likely to result in the 
                        association's being in an unsafe or 
                        unsound condition.
                  [(E) Consolidation of subsidiaries not 
                separately capitalized.--In determining 
                compliance with capital standards prescribed 
                under paragraph (1), the assets and liabilities 
                of each of a savings association's subsidiaries 
                (other than any subsidiary described in 
                subparagraph (C)(ii)) shall be consolidated 
                with the savings association's assets and 
                liabilities, unless all of the savings 
                association's investments in and extensions of 
                credit to the subsidiary are deducted from the 
                savings association's capital pursuant to 
                subparagraph (A).
          [(6) Consequences of failing to comply with capital 
        standards.--
                  [(A) Prior to january 1, 1991.--Prior to 
                January 1, 1991, the Director--
                          [(i) may restrict the asset growth of 
                        any savings association not in 
                        compliance with capital standards; and
                          [(ii) shall, beginning 60 days 
                        following the promulgation of final 
                        regulations under this subsection, 
                        require any savings association not in 
                        compliance with capital standards to 
                        submit a plan under subsection 
                        (s)(4)(A) that--
                                  [(I) addresses the savings 
                                association's need for 
                                increased capital;
                                  [(II) describes the manner in 
                                which the savings association 
                                will increase its capital so as 
                                to achieve compliance with 
                                capital standards;
                                  [(III) specifies the types 
                                and levels of activities in 
                                which the savings association 
                                will engage;
                                  [(IV) requires any increase 
                                in assets to be accompanied by 
                                an increase in tangible capital 
                                not less in percentage amount 
                                than the leverage limit then 
                                applicable;
                                  [(V) requires any increase in 
                                assets to be accompanied by an 
                                increase in capital not less in 
                                percentage amount than required 
                                under the risk-based capital 
                                standard then applicable; and
                                  [(VI) is acceptable to the 
                                Director.
                  [(B) On or after january 1, 1991.--On or 
                after January 1, 1991, the Director--
                          [(i) shall prohibit any asset growth 
                        by any savings association not in 
                        compliance with capital standards, 
                        except as provided in subparagraph (C); 
                        and
                          [(ii) shall require any savings 
                        association not in compliance with 
                        capital standards to comply with a 
                        capital directive issued by the 
                        Director (which may include such 
                        restrictions, including restrictions on 
                        thepayment of dividends and on 
compensation, as the Director determines to be appropriate).
                  [(C) Limited growth exception.--The Director 
                may permit any savings association that is 
                subject to subparagraph (B) to increase its 
                assets in an amount not exceeding the amount of 
                net interest credited to the savings 
                association's deposit liabilities if--
                          [(i) the savings association obtains 
                        the Director's prior approval;
                          [(ii) any increase in assets is 
                        accompanied by an increase in tangible 
                        capital in an amount not less than 6 
                        percent of the increase in assets (or, 
                        in the Director's discretion if the 
                        leverage limit then applicable is less 
                        than 6 percent, in an amount equal to 
                        the increase in assets multiplied by 
                        the percentage amount of the leverage 
                        limit);
                          [(iii) any increase in assets is 
                        accompanied by an increase in capital 
                        not less in percentage amount than 
                        required under the risk-based capital 
                        standard then applicable;
                          [(iv) any increase in assets is 
                        invested in low-risk assets, such as 
                        first mortgage loans secured by 1- to 
                        4-family residences and fully secured 
                        consumer loans; and
                          [(v) the savings association's ratio 
                        of core capital to total assets is not 
                        less than the ratio existing on January 
                        1, 1991.
                  [(D) Additional restrictions in case of 
                excessive risks or rates.--The Director may 
                restrict the asset growth of any savings 
                association that the Director determines is 
                taking excessive risks or paying excessive 
                rates for deposits.
                  [(E) Failure to comply with plan, regulation, 
                or order.--The Director shall treat as an 
                unsafe and unsound practice any material 
                failure by a savings association to comply with 
                any plan, regulation, or order under this 
                paragraph.
                  [(F) Effect on other regulatory authority.--
                This paragraph does not limit any authority of 
                the Director under other provisions of law.
          [(7) Exemption from certain sanctions.--
                  [(A) Application for exemption.--Any savings 
                association not in compliance with the capital 
                standards prescribed under paragraph (1) may 
                apply to the Director for an exemption from any 
                applicable sanction or penalty for 
                noncompliance which the Director may impose 
                under this Act.
                  [(B) Effect of grant of exemption.--If the 
                Director approves any savings association's 
                application under subparagraph (A), the only 
                sanction or penalty to be imposed by the 
                Director under this Act for the savings 
                association's failure to comply with the 
                capital standards prescribed under paragraph 
                (1) is the growth limitation contained in 
                paragraph (6)(B) or paragraph (6)(C), whichever 
                is applicable.
                  [(C) Standards for approval or disapproval.--
                          [(i) Approval.--The Director may 
                        approve an application for an exemption 
                        if the Director determines that--
                                  [(I) such exemption would 
                                pose no significant risk to the 
                                affected deposit insurance 
                                fund;
                                  [(II) the savings 
                                association's management is 
                                competent;
                                  [(III) the savings 
                                association is in substantial 
                                compliance with all applicable 
                                statutes, regulations, orders, 
                                and supervisory agreements and 
                                directives; and
                                  [(IV) the savings 
                                association's management has 
                                not engaged in insider dealing, 
                                speculative practices, or any 
                                other activities that have 
                                jeopardized the association's 
                                safety and soundness or 
                                contributed to impairing the 
                                association's capital.
                          [(ii) Denial or revocation of 
                        approval.--The Director shall deny any 
                        application submitted under clause (i) 
                        and revoke any prior approval granted 
                        with respect to any such application if 
                        the Director determines that the 
                        association's failure to meet any 
                        capital standards prescribed under 
                        paragraph (1) is accompanied by--
                                  [(I) a pattern of consistent 
                                losses;
                                  [(II) substantial dissipation 
                                of assets;
                                  [(III) evidence of imprudent 
                                management or business 
                                behavior;
                                  [(IV) a material violation of 
                                any Federal law, any law of any 
                                State to which such association 
                                is subject, or any applicable 
                                regulation; or
                                  [(V) any other unsafe or 
                                unsound condition or activity, 
                                other than the failure to meet 
                                such capital standards.
                  [(D) Submission of plan required.--Any 
                application submitted under subparagraph (A) 
                shall be accompanied by a plan which--
                          [(i) meets the requirements of 
                        paragraph (6)(A)(ii); and
                          [(ii) is acceptable to the Director.
                  [(E) Failure to comply with plan.--The 
                Director shall treat as an unsafe and unsound 
                practice any material failure by any savings 
                association which has been granted an exemption 
                under this paragraph to comply with the 
                provisions of any plan submitted by such 
                association under subparagraph (D).
                  [(F) Exemption not available with respect to 
                unsafe or unsound practices.--This paragraph 
                does not limit any authority of the Director 
                under any other provision of law, including 
                section 8 of the Federal Deposit Insurance Act, 
                to take any appropriate action with respect to 
                any unsafe or unsound practice or condition of 
                any savings association, other than the failure 
                of such savings association to comply with the 
                capital standards prescribed under paragraph 
                (1).
          [(8) Temporary authority to make exceptions for 
        eligible savings associations.--
                  [(A) In general.--Notwithstanding paragraph 
                (1)(C), the Director may, by order, make 
                exceptions to the capital standards prescribed 
                under paragraph (1) for eligible savings 
                associations. No exception under this paragraph 
                shall be effective after January 1, 1991.
                  [(B) Standards for approval or disapproval.--
                In determining whether to grant an exception 
                under subparagraph (A), the Director shall 
                apply the same standards as apply to 
                determinations under paragraph (7)(C).
          [(9) Definitions.--For purposes of this subsection--
                  [(A) Core capital.--Unless the Director 
                prescribes a more stringent definition, the 
                term ``core capital'' means core capital as 
                defined by the Comptroller of the Currency for 
                national banks, less any unidentifiable 
                intangible assets, plus any purchased mortgage 
                servicing rights excluded from the 
                Comptroller's definition of capital but 
                included in calculating the core capital of 
                savings associations pursuant to paragraph (4).
                  [(B) Qualifying supervisory goodwill.--The 
                term ``qualifying supervisory goodwill'' means 
                supervisory goodwill existing on April 12, 
                1989, amortized on a straightline basis over 
                the shorter of--
                          [(i) 20 years, or
                          [(ii) the remaining period for 
                        amortization in effect on April 12, 
                        1989.
                  [(C) Tangible capital.--The term ``tangible 
                capital'' means core capital minus any 
                intangible assets (as intangible assets are 
                defined by the Comptroller of the Currency for 
                national banks).
                  [(D) Total assets.--The term ``total assets'' 
                means total assets (as total assets are defined 
                by the Comptroller of the Currency for national 
                banks) adjusted in the same manner as total 
                assets would be adjusted in determining 
                compliance with the leverage limit applicable 
                to national banks if the savings association 
                were a national bank.
          [(10) Use of comptroller's definitions.--
                  [(A) In general.--The standards prescribed 
                under paragraph (1) shall include all relevant 
                substantive definitions established by the 
                Comptroller of the Currency for national banks.
                  [(B) Special rule.--If the Comptroller of the 
                Currency has not made effective regulations 
                defining core capital or establishing a risk-
                based capital standard, the Director shall use 
                the definition and standard contained in the 
                Comptroller's most recently published final 
                regulations.
  [(u) Limits on Loans to One Borrower.--
          [(1) In general.--Section 5200 of the Revised 
        Statutes shall apply to savings associations in the 
        same manner and to the same extent as it applies to 
        national banks.
          [(2) Special rules.--
                  [(A) Notwithstanding paragraph (1), a savings 
                association may make loans to one borrower 
                under one of the following clauses:
                          [(i) for any purpose, not to exceed 
                        $500,000; or
                          [(ii) to develop domestic residential 
                        housing units, not to exceed the lesser 
                        of $30,000,000 or 30 percent of the 
                        savings association's unimpaired 
                        capital and unimpaired surplus, if--
                                  [(I) the purchase price of 
                                each single family dwelling 
                                unit the development of which 
                                is financed under this clause 
                                does not exceed $500,000;
                                  [(II) the savings association 
                                is and continues to be in 
                                compliance with the fully 
                                phased-in capital standards 
                                prescribed under subsection 
                                (t);
                                  [(III) the Director, by 
                                order, permits the savings 
                                association to avail itself of 
                                the higher limit provided by 
                                this clause;
                                  [(IV) loans made under this 
                                clause to all borrowers do not, 
                                in aggregate, exceed 150 
                                percent of the savings 
                                association's unimpaired 
                                capital and unimpaired surplus; 
                                and
                                  [(V) such loans comply with 
                                all applicable loan-to-value 
                                requirements.
                  [(B) A savings association's loans to one 
                borrower to finance the sale of real property 
                acquired in satisfaction of debts previously 
                contracted in good faith shall not exceed 50 
                percent of the savings association's unimpaired 
                capital and unimpaired surplus.
          [(3) Authority to impose more stringent 
        restrictions.--The Director may impose more stringent 
        restrictions on a savings association's loans to one 
        borrower if the Director determines that such 
        restrictions are necessary to protect the safety and 
        soundness of the savings association.
  [(v) Reports of Condition.--
          [(1) In general.--Each association shall make reports 
        of conditions to the Director which shall be in a form 
        prescribed by the Director and shall contain--
                  [(A) information sufficient to allow the 
                identification of potential interest rate and 
                credit risk;
                  [(B) a description of any assistance being 
                received by the association, including the type 
                and monetary value of such assistance;
                  [(C) the identity of all subsidiaries and 
                affiliates of the association;
                  [(D) the identity, value, type, and sector of 
                investment of all equity investments of the 
                associations and subsidiaries; and
                  [(E) other information that the Director may 
                prescribe.
          [(2) Public disclosure.--
                  [(A) Reports required under paragraph (1) and 
                all information contained therein shall be 
                available to the public upon request, unless 
                the Director determines--
                          [(i) that a particular item or 
                        classification of information should 
                        not be made public in order to protect 
                        the safety or soundness of the 
                        institution concerned or institutions 
                        concerned, the Savings Association 
                        Insurance Fund; or
                          [(ii) that public disclosure would 
                        not otherwise be in the public 
                        interest.
                  [(B) Any determination made by the Director 
                under subparagraph (A) not to permit the public 
                disclosure of information shall be made in 
                writing, and if the Director restricts any item 
                of information for savings institutions 
                generally, the Director shall disclose the 
                reason in detail in the Federal Register.
                  [(C) The Director's determinations under 
                subparagraph (A) shall not be subject to 
                judicial review.
          [(3) Access by certain parties.--
                  [(A) Notwithstanding paragraph (2), the 
                persons described in subparagraph (B) shall not 
                be denied access to any information contained 
                in a report of condition, subject to reasonable 
                requirements of confidentiality. Those 
                requirements shall not prevent such information 
                from being transmitted to the Comptroller 
                General of the United States for analysis.
                  [(B) The following persons are described in 
                this subparagraph for purposes of subparagraph 
                (A):
                          [(i) the Chairman and ranking 
                        minority member of the Committee on 
                        Banking, Housing, and Urban Affairs of 
                        the Senate and their designees; and
                          [(ii) the Chairman and ranking 
                        minority member of the Committee on 
                        Banking, Finance and Urban Affairs of 
                        the House of Representatives and their 
                        designees.
          [(4) First tier penalties.--Any savings association 
        which--
                  [(A) maintains procedures reasonably adapted 
                to avoid any inadvertent and unintentional 
                error and, as a result of such an error--
                          [(i) fails to submit or publish any 
                        report or information required by the 
                        Director under paragraph (1) or (2), 
                        within the period of time specified by 
                        the Director; or
                          [(ii) submits or publishes any false 
                        or misleading report or information; or
                  [(B) inadvertently transmits or publishes any 
                report which is minimally late,
        shall be subject to a penalty of not more than $2,000 
        for each day during which such failure continues or 
        such false or misleading information is not corrected. 
        The savings association shall have the burden of 
        proving by a preponderence of the evidence that an 
        error was inadvertent and unintentional and that a 
        report was inadvertently transmitted or published late.
          [(5) Second tier penalties.--Any savings association 
        which--
                  [(A) fails to submit or publish any report or 
                information required by the Director under 
                paragraph (1) or (2), within the period of time 
                specified by the Director; or
                  [(B) submits or publishes any false or 
                misleading report or information,
        in a manner not described in paragraph (4) shall be 
        subject to a penalty of not more than $20,000 for each 
        day during which such failure continues or such false 
        or misleading information is not corrected.
          [(6) Third tier penalties.--If any savings 
        association knowingly or with reckless disregard for 
        the accuracy of any information or report described in 
        paragraph (5) submits or publishes any false or 
        misleading report or information, the Director may 
        assess a penalty of not more than $1,000,000 or 1 
        percent of total assets, whichever is less, per day for 
        each day during which such failure continues or such 
        false or misleading information is not corrected.
          [(7) Assessment.--Any penalty imposed under paragraph 
        (4), (5), or (6) shall be assessed and collected by the 
        Director in the manner provided in subparagraphs (E), 
        (F), (G), and (I) of section 8(i)(2) of the Federal 
        Deposit Insurance Act (for penalties imposed under such 
        section), and any such assessment (including the 
        determination of the amount of the penalty) shall be 
        subject to the provisions of such subsection.
          [(8) Hearing.--Any savings association against which 
        any penalty is assessed under this subsection shall be 
        afforded a hearing if such savings association submits 
        a request for such hearing within 20 days after the 
        issuance of the notice of assessment. Section 8(h) of 
        the Federal Deposit Insurance Act shall apply to any 
        proceeding under this subsection.
  [(w) Forfeiture of Franchise for Money Laundering or Cash 
Transaction Reporting Offenses.--
          [(1) In general.--
                  [(A) Conviction of title 18 offense.--
                          [(I) Duty to notify.--If a Federal 
                        savings association has been convicted 
                        of any criminal offense under section 
                        1956 or 1957 of title 18, United States 
                        Code, the Attorney General shall 
                        provide to the Director a written 
                        notification of the conviction and 
                        shall include a certified copy of the 
                        order of conviction from the court 
                        rendering the decision.
                          [(II) Notice of termination; 
                        pretermination hearing.--After 
                        receiving written notification from the 
                        Attorney General of such a conviction, 
                        the Director shall issue to the savings 
                        association a notice of the Director's 
                        intention to terminate all rights, 
                        privileges, and franchises of the 
                        savings association and schedule a 
                        pretermination hearing.
                  [(B) Conviction of title 31 offenses.--If a 
                Federal savings association is convicted of any 
                criminal offenseunder section 5322 or 5324 of 
title 31, United States Code, after receiving written notification from 
the Attorney General, the Director may issue to the savings association 
a notice of the Director's intention to terminate all rights, 
privileges, and franchises of the savings association and schedule a 
pretermination hearing.
                  [(C) Judicial review.--Subsection 
                (d)(1)(B)(vii) shall apply to any proceeding 
                under this subsection.
          [(2) Factors to be considered.--In determining 
        whether a franchise shall be forfeited under paragraph 
        (1), the Director shall take into account the following 
        factors:
                  [(A) The extent to which directors or senior 
                executive officers of the savings association 
                knew of, were involved in, the commission of 
                the money laundering offense of which the 
                association was found guilty.
                  [(B) The extent to which the offense occurred 
                despite the existence of policies and 
                procedures within the savings association which 
                were designed to prevent the occurrence of any 
                such offense.
                  [(C) The extent to which the savings 
                association has fully cooperated with law 
                enforcement authorities with respect to the 
                investigation of the money laundering offense 
                of which the association was found guilty.
                  [(D) The extent to which the savings 
                association has implemented additional internal 
                controls (since the commission of the offense 
                of which the savings association was found 
                guilty) to prevent the occurrence of any other 
                money laundering offense.
                  [(E) The extent to which the interest of the 
                local community in having adequate deposit and 
                credit services available would be threatened 
                by the forfeiture of the franchise.
          [(3) Successor liability.--This subsection shall not 
        apply to a successor to the interests of, or a person 
        who acquires, a savings association that violated a 
        provision of law described in paragraph (1), if the 
        successor succeeds to the interests of the violator, or 
        the acquisition is made, in good faith and not for 
        purposes of evading this subsection or regulations 
        prescribed under this subsection.
          [(4) Definition.--The term ``senior executive 
        officer'' has the same meaning as in regulations 
        prescribed under section 32(f) of the Federal Deposit 
        Insurance Act.

[SEC. 6. LIQUID ASSET REQUIREMENTS.

  [(a) In General.--The purpose of this section is to provide a 
means for creating effective and flexible liquidity in savings 
associations which can be increased when mortgage money is 
plentiful, maintained in easily liquidated instruments, and 
reduced to add to the flow of funds to the mortgage market in 
periods of credit stringency. More flexible liquidity will help 
support sound mortgage credit and a more stable supply of such 
credit.
  [(b) Maintenance of Account.--
          [(1) In general.--Every savings association shall 
        maintain the aggregate amount of its assets of the 
        following types at not less than such amount as, in the 
        opinion of the Director, is appropriate:
          [(A cash;
          [(B) balances maintained in a Federal reserve bank or 
        passed through a Federal home loan bank or another 
        depository institution to a Federal reserve bank 
        pursuant to the Federal Reserve Act; and
          [(C) to such extent as the Director may approve for 
        the purposes of this section--
                  [(i) time and savings deposits in Federal 
                home loan banks, institutions which are, or are 
                eligible to become, members thereof, and 
                commercial banks;
                  [(ii) such obligations, including such 
                special obligations, of the United States, a 
                State, any territory or possession of the 
                United States, or a political subdivision, 
                agency, or instrumentality of any one or more 
                of the foregoing, and bankers' acceptances, as 
                the Director may approve;
                  [(iii) shares or certificates of any open-end 
                management investment company which is 
                registered with the Securities and Exchange 
                Commission under the Investment Company Act of 
                1940 and the portfolio of which is restricted 
                by such investment company's investment policy, 
                changeable only if authorized by shareholder 
                vote, solely to any of the obligations or other 
                investments enumerated in subparagraph (A) and 
                in clauses (i), (ii), (iv), (v), (vi), and 
                (vii) of this subparagraph;
                  [(iv) liquid, highly rated corporate debt 
                obligations with 3 years or less remaining 
                until maturity;
                  [(v) highly rated commercial paper with 270 
                days or less remaining until maturity;
                  [(vi) mortgage related securities (as that 
                term is defined in section 3(a)(41) of the 
                Securities Exchange Act of 1934)--
                          [(I) that have one year or less 
                        remaining until maturity; or
                          [(II) that are subject to an 
                        agreement (including a repurchase 
                        agreement, put option, right of 
                        redemption, or takeout commitment) that 
                        requires another person to purchase the 
                        securities within a period that does 
                        not exceed one year, and that person is 
                        an insured depository institution (as 
                        defined in section 3 of the Federal 
                        Deposit Insurance Act) that is in 
                        compliance with applicable capital 
                        standards, a primary dealer in United 
                        States Government securities, or a 
                        broker or dealer registered under the 
                        Securities Exchange Act of 1934; and
                  [(vii) mortgage loans on the security of a 
                first lien on residential real property, if the 
                mortgage loans qualify as backing for mortgage-
                backed securities issued by the Federal 
                National Mortgage Association or the Federal 
                Home Loan Mortgage Association or guaranteed by 
                the Government National Mortgage Association, 
                and either--
                          [(I) the mortgage loans have one year 
                        or less remaining until maturity, or
                          [(II) the mortgage loans are subject 
                        to an agreement (including a repurchase 
                        agreement, put option, right of 
                        redemption, or takeout commitment) that 
                        requires another person to purchase the 
                        loans within a period that does not 
                        exceed one year, and that person is an 
                        insured depository institution (as 
                        defined in section 3 of the Federal 
                        Deposit Insurance Act) that is in 
                        compliance with applicable capital 
                        standards, a primary dealer in United 
                        States Government securities, or a 
                        broker or dealer registered under the 
                        Securities Exchange Act of 1934.
          [(2) Limitation.--The requirement prescribed by the 
        Director pursuant to this subsection (hereafter in this 
        section referred to as the ``liquidity requirement'') 
        may not be less than 4 percent or more than 10 percent 
        of the obligation of the institution on withdrawable 
        accounts and borrowings payable on demand or with 
        unexpired maturities of one year or less. The Director 
        shall prescribe regulations to implement the provisions 
        of this subsection.
  [(c) Calculation.--The amount of any savings association's 
liquidity requirement, and any deficiency in compliance 
therewith, shall be calculated as the Director shall prescribe. 
The Director may prescribe different liquidity requirements, 
within the limitations specified herein, for different classes 
of savings associations, and for such purposes the Director is 
authorized to classify savings associations according to type, 
size, location, rate of withdrawals, or on such other basis or 
bases of differentiation as the Director may deem to be 
reasonably necessary or appropriate for the purposes of this 
section.
  [(d) Deficiency Assessments.--For any deficiency in 
compliance with the liquidity requirements, the Director may, 
in the Director's discretion, assess a penalty consisting of 
the payment by the institution of such sum as may be assessed 
by the Director but not in excess of a rate equal to the 
highest rate on Federal home loan bank advances of one year or 
less, plus 2 percent per year, on the amount of the deficiency 
for the period with respect to which the deficiency existed. 
Any penalty assessed under this subsection against a savings 
association shall be paid to the Director. The Director may 
authorize or require that, at any time before collection 
thereof, and whether before or after the bringing of any action 
or other legal proceeding, the obtaining of any judgment or 
other recovery, or the issuance or levy of any execution or 
other legal process therefor, and with or without 
consideration, any such penalty or recovery be compromised, 
remitted, or mitigated in whole or part. The penalties 
authorized under this subsection are in addition to all 
remedies and sanctions otherwise available.
  [(e) Reduction or Suspension.--Whenever the Director deems it 
advisable in order to enable a savings association to meet 
withdrawals or to pay obligations, the Director may, to such 
extent and subject to such conditions as the Director may 
prescribe, permit the savings association to reduce its 
liquidity below the minimum amount. Whenever the Director 
determines that conditions of national emergency or unusual 
economic stress exist, the Director may suspend any part or all 
of the liquidity requirements hereunder for such period as the 
Director may prescribe. Any such suspension, unless sooner 
terminated by its terms or by the Director, shall terminate at 
the expiration of 90 days next after its commencement. The 
preceding sentence does not prevent the Director from again 
exercising, before, at, or after any such termination, the 
authority conferred by this subsection.
  [(f) Regulating Authority.--The Director is authorized to 
issue such regulations, including definitions of terms used in 
this section, to make such examinations, and to conduct such 
investigations as the Director deems necessary or appropriate 
to effectuate the purposes of this section. The reasonable cost 
of any such examination or investigation, as determined by the 
Director, shall be paid by the association.

