[House Report 105-531]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     105-531
_______________________________________________________________________


 
 PROVIDING FOR THE CONSIDERATION OF H.R. 10, FINANCIAL SERVICES ACT OF 
                                  1998

                                _______
                                

May 12, 1998.--Referred to the House Calendar and ordered to be printed

_______________________________________________________________________


   Mr. Solomon, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 428]

    The Committee on Rules, having had under consideration 
House Resolution 428, by a nonrecorded vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

               brief summary of provisions of resolution

    The resolution provides for the consideration of H.R. 10, 
the ``Financial Services Act of 1998'' under a structured rule. 
The rule provides one hour of general debate: thirty minutes 
equally divided between the chairman and ranking minority 
member of the Committee on Banking and Financial Services and 
thirty minutes equally divided between the chairman and ranking 
minority member of the Committee on Commerce. The rule waives 
all points of order against consideration of the bill.
    The rule provides that the amendment in the nature of a 
substitute printed in part 1 of this report be considered as an 
original bill for the purpose of amendment and that it shall be 
considered as read. The rule waives all points of order against 
that amendment in the nature of a substitute.
    The rule provides that no amendment to that amendment in 
the nature of a substitute shall be in order except those 
printed in part 2 of this report, which may be offered only in 
the order printed in the report, may be offered only by a 
Member designated in the report, shall be considered as read, 
shall be debatable for the time specified in the report equally 
divided and controlled by the proponent and an opponent and 
shall not be subject to amendment except as specified in the 
report. The rule waives all points of order against the 
amendments printed in the report.
    The rule allows the chairman of the Committee of the Whole 
to postpone recorded votes and to reduce to five minutes the 
voting time on any postponed question, provided voting time on 
the first in any series of questions is not less than 15 
minutes. Finally, the rule provides for one motion to recommit 
with or without instructions.

                                 PART I

    Amendment in the nature of a substitute made in order by 
the rule:
  Strike all after the enacting clause and insert the 
following:

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

  (a) Short Title.--This Act may be cited as the ``Financial 
Services Act of 1998''.
  (b) Purposes.--The purposes of this Act are as follows:
          (1) To enhance competition in the financial services 
        industry, in order to foster innovation and efficiency.
          (2) To ensure the continued safety and soundness of 
        depository institutions.
          (3) To provide necessary and appropriate protections 
        for investors and ensure fair and honest markets in the 
        delivery of financial services.
          (4) To provide for appropriate functional regulation 
        of insurance activities.
          (5) To reduce and, to the maximum extent practicable, 
        to eliminate the legal barriers preventing affiliation 
        among depository institutions, securities firms, 
        insurance companies, and other financial service 
        providers and to provide a prudential framework for 
        achieving that result.
          (6) To enhance the availability of financial services 
        to citizens of all economic circumstances and in all 
        geographic areas.
          (7) To enhance the competitiveness of United States 
        financial service providers internationally.
          (8) To ensure compliance by depository institutions 
        with the provisions of the Community Reinvestment Act 
        of 1977 and enhance the ability of depository 
        institutions to meet the capital and credit needs of 
        all citizens and communities, including underserved 
        communities and populations.
  (c) Table of Contents.--The table of contents for this Act is 
as follows:

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

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

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
          which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Certain State 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--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            Chapter 1--Wholesale Financial Holding Companies

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

               Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

   Subtitle E--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--Federal Home Loan Bank System

Sec. 161. Federal home loan banks.
Sec. 162. Membership and collateral.
Sec. 163. The Office of Finance.
Sec. 164. Management of banks.
Sec. 165. Advances to nonmember borrowers.
Sec. 166. Powers and duties of banks.
Sec. 167. Mergers and consolidations of Federal home loan banks.
Sec. 168. Technical amendments.
Sec. 169. Definitions.
Sec. 170. Resolution funding corporation.
Sec. 171. Capital structure of the Federal home loan banks.
Sec. 172. Investments.
Sec. 173. Federal Housing Finance Board.

                 Subtitle H--Direct Activities of Banks

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

                   Subtitle I--Effective Date of Title

Sec. 191. 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. Sales practices and complaint procedures.
Sec. 205. Information sharing.
Sec. 206. Definition and treatment of banking products.
Sec. 207. Derivative instrument and qualified investor defined.
Sec. 208. Government securities defined.
Sec. 209. 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. 45. 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--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Termination of expanded powers for new unitary S&L holding 
          companies.

  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 1998, 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 
        1998.''.