[SEC. 7. APPLICABILITY.

  [The provisions of this Act shall apply to the United States 
and to Puerto Rico, Guam, and the Virgin Islands.

[SEC. 8. DISTRICT ASSOCIATIONS.

  [(a) In General.--The Director shall, with respect to all 
incorporated or unincorporated building, building or loan, 
building and loan, or homestead associations, and similar 
institutions, of or transacting or doing business in the 
District of Columbia, or maintaining any office in the District 
of Columbia (other than Federal savings associations), have the 
same powers and functions as to examination, operation, and 
regulation as the Director has with respect to Federal savings 
associations.
  [(b) Additional Powers.--Any such association or institution 
incorporated under the laws of, or organized in, the District 
of Columbia shall have in addition to any existing statutory 
authority such statutory authority as is vested in Federal 
savings associations.
  [(c) Charter Amendments.--Charters, certificates of 
incorporation, articles of incorporation, constitutions, 
bylaws, or other organic documents of associations or 
institutions referred to in subsection (b) of this section may, 
without regard to anything contained therein or otherwise, be 
amended in such manner and to such extent and upon such votes 
if any as the Director may by regulation or otherwise provide.
  [(d) Limitation.--Nothing in this section shall cause, or 
permit the Director to cause, District of Columbia associations 
to be or become Federal savings associations, or require the 
Director to impose on District of Columbia associations the 
same regulations as are imposed on Federal savings 
associations.

[SEC. 9. EXAMINATION FEES.

  [(a) Examination of Savings Associations.--The cost of 
conducting examinations of savings associations pursuant to 
section 5(d) shall be assessed by the Director against each 
such savings association as the Director deems necessary or 
appropriate.
  [(b) Examination of Affiliates.--The cost of conducting 
examinations of affiliates of savings associations pursuant to 
this Act may be assessed by the Director against each affiliate 
that is examined as the Director deems necessary or 
appropriate.
  [(c) Assessment Against Association in Case of Affiliate's 
Refusal To Pay.--
          [(1) In general.--Subject to paragraph (2), if any 
        affiliate of any savings association--
                  [(A) refuses to pay any assessment under 
                subsection (b); or
                  [(B) fails to pay any such assessment before 
                the end of the 60-day period beginning on the 
                date of the assessment,
        the Director may assess such cost against, and collect 
        such cost from, such savings association.
          [(2) Affiliate of more than 1 savings association.--
        If any affiliate referred to in paragraph (1) is an 
        affiliate of more than 1 savings association, the 
        assessment with respect to the affiliate against, and 
        collected from, any affiliated savings association in 
        such proportions as the Director may prescribe.
  [(d) Civil Money Penalty for Affiliate's Refusal To 
Cooperate.--
          [(1) Penalty imposed.--If any affiliate of any 
        savings association--
                  [(A) refuses to permit any examiner appointed 
                by the Director to make an examination; or
                  [(B) refuses to provide any information 
                required to be disclosed in the course of any 
                examination,
        the savings association shall forfeit and pay a civil 
        penalty of not more than $5,000 for each day that any 
        such refusal continues.
          [(2) Assessment and collection.--Any penalty imposed 
        under paragraph (1) shall be assessed and collected by 
        the Director, in the manner provided in section 8(i)(2) 
        of the Federal Deposit Insurance Act.
  [(e) Regulations.--Only the Director may prescribe 
regulations with respect to--
          [(1) the computation of, and the assessment for, the 
        cost of conducting examinations pursuant to this 
        section; and
          [(2) the collection and use of such assessments and 
        any fees under this section.
Such regulations may establish formulas to determine a fee or 
schedule of fees to cover the costs of examinations and also to 
cover the cost of processing applications, filings, notices, 
and requests for approvals by the Director or the Director's 
designee.
  [(f) Collection Through FDIC or Federal Home Loan Banks.--The 
Corporation or the Federal home loan banks shall, upon request 
of and by agreement with the Director, collect fees and 
assessments on behalf of the Director and be reimbursed for the 
actual cost of collection.
  [(g) Costs of Other Examinations.--
          [(1) Examination of fiduciary activities.--In 
        addition to any assessment imposed pursuant to 
        subsection (a), the cost of conducting examinations of 
        fiduciary activities of savings associations which 
        exercise fiduciary powers (including savings 
        associations or similar institutions in the District of 
        Columbia) shall be assessed by the Director against 
        such savings associations (or similar institutions).
          [(2) Examinations in excess of 2 per calendar year.--
        If any savings association or affiliate of a savings 
        association is examined by the Director, or the 
        Corporation, as the case may be, more than 2 times in 
        any calendar year, the cost of conducting such 
        additional examinations shall be assessed, in addition 
        to any assessment imposed pursuant to subsection (a), 
        by the Director or the Corporation, as the case may be, 
        against such savings association or affiliate.
  [(h) Additional Information.--Any savings association and any 
affiliate of any savings association shall provide the Director 
with access to any information or report with respect to any 
examination made by any public regulatory authority and furnish 
any additional information with respect thereto as the Director 
may require.
  [(i) Treatment of Examination Assessments.--
          [(1) Deposits.--Amounts received by the Director from 
        assessments under this section (other than an 
        assessment under subsection (d)(2)) or section 10(b)(4) 
        may be deposited in the manner provided in section 5234 
        of the Revised Statutes with respect to assessments by 
        the Comptroller of the Currency.
          [(2) Assessments are not government funds.--The 
        amounts received by the Director from any assessment 
        under this section shall not be construed to be 
        Government or public funds or appropriated money.
          [(3) Assessments are not subject to apportionment of 
        funds.--Notwithstanding any other provision of law, the 
        amounts received by the Director from any assessment 
        under this section shall not be subject to 
        apportionment for the purpose of chapter 15 of title 
        31, United States Code, or under any other authority.
  [(j) Processing Fee.--The Director may, in the Director's 
sole discretion, assess against any person that submits to the 
Director an application, filing, notice, or request a fee to 
cover the cost of processing such submission.
  [(k) Fees For Examinations and Supervisory Activities.--The 
Director may assess against institutions for which the Director 
is the appropriate Federal banking agency, as defined in 
section 3 of the Federal Deposit Insurance Act, fees to fund 
the direct and indirect expenses of the Office as the Director 
deems necessary or appropriate. The fees may be imposed more 
frequently than annually at the discretion of the Director.
  [(l) Working Capital.--The Director is authorized to impose 
fees and assessments pursuant to subsections (a), (b), (e), and 
(k) of this section, in excess of actual expenses for any given 
year, to permit the Director to maintain a working capital 
fund. The Director shall remit to the payors of such fees and 
assessments any funds collected in excess of what he deems 
necessary to maintain such working capital fund.
  [(m) Use of Funds.--The Director is authorized to use the 
combined resources retained through fees and assessments 
imposed pursuant to this section to pay all direct and indirect 
salary and administrative expenses of the Office, including 
contracts and purchases of property and services, and the 
direct and indirect expenses of the examinations and 
supervisory activities of the Office.

[SEC. 10. REGULATION OF HOLDING COMPANIES.

  [(a) Definitions.--
          [(1) In general.--As used in this section, unless the 
        context otherwise requires--
                  [(A) Savings association.--The term ``savings 
                association'' includes a savings bank or 
                cooperative bank which is deemed by the 
                Director to be a savings association under 
                subsection (l).
                  [(B) Uninsured institution.--The term 
                ``uninsured institution'' means any depository 
                institution the deposits of which are not 
                insured by the Federal Deposit Insurance 
                Corporation.
                  [(C) Company.--The term ``company'' means any 
                corporation, partnership, trust, joint-stock 
                company, or similar organization, but does not 
                include the Federal Deposit Insurance 
                Corporation, the Resolution Trust Corporation, 
                any Federal home loan bank, or any company the 
                majority of the shares of which is owned by the 
                United States or any State, or by an 
                instrumentality of the United States or any 
                State.
                  [(D) Savings and loan holding company.--
                          [(i) In general.--Except as provided 
                        in clause (ii), the term ``savings and 
                        loan holding company'' means any 
                        company that directly or indirectly 
                        controls a savings association or that 
                        controls any other company that is a 
                        savings and loan holding company.
                          [(ii) Exclusion.--The term ``savings 
                        and loan holding company'' does not 
                        include a bank holding company that is 
                        registered under, and subject to, the 
                        Bank Holding Company Act of 1956, or to 
                        any company directly or indirectly 
                        controlled by such company (other than 
                        a savings association).
                  [(E) Multiple savings and loan holding 
                company.--The term ``multiple savings and loan 
                holding company'' means any savings and loan 
                holding company which directly or indirectly 
                controls 2 or more savings associations.
                  [(F) Diversified savings and loan holding 
                company.--The term ``diversified savings and 
                loan holding company'' means any savings and 
                loan holding company whose subsidiary savings 
                association and related activities as permitted 
                under paragraph (2) of subsection (c) of this 
                section represented, on either an actual or a 
                pro forma basis, less than 50 percent of its 
                consolidated net worth at the close of its 
                preceding fiscal year and of its consolidated 
                net earnings for such fiscal year, as 
                determined in accordance with regulations 
                issued by the Director.
                  [(G) Subsidiary.--The term ``subsidiary'' has 
                the same meaning as in section 3 of the Federal 
                Deposit Insurance Act.
                  [(H) Affiliate.--The term ``affiliate'' of a 
                savings association means any person which 
                controls, is controlled by, or is under common 
                control with, such savings association.
                  [(I) Bank holding company.--The terms ``bank 
                holding company'' and ``bank'' have the 
                meanings given to such terms in section 2 of 
                the Bank Holding Company Act of 1956.
                  [(J) Acquire.--The term ``acquire'' has the 
                meaning given to such term in section 13(f)(8) 
                of the Federal Deposit Insurance Act.
          [(2) Control.--For purposes of this section, a person 
        shall be deemed to have control of--
                  [(A) a savings association if the person 
                directly or indirectly or acting in concert 
                with one or more other persons, or through one 
                or more subsidiaries, owns, controls, or holds 
                with power to vote, or holds proxies 
                representing, more than 25 percent of the 
                voting shares of such savings association, or 
                controls in any manner the election of a 
                majority of the directors of such association;
                  [(B) any other company if the person directly 
                or indirectly or acting in concert with one or 
                more other persons, or through one or more 
                subsidiaries, owns, controls, or holds with 
                power to vote, or holds proxies representing, 
                more than 25 percent of the voting shares or 
                rights of such other company, or controls in 
                any manner the election or appointment of a 
                majority of the directors or trustees of such 
                other company, or is a general partner in or 
                has contributed more than 25 percent of the 
                capital of such other company;
                  [(C) a trust if the person is a trustee 
                thereof; or
                  [(D) a savings association or any other 
                company if the Director determines, after 
                reasonable notice and opportunity for hearing, 
                that such person directly or indirectly 
                exercises a controlling influence over the 
                management or policies of such association or 
                other company.
          [(3) Exclusions.--Notwithstanding any other provision 
        of this subsection, the term ``savings and loan holding 
        company'' does not include--
                  [(A) any company by virtue of its ownership 
                or control of voting shares of a savings 
                association or a savings and loan holding 
                company acquired in connection with the 
                underwriting of securities if such shares are 
                held only for such period of time (not 
                exceeding 120 days unless extended by the 
                Director) as will permit the sale thereof on a 
                reasonable basis; and
                  [(B) any trust (other than a pension, profit-
                sharing, shareholders', voting, or business 
                trust) which controls a savings association or 
                a savings and loan holding company if such 
                trust by its terms must terminate within 25 
                years or not later than 21 years and 10 months 
                after the death of individuals living on the 
                effective date of the trust, and is (i) in 
                existence on June 26, 1967, or (ii) a 
                testamentary trust created on or after June 26, 
                1967.
          [(4) Special rule relating to qualified stock 
        issuance.--No savings and loan holding company shall be 
        deemed to control a savings association solely by 
        reason of the purchase by such savings and loan holding 
        company of shares issued by such savings association, 
        or issued by any savings and loan holding company 
        (other than a bank holding company)which controls such 
savings association, in connection with a qualified stock issuance if 
such purchase is approved by the Director under subsection (q)(1)(D), 
unless the acquiring savings and loan holding company, directly or 
indirectly, or acting in concert with 1 or more other persons, or 
through 1 or more subsidiaries, owns, controls, or holds with power to 
vote, or holds proxies representing, more than 15 percent of the voting 
shares of such savings association or holding company.
  [(b) Registration and Examination.--
          [(1) In general.--Within 90 days after becoming a 
        savings and loan holding company, each savings and loan 
        holding company shall register with the Director on 
        forms prescribed by the Director, which shall include 
        such information, under oath or otherwise, with respect 
        to the financial condition, ownership, operations, 
        management, and intercompany relationships of such 
        holding company and its subsidiaries, and related 
        matters, as the Director may deem necessary or 
        appropriate to carry out the purposes of this section. 
        Upon application, the Director may extend the time 
        within which a savings and loan holding company shall 
        register and file the requisite information.
          [(2) Reports.--Each savings and loan holding company 
        and each subsidiary thereof, other than a savings 
        association, shall file with the Director, and the 
        regional office of the Director of the district in 
        which its principal office is located, such reports as 
        may be required by the Director. Such reports shall be 
        made under oath or otherwise, and shall be in such form 
        and for such periods, as the Director may prescribe. 
        Each report shall contain such information concerning 
        the operations of such savings and loan holding company 
        and its subsidiaries as the Director may require.
          [(3) Books and records.--Each savings and loan 
        holding company shall maintain such books and records 
        as may be prescribed by the Director.
          [(4) Examinations.--Each savings and loan holding 
        company and each subsidiary thereof (other than a bank) 
        shall be subject to such examinations as the Director 
        may prescribe. The cost of such examinations shall be 
        assessed against and paid by such holding company. 
        Examination and other reports may be furnished by the 
        Director to the appropriate State supervisory 
        authority. The Director shall, to the extent deemed 
        feasible, use for the purposes of this subsection 
        reports filed with or examinations made by other 
        Federal agencies or the appropriate State supervisory 
        authority.
          [(5) Agent for service of process.--The Director may 
        require any savings and loan holding company, or 
        persons connected therewith if it is not a corporation, 
        to execute and file a prescribed form of irrevocable 
        appointment of agent for service of process.
          [(6) Release from registration.--The Director may at 
        any time, upon the Director's own motion or upon 
        application, release a registered savings and loan 
        holding company from any registration theretofore made 
        by such company, if the Director determines that such 
        company no longer has control of any savings 
        association.
  [(c) Holding Company Activities.--
          [(1) Prohibited activities.--Except as otherwise 
        provided in this subsection, no savings and loan 
        holding company and no subsidiary which is not a 
        savings association shall--
                  [(A) engage in any activity or render any 
                service for or on behalf of a savings 
                association subsidiary for the purpose or with 
                the effect of evading any law or regulation 
                applicable to such savings association;
                  [(B) commence any business activity, other 
                than the activities described in paragraph (2); 
                or
                  [(C) continue any business activity, other 
                than the activities described in paragraph (2), 
                after the end of the 2-year period beginning on 
                the date on which such company received 
                approval under subsection (e) of this section 
                to become a savings and loan holding company 
                subject to the limitations contained in this 
                subparagraph.
          [(2) Exempt activities.--The prohibitions of 
        subparagraphs (B) and (C) of paragraph (1) shall not 
        apply to the following business activities of any 
        savings and loan holding company or any subsidiary (of 
        such company) which is not a savings association:
                  [(A) Furnishing or performing management 
                services for a savings association subsidiary 
                of such company.
                  [(B) Conducting an insurance agency or escrow 
                business.
                  [(C) Holding, managing, or liquidating assets 
                owned or acquired from a savings association 
                subsidiary of such company.
                  [(D) Holding or managing properties used or 
                occupied by a savings association subsidiary of 
                such company.
                  [(E) Acting as trustee under deed of trust.
                  [(F) Any other activity--
                          [(i) which the Board of Governors of 
                        the Federal Reserve System, by 
                        regulation, has determined to be 
                        permissible for bank holding companies 
                        under section 4(c) of the Bank Holding 
                        Company Act of 1956, unless the 
                        Director, by regulation, prohibits or 
                        limits any such activity for savings 
                        and loan holding companies; or
                          [(ii) in which multiple savings and 
                        loan holding companies were authorized 
                        (by regulation) to directly engage on 
                        March 5, 1987.
                  [(G) In the case of a savings and loan 
                holding company, purchasing, holding, or 
                disposing of stock acquired in connection with 
                a qualified stock issuance if the purchase of 
                such stock by such savings and loan holding 
                company is approved by the Director pursuant to 
                subsection (q)(1)(D).
          [(3) Certain limitations on activities not applicable 
        to certain holding companies.--Notwithstanding 
        paragraphs (4) and (6) of this subsection, the 
        limitations contained in subparagraphs (B) and (C) of 
        paragraph (1) shall not apply to any savings and loan 
        holding company (or any subsidiary of such company) 
        which controls--
                  [(A) only 1 savings association, if the 
                savings association subsidiary of such company 
                is a qualified thrift lender (as determined 
                under subsection (m)); or
                  [(B) more than 1 savings association, if--
                          [(i) all, or all but 1, of the 
                        savings association subsidiaries of 
                        such company were initially acquired by 
                        the company or by an individual who 
                        would be deemed to control such company 
                        if such individual were a company--
                                  [(I) pursuant to an 
                                acquisition under section 13(c) 
                                or 13(k) of the Federal Deposit 
                                Insurance Act or section 408(m) 
                                of the National Housing Act; or
                                  [(II) pursuant to an 
                                acquisition in which assistance 
                                was continued to a savings 
                                association under section 13(i) 
                                of the Federal Deposit 
                                Insurance Act; and
                          [(ii) all of the savings association 
                        subsidiaries of such company are 
                        qualified thrift lenders (as determined 
                        under subsection (m)).
          [(4) Prior approval of certain new activities 
        required.--
                  [(A) In general.--No savings and loan holding 
                company and no subsidiary which is not a 
                savings association shall commence, either de 
                novo or by an acquisition (in whole or in part) 
                of a going concern, any activity described in 
                paragraph (2)(F)(i) of this subsection without 
                the prior approval of the Director.
                  [(B) Factors to be considered by director.--
                In considering any application under 
                subparagraph (A) by any savings and loan 
                holding company or any subsidiary of any such 
                company which is not a savings association, the 
                Director shall consider--
                          [(i) whether the performance of the 
                        activity described in such application 
                        by the company or the subsidiary can 
                        reasonably be expected to produce 
                        benefits to the public (such as greater 
                        convenience, increased competition, or 
                        gains in efficiency) that outweigh 
                        possible adverse effects of such 
                        activity (such as undue concentration 
                        of resources, decreased or unfair 
                        competition, conflicts of interest, or 
                        unsound financial practices);
                          [(ii) the managerial resources of the 
                        companies involved; and
                          [(iii) the adequacy of the financial 
                        resources, including capital, of the 
                        companies involved.
                  [(C) Director may differentiate between new 
                and ongoing activities.--In prescribing any 
                regulation or considering any application under 
                this paragraph, the Director may differentiate 
                between activities commenced de novo and 
                activities commenced by the acquisition, in 
                whole or in part, of a going concern.
                  [(D) Approval or disapproval by order.--The 
                approval or disapproval of any application 
                under this paragraph by the Director shall be 
                made in an order issued by the Director 
                containing the reasons for such approval or 
                disapproval.
          [(5) Grace period to achieve compliance.--If any 
        savings association referred to in paragraph (3) fails 
        to maintain the status of such association as a 
        qualified thrift lender, the Director may allow, for 
        good cause shown, any company that controls such 
        association (or any subsidiary of such company which is 
        not a savings association) up to 3 years to comply with 
        the limitations contained in paragraph (1)(C).
          [(6) Special provisions relating to certain companies 
        affected by 1987 amendments.--
                  [(A) Exception to 2-year grace period for 
                achieving compliance.--Notwithstanding 
                paragraph (1)(C), any company which received 
                approval under subsection (e) of this section 
                to acquire control of a savings association 
                between March 5, 1987, and August 10, 1987, 
                shall not continue any business activity other 
                than an activity described in paragraph (2) 
                after August 10, 1987.
                  [(B) Exemption for activities lawfully 
                engaged in before march 5, 1987.--
                Notwithstanding paragraph (1)(C) and subject to 
                subparagraphs (C) and (D), any savings and loan 
                holding company which received approval, before 
                March 5, 1987, under subsection (e) of this 
                section to acquire control of a savings 
                association may engage, directly or through any 
                subsidiary (other than a savings association 
                subsidiary of such company), in any activity in 
                which such company or such subsidiary was 
                lawfully engaged on such date.
                  [(C) Termination of subparagraph (b) 
                exemption.--The exemption provided under 
                subparagraph (B) for activities engaged in by 
                any savings and loan holding company or a 
                subsidiary of such company (which is not a 
                savings association) which would otherwise be 
                prohibited under paragraph (1)(C) shall 
                terminate with respect to such activities of 
                such company or subsidiary upon the occurrence 
                (after August 10, 1987) of any of the 
                following:
                          [(i) The savings and loan holding 
                        company acquires control of a bank or 
                        an additional savings association 
                        (other than a savings association 
                        acquired pursuant to section 13(c) or 
                        13(k) of the Federal Deposit Insurance 
                        Act or section 406(f) or 408(m) of the 
                        National Housing Act).
                          [(ii) Any savings association 
                        subsidiary of the savings and loan 
                        holding company fails to qualify as a 
                        domestic building and loan association 
                        under section 7701(a)(19) of the 
                        Internal Revenue Code of 1986.
                          [(iii) The savings and loan holding 
                        company engages in any business 
                        activity--
                                  [(I) which is not described 
                                in paragraph (2); and
                                  [(II) in which it was not 
                                engaged on March 5, 1987.
                          [(iv) Any savings association 
                        subsidiary of the savings and loan 
                        holding company increases the number of 
                        locations from which such savings 
                        association conducts business after 
                        March 5, 1987 (other than an increase 
                        which occurs in connection with a 
                        transaction under section 13 (c) or (k) 
                        of the Federal Deposit Insurance Act or 
                        section 408(m) of the National Housing 
                        Act.
                          [(v) Any savings association 
                        subsidiary of the savings and loan 
                        holding company permits any overdraft 
                        (including an intraday overdraft), or 
                        incurs any such overdraft in its 
                        account at a Federal Reserve bank, on 
                        behalf of an affiliate, unless such 
                        overdraft is the result of an 
                        inadvertent computer or accounting 
                        error that is beyond the control of 
                        both the savings association subsidiary 
                        and the affiliate.
                  [(D) Order by Director to terminate 
                subparagraph (b) activity.--Any activity 
                described in subparagraph (B) may also be 
                terminated by the Director, after opportunity 
                for hearing, if the Director determines, having 
                due regard for the purposes of this title, that 
                such action is necessary to prevent conflicts 
                of interest or unsound practices or is in the 
                public interest.
          [(7) Foreign savings and loan holding company.--
        Notwithstanding any other provision of this section, 
        any savings and loan holding company organized under 
        the laws of a foreign country as of June 1, 1984 
        (including any subsidiary thereof which is not a 
        savings association), which controls a single savings 
        association on August 10, 1987, shall not be subject to 
        this subsection with respect to any activities of such 
        holding company which are conducted exclusively in a 
        foreign country.
          [(8) Exemption for bank holding companies.--Except 
        for paragraph (1)(A), this subsection shall not apply 
        to any company that is treated as a bank holding 
        company for purposes of section 4 of the Bank Holding 
        Company Act of 1956, or any of its subsidiaries.
  [(d) Transactions With Affiliates.--Transactions between any 
subsidiary savings association of a savings and loan holding 
company and any affiliate (of such savings association 
subsidiary) shall be subject to the limitations and 
prohibitions specified in section 11 of this Act.
  [(e) Acquisitions.--
          [(1) In general.--It shall be unlawful for--
                  [(A) any savings and loan holding company 
                directly or indirectly, or through one or more 
                subsidiaries or through one or more 
                transactions--
                          [(i) to acquire, except with the 
                        prior written approval of the Director, 
                        the control of a savings association or 
                        a savings and loan holding company, or 
                        to retain the control of such an 
                        association or holding company acquired 
                        or retained in violation of this 
                        section as heretofore or hereafter in 
                        effect;
                          [(ii) to acquire, except with the 
                        prior written approval of the Director, 
                        by the process of merger, 
                        consolidation, or purchase of assets, 
                        another savings association or a 
                        savings and loan holding company, or 
                        all or substantially all of the assets 
                        of any such association or holding 
                        company;
                          [(iii) to acquire, by purchase or 
                        otherwise, or to retain more than 5 
                        percent of the voting shares of a 
                        savings association not a subsidiary, 
                        or of a savings and loan holding 
                        company not a subsidiary, or in the 
                        case of a multiple savings and loan 
                        holding company (other than a company 
                        described in subsection (c)(8)), to so 
                        acquire or retain more than 5 percent 
                        of the voting shares of any company not 
                        a subsidiary which is engaged in any 
                        business activity other than the 
                        activities specified in subsection 
                        (c)(2). This clause shall not apply to 
                        shares of a savings association or of a 
                        savings and loan holding company--
                                  [(I) held as a bona fide 
                                fiduciary (whether with or 
                                without the sole discretion to 
                                vote such shares);
                                  [(II) held temporarily 
                                pursuant to an underwriting 
                                commitment in the normal course 
                                of an underwriting business;
                                  [(III) held in an account 
                                solely for trading purposes;
                                  [(IV) over which no control 
                                is held other than control of 
                                voting rights acquired in the 
                                normal course of a proxy 
                                solicitation;
                                  [(V) acquired in securing or 
                                collecting a debt previously 
                                contracted in good faith, 
                                during the 2-year period 
                                beginning on the date of such 
                                acquisition or for such 
                                additional time (not exceeding 
                                3 years) as the Director may 
                                permit if the Director 
                                determines that such an 
                                extension will not be 
                                detrimental to the public 
                                interest;
                                  [(VI) acquired under section 
                                408(m) of the National Housing 
                                Act or section 13(k) of the 
                                Federal Deposit Insurance Act;
                                  [(VII) held by any insurance 
                                company, as defined in section 
                                2(a)(17) of the Investment 
                                Company Act of 1940, except as 
                                provided in paragraph (6); or
                                  [(VIII) acquired pursuant to 
                                a qualified stock issuance if 
                                such purchase is approved by 
                                the Director under subsection 
                                (q)(1)(D);
                        except that the aggregate amount of 
                        shares held under this clause (other 
                        than under subclauses (I), (II), (III), 
                        (IV), and (VI)) may not exceed 15 
                        percent of all outstanding shares or of 
                        the voting power of a savings 
                        association or savings and loan holding 
                        company; or
                          [(iv) to acquire the control of an 
                        uninsured institution, or to retain for 
                        more than one year after February 14, 
                        1968, or from the date on which such 
                        control was acquired, whichever is 
                        later, except that the Director may 
                        upon application by such company extend 
                        such one-year period from year to year, 
                        for an additional period not exceeding 
                        3 years, if the Director finds such 
                        extension is warranted and is not 
                        detrimental to the public interest; and
                  [(B) any other company, without the prior 
                written approval of the Director, directly or 
                indirectly, or through one or more subsidiaries 
                or through one or more transactions, to acquire 
                the control of one or more savings 
                associations, except that such approval shall 
                not be required in connection with the control 
                of a savings association, (i) acquired by 
                devise under the terms of a will creating a 
                trust which is excluded from the definition of 
                ``savings and loan holding company'' under 
                subsection (a) of this section, (ii) acquired 
                in connection with a reorganization in which a 
                person or group of persons, having had control 
                of a savings association for more than 3 years, 
                vests control of that association in a newly 
                formed holding company subject to the control 
                of the same person or group of persons, or 
                (iii) acquired by a bank holding company that 
                is registered under, and subject to, the Bank 
                Holding Company Act of 1956, or any company 
                controlled by such bank holding company. The 
                Director shall approve an acquisition of a 
                savings association under this subparagraph 
                unless the Director finds the financial and 
                managerial resources and future prospects of 
                the company and association involved to be such 
                that the acquisition would be detrimental to 
                the association or the insurance risk of the 
                Savings Association Insurance Fund or Bank 
                Insurance Fund, and shall render a decision 
                within 90 days after submission to the Director 
                of the complete record on the application.
        Consideration of the managerial resources of a company 
        or savings association under subparagraph (B) shall 
        include consideration of the competence, experience, 
        and integrity of the officers, directors, and principal 
        shareholders of the company or association.
          [(2) Factors to be considered.--The Director shall 
        not approve any acquisition under subparagraph (A)(i) 
        or (A)(ii), or of more than one savings association 
        under subparagraph (B) of paragraph (1) of this 
        subsection, any acquisition of stock in connection with 
        a qualified stock issuance, any acquisition under 
        paragraph (4)(A), or any transaction under section 
        13(k) of the Federal Deposit Insurance Act, except in 
        accordance with this paragraph. In every case, the 
        Director shall take into consideration the financial 
        and managerial resources and future prospects of the 
        company and association involved, the effect of the 
        acquisition on the association, the insurance risk to 
        the Savings Association Insurance Fund or the Bank 
        Insurance Fund \1\, and the convenience and needs of 
        the community to be served, and shall render a decision 
        within 90 days after submission to the Director of the 
        complete record on the application. Consideration of 
        the managerial resources of a company or savings 
        association shall include consideration of the 
        competence, experience, and integrity of the officers, 
        directors, and principal shareholders of the company or 
        association. Before approving any such acquisition, 
        except a transaction under section 13(k) of the Federal 
        Deposit Insurance Act, the Director shall request from 
        the Attorney General and consider any report rendered 
        within 30 days on the competitive factors involved. The 
        Director shall not approve any proposed acquisition--
                  [(A) which would result in a monopoly, or 
                which would be in furtherance of any 
                combination or conspiracy to monopolize or to 
                attempt to monopolize the savings and loan 
                business in any part of the United States,
                  [(B) the effect of which in any section of 
                the country may be substantially to lessen 
                competition, or tend to create a monopoly, or 
                which in any other manner would be in restraint 
                of trade, unless it finds that the 
                anticompetitive effects of the proposed 
                acquisition are clearly outweighed in the 
                public interest by the probable effect of the 
                acquisition in meeting the convenience and 
                needs of the community to be served,
                  [(C) if the company fails to provide adequate 
                assurances to the Director that the company 
                will make available to the Director such 
                information on the operations or activities of 
                the company, and any affiliate of the company, 
                as the Director determines to be appropriate to 
                determine and enforce compliance with this Act, 
                or
                  [(D) in the case of an application involving 
                a foreign bank, if the foreign bank is not 
                subject to comprehensive supervision or 
                regulation on a consolidated basis by the 
                appropriate authorities in the bank's home 
                country.
          [(3) Interstate Acquisitions.--No acquisition shall 
        be approved by the Director under this subsection which 
        will result in the formation by any company, through 
        one or more subsidiaries or through one or more 
        transactions, of a multiple savings and loan holding 
        company controlling savings associations in more than 
        one State, unless--
                  [(A) such company, or a savings association 
                subsidiary of such company, is authorized to 
                acquire control of a savings association 
                subsidiary, or to operate a home or branch 
                office, in the additional State or States 
                pursuant to section 13(k) of the Federal 
                Deposit Insurance Act;
                  [(B) such company controls a savings 
                association subsidiary which operated a home or 
                branch office in the additional State or States 
                as of March 5, 1987; or
                  [(C) the statutes of the State in which the 
                savings association to be acquired is located 
                permit a savings association chartered by such 
                State to be acquired by a savings association 
                chartered by the State where the acquiring 
                savings association or savings and loan holding 
                company is located or by a holding company that 
                controls such a State chartered savings 
                association, and such statutes specifically 
                authorize such an acquisition by language to 
                that effect and not merely by implication.
          [(4) Acquisitions by certain individuals.--
                  [(A) In general.--Notwithstanding subsection 
                (h)(2), any director or officer of a savings 
                and loan holding company, or any individual who 
                owns, controls, or holds with power to vote (or 
                holds proxies representing) more than 25 
                percent of the voting shares of such holding 
                company, may acquire control of any savings 
                association not a subsidiary of such savings 
                and loan holding company with the prior written 
                approval of the Director.
                  [(B) Treatment of certain holding 
                companies.--If any individual referred to in 
                subparagraph (A) controls more than 1 savings 
                and loan holding company or more than 1 savings 
                association, any savings and loan holding 
                company controlled by such individual shall be 
                subject to the activities limitations contained 
                in subsection (c) to the same extent such 
                limitations apply to multiple savings and loan 
                holding companies, unless all or all but 1 of 
                the savings associations (including any 
                institution deemed to be a savings association 
                under subsection (1) of this section) 
                controlled directly or indirectly by such 
                individual was acquired pursuant to an 
                acquisition described in subclause (I) or (II) 
                of subsection (c)(3)(B)(i).
          [(5) Acquisitions pursuant to certain security 
        interests.--This subsection and subsection (c)(2) of 
        this section do not apply to any savings and loan 
        holding company which acquired the control of a savings 
        association or of a savings and loan holding company 
        pursuant to a pledge or hypothecation to secure a loan, 
        or in connection with the liquidation of a loan, made 
        in the ordinary course of business. It shall be 
        unlawful for any such company to retain such control 
        for more than one year after February 14, 1968, or from 
        the date on which such control was acquired, whichever 
        is later, except that the Director may upon application 
        by such company extend such one-year period from year 
        to year, for an additional period not exceeding 3 
        years, if the Director finds such extension is 
        warranted and would not be detrimental to the public 
        interest.
          [(6) Shares held by insurance affiliates.--Shares 
        described in clause (iii)(VII) of paragraph (1)(A) 
        shall not be excluded for purposes of clause (iii) of 
        such paragraph if--
                  [(A) all shares held under such clause 
                (iii)(VII) by all insurance company affiliates 
                of such savings association or savings and loan 
                holding company in the aggregate exceed 5 
                percent of all outstanding shares or of the 
                voting power of the savings association or 
                savings and loan holding company; or
                  [(B) such shares are acquired or retained 
                with a view to acquiring, exercising, or 
                transferring control of the savings association 
                or savings and loan holding company.
  [(f) Declaration of Dividend.--Every subsidiary savings 
association of a savings and loan holding company shall give 
the Director not less than 30 days' advance notice of the 
proposed declaration by its directors of any dividend on its 
guaranty, permanent, or other nonwithdrawable stock. Such 
notice period shall commence to run from the date of receipt of 
such notice by the Director. Any such dividend declared within 
such period, or without the giving of such notice to the 
Director, shall be invalid and shall confer no rights or 
benefits upon the holder of any such stock.
  [(g) Administration and Enforcement.--
          [(1) In general.--The Director is authorized to issue 
        such regulations and orders as the Director deems 
        necessary or appropriate to enable the Director to 
        administer and carry out the purposes of this section, 
        and to require compliance therewith and prevent 
        evasions thereof.
          [(2) Investigations.--The Director may make such 
        investigations as the Director deems necessary or 
        appropriate to determine whether the provisions of this 
        section, and regulations and orders thereunder, are 
        being and have been complied with by savings and loan 
        holding companies and subsidiaries and affiliates 
        thereof. For the purpose of any investigation under 
        this section, the Director may administer oaths and 
        affirmations, issue subpenas, take evidence, and 
        require the production of any books, papers, 
        correspondence, memorandums, or other records which may 
        be relevant or material to the inquiry. The attendance 
        of witnesses and the production of any such records may 
        be required from any place in any State. The Director 
        may apply to the United States district court for the 
        judicial district (or the United States court in any 
        territory) in which any witness or company subpenaed 
        resides or carries on business, for enforcement of any 
        subpena issued pursuant to this paragraph, and such 
        courts shall have jurisdiction and power to order and 
        require compliance.
          [(3) Proceedings.--(A) In any proceeding under 
        subsection (a)(2)(D) or under paragraph (5) of this 
        section, the Director may administer oaths and 
        affirmations, take or cause to be taken depositions, 
        and issue subpenas. The Director may make regulations 
        with respect to any such proceedings. The attendance of 
        witnesses and the production of documents provided for 
        in this paragraph may be required from any place in any 
        State or in any territory at any designated place where 
        such proceeding is being conducted. Any party to such 
        proceedings may apply to the United States District 
        Court for the District of Columbia, or the United 
        States district court for the judicial district or the 
        United States court in any territory in which such 
        proceeding is being conducted, or where the witness 
        resides or carries on business, for enforcement of any 
        subpena issued pursuant to this paragraph, and such 
        courts shall have jurisdiction and power to order and 
        require compliance therewith. Witnesses subpenaed under 
        this section shall be paid the same fees and mileage 
        that are paid witnesses in the district courts of the 
        United States.
          [(B) Any hearing provided for in subsection (a)(2)(D) 
        or under paragraph (5) of this section shall be held in 
        the Federal judicial district or in the territory in 