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) All of the subsidiary insured 
                depository institutions of the bank holding 
                company (other than any such depository 
                institution which does not, in the ordinary 
                course of the business of the depository 
                institution, offer consumer transaction 
                accounts to the general public) offer and 
                maintain low-cost basic banking accounts.
                  ``(E) 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 (D).
          ``(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 inthe 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)(E) 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 wholesale financial 
        holding company may engage in any activity, and acquire 
        and retain the shares of any company engaged in any 
        activity, 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 1998;
                  ``(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 1998, 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 1998) 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 
        theextent 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 wholesale financial holding 
                company that acquires any company, or commences 
                any activity, pursuant to this subsection shall 
                provide written notice to the Board describing 
                the activity commenced or conducted by the 
                company acquired no later than 30 calendar days 
                after commencing the activity or consummating 
                the acquisition.
                  ``(B) Approval not required for certain 
                financial activities.--Except as provided in 
                section 4(j) with regard to the acquisition of 
                a savings association, a financial holding 
                company and a wholesale financial holding 
                company may commence any activity, or acquire 
                any company, pursuant to paragraph (3) or any 
                regulation prescribed or order issued under 
                paragraph (4), without prior approval of the 
                Board.
  ``(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 1998 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) Continuing revenue limitation on grandfathered 
        commercial activities.--Notwithstanding any other 
        provision of this subsection, a financial holding 
        company may continue to engage in activities or hold 
        shares in companies pursuant to this subsection only to 
        the extent that the aggregate annual gross revenues 
        derived from all such activities and all such companies 
        does not exceed 15 percent of the consolidated annual 
        gross revenues of the financial holding company.
          ``(5) Cross marketing restrictions applicable to 
        commercial activities.--A depositoryinstitution 
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).
          ``(6) 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, subsection 
        (f), or subparagraph (H) or (I) of subsection (c)(3).
  ``(h) Developing Activities.--A financial holding company and 
a wholesale financial holding company may engage directly or 
indirectly, or acquire shares of any company engaged, in any 
activity that the Board has not determined to be financial in 
nature or incidental to financial activities under subsection 
(c) if--
          ``(1) the holding company reasonably concludes that 
        the activity is financial in nature or incidental to 
        financial activities;
          ``(2) the gross revenues from all activities 
        conducted under this subsection represent less than 5 
        percent of the consolidated gross revenues of the 
        holding company;
          ``(3) the aggregate total assets of all companies the 
        shares of which are held under this subsection do not 
        exceed 5 percent of the holding company's consolidated 
        total assets;
          ``(4) the total capital invested in activities 
        conducted under this subsection represents less than 5 
        percent of the consolidated total capital of the 
        holding company;
          ``(5) the Board has not 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 LAWS PREEMPTED.

  (a) Affiliations.--No State may by statute, 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 any other provision of Federal law.
  (b) Activities.
          (1) Except as provided in paragraphs (2) and (3) and 
        subject to section 18(c) of the Securities Act of 1933, 
        no State may by statute, regulation, order, 
        interpretation, or otherwise, prevent or restrict an 
        insured depository institution or a wholesale financial 
        institution from engaging, directly or indirectly or in 
        conjunction with an affiliate, in any activity 
        authorized under this Act or any other provision of 
        Federal law.
          (2) As stated by the United States Supreme Court in 
        Barnett Bank of Marion County, N.A. v. Nelson, 116 
        S.Ct. 1103 (1996), no State may, by statute, 
        regulation, order, interpretation, or otherwise, 
        prevent or significantly interfere with the ability of 
        an insured depository institution or wholesale 
        financial institution to engage, directly or 
        indirectly, or in conjunction with an affiliate, in any 
        insurance sales or solicitation activity, except that--
                  (A) State statutes and regulations governing 
                insurance sales and solicitations which are no 
                more restrictive than provisions in the 
                Illinois ``Act Authorizing and Regulating the 
                Sale of Insurance by Financial Institutions, 
                Public Act 90-41'' (215 ILCS 5/1400-1416), as 
                in effect on October 1, 1997, shall not be 
                deemed to prevent or significantly interfere 
                with the ability of an insured depository 
                institution or wholesale financial institution 
                to engage, directly or indirectly, or in 
                conjunction with an affiliate, in any insurance 
                sales or solicitation activity; and
                  (B) subparagraph (A) shall not create any 
                inference regarding State statutes, and 
                regulations governing insurance sales and 
                solicitations which are more restrictive than 
                any provision in the Illinois ``Act Authorizing 
                and Regulating the Sale of Insurance by 
                Financial Institutions'', (Public Act 90-41; 
                215 ILCS 5/1400-1416), as in effect on October 
                1, 1997.
          (3) State statutes, regulations, orders, and 
        interpretations which are applicable to and are applied 
        in the same manner with respect to insurance 
        underwriting activities of an affiliate of an insured 
        depository institution or a wholesale financial 
        institutionas they are applicable to and are applied to 
an insurance underwriter which is not affiliated with an insured 
depository institution or a wholesale financial institution shall not 
be preempted under paragraph (1).