        which the principal office of the association or other 
        company is located unless the party afforded the 
        hearing consents to another place, and shall 
beconducted in accordance with the provisions of chapter 5 of title 5, 
United States Code.
          [(4) Injunctions.--Whenever it appears to the 
        Director that any person is engaged or has engaged or 
        is about to engage in any acts or practices which 
        constitute or will constitute a violation of the 
        provisions of this section or of any regulation or 
        order thereunder, the Director may bring an action in 
        the proper United States district court, or the United 
        States court of any territory or other place subject to 
        the jurisdiction of the United States, to enjoin such 
        acts or practices, to enforce compliance with this 
        section or any regulation or order, or to require the 
        divestiture of any acquisition in violation of this 
        section, or for any combination of the foregoing, and 
        such courts shall have jurisdiction of such actions. 
        Upon a proper showing an injunction, decree, 
        restraining order, order of divestiture, or other 
        appropriate order shall be granted without bond.
          [(5) Cease and desist orders.--(A) Notwithstanding 
        any other provision of this section, the Director may, 
        whenever the Director has reasonable cause to believe 
        that the continuation by a savings and loan holding 
        company of any activity or of ownership or control of 
        any of its noninsured subsidiaries constitutes a 
        serious risk to the financial safety, soundness, or 
        stability of a savings and loan holding company's 
        subsidiary savings association and is inconsistent with 
        the sound operation of a savings association or with 
        the purposes of this section or section 8 of the 
        Federal Deposit Insurance Act, order the savings and 
        loan holding company or any of its subsidiaries, after 
        due notice and opportunity for hearing, to terminate 
        such activities or to terminate (within 120 days or 
        such longer period as the Director directs in unusual 
        circumstances) its ownership or control of any such 
        noninsured subsidiary either by sale or by distribution 
        of the shares of the subsidiary to the shareholders of 
        the savings and loan holding company. Such distribution 
        shall be pro rata with respect to all of the 
        shareholders of the distributing savings and loan 
        holding company, and the holding company shall not make 
        any charge to its shareholders arising out of such a 
        distribution.
          [(B) The Director may in the Director's discretion 
        apply to the United States district court within the 
        jurisdiction of which the principal office of the 
        company is located, for the enforcement of any 
        effective and outstanding order issued under this 
        section, and such court shall have jurisdiction and 
        power to order and require compliance therewith. Except 
        as provided in subsection (j), no court shall have 
        jurisdiction to affect by injunction or otherwise the 
        issuance or enforcement of any notice or order under 
        this section, or to review, modify, suspend, terminate, 
        or set aside any such notice or order.
  [(h) Prohibited Acts.--It shall be unlawful for--
          [(1) any savings and loan holding company or 
        subsidiary thereof, or any director, officer, employee, 
        or person owning, controlling, or holding with power to 
        vote, or holding proxies representing, more than 25 
        percent of the voting shares, of such holding company 
        or subsidiary, to hold, solicit, or exercise any 
        proxies in respect of any voting rights in a savings 
        association which is a mutual association;
          [(2) any director or officer of a savings and loan 
        holding company, or any individual who owns, controls, 
        or holds with power to vote (or holds proxies 
        representing) more than 25 percent of the voting shares 
        of such holding company, to acquire control of any 
        savings association not a subsidiary of such savings 
        and loan holding company, unless such acquisition is 
        approved by the Director pursuant to subsection (e)(4); 
        or
          [(3) any individual, except with the prior approval 
        of the Director, to serve or act as a director, 
        officer, or trustee of, or become a partner in, any 
        savings and loan holding company after having been 
        convicted of any criminal offense involving dishonesty 
        or breach of trust.
  [(i) Penalties.--
          [(1) Criminal penalty.--(A) Whoever knowingly 
        violates any provision of this section or being a 
        company, violates any regulation or order issued by the 
        Director under this section, shall be imprisoned not 
        more than 1 year, fined not more than $100,000 per day 
        for each day during which the violation continues, or 
        both.
          [(B) Whoever, with the intent to deceive, defraud, or 
        profit significantly, knowingly violates any provision 
        of this section shall be fined not more than $1,000,000 
        per day for each day during which the violation 
        continues, imprisoned not more than 5 years, or both.
          [(2) Civil money penalty.--
                  [(A) Penalty.--Any company which violates, 
                and any person who participates in a violation 
                of, any provision of this section, or any 
                regulation or order issued pursuant thereto, 
                shall forfeit and pay a civil penalty of not 
                more than $25,000 for each day during which 
                such violation continues.
                  [(B) Assessment.--Any penalty imposed under 
                subparagraph (A) may be assessed and collected 
                by the Director in the manner provided in 
                subparagraphs (E), (F), (G), and (I) of section 
                8(i)(2) of the Federal Deposit Insurance Act 
                for penalties imposed (under such section) and 
                any such assessment shall be subject to the 
                provisions of such section.
                  [(C) Hearing.--The company or other person 
                against whom any civil penalty is assessed 
                under this paragraph shall be afforded a 
                hearing if such company or person submits a 
                request for such hearing within 20 days after 
                the issuance of the notice of assessment. 
                Section 8(h) of the Federal Deposit Insurance 
                Act shall apply to any proceeding under this 
                paragraph.
                  [(D) Disbursement.--All penalties collected 
                under authority of this paragraph shall be 
                deposited into the Treasury.
                  [(E) Violate defined.--For purposes of this 
                section, the term ``violate'' includes any 
                action (alone or with another or others) for or 
                toward causing, bringing about, participating 
                in, counseling, or aiding or abetting a 
                violation.
                  [(F) Regulations.--The Director shall 
                prescribe regulations establishing such 
                procedures as may be necessary to carry out 
                this paragraph.
          [(3) Civil money penalty.--
                  [(A) Penalty.--Any company which violates, 
                and any person who participates in a violation 
                of, any provision of this section, or any 
                regulation or order issued pursuant thereto, 
                shall forfeit and pay a civil penalty of not 
                more than $25,000 for each day during which 
                such violation continues.
                  [(B) Assessment; etc.--Any penalty imposed 
                under subparagraph (A) may be assessed and 
                collected by the Director in the manner 
                provided in subparagraphs (E), (F), (G), and 
                (I) of section 8(i)(2) of the Federal Deposit 
                Insurance Act for penalties imposed (under such 
                section) and any such assessment shall be 
                subject to the provisions of such section.
                  [(C) Hearing.--The company or other person 
                against whom any penalty is assessed under this 
                paragraph shall be afforded an agency hearing 
                if such company or person submits a request for 
                such hearing within 20 days after the issuance 
                of the notice of assessment. Section 8(h) of 
                the Federal Deposit Insurance Act shall apply 
                to any proceeding under this paragraph.
                  [(D) Disbursement.--All penalties collected 
                under authority of this paragraph shall be 
                deposited into the Treasury.
                  [(E) Violate defined.--For purposes of this 
                section, the term ``violate'' includes any 
                action (alone or with another or others) for or 
                toward causing, bringing about, participating 
                in, counseling, or aiding or abetting a 
                violation.
                  [(F) Regulations.--The Director shall 
                prescribe regulations establishing such 
                procedures as may be necessary to carry out 
                this paragraph.
          [(5) Notice under this section after separation from 
        service.--The resignation, termination of employment or 
        participation, or separation of an institution-
        affiliated party (within the meaning of section 3(u) of 
        the Federal Deposit Insurance Act) with respect to a 
        savings and loan holding company or subsidiary thereof 
        (including a separation caused by the deregistration of 
        such a company or such a subsidiary) shall not affect 
        the jurisdiction and authority of the Director to issue 
        any notice and proceed under this section against any 
        such party, if such notice is served before the end of 
        the 6-year period beginning on the date such party 
        ceased to be such a party with respect to such holding 
        company or its subsidiary (whether such date occurs 
        before, on, or after the date of the enactment of this 
        paragraph).
  [(j) Judicial Review.--Any party aggrieved by an order of the 
Director under this section may obtain a review of such order 
by filing in the court of appeals of the United States for the 
circuit in which the principal office of such party is located, 
or in the United States Court of Appeals for the District of 
Columbia Circuit, within 30 days after the date of service of 
such order, a written petition praying that the order of the 
Director be modified, terminated, or set aside. A copy of the 
petition shall be forthwith transmitted by the clerk of the 
court to the Director, and thereupon the Director shall file in 
the court the record in the proceeding, as provided in section 
2112 of title 28, United States Code. Upon the filing of such 
petition, such court shall have jurisdiction, which upon the 
filing of the record shall be exclusive, to affirm, modify, 
terminate, or set aside, in whole or in part, the order of the 
Director. Review of such proceedings shall be had as provided 
in chapter 7 of title 5, United States Code. The judgment and 
decree of the court shall be final, except that the same shall 
be subject to review by the Supreme Court upon certiorari as 
provided in section 1254 of title 28, United States Code.
  [(k) Savings Clause.--Nothing contained in this section, 
other than any transaction approved under subsection (e)(2) of 
this section or section 13 of the Federal Deposit Insurance 
Act, shall be interpreted or construed as approving any act, 
action, or conduct which is or has been or may be in violation 
of existing law, nor shall anything herein contained constitute 
a defense to any action, suit, or proceeding pending or 
hereafter instituted on account of any act, action, or conduct 
in violation of the antitrust laws.
  [(l) Treatment of FDIC Insured State Savings Banks and 
Cooperative Banks as Savings Associations.--
          [(1) In general.--Notwithstanding any other provision 
        of law, a savings bank (as defined in section 3(g) of 
        the Federal Deposit Insurance Act) and a cooperative 
        bank that is an insured bank (as defined in section 
        3(h) of the Federal Deposit Insurance Act) upon 
        application shall be deemed to be a savings association 
        for the purpose of this section, if the Director 
        determines that such bank is a qualified thrift lender 
        (as determined under subsection (m)).
          [(2) Failure to maintain qualified thrift lender 
        status.--If any savings bank which is deemed to be a 
        savings association under paragraph (1) subsequently 
        fails to maintain its status as a qualified thrift 
        lender, as determined by the Director, such bank may 
        not thereafter be a qualified thrift lender for a 
        period of 5 years.
  [(m) Qualified Thrift Lender Test.--
          [(1) In general.--Except as provided in paragraphs 
        (2) and (7), any savings association is a qualified 
        thrift lender if--
                  [(A) the savings association qualifies as a 
                domestic building and loan association, as such 
                term is defined in section 7701(a)(19) of the 
                Internal Revenue Code of 1986; or
                  [(B)(i) the savings association's qualified 
                thrift investments equal or exceed 65 percent 
                of the savings association's portfolio assets; 
                and
                  [(ii) the savings association's qualified 
                thrift investments continue to equal or exceed 
                65 percent of the savings association's 
                portfolio assets on a monthly average basis in 
                9 out of every 12 months.
          [(2) Exceptions granted by director.--Notwithstanding 
        paragraph (1), the Director may grant such temporary 
        and limited exceptions from the minimum actual thrift 
        investment percentage requirement contained in such 
        paragraph as the Director deems necessary if--
                  [(A) the Director determines that 
                extraordinary circumstances exist, such as when 
                the effects of high interest rates reduce 
                mortgage demand to such a degree that an 
                insufficient opportunity exists for a savings 
                association to meet such investment 
                requirements; or
                  [(B) the Director determines that--
                          [(i) the grant of any such exception 
                        will significantly facilitate an 
                        acquisition under section 13(c) or 
                        13(k) of the Federal Deposit Insurance 
                        Act;
                          [(ii) the acquired association will 
                        comply with the transition requirements 
                        of paragraph (7)(B), as if the date of 
                        the exemption were the starting date 
                        for the transition period described in 
                        that paragraph; and
                          [(iii) the Director determines that 
                        the exemption will not have an undue 
                        adverse effect on competing savings 
                        associations in the relevant market and 
                        will further the purposes of this 
                        subsection.
          [(3) Failure to become and remain a qualified thrift 
        lender.--
                  [(A) In general.--A savings association that 
                fails to become or remain a qualified thrift 
                lender shall either become one or more banks 
                (other than a savings bank) or be subject to 
                subparagraph (B), except as provided in 
                subparagraph (D).
                  [(B) Restrictions applicable to savings 
                associations that are not qualified thrift 
                lenders.--
                          [(i) Restrictions effective 
                        immediately.--The following 
                        restrictions shall apply to a savings 
                        association beginning on the date on 
                        which the savings association should 
                        have become or ceases to be a qualified 
                        thrift lender:
                                  [(I) Activities.--The savings 
                                association shall not make any 
                                new investment (including an 
                                investment in a subsidiary) or 
                                engage, directly or indirectly, 
                                in any other new activity 
                                unless that investment or 
                                activity would be permissible 
                                for the savings association if 
                                it were a national bank, and is 
                                also permissible for the 
                                savings association as a 
                                savings association.
                                  [(II) Branching.--The savings 
                                association shall not establish 
                                any new branch office at any 
                                location at which a national 
                                bank located in the savings 
                                association's home State may 
                                not establish a branch office. 
                                For purposes of this subclause, 
                                a savings association's home 
                                State is the State in which the 
                                savings association's total 
                                deposits were largest on the 
                                date on which the savings 
                                association should have become 
                                or ceased to be a qualified 
                                thrift lender.
                                  [(III) Advances.--The savings 
                                association shall not be 
                                eligible to obtain new advances 
                                from any Federal home loan 
                                bank.
                                  [(IV) Dividends.--The savings 
                                association shall be subject to 
                                all statutes and regulations 
                                governing the payment of 
                                dividends by a national bank in 
                                the same manner and to the same 
                                extent as if the savings 
                                association were a national 
                                bank.
                          [(ii) Additional restrictions 
                        effective after three years.--The 
                        following additional restrictions shall 
                        apply to a savings association 
                        beginning 3 years after the date on 
                        which the savings association should 
                        have become or ceases to be a qualified 
                        thrift lender:
                                  [(I) Activities.--The savings 
                                association shall not retain 
                                any investment (including an 
                                investment in any subsidiary) 
                                or engage, directly or 
                                indirectly, in any activity 
                                unless that investment or 
                                activity would be permissible 
                                for the savings association if 
                                it were a national bank, and is 
                                also permissible for the 
                                savings association as a 
                                savings association.
                                  [(II) Advances.--The savings 
                                association shall repay any 
                                outstanding advances from any 
                                Federal home loan bank as 
                                promptly as can be prudently 
                                done consistent with the safe 
                                and sound operation of the 
                                savings association.
                  [(C) Holding company regulation.--Any company 
                that controls a savings association that is 
                subject to any provision of subparagraph (B) 
                shall, within one year after the date on which 
                the savings association should have become or 
                ceases to be a qualified thrift lender, 
                register as and be deemed to be a bank holding 
                company subject to all of the provisions of the 
                Bank Holding Company Act of 1956, section 8 of 
                the Federal Deposit Insurance Act, and other 
                statutes applicable to bank holding companies, 
                in the same manner and to the same extent as if 
                the company were a bank holding company and the 
                savings association were a bank, as those terms 
                are defined in the Bank Holding Company Act of 
                1956.
                  [(D) Requalification.--A savings association 
                that should have become or ceases to be a 
                qualified thrift lender shall not be subject to 
                subparagraph (B) or (C) if the savings 
                association becomes a qualified thrift lender 
                by meeting the qualified thrift lender 
                requirement in paragraph (1) on a monthly 
                average basis in 9 out of the preceding 12 
                months and remains a qualified thrift lender. 
                If the savings association (or any savings 
                association that acquired all or substantially 
                all of its assets from that savings 
                association) at any time thereafter ceases to 
                be a qualified thrift lender, it shall 
                immediately be subject to all provisions of 
                subparagraphs (B) and (C) as if all the periods 
                described in subparagraphs (B)(ii) and (C) had 
                expired.
                  [(E) Deposit insurance assessments.--Any bank 
                chartered as a result of the requirements of 
                this section shall be obligated until December 
                31, 1993, to pay to the Savings Association 
                Insurance Fund the assessments assessed on 
                savings associations under the Federal Deposit 
                Insurance Act. Such association shall also be 
                assessed, on the date of its change of status 
                from a Savings Association Insurance Fund 
                member, the exit fee and entrance fee provided 
                in section 5(d) of the Federal Deposit 
                Insurance Act. Such institution shall not be 
                obligated to pay the assessments assessed on 
                banks under the Federal Deposit Insurance Act 
                until--
                          [(i) December 31, 1993, or
                          [(ii) the institution's change of 
                        status from a Savings Association 
                        Insurance Fund member to a Bank 
                        Insurance Fund member,
                whichever is later.
                  [(F) Exemption for specialized savings 
                associations serving certain military 
                personnel.--Subparagraph (A) shall not apply to 
                a savings association subsidiary of a savings 
                and loan holding company if at least 90 percent 
                of the customers of the savings and loan 
                holding company and its subsidiaries and 
                affiliates are active or former members in the 
                United States military services or the widows, 
                widowers, divorced spouses, or current or 
                former dependents of such members.
                  [(G) Exemption for certain federal savings 
                associations.--This paragraph shall not apply 
                to any Federal savings association in existence 
                as a Federal savings association on the date of 
                enactment of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989--
                          [(i) that was chartered before 
                        October 15, 1982, as a savings bank or 
                        a cooperative bank under State law; or
                          [(ii) that acquired its principal 
                        assets from an association that was 
                        chartered before October 15, 1982, as a 
                        savings bank or a cooperative bank 
                        under State law.
                  [(H) No circumvention of exit moratorium.--
                Subparagraph (A) of this paragraph shall not be 
                construed as permitting any insured depository 
                institution to engage in any conversion 
                transaction prohibited under section 5(d) of 
                the Federal Deposit Insurance Act.
          [(4) Definitions.--For purposes of this subsection, 
        the following definitions shall apply:
                  [(A) Actual thrift investment percentage.--
                The term ``actual thrift investment 
                percentage'' means the percentage determined by 
                dividing--
                          [(i) the amount of a savings 
                        association's qualified thrift 
                        investments, by
                          [(ii) the amount of the savings 
                        association's portfolio assets.
                  [(B) Portfolio assets.--The term ``portfolio 
                assets'' means, with respect to any savings 
                association, the total assets of the savings 
                association, minus the sum of--
                          [(i) goodwill and other intangible 
                        assets;
                          [(ii) the value of property used by 
                        the savings association to conduct its 
                        business; and
                          [(iii) liquid assets of the type 
                        required to be maintained under section 
                        6 of the Home Owners' Loan Act, in an 
                        amount not exceeding the amount equal 
                        to 20 percent of the savings 
                        association's total assets.
                  [(C) Qualified thrift investments.--
                          [(i) In general.--The term 
                        ``qualified thrift investments'' means, 
                        with respect to any savings 
                        association, the assets of the savings 
                        association that are described in 
                        clauses (ii) and (iii).
                          [(ii) Assets includible without 
                        limit.--The following assets are 
                        described in this clause for purposes 
                        of clause (i):
                                  [(I) The aggregate amount of 
                                loans held by the savings 
                                association that were made to 
                                purchase, refinance, construct, 
                                improve, or repair domestic 
                                residential housing or 
                                manufactured housing.
                                  [(II) Home-equity loans.
                                  [(III) Securities backed by 
                                or representing an interest in 
                                mortgages on domestic 
                                residential housing or 
                                manufactured housing.
                                  [(IV) Existing obligations of 
                                deposit insurance agencies.--
                                Direct or indirect obligations 
                                of the Federal Deposit 
                                Insurance Corporation or the 
                                Federal Savings and Loan 
                                Insurance Corporation issued in 
                                accordance with the terms of 
                                agreements entered into prior 
                                to July 1, 1989, for the 10-
                                year period beginning on the 
                                date of issuance of such 
                                obligations.
                                  [(V) New obligations of 
                                deposit insurance agencies.--
                                Obligations of the Federal 
                                Deposit Insurance Corporation, 
                                the Federal Savings and Loan 
                                Insurance Corporation, the 
                                FSLIC Resolution Fund, and the 
                                Resolution Trust Corporation 
                                issued in accordance with the 
                                terms of agreements entered 
                                into on or after July 1, 1989, 
                                for the 5-year period beginning 
                                on the date of issuance of such 
                                obligations.
                                  [(VI) Shares of stock issued 
                                by any Federal home loan bank.
                                  [(VII) Loans for educational 
                                purposes, loans to small 
                                businesses, and loans made 
                                through credit cards or credit 
                                card accounts.
                          [(iii) Assets includible subject to 
                        percentage restriction.--The following 
                        assets are described in this clause for 
                        purposes of clause (i):
                                  [(I) 50 percent of the dollar 
                                amount of the residential 
                                mortgage loans originated by 
                                such savings association and 
                                sold within 90 days of 
                                origination.
                                  [(II) Investments in the 
                                capital stock or obligations 
                                of, and any other security 
                                issued by, any service 
                                corporation if such service 
                                corporation derives at least 80 
                                percent of its annual gross 
                                revenues from activities 
                                directly related to purchasing, 
                                refinancing, constructing, 
                                improving, or repairing 
                                domestic residential real 
                                estate or manufactured housing.
                                  [(III) 200 percent of the 
                                dollar amount of loans and 
                                investments made to acquire, 
                                develop, and construct 1- to 4-
                                family residences the purchase 
                                price of which is or is 
                                guaranteed to be not greater 
                                than 60 percent of the median 
                                value of comparable newly 
                                constructed 1- to 4-family 
                                residences within the local 
                                community in which such real 
                                estate is located, except that 
                                not more than 25 percent of the 
                                amount included under this 
                                subclause may consist of 
                                commercial properties related 
                                to the development if those 
                                properties are directly related 
                                to providing services to 
                                residents of the development.
                                  [(IV) 200 percent of the 
                                dollar amount of loans for the 
                                acquisition or improvement of 
                                residential real property, 
                                churches, schools, and nursing 
                                homes located within, and loans 
                                for any other purpose to any 
                                small businesses located within 
                                any area which has been 
                                identified by the Director, in 
                                connection with any review or 
                                examination of community 
                                reinvestment practices, as a 
                                geographic area or neighborhood 
                                in which the credit needs of 
                                the low- and moderate-income 
                                residents of such area or 
                                neighborhood are not being 
                                adequately met.
                                  [(V) Loans for the purchase 
                                or construction of churches, 
                                schools, nursing homes, and 
                                hospitals, other than those 
                                qualifying under clause (IV), 
                                and loans for the improvement 
                                and upkeep of such properties.
                                  [(VI) Loans for personal, 
                                family, or household purposes 
                                (other than loans for personal, 
                                family, or household purposes 
                                described in clause (ii)(VII)).
                                  [(VII) Shares of stock issued 
                                by the Federal Home Loan 
                                Mortgage Corporation or the 
                                Federal National Mortgage 
                                Association.
                          [(iv) Percentage restriction 
                        applicable to certain assets.--The 
                        aggregate amount of the assets 
                        described in clause (iii) which may be 
                        taken into account in determining the 
                        amount of the qualified thrift 
                        investments of any savings association 
                        shall not exceed the amount which is 
                        equal to 20 percent of a savings 
                        association's portfolio assets.
                          [(v) The term ``qualified thrift 
                        investments'' excludes--
                                  [(I) except for home equity 
                                loans, that portion of any loan 
                                or investment that is used for 
                                any purpose other than those 
                                expressly qualifying under any 
                                subparagraph of clause (ii) or 
                                (iii); or
                                  [(II) goodwill or any other 
                                intangible asset.
                  [(D) Credit card.--The Director shall issue 
                such regulations as may be necessary to define 
                the term ``credit card''.
                  [(E) Small business.--The Director shall 
                issue such regulations as may be necessary to 
                define the term ``small business''.
          [(5) Consistent accounting required.--
                  [(A) In determining the amount of a savings 
                association's portfolio assets, the assets of 
                any subsidiary of the savings association shall 
                be consolidated with the assets of the savings 
                association if--
                          [(i) Assets of the subsidiary are 
                        consolidated with the assets of the 
                        savings association in determining the 
                        savings association's qualified thrift 
                        investments; or
                          [(ii) Residential mortgage loans 
                        originated by the subsidiary are 
                        included pursuant to paragraph 
                        (4)(C)(iii)(I) in determining the 
                        savings association's qualified thrift 
                        investments.
                  [(B) In determining the amount of a savings 
                association's portfolio assets and qualified 
                thrift investments, consistent accounting 
                principles shall be applied.
          [(6) Special rules for puerto rico and virgin islands 
        savings associations.--
                  [(A) Puerto rico savings associations.--With 
                respect to any savings association 
                headquartered and operating primarily in Puerto 
                Rico--
                          [(i) the term ``qualified thrift 
                        investments'' includes, in addition to 
                        the items specified in paragraph (4)--
                                  [(I) the aggregate amount of 
                                loans for personal, family, 
                                educational, or household 
                                purposes made to persons 
                                residing or domiciled in the 
                                Commonwealth of Puerto Rico; 
                                and
                                  [(II) the aggregate amount of 
                                loans for the acquisition or 
                                improvement of churches, 
                                schools, or nursing homes, and 
                                of loans to small businesses, 
                                located within the Commonwealth 
                                of Puerto Rico; and
                          [(ii) the aggregate amount of loans 
                        related to the purchase, acquisition, 
                        development and construction of 1- to 
                        4-family residential real estate--
                                  [(I) which is located within 
                                the Commonwealth of Puerto 
                                Rico; and
                                  [(II) the value of which (at 
                                the time of acquisition or upon 
                                completion of the development 
                                and construction) is below the 
                                median value of newly 
                                constructed 1- to 4-family 
                                residences in the Commonwealth 
                                of Puerto Rico, which may be 
                                taken into account in 
                                determining the amount of the 
                                qualified thrift investments 
                                and of such savings association 
                                shall be doubled.
                  [(B) Virgin islands savings associations.--
                With respect to any savings association 
                headquartered and operating primarily in the 
                Virgin Islands--
                          [(i) the term ``qualified thrift 
                        investments'' includes, in addition to 
                        the items specified in paragraph (4)--
                                  [(I) the aggregate amount of 
                                loans for personal, family, 
                                educational, or household 
                                purposes made to persons 
                                residing or domiciled in the 
                                Virgin Islands; and
                                  [(II) the aggregate amount of 
                                loans for the acquisition or 
                                improvement of churches, 
                                schools, or nursing homes, and 
                                of loans to small businesses, 
                                located within the Virgin 
                                Islands; and
                          [(ii) the aggregate amount of loans 
                        related to the purchase, acquisition, 
                        development and construction of 1- to 
                        4-family residential real estate--
                                  [(I) which is located within 
                                the Virgin Islands; and
                                  [(II) the value of which (at 
                                the time of acquisition or upon 
                                completion of the development 
                                and construction) is below the 
                                median value of newly 
                                constructed 1- to 4-family 
                                residences in the Virgin 
                                Islands, which may be taken 
                                into account in determining the 
                                amount of the qualified thrift 
                                investments and of such savings 
                                association shall be doubled.
          [(7) Transitional rule for certain savings 
        associations.--
                  [(A) In general.--If any Federal savings 
                association in existence as a Federal savings 
                association on the date of enactment of the 
                Financial Institutions Reform, Recovery, and 
                Enforcement Act of 1989--
                          [(i) that was chartered as a savings 
                        bank or a cooperative bank under State 
                        law before October 15, 1982; or
                          [(ii) that acquired its principal 
                        assets from an association that was 
                        chartered before October 15, 1982, as a 
                        savings bank or a cooperative bank 
                        under State law,
                meets the requirements of subparagraph (B), 
                such savings association shall be treated as a 
                qualified thrift lender during period ending on 
                September 30, 1995.
                  [(B) Subparagraph (b) requirements.--A 
                savings association meets the requirements of 
                this subparagraph if, in the determination of 
                the Director--
                          [(i) the actual thrift investment 
                        percentage of such association does 
                        not, after the date of enactment of the 
                        Financial Institutions Reform, 
                        Recovery, and Enforcement Act of 1989, 
                        decrease below the actual thrift 
                        investment percentage of such 
                        association on July 15, 1989; and
                          [(ii) the amount by which--
                                  [(I) the actual thrift 
                                investment percentage of such 
                                association at the end of each 
                                period described in the 
                                following table, exceeds
                                  [(II) the actual thrift 
                                investment percentage of such 
                                association on July 15, 1989,
                        is equal to or greater than the 
                        applicable percentage (as determined 
                        under the following table) of the 
                        amount by which 70 percent exceeds the 
                        actual thrift investment percentage of 
                        such association on such date of 
                        enactment:

          [For the following                              The applicable
          period:                                         percentage is:
          July 1, 1991-September 30, 1992...............      25 percent
          October 1, 1992-March 31, 1994................      50 percent
          April 1, 1994-September 30, 1995..............      75 percent
          Thereafter....................................     100 percent

                  [(C) For purposes of this paragraph, the 
                actual thrift investment percentage of an 
                association on July 15, 1989, shall be 
                determined by applying the definition of 
                ``actual thrift investment percentage'' that 
                takes effect on July 1, 1991.
  [(n) Tying Restrictions.--A savings and loan holding company 
and any of its affiliates shall be subject to section 5(q) and 
regulations prescribed under such section, in connection with 
transactions involving the products or services of such company 
or affiliate and those of an affiliated savings association as 
if such company or affiliate were a savings association.
  [(o) Mutual Holding Companies.--
          [(1) In general.--A savings association operating in 
        mutual form may reorganize so as to become a holding 
        company by--
                  [(A) chartering an interim savings 
                association, the stock of which is to be wholly 
                owned, except as otherwise provided in this 
                section, by the mutual association; and
                  [(B) transferring the substantial part of its 
                assets and liabilities, including all of its 
                insured liabilities, to the interim savings 
                association.
          [(2) Directors and certain account holders' approval 
        of plan required.--A reorganization is not authorized 
        under this subsection unless--
                  [(A) a plan providing for such reorganization 
                has been approved by a majority of the board of 
                directors of the mutual savings association; 
                and
                  [(B) in the case of an association in which 
                holders of accounts and obligors exercise 
                voting rights, such plan has been submitted to 
                and approved by a majority of such individuals 
                at a meeting held at the call of the directors 
                in accordance with the procedures prescribed by 
                the association's charter and bylaws.
          [(3) Notice to the director; disapproval period.--
                  [(A) Notice required.--At least 60 days prior 
                to taking any action described in paragraph 
                (1), a savings association seeking to establish 
                a mutual holding company shall provide written 
                notice to the Director. The notice shall 
                contain such relevant information as the 
                Director shall require by regulation or by 
                specific request in connection with any 
                particular notice.
                  [(B) Transaction allowed if not 
                disapproved.--Unless the Director within such 
                60-day notice period disapproves the proposed 
                holding company formation, or extends for 
                another 30 days the period during which such 
                disapproval may be issued, the savings 
                association providing such notice may proceed 
                with the transaction, if the requirements of 
                paragraph (2) have been met.
                  [(C) Grounds for disapproval.--The Director 
                may disapprove any proposed holding company 
                formation only if--
                          [(i) such disapproval is necessary to 
                        prevent unsafe or unsound practices;
                          [(ii) the financial or management 
                        resources of the savings association 
                        involved warrant disapproval;
                          [(iii) the savings association fails 
                        to furnish the information required 
                        under subparagraph (A); or
                          [(iv) the savings association fails 
                        to comply with the requirement of 
                        paragraph (2).
                  [(D) Retention of capital assets.--In 
                connection with the transaction described in 
                paragraph (1), a savings association may, 
                subject to the approval of the Director, retain 
                capital assets at the holding company level to 
                the extent that such capital exceeds the 
                association's capital requirement established 
                by the Director pursuant to sections 5 (s) and 
                (t) of this Act.
          [(4) Ownership.--
                  [(A) In general.--Persons having ownership 
                rights in the mutual association pursuant to 
                section 5(b)(1)(B) of this Act or State law 
                shall have the same ownership rights with 
                respect to the mutual holding company.
                  [(B) Holders of certain accounts.--Holders of 
                savings, demand or other accounts of--
                          [(i) a savings association chartered 
                        as part of a transaction described in 
                        paragraph (1); or
                          [(ii) a mutual savings association 
                        acquired pursuant to paragraph (5)(B),
                shall have the same ownership rights with 
                respect to the mutual holding company as 
                persons described in subparagraph (A) of this 
                paragraph.
          [(5) Permitted activities.--A mutual holding company 
        may engage only in the following activities:
                  [(A) Investing in the stock of a savings 
                association.
                  [(B) Acquiring a mutual association through 
                the merger of such association into a savings 
                association subsidiary of such holding company 
                or an interim savings association subsidiary of 
                such holding company.
                  [(C) Subject to paragraph (6), merging with 
                or acquiring another holding company, one of 
                whose subsidiaries is a savings association.
                  [(D) Investing in a corporation the capital 
                stock of which is available for purchase by a 
                savings association under Federal law or under 
                the law of any State where the subsidiary 
                savings association or associations have their 
                home offices.
                  [(E) Engaging in the activities described in 
                subsection (c)(2), except subparagraph (B).
          [(6) Limitations on certain activities of acquired 
        holding companies.--
                  [(A) New activities.--If a mutual holding 
                company acquires or merges with another holding 
                company under paragraph (5)(C), the holding 
                company acquired or the holding company 
                resulting from such merger or acquisition may 
                only invest in assets and engage in activities 
                which are authorized under paragraph (5).
                  [(B) Grace period for divesting prohibited 
                assets or discontinuing prohibited 
                activities.--Not later than 2 years following a 
                merger or acquisition described in paragraph 
                (5)(C), the acquired holding company or the 
                holding company resulting from such merger or 
                acquisition shall--
                          [(i) dispose of any asset which is an 
                        asset in which a mutual holding company 
                        may not invest under paragraph (5); and
                          [(ii) cease any activity which is an 
                        activity in which a mutual holding 
                        company may not engage under paragraph 
                        (5).
          [(7) Regulation.--A mutual holding company shall be 
        chartered by the Director and shall be subject to such 
        regulations as the Director may prescribe. Unless the 
        context otherwise requires, a mutual holding company 
        shall be subject to the other requirements of this 
        section regarding regulation of holding companies.
          [(8) Capital improvement.--
                  [(A) Pledge of stock of savings association 
                subsidiary.--This section shall not prohibit a 
                mutual holding company from pledging all or a 
                portion of the stock of a savings association 
                chartered as part of a transaction described in 
                paragraph (1) to raise capital for such savings 
                association.
                  [(B) Issuance of nonvoting shares.--This 
                section shall not prohibit a savings 
                association chartered as part of a transaction 
                described in paragraph (1) from issuing any 
                nonvoting shares or less than 50 percent of the 
                voting shares of such association to any person 
                other than the mutual holding company.
          [(9) Insolvency and liquidation.--
                  [(A) In general.--Notwithstanding any 
                provision of law, upon--
                          [(i) the default of any savings 
                        association--
                                  [(I) the stock of which is 
                                owned by any mutual holding 
                                company; and
                                  [(II) which was chartered in 
                                a transaction described in 
                                paragraph (1);
                          [(ii) the default of a mutual holding 
                        company; or
                          [(iii) a foreclosure on a pledge by a 
                        mutual holding company described in 
                        paragraph (8)(A),
                a trustee shall be appointed receiver of such 
                mutual holding company and such trustee shall 
                have the authority to liquidate the assets of, 
                and satisfy the liabilities of, such mutual 
                holding company pursuant to title 11, United 
                States Code.
                  [(B) Distribution of net proceeds.--Except as 
                provided in subparagraph (C), the net proceeds 
                of any liquidation of any mutual holding 
                company pursuant to subparagraph (A) shall be 
                transferred to persons who hold ownership 
                interests in such mutual holding company.
                  [(C) Recovery by corporation.--If the 
                Corporation incurs a loss as a result of the 
                default of any savings association subsidiary 
                of a mutual holding company which is liquidated 
                pursuant to subparagraph (A), the Corporation 
                shall succeed to the ownership interests of the 
                depositors of such savings association in the 
                mutual holding company, to the extent of the 
                Corporation's loss.
          [(10) Definitions.--For purposes of this subsection--
                  [(A) Mutual holding company.--The term 
                ``mutual holding company'' means a corporation 
                organized as a holding company under this 
                subsection.
                  [(B) Mutual association.--The term ``mutual 
                association'' means a savings association which 
                is operating in mutual form.
                  [(C) Default.--The term ``default'' means an 
                adjudication or other official determination of 
                a court of competent jurisdiction or other 
                public authority pursuant to which a 
                conservator, receiver, or other legal custodian 
                is appointed.
  [(p) Holding Company Activities Constituting Serious Risk to 
Subsidiary Savings Association.--
          [(1) Determination and imposition of restrictions.--
        If the Director determines that there is reasonable 
        cause to believe that the continuation by a savings and 
        loan holding company of any activity constitutes a 
        serious risk to the financial safety, soundness, or 
        stability of a savings and loan holding company's 
        subsidiary savings association, the Director may impose 
        such restrictions as the Director determines to be 
        necessary to address such risk. Such restrictions shall 
        be issued in the form of a directive to the holding 
        company and any of its subsidiaries, limiting--
                  [(A) the payment of dividends by the savings 
                association;
                  [(B) transactions between the savings 
                association, the holding company, and the 
                subsidiaries or affiliates of either; and
                  [(C) any activities of the savings 
                association that might create a serious risk 
                that the liabilities of the holding company and 
                its other affiliates may be imposed on the 
                savings association.
        Such directive shall be effective as a cease and desist 
        order that has become final.
          [(2) Review of directive.--
                  [(A) Administrative review.--After a 
                directive referred to in paragraph (1) is 
                issued, the savings and loan holding company, 
                or any subsidiary of such holding company 
                subject to the directive, may object and 
                present in writing its reasons why the 
                directive should be modified or rescinded. 
                Unless within 10 days after receipt of such 
                response the Director affirms, modifies, or 
                rescinds the directive, such directive shall 
                automatically lapse.
                  [(B) Judicial review.--If the Director 
                affirms or modifies a directive pursuant to 
                subparagraph (A), any affected party may 
                immediately thereafter petition the United 
                States district court for the district in which 
                the savings and loan holding company has its 
                main office or in the United States District 
                Court for the District of Columbia to stay, 
                modify, terminate or set aside the directive. 
                Upon a showing of extraordinary cause, the 
                savings and loan holding company, or any 
                subsidiary of such holding company subject to a 
                directive, may petition a United States 
                district court for relief without first 
                pursuing or exhausting the administrative 
                remedies set forth in this paragraph.
  [(q) Qualified Stock Issuance by Undercapitalized Savings 
Associations or Holding Companies.--
          [(1) In general.--For purposes of this section, any 
        issue of shares of stock shall be treated as a 
        qualified stock issuance if the following conditions 
        are met:
                  [(A) The shares of stock are issued by--
                          [(i) an undercapitalized savings 
                        association; or
                          [(ii) a savings and loan holding 
                        company which is not a bank holding 
                        company but which controls an 
                        undercapitalized savings association 
                        if, at the time of issuance, the 
                        savings and loan holding company is 
                        legally obligated to contribute the net 
                        proceeds from the issuance of such 
                        stock to the capital of an 
                        undercapitalized savings association 
                        subsidiary of such holding company.
                  [(B) All shares of stock issued consist of 
                previously unissued stock or treasury shares.
                  [(C) All shares of stock issued are purchased 
                by a savings and loan holding company that is 
                registered, as of the date of purchase, with 
                the Director in accordance with the provisions 
                of subsection (b)(1) of this section.
                  [(D) Subject to paragraph (2), the Director 
                approved the purchase of the shares of stock by 
                the acquiring savings and loan holding company.
                  [(E) The entire consideration for the stock 
                issued is paid in cash by the acquiring savings 
                and loan holding company.
                  [(F) At the time of the stock issuance, each 
                savings association subsidiary of the acquiring 
                savings and loan holding company (other than an 
                association acquired in a transaction pursuant 
                to subsection (c) or (k) of section 13 of the 
                Federal Deposit Insurance Act or section 408(m) 
                of the National Housing Act) has capital (after 
                deducting any subordinated debt, intangible 
                assets, and deferred, unamortized gains or 
                losses) of not less than 6\1/2\ percent of the 
                total assets of such savings association.
                  [(G) Immediately after the stock issuance, 
                the acquiring savings and loan holding company 
                holds not more than 15 percent of the 
                outstanding voting stock of the issuing 
                undercapitalized savings association or savings 
                and loan holding company.
                  [(H) Not more than one of the directors of 
                the issuing association or company is an 
                officer, director, employee, or other 
                representative of the acquiring company or any 
                of its affiliates.
                  [(I) Transactions between the savings 
                association or savings and loan holding company 
                that issues the shares pursuant to this section 
                and the acquiring company and any of its 
                affiliates shall be subject to the provisions 
                of section 11.
          [(2) Approval of acquisitions.--
                  [(A) Additional capital commitments not 
                required.--The Director shall not disapprove 
                any application for the purchase of stock in 
                connection with a qualified stock issuance on 
                the grounds that the acquiring savings and loan 
                holding company has failed to undertake to make 
                subsequent additional capital contributions to 
                maintain the capital of the undercapitalized 
                savings association at or above the minimum 
                level required by the Director or any other 
                Federal agency having jurisdiction.
                  [(B) Other conditions.--Notwithstanding 
                subsection (a)(4), the Director may impose such 
                conditions on any approval of an application 
                for the purchase of stock in connection with a 
                qualified stock issuance as the Director 
                determines to be appropriate, including--
                          [(i) a requirement that any savings 
                        association subsidiary of the acquiring 
                        savings and loan holding company limit 
                        dividends paid to such holding company 
                        for such period of time as the Director 
                        may require; and
                          [(ii) such other conditions as the 
                        Director deems necessary or appropriate 
                        to prevent evasions of this section.
                  [(C) Application deemed approved if not 
                disapproved within 90 days.--An application for 
                approval of a purchase of stock in connection 
                with a qualified stock issuance shall be deemed 
                to have been approved by the Director if such 
                application has not been disapproved by the 
                Director before the end of the 90-day period 
                beginning on the date such application has been 
                deemed sufficient under regulations issued by 
                the Director.
          [(3) No limitation on class of stock issued.--The 
        shares of stock issued in connection with a qualified 
        stock issuance may be shares of any class.
          [(4) Undercapitalized savings association defined.--
        For purposes of this subsection, the term 
        ``undercapitalized savings association'' means any 
        savings association--
                  [(A) the assets of which exceed the 
                liabilities of such association; and
                  [(B) which does not comply with one or more 
                of the capital standards in effect under 
                section 5(t).
  [(r) Penalty for Failure To Provide Timely and Accurate 
Reports.--
          [(1) First tier.--Any savings and loan holding 
        company, and any subsidiary of such holding company, 
        which--
                  [(A) maintains procedures reasonably adapted 
                to avoid any inadvertent and unintentional 
                error and, as a result of such an error--
                          [(i) fails to submit or publish any 
                        report or information required under 
                        this section or regulations prescribed 
                        by the Director, within the period of 
                        time specified by the Director; or
                          [(ii) submits or publishes any false 
                        or misleading report or information; or
                  [(B) inadvertently transmits or publishes any 
                report which is minimally late,
        shall be subject to a penalty of not more than $2,000 
        for each day during which such failure continues or 
        such false or misleading information is not corrected. 
        Such holding company or subsidiary shall have the 
        burden of proving by a preponderence of the evidence 
        that an error was inadvertent and unintentional and 
        that a report was inadvertently transmitted or 
        published late.
          [(2) Second tier.--Any savings and loan holding 
        company, and any subsidiary of such holding company, 
        which--
                  [(A) fails to submit or publish any report or 
                information required under this section or 
                under regulations prescribed by the Director, 
                within the period of time specified by the 
                Director; or
                  [(B) submits or publishes any false or 
                misleading report or information,
        in a manner not described in paragraph (1) shall be 
        subject to a penalty of not more than $20,000 for each 
        day during which such failure continues or such false 
        or misleading information is not corrected.
          [(3) Third tier.--If any savings and loan holding 
        company or any subsidiary of such a holding company 
        knowingly or with reckless disregard for the accuracy 
        of any information or report described in paragraph (2) 
        submits or publishes any false or misleading report or 
        information, the Director may assess a penalty of not 
        more than $1,000,000 or 1 percent of total assets of 
        such company or subsidiary, whichever is less, per day 
        for each day during which such failure continues or 
        such false or misleading information is not corrected.
          [(4) Assessment.--Any penalty imposed under paragraph 
        (1), (2), or (3) shall be assessed and collected by the 
        Director in the manner provided in subparagraphs (E), 
        (F), (G), and (I) of section 8(i)(2) of the Federal 
        Deposit Insurance Act (for penalties imposed under such 
        section) and any such assessment (including the 
        determination of the amount of the penalty) shall be 
        subject to the provisions of such subsection.
          [(5) Hearing.--Any savings and loan holding company 
        or any subsidiary of such a holding company against 
        which any penalty is assessed under this subsection 
        shall be afforded a hearing if such savings and loan 
        holding company or such subsidiary, as the case may be, 
        submits a request for such hearing within 20 days after 
        the issuance of the notice of assessment. Section 8(h) 
        of the Federal Deposit Insurance Act shall apply to any 
        proceeding under this subsection.
  [(s) Mergers, Consolidations, and Other Acquisitions 
Authorized.--
          [(1) In general.--Subject to sections 5(d)(3) and 
        18(c) of the Federal Deposit Insurance Act and all 
        other applicable laws, any Federal savings association 
        may acquire or be acquired by any insured depository 
        institution.
          [(2) Expedited approval of acquisitions.--
                  [(A) In general.--Any application by a 
                savings association to acquire or be acquired 
                by another insured depository institution which 
                is required to be filed with the Director under 
                any applicable law or regulation shall be 
                approved or disapproved in writing by the 
                Director before the end of the 60-day period 
                beginning on the date such application is filed 
                with the agency.
                  [(B) Extension of period.--The period for 
                approval or disapproval referred to in 
                subparagraph (A) may be extended for an 
                additional 30-day period if the Director 
                determines that--
                          [(i) an applicant has not furnished 
                        all of the information required to be 
                        submitted; or
                          [(ii) in the Director's judgment, any 
                        material information submitted is 
                        substantially inaccurate or incomplete.
          [(3) Acquire defined.--For purposes of this 
        subsection, the term ``acquire'' means to acquire, 
        directly or indirectly, ownership or control through a 
        merger or consolidation or an acquisition of assets or 
        assumption of liabilities, provided that following such 
        merger, consolidation, or acquisition, an acquiring 
        insured depository institution may not own the shares 
        of the acquired insured depository institution.
          [(4) Regulations.--
                  [(A) Required.--The Director shall prescribe 
                such regulations as may be necessary to carry 
                out paragraph (1).
                  [(B) Effective date.--The regulations 
                required under subparagraph (A) shall--
                          [(i) be prescribed in final form 
                        before the end of the 90-day period 
                        beginning on the date of the enactment 
                        of this subsection; and
                          [(ii) take effect before the end of 
                        the 120-day period beginning on such 
                        date.
          [(5) Limitation.--No provision of this section shall 
        be construed to authorize a national bank or any 
        subsidiary thereofto engage in any activity not 
otherwise authorized under the National Bank Act or any other law 
governing the powers of a national bank.
  [(t) Exemption for Bank Holding Companies.--This section 
shall not apply to a bank holding company that is subject to 
the Bank Holding Company Act of 1956, or any company controlled 
by such bank holding company.

[SEC. 11. TRANSACTIONS WITH AFFILIATES; EXTENSIONS OF CREDIT TO 
                    EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL 
                    SHAREHOLDERS.

  [(a) Affiliate Transactions.--
          [(1) In general.--Sections 23A and 23B of the Federal 
        Reserve Act shall apply to every savings association in 
        the same manner and to the same extent as if the 
        savings association were a member bank (as defined in 
        such Act), except that--
                  [(A) no loan or other extension of credit may 
                be made to any affiliate unless that affiliate 
                is engaged only in activities described in 
                section 10(c)(2)(F)(i); and
                  [(B) no savings association may enter into 
                any transaction described in section 
                23A(b)(7)(B) of the Federal Reserve Act with 
                any affiliate other than with respect to shares 
                of a subsidiary.
          [(2) Sister bank exemption made available to savings 
        associations.--
                  [(A) Savings associations controlled by bank 
                holding companies.--Every savings association 
                more than 80 percent of the voting stock of 
                which is owned by a company described in 
                section 10(c)(8) shall be treated as a bank for 
                purposes of section 23A(d)(1) and section 23B 
                of the Federal Reserve Act, if every savings 
                association and bank controlled by such company 
                complies with all applicable capital 
                requirements on a fully phased-in basis and 
                without reliance on goodwill.
                  [(B) Savings associations generally.--
                Effective on and after January 1, 1995, every 
                savings association shall be treated as a bank 
                for purposes of section 23A(d)(1) and section 
                23B of the Federal Reserve Act.
          [(3) Affiliates described.--Any company that would be 
        an affiliate (as defined in sections 23A and 23B of the 
        Federal Reserve Act) of any savings association if such 
        savings association were a member bank (as such term is 
        defined in such Act) shall be deemed to be an affiliate 
        of such savings association for purposes of paragraph 
        (1).
          [(4) Additional restrictions authorized.--The 
        Director may impose such additional restrictions on any 
        transaction between any savings association and any 
        affiliate of such savings association as the Director 
        determines to be necessary to protect the safety and 
        soundness of the savings association.
  [(b) Extensions of Credit to Executive Officers, Directors, 
and Principal Shareholders.--
          [(1) In general.--Subsections (g) and (h) of section 
        22 of the Federal Reserve Act shall apply to every 
        savings association in the same manner and to the same 
        extent as if the savings association were a member bank 
        (as defined in such Act).
          [(2) Additional restrictions authorized.--The 
        Director may impose such additional restrictions on 
        loans or extensions of credit to any director or 
        executive officer of any savings association, or any 
        person who directly or indirectly owns, controls, or 
        has the power to vote more than 10 percent of any class 
        of voting securities of a savings association, as the 
        Director determines to be necessary to protect the 
        safety and soundness of the savings association.
  [(c) Administrative Enforcement.--The Director may take 
enforcement action with respect to violations of this section 
pursuant to section 8 or 18(j) of the Federal Deposit Insurance 
Act, as appropriate.