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 
        1998,'' 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 theUnited 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 
                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.''.

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)(E) 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 Actof 
1998, 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 a wholesale financial holding company where the 
purpose or effect of doing so would be to take action 
indirectly against or with respect to a regulated subsidiary 
that may not be taken directly against or with respect to such 
subsidiary in accordance with subsection (a).
  ``(c) Actions Specifically Authorized.--Notwithstanding 
subsection (a), the Board may take action under this Act or 
section 8 of the Federal Deposit Insurance Act to enforce 
compliance by a regulated subsidiary with Federal law that the 
Board has specific jurisdiction to enforce against such 
subsidiary.
  ``(d) Regulated Subsidiary Defined.--For purposes of this 
section, the term `regulated subsidiary' means any company that 
is not a bank holding company and is--
          ``(1) a broker or dealer registered under the 
        Securities Exchange Act of 1934;
          ``(2) an investment adviser registered 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 or any other interest in any company engaged 
        in, any activity that--
                  ``(A) is not permissible for a national bank 
                to engage in directly; or
                  ``(B) is conducted under terms or conditions 
                other than those that would govern the conduct 
                of such activity by a national bank,
        unless a national bank is specifically authorized by 
        the express terms of a Federal statute and not by 
        implication or interpretation to acquire shares of or 
        an interest in, or to control, such subsidiary, such as 
        by paragraph (2) of this subsection and section 25A of 
        the Federal Reserve Act.
          ``(2) Specific authorization to conduct agency 
        activities which are financial in nature.--A national 
        bank may control a company that engages in agency 
        activities that have been determined to be financial in 
        nature or incidental to such financial activities 
        pursuant to and in accordance with section 6(c) of the 
        Bank Holding Company Act of 1956 if--
                  ``(A) the company engages in such activities 
                solely as agent and not directly or indirectly 
                as principal,
                  ``(B) 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;
                  ``(C) 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
                  ``(D) 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.''.
  (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--
          (1) by inserting ``, or to be a subsidiary of any 
        person, firm, corporation, association, business trust, 
        or similar organization engaged (unless such subsidiary 
        (A) was engaged in such securities activities as of 
        September 15, 1997, or (B) is a nondepository 
        subsidiary of a foreign bank and is not also a 
        subsidiary of a domestic depository institution),'' 
        after ``to engage at the same time''; and
          (2) by inserting ``or any subsidiary of such bank, 
        company, or institution'' after ``or private bankers''.
  (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) 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--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

SEC. 131. WHOLESALE FINANCIAL 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. WHOLESALE FINANCIAL HOLDING COMPANIES.