[SEC. 12. ADVERTISING.

  [No savings association shall carry on any sale, plan, or 
practices, or any advertising, in violation of regulations 
promulgated by the Director.

[SEC. 13. POWERS OF EXAMINERS.

  [For the purposes of this Act, examiners appointed by the 
Director shall--
          [(1) be subject to the same requirements, 
        responsibilities, and penalties as are applicable to 
        examiners under the Federal Reserve Act and title LXII 
        of the Revised Statutes; and
          [(2) have, in the exercise of functions under this 
        Act, the same powers and privileges as are vested in 
        such examiners by law.

[SEC. 14. SEPARABILITY PROVISION.

  [If any provision of this Act, or the application thereof to 
any person or circumstances, is held invalid, the remainder of 
the Act, and the application of such provision to other persons 
or circumstances, shall not be affected thereby.]
                              ----------                              


   THE ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION ACT OF 1996

      TITLE II--ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION

SEC. 2001. SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS.

  (a) Short Title.--This title may be cited as the ``Economic 
Growth and Regulatory Paperwork Reduction Act of 1996''.
          * * * * * * *

             Subtitle B--Streamlining Government Regulation

          * * * * * * *

         CHAPTER 2--ELIMINATING UNNECESSARY REGULATORY BURDENS

          * * * * * * *

SEC. 2227. CREDIT AVAILABILITY ASSESSMENT.

  (a) Study.--
          (1) In general.--Not later than 12 months after the 
        date of enactment of this Act, and once every 60 months 
        thereafter, the Board, in consultation with [the 
        Director of the Office of Thrift Supervision,] the 
        Comptroller of the Currency, the Board of Directors of 
        the Corporation, the Administrator of the National 
        Credit Union Administration, the Administrator of the 
        Small Business Administration, and the Secretary of 
        Commerce, shall conduct a study and submit a report to 
        the Congress detailing the extent of small business 
        lending by all creditors.
          * * * * * * *

                  Subtitle G--Deposit Insurance Funds

          * * * * * * *

SEC. 2704. MERGER OF BIF AND SAIF.

  (a) * * *
          * * * * * * *
  [(c) Effective Date.--This section and the amendments made by 
this section shall become effective on January 1, 1999, if no 
insured depository institution is a savings association on that 
date.]
  (c) Effective Date.--This section and the amendments made by 
this section shall take effect on the earlier of--
          (1) January 1, 2000; or
          (2) the end of the 2-year period beginning on the 
        date of the enactment of the Thrift Charter Transition 
        Act of 1997.
          * * * * * * *
                              ----------                              


                       FEDERAL HOME LOAN BANK ACT

          * * * * * * *

                              definitions

  Sec. 2. As used in this Act--
          (1) * * *
          * * * * * * *
          [(9) Savings association.--The term ``savings 
        association'' has the meaning given to such term in 
        section 3 of the Federal Deposit Insurance Act.]
          [(10)] (9) Chairperson.--The term ``Chairperson'' 
        means the Chairperson of the Board.
          [(11)] (10) Secretary.--The term ``Secretary'' means 
        the Secretary of Housing and Urban Development.
          [(12)] (11) Insured depository institution.--The term 
        ``insured depository institution'' means--
                  (A) * * *
          * * * * * * *

                          advances to members

  Sec. 10. (a) * * *
          * * * * * * *
  [(h) Special Liquidity Advances.--
          [(1) In general.--Subject to paragraph (2), the 
        Federal Home Loan Banks may, upon the request of the 
        Director of the Office of Thrift Supervision, make 
        short-term liquidity advances to a savings association 
        that--
                  [(A) is solvent but presents a supervisory 
                concern because of such association's poor 
                financial condition; and
                  [(B) has reasonable and demonstrable 
                prospects of returning to a satisfactory 
                financial condition.
          [(2) Interest on and security for special liquidity 
        advances.--Any loan by a Federal Home Loan Bank 
        pursuant to paragraph (1) shall be subject to all 
        applicable collateral requirements, including the 
        requirements of section 10(a) of this Act, and shall be 
        at an interest rate no less favorable than those made 
        available for similar short-term liquidity advances to 
        savings associations that do not present such 
        supervisory concern.]
  (h) [Repealed]
          * * * * * * *

                   general powers and duties of banks

  Sec. 11. (a) * * *
          * * * * * * *
  (e)(1) Each Federal Home Loan Bank shall have power to accept 
deposits made by members of such bank or by any other Federal 
Home Loan Bank or other instrumentality of the United States, 
upon such terms and conditions as the Board may prescribe, but 
no Federal Home Loan Bank shall transact any banking or other 
business not incidental to activities authorized by this Act.
  (2)(A) * * *
          * * * * * * *
  (C) The Board is authorized, with respect to participation in 
the collection and settlement of any items by Federal Home Loan 
Banks[, and with respect to the collection and settlement 
(including payment by the payor institution) of items payable 
by Federal savings and loan associations and Federal mutual 
savings banks,] to prescribe rules and regulations regarding 
the rights, powers, responsibilities, duties, and liabilities, 
including standards relating thereto, of such Federal Home Loan 
Banks[, associations, or banks] and other parties to any such 
items or their collection and settlement. In prescribing such 
rules and regulations, the Board may adopt or apply, in whole 
or in part, general banking usage and practices, and, in 
instances or respects in which they would otherwise not be 
applicable, Federal Reserve regulations and operating letters, 
the Uniform Commercial Code, and clearinghouse rules.
          * * * * * * *

                        administrative expenses

  Sec. 18.
  (b) * * *
  [(c)(1) The Director of the Office of Thrift Supervision, 
utilizing the services of the Administrator of General Services 
(hereinafter referred to as the ``Administrator''), and subject 
to any limitation hereon which may hereafter be imposed in 
appropriation Acts, is hereby authorized--
          [(A) to acquire, in the name of the United States, 
        real property in the District of Columbia, for the 
        purposes set forth in this subsection;
          [(B) to construct, develop, furnish, and equip such 
        buildings thereon and such facilities as in its 
        judgment may be appropriate to provide, to such extent 
        as the Director of the Office of Thrift Supervision may 
        deem advisable, suitable and adequate quarters and 
        facilities for the Director of the Office of Thrift 
        Supervision and the agencies under its administration 
        or supervision;
          [(C) to enlarge, remodel, or reconstruct any of the 
        same; and
          [(D) to make or enter into contracts for any of the 
        foregoing.
  [(2) The Director of the Office of Thrift Supervision may 
require of the respective banks, and they shall make to the 
Director of the Office of Thrift Supervision, such advances of 
funds for the purposes set out in paragraph (1) as in the sole 
judgment of the Director of the Office of Thrift Supervision 
may from time to time be advisable. Such advances shall be in 
addition to the assessments authorized in subsection (b) and 
shall be apportioned by the Director of the Office of Thrift 
Supervision among the banks in proportion to the total assets 
of the respective banks, determined in such manner and as of 
such times as the Director of the Office of Thrift Supervision 
may prescribe. Each such advance shall bear interest at the 
rate of 4\1/2\ per centum per annum from the date of the 
advance and shall be repaid by the Director of the Office of 
Thrift Supervision in such installments and over such period, 
not longer than twenty-five years from the making of the 
advance, as the Director of the Office of Thrift Supervision 
may determine. Payments of interest and principal upon such 
advances shall be made from receipts of the Director of the 
Office of Thrift Supervision or from other sources which may 
from time to time be available to the Director of the Office of 
Thrift Supervision. The obligation of the Director of the 
Office of Thrift Supervision to make any such payment shall not 
be regarded as an obligation of the United States. To such 
extent as the Director of the Office of Thrift Supervision may 
prescribe any such obligation shall be regarded as a legal 
investment for the purposes of subsections (g) and (h) of 
section 11 and for the purposes of section 16.
  [(3) The plans and designs for such buildings and facilities 
and for any such enlargement, remodeling, or reconstruction 
shall, to such extent as the chairperson of the Director of the 
Office of Thrift Supervision may request, be subject to his 
approval.
  [(4) Upon the making of arrangements mutually agreeable to 
the Director of the Office of Thrift Supervision and the 
Administrator, which arrangements may be modified from time to 
time by mutual agreement between them and may include but shall 
not be limited to the making of payments by the Director of the 
Office of Thrift Supervision and such agencies to the 
Administrator and by the Administrator to the Director of the 
Office of Thrift Supervision, the custody, management, and 
control of such buildings and facilities and of such real 
property shall be vested in the Administrator in accordance 
therewith. Until the making of such arrangements such custody, 
management, and control including the assignment and allotment 
and the reassignment and reallotment of building and other 
space, shall be vested in the Director of the Office of Thrift 
Supervision.
  [(5) Any proceeds (including advances) received by the 
Director of the Office of Thrift Supervision in connection with 
this subsection, and any proceeds from the sale or other 
disposition of real or other property acquired by the Director 
of the Office of Thrift Supervision under this subsection, 
shall be considered as receipts of the Director of the Office 
of Thrift Supervision, and obligations and expenditures of the 
Director of the Office of Thrift Supervision and such agencies 
in connection with this subsection shall not be considered as 
administrative expenses. As used in this subsection, the term 
``property'' shall include interests in property.
  [(6) With respect to its functions under this subsection the 
Director of the Office of Thrift Supervision shall (A) annually 
prepare and submit a budget program as provided in title I of 
the Government Corporation Control Act with regard to wholly 
owned Government corporations, and for purposes of this 
sentence, the terms ``wholly owned Government corporations'' 
and ``Government corporations'', wherever used in such title, 
shall include the Director of the Office of Thrift Supervision, 
and (B) maintain an integral set of accounts which shall be 
audited by the General Accounting Office in accordance with the 
principles and procedures applicable to commercial corporate 
transactions as provided in such title, and no other settlement 
or adjustment shall be required with respect to transactions 
under this subsection or with respect to claims, demands, or 
accounts by or against any person arising thereunder. The first 
budget program shall be for the first full fiscal year 
beginning on or after the date of the enactment of this 
subsection. Except as otherwise provided in this subsection or 
by the Director of the Office of Thrift Supervision, the 
provisions of this subsection and the functions thereby or 
thereunder subsisting shall be applicable and exercisable 
notwithstanding and without regard to the Act of June 20, 1938 
(D.C. Code, secs. 5-413--5-428), except that the proviso of 
section 16 thereof shall apply to any building constructed 
under this subsection, and section 306 of the Act of July 30, 
1947 (61 Stat. 584), or any other provison of law relating to 
the construction, alteration, repair, or furnishing of public 
or other buildings or structures or the obtaining of sites 
therefor, but any person or body in whom any such function is 
vested may provide for delegation or redelegation of the 
exercise of such function.
  [(7) No obligation shall be incurred and no expenditure, 
except in liquidation of obligation, shall be made pursuant to 
the first two subparagraphs of paragraph (1) of this subsection 
if the total amount of all obligations incurred pursuant 
thereto would thereupon exceed $13,200,000, or such greater 
amount as may be provided in an appropriation Act or other 
law.]
          * * * * * * *

SEC. 22. MEMBER FINANCIAL INFORMATION.

  (a) In General.--In order to enable the Federal Home Loan 
Banks to carry out the provisions of this Act, the Secretary of 
the Treasury, the Comptroller of the Currency, the Chairman of 
the Board of Governors of the Federal Reserve System, the 
Chairperson of the Federal Deposit Insurance Corporation, and 
the Chairperson of the National Credit Union Administration[, 
and the Director of the Office of Thrift Supervision], upon 
request by any Federal Home Loan Bank--
          (1) * * *
          * * * * * * *
In addition, the Comptroller of the Currency, the Chairman of 
the Board of Governors of the Federal Reserve System, and the 
Chairperson of the National Credit Union Administration[, and 
the Director of the Office of Thrift Supervision] shall make 
available to the Board or any Federal Home Loan Bank the 
financial reports filed by members of any Bank to enable the 
Board or a Bank to compile and publish cost of funds indices or 
other financial or statistical reports.
          * * * * * * *
  [Sec. 24. (a) Any organization organized under the laws of 
any State and subject to inspection and regulation under the 
banking or similar laws of such State shall be eligible to 
become a member under this Act if--
          [(1) it is organized solely for the purpose of 
        supplying credit to its members;
          [(2) its membership (A) is confined exclusively to 
        building and loan associations, savings and loan 
        associations, cooperative banks, and homestead 
        associations; or (B) is confined exclusively to savings 
        banks; and
          [(3) of the institutions to which its membership is 
        confined which are organized within the State, its 
        membership includes a majority of such institutions.
  [(b) In all respects, but subject to such additional rules 
and regulations as the Board may provide, any such organization 
shall be a member for the purposes of this Act.]
          * * * * * * *
                              ----------                              


                      TITLE 11, UNITED STATES CODE

          * * * * * * *

                     CHAPTER 1--GENERAL PROVISIONS

Sec. 101. Definitions

  In this title--
          (1) * * *
          * * * * * * *
          (21C) ``Federal mutual bank holding company'' has the 
        same meaning as in section 5133B(h)(1) of the Revised 
        Statutes of the United States.
          * * * * * * *

                     CHAPTER 3--CASE ADMINISTRATION

          * * * * * * *

                  SUBCHAPTER I--COMMENCEMENT OF A CASE

Sec. 303. Involuntary cases

  (a) * * *
  (b) An involuntary case against a person is commenced by the 
filing with the bankruptcy court of a petition under chapter 7 
or 11 of this title--
          (1) * * *
          * * * * * * *
          (3) if such person is a partnership--
                  (A) by fewer than all of the general partners 
                in such partnership; or
                  (B) if relief has been ordered under this 
                title with respect to all of the general 
                partners in such partnership, by a general 
                partner in such partnership, the trustee of 
                such a general partner, or a holder of a claim 
                against such partnership; [or]
          (4) by a foreign representative of the estate in a 
        foreign proceeding concerning such person[.]; or
          (5) in a proceeding concerning a Federal mutual bank 
        holding company, the Comptroller of the Currency.
          * * * * * * *
  (e) After notice and a hearing, and for cause, the court may 
require the petitioners under this section, other than a 
petitioner specified in subsection (b)(5), to file a bond to 
indemnify the debtor for such amounts as the court may later 
allow under subsection (i) of this section.
  (f) Notwithstanding section 363 of this title, except to the 
extent that the court orders otherwise or a petition was filed 
by a petitioner specified in subsection (b)(5), and until an 
order for relief in the case, any business of the debtor may 
continue to operate, and the debtor may continue to use, 
acquire, or dispose of property as if an involuntary case 
concerning the debtor had not been commenced.
  (g) At any time after the commencement of an involuntary case 
under chapter 7 of this title but before an order for relief in 
the case, the court, on request of a party in interest, after 
notice to the debtor and a hearing, and if necessary to 
preserve the property of the estate or to prevent loss to the 
estate, may order the United States trustee to appoint an 
interim trustee under section 701 of this title to take 
possession of the property of the estate and to operate any 
business of the debtor. Upon the filing of a petition by a 
petitioner specified in subsection (b)(5), and without 
requiring notice or hearing, the United States Trustee shall 
appoint an interim trustee from a list submitted by the 
Comptroller of the Currency of 5 disinterested persons that are 
qualified and willing to serve. Before an order for relief, the 
debtor may regain possession of property in the possession of a 
trustee ordered appointed under this subsection if the debtor 
files such bond as the court requires, conditioned on the 
debtor's accounting for and delivering to the trustee, if there 
is an order for relief in the case, such property, or the 
value, as of the date the debtor regains possession, of such 
property.
          * * * * * * *
                              ----------                              


                      TITLE 31, UNITED STATES CODE

          * * * * * * *

                          SUBTITLE I--GENERAL

          * * * * * * *

                 CHAPTER 3--DEPARTMENT OF THE TREASURY

          * * * * * * *

                     SUBCHAPTER II--ADMINISTRATIVE

Sec. 321. General authority of the Secretary

  (a) * * *
          * * * * * * *
  [(e) Certain Reorganization Prohibited.--The Secretary of the 
Treasury may not merge or consolidate the Office of Thrift 
Supervision, or any of the functions or responsibilities of the 
Office or the Director of such office, with the Office of the 
Comptroller of the Currency or the Comptroller of the 
Currency.]
          * * * * * * *
                              ----------                              


 SECTION 804 OF THE ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT OF 1982

                     alternative mortgage authority

  Sec. 804. (a) In order to prevent discrimination against 
State-chartered depository institutions, and other nonfederally 
chartered housing creditors, with respect to making, 
purchasing, and enforcing alternative mortgage transactions, 
housing creditors may make, purchase, and enforce alternative 
mortgage transactions, except that this section shall apply--
          (1) with respect to banks (as such term is defined in 
        section 3 of the Federal Deposit Insurance Act) and all 
        other housing creditors, only to transactions made in 
        accordance with regulations governing alternative 
        mortgage transactions as issued by the Comptroller of 
        the Currency for national banks, to the extent that 
        such regulations are authorized by rulemaking authority 
        granted to the Comptroller of the Currency with regard 
        to national banks under laws other than this section; 
        and
          (2) with respect to credit unions, only to 
        transactions made in accordance with regulations 
        governing alternative mortgage transactions as issued 
        by the National Credit Union Administration Board for 
        Federal credit unions, to the extent that such 
        regulations are authorized by rulemaking authority 
        granted to the National Credit Union Administration 
        with regard to Federal credit unions under laws other 
        than this section[; and].
          [(3) with respect to all other housing creditors, 
        including without limitation, savings and loan 
        associations, mutual savings banks, and savings banks, 
        only to transactions made in accordance with 
        regulations governing alternative mortgage transactions 
        as issued by the Director of the Office of Thrift 
        Supervision for federally charter savings and loan 
        associations, to the extent that such regulations are 
        authorized by rulemaking authority granted to the 
        Director of the Office of Thrift Supervision with 
        regard to federally chartered savings and loan 
        associations under laws other than this section.]
          * * * * * * *
                              ----------                              


              SECTION 2 OF THE BANK PROTECTION ACT OF 1968

  Sec. 2. As used in this Act the term ``Federal supervisory 
agency'' means--
          (1) The Comptroller of the Currency with respect to 
        national banks and district banks,
          (2) The Board of Governors of the Federal Reserve 
        System with respect to Federal Reserve banks and State 
        banks which are members of the Federal Reserve System, 
        and
          (3) The Federal Deposit Insurance Corporation with 
        respect to State banks which are not members of the 
        Federal Reserve System but the deposits of which are 
        insured by the Federal Deposit Insurance Corporation 
        and State savings associations[, and].
          [(4) The Director of the Office of Thrift Supervision 
        with respect to Federal savings.]
                              ----------                              


         SECTION 803 OF THE COMMUNITY REINVESTMENT ACT OF 1977

      Sec. 803. For the purposes of this title--
          (1) the term ``appropriate Federal financial 
        supervisory agency'' means--
                  (A) the Comptroller of the Currency with 
                respect to national banks;
                  (B) the Board of Governors of the Federal 
                Reserve System with respect to State chartered 
                banks which are members of the Federal Reserve 
                System and bank holding companies; and
                  (C) the Federal Deposit Insurance Corporation 
                with respect to State chartered banks and 
                savings banks which are not members of the 
                Federal Reserve System and the deposits of 
                which are insured by the Corporation; [and]
          [(2) section 8 of the Federal Deposit Insurance Act, 
        by the Director of the Office of Thrift Supervision, in 
        the case of a savings association (the deposits of 
        which are insured by the Federal Deposit Insurance 
        Corporation) and a savings and loan holding company;]
          * * * * * * *
          (3) the term ``application for a deposit facility'' 
        means an application to the appropriate Federal 
        financial supervisory agency otherwise required under 
        Federal law or regulations thereunder for--
                  (A) a charter for a national bank [or Federal 
                savings and loan association];
          * * * * * * *
                              ----------                              


 SECTION 208 OF THE DEPOSITORY INSTITUTIONS DEREGULATION AND MONETARY 
                          CONTROL ACT OF 1980

                              enforcement

  Sec. 208. (a) Compliance with the regulations issued by the 
Deregulation Committee under this title shall be enforced 
under--
          (1) section 8 of the Federal Deposit Insurance Act 
        (12 U.S.C. 1818), in the case of--
                  (A) * * *
          * * * * * * *
                  (C) banks insured by the Federal Deposit 
                Insurance Corporation (other than members of 
                the Federal Reserve System), by the Board of 
                Directors of the Federal Deposit Insurance 
                Corporation[; and] .
          [(2) section 8 of the Federal Deposit Insurance Act, 
        by the Director of the Office of Thrift Supervision, in 
        the case of a savings association the deposits of which 
        are insured by the Federal Deposit Insurance 
        Corporation.]
          * * * * * * *
                              ----------                              


            DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT

          * * * * * * *
  Sec. 202. As used in this title--
          (1) * * *
          (2) the term ``depository holding company'' means a 
        bank holding company as defined in section 2(a) of the 
        Bank Holding Company Act of 1956, a company which would 
        be or a bank holding company as defined in section 2(a) 
        of the Bank Holding Company Act of 1956 but for the 
        exemption contained in section 2(a)(5)(F) thereof[, or 
        a savings and loan holding company as defined in 
        section 408(a)(1)(I) of the National Housing Act];
          * * * * * * *
  Sec. 205. The prohibitions contained in sections 203 and 204 
shall not apply in the case of any one or more of the following 
or subsidiary thereof:
          (1) * * *
          * * * * * * *
          (8)(A) A [diversified savings and loan holding 
        company (as defined in section 408(a)(1)(F) of the 
        National Housing Act) with respect to] company which 
        is, or has filed an application to become, a depository 
        institution holding company and which satisfies the 
        consolidated net worth and consolidated net earnings 
        requirements for a diversified savings and loan holding 
        company (as set forth in section 10(1)(F) of the Home 
        Owners' Loan Act, as such section is in effect and 
        interpreted on such date, which shall be applicable for 
        purposes of this paragraph without regard to the fact 
        that a depository institution subsidiary of such 
        holding company has ceased to be a savings association 
        after January 1, 1997) with respect to the service of a 
        director of such company who is also a director of any 
        nonaffiliated depository institution or depository 
        holding company (including a savings and loan holding 
        company) if--
                  (i) notice of the proposed dual service is 
                given by such diversified savings and loan 
                holding company to--
          * * * * * * *
          [(9) Any savings association (as defined in section 
        10(a)(1)(A) of the Home Owners' Loan Act or any savings 
        and loan holding company (as defined in section 
        10(a)(1)(D) of such Act) which has issued stock in 
        connection with a qualified stock issuance pursuant to 
        section 10(q) of such Act, except that this paragraph 
        shall apply only with respect to service as a single 
        management official of such savings association or 
        holding company, or any subsidiary of such savings 
        association or holding company, by a single management 
        official of the savings and loan holding company which 
        purchased the stock issued in connection with such 
        qualified stock issuance, and shall apply only when the 
        Director of the Office of Thrift Supervision has 
        determined that such service is consistent with the 
        purposes of this Act and the Home Owners' Loan Act.]
          * * * * * * *
  Sec. 207. This title shall be administered and enforced by--
          (1) * * *
          * * * * * * *
          [(4) the Director of the Office of Thrift Supervision 
        with respect to a savings association (the deposits of 
        which are insured by the Federal Deposit Insurance 
        Corporation) and savings and loan holding companies,]
          [(5)] (4) the National Credit Union Administration 
        with respect to credit unions the accounts of which are 
        insured by the National Credit Union Administration, 
        and
          [(6)] (5) Upon referral by the agencies named in the 
        foregoing paragraphs (1) through (5), the Attorney 
        General shall have the authority to enforce compliance 
        by any person with this title.
          * * * * * * *
  Sec. 209. Regulations to carry out this title, including 
regulations that permit service by a management official that 
would otherwise be prohibited by section 203 or section 204, if 
such service would not result in a monopoly or substantial 
lessening of competition, may be prescribed by--
          (1) * * *
          * * * * * * *
          (3) the Board of Directors of the Federal Deposit 
        Insurance Corporation with respect to State banks which 
        are not members of the Federal Reserve System but the 
        deposits of which are insured by the Federal Deposit 
        Insurance Corporation, and
          [(4) the Director of the Office of Thrift Supervision 
        with respect to in-titutions the accounts of which are 
        insured by the Federal Deposit Insurance Corporation, 
        and savings and loan holding companies, and]
          [(5)] (4) the National Credit Union Administration 
        with respect to credit unions the accounts of which are 
        insured by the National Credit Union Administration.
                              ----------                              


         SECTION 305 OF THE EMERGENCY HOME FINANCE ACT OF 1970

                          mortgage operations

      Sec. 305. (a) * * *
          * * * * * * *
    (b) Notwithstanding any other law, authority to enter into 
and to perform and carry out any transactions or matter 
referred to in this section is conferred on any Federal home 
loan bank, Resolution Trust Corporation, the Federal Deposit 
Insurance Corporation, the National Credit Union 
Administration, [any Federal savings and loan association,] any 
Federal home loan bank member, and any other financial 
institution the deposits or accounts of which are insured by 
any agency of the United States to the extent that Congress has 
the power to confer such authority.
          * * * * * * *
                              ----------                              


          SECTION 610 OF THE EXPEDITED FUNDS AVAILABILITY ACT

SEC. 610. ADMINISTRATIVE ENFORCEMENT.

  (a) Administrative Enforcement.--Compliance with the 
requirements imposed under this title, including regulations 
prescribed by and orders issued by the Board of Governors of 
the Federal Reserve System under this title, shall be enforced 
under--
          (1) section 8 of the Federal Deposit Insurance Act in 
        the case of--
                  (A) national banks, and Federal branches and 
                Federal agencies of foreign banks, by the 
                Office of the Comptroller of the Currency;
                  (B) member banks of the Federal Reserve 
                System (other than national banks), and 
                offices, branches, and agencies of foreign 
                banks located in the United States (other than 
                Federal branches, Federal agencies, and insured 
                State branches of foreign banks), by the Board 
                of Governors of the Federal Reserve System; and
                  (C) banks insured by the Federal Deposit 
                Insurance Corporation (other than members of 
                the Federal Reserve System) and insured State 
                branches of foreign banks, by the Board of 
                Directors of the Federal Deposit Insurance 
                Corporation; and
          [(2) section 8 of the Federal Deposit Insurance Act, 
        by the Director of the Office of Thrift Supervision in 
        the case of savings associations the deposits of which 
        are insured by the Federal Deposit Insurance 
        Corporation; and]
          [(3)] (2) the Federal Credit Union Act, by the 
        National Credit Union Administration Board with respect 
        to any Federal credit union or insured credit union.
The terms used in paragraph (1) that are not defined in this 
title or otherwise defined in section 3(s) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the 
meaning given to them in section 1(b) of the International 
Banking Act of 1978 (12 U.S.C. 3101).
          * * * * * * *

                        FEDERAL CREDIT UNION ACT

                     TITLE I--FEDERAL CREDIT UNIONS

          * * * * * * *

                                 powers

  Sec. 107. A Federal credit union shall have succession in its 
corporate name during its existence and shall have power--
          (1) * * *
          * * * * * * *
          (7) to invest its funds (A) in loans exclusively to 
        members; (B) in obligations of the United States of 
        America, or securities fully guaranteed as to principal 
        and interest thereby; (C) in accordance with rules and 
        regulations prescribed by the Board, in loans to other 
        credit unions in the total amount not exceeding 25 per 
        centum of its paid-in and unimpaired capital and 
        surplus; (D) in shares or accounts of savings and loan 
        associations or mutual savings banks, the accounts of 
        which are insured by [the Federal Savings and Loan 
        Insurance Corporation or] the Federal Deposit Insurance 
        Corporation; (E) in obligations issued by banks for 
        cooperatives, Federal land banks, Federal intermediate 
        credit banks, Federal home loan banks, the Federal Home 
        Loan Bank Board, or any corporation designated in 
        section 101 of the Government Corporation Control Act 
        as a wholly owned Government corporation; or in 
        obligations, participations, or other instruments of or 
        issued by, or fully guaranteed as to principal and 
        interest by, the Federal National Mortgage Association 
        or the Government National Mortgage Association; or in 
        mortgages, obligations, or other securities which are 
        or ever have been sold by the Federal Home Loan 
        Mortgage Corporation pursuant to section 305 or section 
        306 of the Federal Home Loan Mortgage Corporation Act; 
        or in obligations, participations, securities, or other 
        instruments of, or issued by, or fully guaranteed as to 
        principal and interest by any other agency of the 
        United States and a Federal credit union may issue and 
        sell securities which are guaranteed pursuant to 
        section 306(g) of the National Housing Act; (F) in 
        participation certificates evidencing beneficial 
        interests in obligations, or in the right to receive 
        interest and principal collections therefrom, which 
        obligations have been subjected by one or more 
        Government agencies to a trust or trusts for which any 
        executive department, agency, or instrumentality of the 
        United States (or the head thereof) has been named to 
        act as trustee; (G) in shares or deposits of any 
        central credit union in which such investments are 
        specifically authorized by the board of directors of 
        the Federal credit union making the investment; (H) in 
        shares, share certificates, or share deposits of 
        federally insured credit unions; (I) in the shares, 
        stocks, or obligations of any other organization, 
        providing services which are associated with the 
        routine operations of credit unions, up to 1 per centum 
        of the total paid in and unimpaired capital and surplus 
        of the credit union with the approval of the Board: 
        Provided, however, That such authority does not include 
        the power to acquire control directly or indirectly, of 
        another financial institution, nor invest in shares, 
        stocks or obligations of an insurance company, trade 
        association, liquidity facility or any other similar 
        organization, corporation, or association, except as 
        otherwise expressly provided by this Act; (J) in the 
        capital stock of the National Credit Union Central 
        Liquidity Facility (K) investments in obligations of, 
        or issued by, any State or political subdivision 
        thereof (including any agency, corporation, or 
        instrumentality of a State or political subdivision), 
        except that no credit union may invest more than 10 per 
        centum of its unimpaired capital and surplus in the 
        obligations of any one issuer (exclusive of general 
        obligations of the issuer).
          * * * * * * *

                       TITLE II--SHARE INSURANCE

          * * * * * * *

termination of insurance; cease-and-desist proceedings; suspension and/
   or removal of directors, officers, and committee members; taking 
                    possession of committee members

  Sec. 206. (a) * * *
          * * * * * * *
  (g) Removal and Prohibition Authority.--
          (1) * * *
          * * * * * * *
  (7) Industrywide Prohibition.--
          (A) In general.--Except as provided in subparagraph 
        (B), any person who, pursuant to an order issued under 
        this subsection or subsection (i), has been removed or 
        suspended from office in an insured credit union or 
        prohibited from participating in the conduct of the 
        affairs of an insured credit union may not, while such 
        order is in effect, continue or commence to hold any 
        office in, or participate in any manner in the conduct 
        of the affairs of--
                  (i) any insured depository institution;
                  (ii) any institution treated as an insured 
                bank under paragraph (3) or (4) of section 8(b) 
                of the Federal Deposit Insurance Act[, or as a 
                savings association under section 8(b)(8) of 
                such Act];
          * * * * * * *
                              ----------                              


     FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL ACT OF 1978

      TITLE X--FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

          * * * * * * *
  Sec. 1001. This title may be cited as the ``Federal Financial 
Institutions Examination Council Act of 1978''.
          * * * * * * *

                              definitions

  Sec. 1003. As used in this title--
          (1) the term ``Federal financial institutions 
        regulatory agencies'' means the Office of the 
        Comptroller of the Currency, the Board of Governors of 
        the Federal Reserve System, the Federal Deposit 
        Insurance Corporation, [the Office of Thrift 
        Supervision,] and the National Credit Union 
        Administration;
          * * * * * * *

                      establishment of the council

  Sec. 1004. (a) There is established the Financial 
Institutions Examination Council which shall consist of--
          (1) * * *
          * * * * * * *
          (3) a Governor of the Board of Governors of the 
        Federal Reserve System designated by the Chairman of 
        the Board, and
          [(4) the Director, Office of Thrift Supervision.]
          [(5)] (4) the Chairman of the National Credit Union 
        Administration Board.
          * * * * * * *
                              ----------                              


  FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989

          * * * * * * *

           TITLE XI--REAL ESTATE APPRAISAL REFORM AMENDMENTS

          * * * * * * *

SEC. 1121. DEFINITIONS.

  For purposes of this title:
          (1) * * *
          * * * * * * *
          (6) Federal financial institutions regulatory 
        agencies.--The term ``Federal financial institutions 
        regulatory agencies'' means the Board of Governors of 
        the Federal Reserve System, the Federal Deposit 
        Insurance Corporations, the Office of the Comptroller 
        of the Currency, [the Office of Thrift Supervision,] 
        and the National Credit Union Administration.
          * * * * * * *

                  TITLE XII--MISCELLANEOUS PROVISIONS

           * * * * * * *

SEC. 1206. COMPARABILITY IN COMPENSATION SCHEDULES.

  The Federal Deposit Insurance Corporation, the Comptroller of 
the Currency, the National Credit Union Administration Board, 
the Federal Housing Finance Board, the Oversight Board of the 
Resolution Trust Corporation, and the Farm Credit 
Administration, [and the Office of Thrift Supervision,] in 
establishing and adjusting schedules of compensation and 
benefits which are to be determined solely by each agency under 
applicable provisions of law, shall inform the heads of the 
other agencies and the Congress of such compensation and 
benefits and shall seek to maintain comparability regarding 
compensation and benefits.
          * * * * * * *

SEC. 1216. EQUAL OPPORTUNITY.

  (a) In General.--For purposes of this Act, Executive Order 
Numbered 11478, providing for equal employment opportunity in 
the Federal Government, shall apply to--
          (1) the Comptroller of the Currency;
          [(2) the Director of the Office of Thrift 
        Supervision;]
          [(3)] (2) the Federal home loan banks;
          [(4)] (3) the Federal Deposit Insurance Corporation;
          [(5)] (4) the Oversight Board of the Resolution Trust 
        Corporation; and
          [(6)] (5) the Resolution Trust Corporation.
          * * * * * * *
  (c) Solicitation of Contracts.--The Federal Deposit Insurance 
Corporation, the Comptroller of the Currency, [the Director of 
the Office of Thrift Supervision,] the Federal Housing Finance 
Board, the Oversight Board of the Resolution Trust Corporation, 
and the Resolution Trust Corporation shall each prescribe 
regulations to establish and oversee a minority outreach 
program within each such agency to ensure inclusion, to the 
maximum extent possible, of minorities and women, and entities 
owned by minorities and women, including financial 
institutions, investment banking firms, underwriters, 
accountants, and providers of legal services, in all contracts 
entered into by the agency with such persons or entities, 
public and private, in order to manage the institutions and 
their assets for which the agency is responsible or to perform 
such other functions authorized under any law applicable to 
such agency.
          * * * * * * *
                              ----------                              


                  HOME MORTGAGE DISCLOSURE ACT OF 1975

                  TITLE III--HOME MORTGAGE DISCLOSURE

                              short title

    Sec. 301. This title may be cited as the ``Home Mortgage 
Disclosure Act of 1975''.
          * * * * * * *

              maintenance of records and public disclosure

    Sec. 304. (a) * * *
          * * * * * * *
    (h) Submission to Agencies.--The data required to be 
disclosed under susbsection (b)(4) shall be submitted to the 
appropriate agency for each institution reporting under this 
title. Notwithstanding the requirement of section 304(a)(2)(A) 
for disclosure by census tract, the Board, in cooperation with 
other appropriate regulators, including--
          (1) the Office of the Comptroller of the Currency for 
        national banks and Federal branches and Federal 
        agencies of foreign banks;
          [(2) the Director of the Office of Thrift Supervision 
        for savings associations;]
          [(3)] (2) the Federal Deposit Insurance Corporation 
        for banks insured by the Federal Deposit Insurance 
        Corporation (other than members of the Federal Reserve 
        System), mutual savings banks, insured State branches 
        of foreign banks, and any other depository institution 
        described in section 303(2)(A) which is not otherwise 
        referred to in this paragraph;
          [(4)] (3) the National Credit Union Administration 
        Board for credit unions; and
          [(5)] (4) the Secretary of Housing and Urban 
        Development for other lending institutions not 
        regulated by the agencies referred to in paragraphs (1) 
        through [(4)] (3),
shall develop regulations prescribing the format for such 
disclosures, the method for submission of the data to the 
appropriate regulatory agency, and the procedures for 
disclosing the information to the public. These regulations 
shall also require the collection of data required to be 
disclosed under subsection (b)(4) with respect to loans sold by 
each institution reporting under this title, and, in addition, 
shall require disclosure of the class of the purchaser of such 
loans. Any reporting institution may submit in writing to the 
appropriate agency such additional data or explanations as it 
deems relevant to the decision to originate or purchase 
mortgage loans.
          * * * * * * *

                              enforcement

    Sec. 305. (a) * * *
    (b) Compliance with the requirements imposed under this 
title shall be enforced under--
          (1) * * *
          [(2) section 8 of the Federal Deposit Insurance Act, 
        by the Director of the Office of Thrift Supervision, in 
        the case of a savings association the deposits of which 
        are insured by the Federal Deposit Insurance 
        Corporation;]
          [(3)] (2) the Federal Credit Union Act, by the 
        Administrator of the National Credit Union 
        Administration with respect to any credit union; and
          [(4)] (3) other lending institutions, by the 
        Secretary of Housing and Urban Development.
The terms used in paragraph (1) that are not defined in this 
title or otherwise defined in section 3(s) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the 
meaning given to them in section 1(b) of the International 
Banking Act of 1978 (12 U.S.C. 3101).
          * * * * * * *

                         relation to state laws

    Sec. 306. (a) * * *
    (b) The Board may by regulation exempt from the 
requirements of this title any State chartered depository 
institution within any State or subdivision thereof if it 
determines that, under the law of such State or subdivision, 
that instititution is subject to requirements substantially 
similar to those imposed under this title, and that such law 
contains adequate provisions for enforcement. Notwithstanding 
any other provision of this subsection, compliance with the 
requirements imposed under this subsection [shall be enforced 
under--
          [(1) section 8 of the Federal Deposit Insurance Act 
        in the case of national banks, by the Comptroller of 
        the Currency; and
          [(2) section 8 of the Federal Deposit Insurance Act, 
        by the Director of the Office of Thrift Supervision in 
        the case of a savings association the deposits of which 
        are insured by the Federal Deposit Insurance 
        Corporation] under section 8 of the Federal Deposit 
        Insurance Act (12 U.S.C. 1818) in the case of national 
        banks, by the Comptroller of the Currency.
          * * * * * * *
                              ----------                              


             HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1992

          * * * * * * *

              TITLE XIII--GOVERNMENT SPONSORED ENTERPRISES

          * * * * * * *

         Subtitle A--Supervision and Regulation of Enterprises

            PART 1--FINANCIAL SAFETY AND SOUNDNESS REGULATOR

          * * * * * * *

SEC. 1315. PERSONNEL.

  (a) * * *
  (b) Comparability of Compensation With Federal Banking 
Agencies.--In fixing and directing compensation under 
subsection (a), the Director shall consult with, and maintain 
comparability with compensation of officers and employees of 
the Office of the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System, and the Federal 
Deposit Insurance Corporation[, and the Office of Thrift 
Supervision].
          * * * * * * *

SEC. 1317. EXAMINATIONS.

  (a) * * *
          * * * * * * *
  (c) Examiners.--The Director shall appoint examiners to 
conduct examinations under this section. The Director may 
contract with the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System, or the Federal Deposit 
Insurance Corporation[, or the Director of the Office of Thrift 
Supervision] for the services of examiners. The Director shall 
reimburse such agencies for any costs of providing examiners 
from amounts available in the Federal Housing Enterprises 
Oversight Fund.
          * * * * * * *
                              ----------                              


                          NATIONAL HOUSING ACT

          * * * * * * *

                      TITLE II--MORTGAGE INSURANCE

          * * * * * * *
    Sec. 203. (a)  * * *
          * * * * * * *
    (s) Whenever the Secretary has taken any discretionary 
action to suspend or revoke the approval of any mortgagee to 
participate in any mortgage insurance program under this title, 
the Secretary shall provide prompt notice of the action and a 
statement of the reasons for the action to--
          (1) * * *
          * * * * * * *
          (6) if the mortgagee is a State bank that is a member 
        of the Federal Reserve System or a subsidiary or 
        affiliate of such a bank, or a bank holding company or 
        a subsidiary or affiliate of such a company, the Board 
        of Governors of the Federal Reserve System; and
          (7) if the mortgagee is a State bank (as defined in 
        section 3 of the Federal Deposit Insurance Act) that is 
        not a member of the Federal Reserve System or is a 
        subsidiary or affiliate of such a bank, the Board of 
        Directors of the Federal Deposit Insurance 
        Corporation[; and].
          [(8) if the mortgagee is a Federal or State savings 
        association or a subsidiary or affiliate of a savings 
        association, the Director of the Office of Thrift 
        Supervision.]
          * * * * * * *

          TITLE V--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

          * * * * * * *
  Sec. 502. In carrying out their respective functions, powers, 
and duties--
  (a) * * *
          * * * * * * *
  (c) The Secretary of Housing and Urban Development [and the 
Director of the Office of Thrift Supervision, respectively], 
may, in addition to and not in derogation of any powers and 
authorities conferred elsewhere in this Act--
          (1) * * *
          * * * * * * *
                              ----------                              


               SECTION 202 OF THE ACT OF OCTOBER 28, 1974

   AN ACT To increase deposit insurance from $20,000 to $40,000, to 
    provide full insurance for public unit deposits of $100,000 per 
    account, to establish a National Commission on Electronic Fund 
                   Transfers, and for other purposes.

                               membership

  Sec. 202. (a) The Commission shall be composed of twenty-six 
members as follows:
          (1) * * *
          * * * * * * *
          (12) seven individuals, appointed by the President, 
        who are officers or employees of, or who otherwise 
        represent banking, [thrift, or other business entities, 
        including one representative each of commercial banks, 
        mutual savings banks, savings and loan associations,] 
        or other business entities, including 3 representatives 
        from different types of insured depository institutions 
        (as defined in section 3 of the Federal Deposit 
        Insurance Act) and 1 representative each of credit 
        unions, retailers, nonbanking institutions offering 
        credit card services, and organizations providing 
        interchange services, for credit cards issued by banks;
          * * * * * * *
                              ----------                              


     SECTION 4 OF THE REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974

                      uniform settlement statement

    Sec. 4. (a) The Secretary, in consultation with the 
Administrator of Veterans' Affairs[,] and the Federal Deposit 
Insurance Corporation[, and the Director of the Office of 
Thrift Supervision], shall develop and prescribe a standard 
form for the statement of settlement costs which shall be used 
(with such variations as may be necessary to reflect 
differences in legal and administrative requirements or 
practices in different areas of the country) as the standard 
real estate settlement form in all transactions in the United 
States which involve federally related mortgage loans. Such 
form shall conspicuously and clearly itemize all charges 
imposed upon the borrower and all charges imposed upon the 
seller in connection with the settlement and shall indicate 
whether any title insurance premium included in such charges 
covers or insures the lender's interest in the property, the 
borrower's interest, or both. The Secretary may, by regulation, 
permit the deletion from the form prescribed under this section 
of items which are not, under local laws or customs, applicable 
in any locality, except that such regulation shall require that 
the numerical code prescribed by the Secretary be retained in 
forms to be used in all localities. Nothing in this section may 
be construed to require that that part of the standard form 
which relates to the borrower's transaction to be furnished to 
the seller, or to require that that part of the standard form 
which relates to the seller be furnished to the borrower.
          * * * * * * *
                              ----------                              


  RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF 1994

          * * * * * * *

         TITLE I--COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION

 Subtitle A--Community Development Banking and Financial Institutions 
                                  Act

          * * * * * * *

SEC. 117. STUDIES AND REPORTS; EXAMINATION AND AUDIT.

  (a) * * *
          * * * * * * *
  (e) Consultation.--In the conduct of the studies required 
under this section, the Fund shall consult, as appropriate, 
with the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, the Board of Governors of the Federal 
Reserve System, the Federal Housing Finance Board, the Farm 
Credit Administration, [the Director of the Office of Thrift 
Supervision,] the National Credit Union Administration Board, 
Indian tribal governments, community reinvestment 
organizations, civil rights organizations, consumer 
organizations, financial organizations, and such 
representatives of agencies or other persons, at the discretion 
of the Fund.
          * * * * * * *

       TITLE III--PAPERWORK REDUCTION AND REGULATORY IMPROVEMENT

          * * * * * * *

SEC. 307. CALL REPORT SIMPLIFICATION.

  (a) Modernization of Call Report Filing and Disclosure 
System.--In order to reduce the administrative requirements 
pertaining to bank reports of condition, [savings association 
financial reports,] and bank holding company consolidated and 
parent-only financial statements, and to improve the timeliness 
of such reports and statements, the Federal banking agencies 
shall--
          (1) * * *
          * * * * * * *
                              ----------                              


                 SECTION 270 OF THE TRUTH IN SAVINGS ACT

SEC. 270. ADMINISTRATIVE ENFORCEMENT.

  (a) In General.--Compliance with the requirements imposed 
under this Act shall be enforced under--
          (1) section 8 of the Federal Deposit Insurance Act--
                  (A) by the appropriate Federal banking agency 
                (as defined in section 3(q) of the Federal 
                Deposit Insurance Act) in the case of insured 
                depository institutions (as defined in section 
                3(c)(2) of such Act); and
                  (B) by the Federal Deposit Insurance 
                Corporation in the case of depository 
                institutions described in clause (i), (ii), [or 
                (iii)] (iii), or (v) of section 19(b)(1)(A) of 
                the Federal Reserve Act which are not insured 
                depository institutions (as defined in section 
                3(c)(2) of the Federal Deposit Insurance Act)[; 
                and].
                  [(C) by the Director of the Office of Thrift 
                Supervision in the case of depository 
                institutions described in clause (v) and or 
                (vi) of section 19(b)(1)(A) of the Federal 
                Reserve Act which are not insured depository 
                institutions (as defined in section 3(c)(2) of 
                the Federal Deposit Insurance Act); and]
          * * * * * * *

                     Additional and Minority Views

                              ----------                              


                  ADDITIONAL VIEWS OF HON. RICK LAZIO

    Congratulations to Chairman Bliley, Chairman Oxley, Ranking 
Member Dingell and my good fried from New York, Ranking Member 
Manton. You have all done tremendous work to get our Committee 
to this point on this very controversial bill.
    For three years, I have been working on legislation which 
claims to accomplish ``financial modernization''. Clearly, 
Congress is not driving the modernization process. We are 
attempting, instead, to keep pace legislatively with the 
changes underway due to the forces of technology and the 
actions of the financial services industry.
    This legislation is critical because the markets are moving 
so swiftly. Technology is enabling the financial services 
industry and its customers to interact directly. Consider the 
following examples: dramatic shifts of family savings from 
traditional banking instruments into mutual funds; the advent 
of sweep accounts and ATMs; and an Online Banking Association 
unveiling of a system that brings Internet surfing to 
televisions so consumers will be able to use smart cards for 
on-line commerce. A survey recently released by Booz Allen & 
Hamilton predicts that corporate Internet financial services 
sites will increase to over 2,000 by the year 2000. The 
financial services industry is so different from the one that 
existed 60 years ago when Glass-Steagall was enacted; Congress 
need to act.
    At the Subcommittee, I offered an amendment to the 
Substitute that makes several significant substantive changes 
to the scope of the thrift grandfather provisions of H.R. 10 
(as passed by the Banking Committee), including: (i) the scope 
of grandfathered activities and affiliations for unitary thrift 
holding companies is significantly curtailed; (ii) 
grandfathered holding companies are precluded from acquiring 
additional banks or thrifts even if those institutions are 
merged into the converted thrift; and (iii) safeguards are 
provided to the taxpayer when transactions occur between a 
thrift and a commercial affiliate when both are owned by the 
same unitary holding company.
    The amendment is consistent with the concept of financial 
services modernization because our bill should permit companies 
to take advantage of the changes in the financial services 
marketplace. Our Committee's legislation should grandfather all 
activities and affiliations that are currently permitted for a 
unitary thrift holding company (not just those in which a 
company is currently engaged) because this approach more 
appropriately balances the competing goals of restricting the 
spread of unitary holding companies and allowing existing 
unitary holding companies to continue to operate with a minimum 
of disruption. The Banking Committee bill also avoids disputes 
over the scope of grandfathered activities (e.g., would 
acquisition of a new piece of property by a grandfathered 
holding company engaged in real estate activities constitute a 
new ``activity''? and preserves organizational flexibility 
(e.g., forming a new company to hold an existing real estate 
project would not be prohibited as a new ``affiliation'').
    Prohibiting the converted thrift subsidiary of a 
grandfathered unitary thrift holding company from acquiring 
another bank through a merger unnecessarily harms the 
competitive position of that organization. Concerns over the 
wholesale mixing of commercial banking and commerce are 
adequately addressed by the requirements in H.R. 10 that the 
converted thrift subsidiary resulting from the merger continue 
to meet the Qualified Thrift Lender test and the restrictions 
on commercial and certain other lending activities that 
currently apply to thrifts. Congress must be careful to ensure 
that while we encourage companies to engage in new business we 
also fully recognize that insured depository institutions and 
federal taxpayers should be protected.
    I am pleased that most of my amendment concerning the 
grandfathering of the unitary thrift holding companies is 
incorporated in the Manager's Amendment today. The provisions 
that will be included in the Manager's Amendment will 
permanently grandfather all powers, activities and 
affiliations, that unitary thrift holding companies have today 
and place limitations on transactions between a thrift and a 
commercial affiliate. This is a significant step in the right 
direction and I will support these provisions. However, I look 
forward to working with my colleagues to further improve the 
grandfathering provisions for thrifts and unitaries by 
empowering a converted thrift to acquire additional banks or 
thrifts if those institutions are merged into the converted 
thrift. To restrict the growth of a financial company in 
today's marketplace condemns it to a slow death,
    At the Subcommittee, I also offered, with the intention to 
initiate a constructive debate, an amendment to the Substitute 
that would have allowed a financial holding company and an 
investment bank holding company supervised by the Federal 
Reserve Board to engage in activities that are not financial in 
nature provided: (i) gross domestic revenues derived from such 
activities do not exceed ten percent of the consolidated annual 
gross domestic revenues of the holding company; (ii) the assets 
of any subsidiary engaged in nonfinancial activities do not 
exceed $750 million at the time that shares of the subsidiary 
are acquired by the holding company (commercial affiliations 
would be prevented between the top 1000 companies and a 
financial holding company); and (iii) such holding company 
provides notice to the board within 30 days of commencing the 
activity or acquiring the shares. My amendment also provided 
that an insured depository institution may not engage in a 
covered transaction with any such affiliated nonfinancial 
company. My amendment replaced the grandfather provisions for 
nonfinancial activities contained in the Substitute.
    A commercial basket is necessary to ensure that financial 
services providers can continue to innovate and evolve without 
facing unnecessary statutory and regulatory barriers. Years 
ago, the banking industry was prohibited from engaging in the 
data information because of outdated laws. Today, technology is 
moving so fast: from pagers and cellular phone to electronic 
commerce and the Internet. To place artificial and unreasonable 
barriers on our financial service industry makes no sense, 
since it is impossible to predict what products and services 
will emerge tomorrow.
    In fact, securities firms, insurance companies and other 
diversified financial services business have never been 
prohibited from affiliating with commercial enterprises. 
Modernization legislation should reflect the current market, 
move us forward and permit some form of commercial affiliation. 
A ten percent basket, in my opinion, is a reasonable first step 
toward the integration of commerce and banking. We do not want 
to put our financial services industry in a position where they 
might lose out on cutting edge products. This sized basket is 
sound public policy because it accounts for the current 
activities of most companies today and permits substantial 
growth for years to come. The basket should provide a cushion 
to accommodate the normal growth of a commercial enterprise and 
the potential decrease of financial activity revenues.
    I am please that much of my commercial basket amendment is 
incorporated into the Manager's Amendment today. The provisions 
in the Manager's Amendment will create a commercial basket that 
is limited to five percent of gross domestic revenues or $500 
million in revenues, whichever is less. The prohibition of 
affiliations between a financial holding company and the top 
1000 companies is also included in the Manager's Amendment. 
Again, this is a significant step in the right direction and I 
will support these provisions. However, I look forward to 
working with may colleagues to increase the size of the 
commercial basket to one that adequately looks forward and 
allows for the innovation and creativity of our financial 
services providers.
    The only amendment I will offer today is designed to begin 
the discussion of a compromise approach to the provisions in 
this bill that would push traditional banking activities out of 
a bank to a broker-dealer. My amendment represents a sound 
starting point to bring the stakeholders together.
    It does not push out as many activities as our Committee 
bill but it also does not permit as many activities to remain 
inside a bank as the Banking Committee bill.
    My amendment makes changes to the following areas: trust 
and fiduciary activities, stock purchase and dividend 
reinvestment plan activities, private placements, safekeeping 
and custodial activities, and the definition of a qualified 
investor. As the following examples demonstrate, a blind 
application of the functional regulation principle without 
consideration of whether its underlying purposes--safety and 
soundness and investor protection--are served, benefits no one.
    The exemption for trust and fiduciary activities, services 
for which customers receive the very highest level of 
protection and for which banks are subject to private causes of 
action, has been significantly narrowed by our Committee's 
bill. Among other things, this provision would essentially 
repeal Congress' decision to allow banks to offer self-directed 
IRAs to individuals. Section 408 of the Internal Revenue Code 
specifically authorizes banks to serve as trustees or 
custodians for self-directed IRA accounts. Even though these 
accounts are treated as trusts, have been offered for years 
without any suggestion of problems, are regulated by the 
banking agencies and the Secretary of Labor, the Substitute 
would force banks to stop offering them.
    The Substitute also limits the flexibility of shareholder 
benefit plans. Corporations, such as Exxon, IBM, ATT, Ford, 
Chrysler and over 300 others, offer investors the opportunity 
to purchase shares of the company directly through a 
shareholder benefit plan. These plans are administered by the 
corporation's transfer agent, which frequently is a bank, and 
are subject to conditions set out by the SEC. They offer 
investors the ability to purchase stock in a company in which 
they have chosen to invest at little or no cost, particularly 
when compared to fees charged by brokers. These plans represent 
a further democratization of the stock market because customers 
can invest without a broker and with little cost. The 
Substitute's exemption for employee and shareholder benefit 
plans would prohibit banks from offering these direct 
participation programs. The arrangements clearly benefit 
investors and there has been no indication that any wrongdoing 
has occurred.
    A third example is that private placements for third 
parties would be pushed out of the bank even though it is a 
riskless agency activity that banks have provided to customers 
for years. Individuals who purchase securities pursuant to a 
private placement conducted by a bank receive all the same 
disclosures under the Securities Act of 1933 that a broker 
would have to provide to private placement investors.
    The changes made by this amendment are critical for four 
reasons.
    First, the amendment draws the line between banking and 
securities activities more appropriately than either the bill 
before us today of H.R. 10 as passed by the Banking Committee. 
It represents sound policy and is fully consistent with the 
concept of functional regulation.
    Second, I want to make clear to my colleagues that these 
issues have not been worked out. The banking industry remains 
fundamentally opposed to the push out provisions in our 
committee's bill.
    Third, this amendment does not create any loopholes that 
would allow banks to escape any broker-dealer regulation to 
which they are subject today. In fact, that would be impossible 
because banks today are completely exempt from all such 
regulation. My amendment wouldsimply subject some banking 
activities to broker-dealer regulation but not go as far as the 
committee bill.
    Finally, a consensus on these issues is not far away. The 
banking and securities industries have been discussing these 
issues, and the parties are close to the type of compromise 
that I could support.
    There is one other issue that I want to mention. The area 
of derivatives is controversial but is not in my amendment. I 
want to urge the parties to try to agree on the proper 
regulatory treatment for all derivative products that we know 
of today. At the same time, we should not stifle the creativity 
of financial services companies by pigeon-holing future 
derivative products into multiple regulatory schemes.
    As a general matter, pure functional regulation for the 
sole purpose of ``functional regulation'' makes little sense if 
all the affected activities are subject to fully regulation by 
the bank regulators, no evidence of abuse exists, and the 
increased costs of pushing these activities out of the bank 
translates into increased costs for customers. Make no mistake, 
the costs will be borne by the market.
    My amendment is not meant to be a comprehensive compromise 
on the push out portions of this legislation. However, the 
changes I have described must be fully considered in order to 
avoid a bitterly divisive fight at the Rules Committee and on 
the House floor.
    A workable compromise on these issues is within reach. If 
we are truly serious about financial modernization, we must 
roll up our sleeves and find a fair middle ground. I look 
forward to working with my colleagues to revise the bank 
broker-dealer exemptions to make them workable and consistent 
with good public policy as well as a rationale application of 
functional regulation. This is something that we can do, should 
do and must do if we want to pass reform legislation.
    Financial services modernization legislation is critical to 
the country because a strong and healthy financial base is at 
the core of a healthy economy. We as legislators, do not know 
what financial products and services will be available to and 
wanted by the public in the future. Technology has the power to 
change the shape of our market almost overnight. How will a 
community's needs and thus a financial services company's 
business change as a result of the information age? Congress 
can't tell you and unnecessary legislative constraints on the 
growth and prosperity of the marketplace is dangerous to 
financial institutions, to businesses, to the economy, and to 
the customer. It is possible to push the markets in the right 
direction while, in the public interest maintaining the 
necessary safeguards applicable to insured depository 
institutions.
    Technology is pushing the insurance, securities and banking 
industries into the information age, but they are still being 
held back by laws written 60 years ago. Congress should break 
down barriers and encourage competition because more innovative 
products and better prices will result. If a company's activity 
doesn't fit into them the pretty little boxes of authorized 
activities that are created by this bill will we threaten its 
corporate survival? Do we want them to be able to bridge the 
gap, if it is a wise investment, in a rural area that needs a 
hospital or agricultural cooperative? As a whole, our financial 
services companies are innovative and healthy and they should 
not be penalized as we move this legislation forward. They 
should be given flexibility to strive for the corporate 
synergies because to do anything less would conflict with the 
notion of modernization.
    I also want to thank Chairman Bliley, Chairman Oxley and 
Ranking Members Dingell and Manton for their cooperation in 
working with me. Many people will view this bill as a ``glass 
that is half empty.'' I personally view our Committee's 
financial modernization bill as a ``glass that is half full''. 
It certainly has improved during every legislative step at our 
Committee. I will vote for the bill today because this process 
must continue to move forward. My hope is that at the next step 
we will move even close to the ever-elusive financial services 
modernization bill that is so close to perfectly balanced that 
most of the industry stakeholders are in support of its 
passage.

                                                        Rick Lazio.

            ADDITIONAL VIEWS OF CONGRESSMAN JOHN D. DINGELL

    I support H.R. 10, the Financial Services Act of 1997, as 
reported by the Committee on Commerce, and I commend both Mr. 
Bliley, the chairman of the full Committee, and Mr. Oxley, the 
chairman of the finance subcommittee, for their willingness to 
work with the Democratic Members of the Committee. The Banking 
Committee's version of the bill was totally unacceptable. The 
bipartisan bill that has come forward from our compromise is a 
good one.
    This bill now meets the requirements that I have always 
felt were necessary for a proper reform of Glass-Steagall: one, 
true separation of financial activities, and two, functional 
regulation. The bill meets both of these tests. It sees to it 
that the playing field is level and fair. It does not afford 
the banks the kind of special preference that they sought, but 
it does allow them to complete in a fair and even manner on 
fair and even ground. It does not undermine the Supreme Court 
decision in the Barnett Bank case, nor does it impair the 
ability of banks to compete fairly in the marketplace.
    I am one of the few people voting to report this bill who 
remembers the Depression. The causes of the Depression were 
investigated in a very lengthy fashion, and literally volumes 
were published. Those inquiries found that all financial powers 
were concentrated in banks, who abused their ability to sell 
securities and to manipulate the securities markets, their 
ability to control the deposits of their depositors, and their 
ability to engage in all manner of unrestrained and untrammeled 
economic activity. They were not constrained in the slightest 
degree by either good sense or by the requirements of law. A 
tremendous and a terrifying collapse occurred that threw one-
third of American workers into unemployment and that caused the 
currency to simply disappear. People refused to spend money: 
they put it under their mattress because they did not trust the 
banks.
    The Government went through some very heroic efforts to try 
and get this country going again. It first of all had to 
guarantee bank deposits because nobody trusted banks or 
bankers. Second of all, to see to it that banks and bankers did 
not engage again in the practices that had caused the 
Depression, banking was split from other financial activities. 
Third of all, laws were put in place to regulate the securities 
markets and to do other things. Yet, in spite of all of this, 
it took this country 10 years and a major war to pull ourselves 
out of the mess that had been created.
    While I have lingering concerns about the thrift 
provisions, the bill before us is a good one. The bill resolves 
the legitimate complaints of people in the financial industry. 
At the same time, it keeps intact intelligent protections of 
investors and of consumers of banking and insurance services. 
It also protects the Federal Government and the taxpayers 
against games being played with Federal deposit insurance, and 
it sees to it that we still have a financial system which the 
little guy can trust.

                                                   John D. Dingell.

                 ADDITIONAL VIEWS OF CONGRESSMAN STUPAK

    The stated intention of this bill is to open up our 
financial system and allow for financial combinations between 
industries, in order to promote more effective and efficient 
capital flows.
    The restrictive state branching laws continue to prevent 
true competition in areas like Northern Michigan. The State of 
Michigan, to its credit, has adopted liberal banking laws that 
allow out-of-state banks to acquire existing branch facilities 
and to build de novo branches. Due to this opportunity, many 
banks from Wisconsin have come across the border and are 
providing banking services out of branches in Michigan. 
However, Wisconsin law prohibits Michigan banks from acquiring 
existing branches or building a de novo branch in Wisconsin. 
Although the Riegle-Neal Interstate Banking Act was supposed to 
open up our nation's banking system and tear down state 
impediments to competition, in the case of Northern Michigan it 
has been ineffective.
    I offered and withdrew an amendment at Subcommittee that 
would prohibit banks from forming or affiliating with a 
Financial Services Holding Company if they are in a state that 
does not allow out of state banks to branch into their state, 
but allows their banks to branch out of state. The amendment 
did not pre-empt state law, nor did it require a state to 
permit out of state banks to branch interstate. Rather it gave 
states a choice of either providing for a level playing field 
in their banking markets or prohibiting banks in their state 
from taking advantage of the new affiliations we allow under 
this bill. Either way the choice remained in the hands of the 
states.
    My intent was not to punish states, nor to impose a federal 
mandate on them. Rather I wished to ensure that banks like 
those in Michigan are not disadvantaged by allowing competition 
in their markets, while keeping them out of the markets of 
their competitors. To perpetuate this inequity would run 
counter the entire concept of H.R. 10.
    I withdrew my amendment and did not reoffer at the full 
Committee, because I received a commitment from Chairman Leach 
of the Banking Committee that a representative of the Northern 
Michigan banks could testify at the Banking Committee's next 
hearing on Interstate Branching. It is my hope that their 
testimony will either push the Banking Committee to take action 
on this issue, or shame the Wisconsin State legislature to 
bring down their restrictive walls.

                                                       Bart Stupak.

                             MINORITY VIEWS

    We are pleased that the Committee has reported financial 
modernization legislation for consideration by the full House. 
H.R. 10 is an important step towards achieving our goal of 
modernizing the nation's financial structure. As New Yorkers, 
we fully understand the importance and significance of 
providing a proper framework where financial services can 
thrive. New York is the capital of the world's economy and it 
is important that it remain so. Any legislation that is 
reported by this Committee must ensure that our financial 
structure retains its ability to adapt to the changing needs of 
the public.
    To this end, we urge the House to include a 10% 
``commercial basket'' provision in the final version of H.R. 
10. A 10% commercial basket would permit financial holding 
companies (FHC) and investment bank holding companies (IBHC) to 
derive 10% of their gross revenues from commercial activities. 
FHCs or IBHCs could acquire a company engaged in commercial 
activities only if, at the time of the acquisition, the company 
did not have consolidated assets of more than $750 million.
    We believe that financial services modernization 
legislation must allow FHCs and IBHCs to invest some percentage 
of its domestic gross revenues in non-financial activities. 
Modernization legislation should reflect the current market and 
permit some form of commercial affiliation. A 10-percent 
commercial basket is a reasonable first step toward integrating 
commerce and banking.
    Legislation on this matter must be flexible enough to 
ensure that financial service providers can continue to evolve. 
While we are pleased that a 5% basket was included in the bill, 
a 10% basket provides the proper cushion to accommodate the 
both normal growth of a commercial enterprise and the potential 
decrease of financial activity revenues. H.R. 10 represents a 
huge step forward in modernizing our financial structure and 
establishing a proper basket provides avenues for future growth 
and innovation.
    We strongly urge the House to include a 10% basket in H.R. 
10 so that financial providers can move forward as we approach 
the 21st century. We look forward to working with our 
colleagues on this matter and thank you for your consideration.

                                   Eliot L. Engel.
                                   Edolphus Towns.

                                
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