  ``(a) Companies That Control Wholesale Financial 
Institutions.--
          ``(1) Wholesale financial holding company defined.--
        The term `wholesale financial holding company' means 
        any company that--
                  ``(A) is registered as a bank holding 
                company;
                  ``(B) is predominantly engaged in financial 
                activities as defined in section 6(g)(2);
                  ``(C) controls 1 or more wholesale financial 
                institutions;
                  ``(D) does not control--
                          ``(i) a bank other than a wholesale 
                        financial institution;
                          ``(ii) an insured bank other than an 
                        institution permitted under 
                        subparagraph (D), (F), or (G) of 
                        section 2(c)(2); or
                          ``(iii) a savings association; and
                  ``(E) is not a foreign bank (as defined in 
                section 1(b)(7) of the International Banking 
                Act of 1978).
          ``(2) Savings association transition period.--
        Notwithstanding paragraph (1)(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) Supervision by the Board.--
          ``(1) In general.--The provisions of this section 
        shall govern the reporting, examination, and capital 
        requirements of wholesale financial holding companies.
          ``(2) Reports.--
                  ``(A) In general.--The Board from time to 
                time may require any wholesale financial 
                holding company and any subsidiary of such 
                company to submit reports under oath to keep 
                the Board informed as to--
                          ``(i) the company's or subsidiary's 
                        activities, financial condition, 
                        policies, systems for monitoring and 
                        controlling financial and operational 
                        risks, and transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          ``(ii) the extent to which the 
                        company or subsidiary has complied with 
                        the provisions of this Act and 
                        regulations prescribed and orders 
                        issued under this Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, 
                        to the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraphthat the wholesale financial 
holding company or any subsidiary of such company has provided or been 
required to provide to other Federal and State supervisors or to 
appropriate self-regulatory organizations.
                          ``(ii) Availability.--A wholesale 
                        financial holding company or a 
                        subsidiary of such company shall 
                        provide to the Board, at the request of 
                        the Board, a report referred to in 
                        clause (i).
                  ``(C) Exemptions from reporting 
                requirements.--
                          ``(i) In general.--The Board may, by 
                        regulation or order, exempt any company 
                        or class of companies, under such terms 
                        and conditions and for such periods as 
                        the Board shall provide in such 
                        regulation or order, from the 
                        provisions of this paragraph and any 
                        regulation prescribed under this 
                        paragraph.
                          ``(ii) Criteria for consideration.--
                        In making any determination under 
                        clause (i) with regard to any exemption 
                        under such clause, the Board shall 
                        consider, among such other factors as 
                        the Board may determine to be 
                        appropriate, the following factors:
                                  ``(I) Whether information of 
                                the type required under this 
                                paragraph is available from a 
                                supervisory agency (as defined 
                                in section 1101(7) of the Right 
                                to Financial Privacy Act of 
                                1978) or a foreign regulatory 
                                authority of a similar type.
                                  ``(II) The primary business 
                                of the company.
                                  ``(III) The nature and extent 
                                of the domestic and foreign 
                                regulation of the activities of 
                                the company.
          ``(3) Examinations.--
                  ``(A) Limited use of examination authority.--
                The Board may make examinations of each 
                wholesale financial holding company and each 
                subsidiary of such company in order to--
                          ``(i) inform the Board regarding the 
                        nature of the operations and financial 
                        condition of the wholesale financial 
                        holding company and its subsidiaries;
                          ``(ii) inform the Board regarding--
                                  ``(I) the financial and 
                                operational risks within the 
                                wholesale financial holding 
                                company system that may affect 
                                any depository institution 
                                owned by such holding company; 
                                and
                                  ``(II) the systems of the 
                                holding company and its 
                                subsidiaries for monitoring and 
                                controlling those risks; and
                          ``(iii) monitor compliance with the 
                        provisions of this Act and those 
                        governing transactions and 
                        relationships between any depository 
                        institution controlled by the wholesale 
                        financial holding company and any of 
                        the company's other subsidiaries.
                  ``(B) Restricted focus of examinations.--The 
                Board shall, to the fullest extent possible, 
                limit the focus and scope of any examination of 
                a wholesale financial holding company under 
                this paragraph to--
                          ``(i) the holding company; and
                          ``(ii) any subsidiary (other than an 
                        insured depository institution 
                        subsidiary) of the holding company 
                        that, because of the size, condition, 
                        or activities of the subsidiary, the 
                        nature or size of transactions between 
                        such subsidiary and any affiliated 
                        depository institution, or the 
                        centralization of functions within the 
                        holding company system, could have a 
                        materially adverse effect on the safety 
                        and soundness of any depository 
                        institution affiliate of the holding 
                        company.
                  ``(C) Deference to bank examinations.--The 
                Board shall, to the fullest extent possible, 
                use the reports of examination of depository 
                institutions made by the Comptroller of the 
                Currency, the Federal Deposit Insurance 
                Corporation, the Director of the Office of 
                Thrift Supervision or the appropriate State 
                depository institution supervisory authority 
                for the purposes of this section.
                  ``(D) Deference to other examinations.--The 
                Board shall, to the fullest extent possible, 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and by instead 
                reviewing the reports of examination made of--
                          ``(i) any registered broker or dealer 
                        or any registered investment adviser by 
                        or on behalf of the Commission; and
                          ``(ii) any licensed insurance company 
                        by or on behalf of any State government 
                        insurance agency responsible for the 
                        supervision of the insurance company.
                  ``(E) Confidentiality of reported 
                information.--
                          ``(i) In general.--Notwithstanding 
                        any other provision of law, the Board 
                        shall not be compelled to disclose any 
                        nonpublic information required to be 
                        reported under this paragraph, or any 
                        information supplied to the Board by 
                        any domestic or foreign regulatory 
                        agency, that relates to the financial 
                        or operational condition of any 
                        wholesale financial holding company or 
                        any subsidiary of such company.
                          ``(ii) Compliance with requests for 
                        information.--No provision of this 
                        subparagraph shall be construed as 
                        authorizing the Board to withhold 
                        information from the Congress, or 
                        preventing the Board from complying 
                        with a request for information from any 
                        other Federal department or agency for 
                        purposes within the scope of such 
                        department's or agency's jurisdiction, 
                        or from complying with any order of a 
                        court of competent jurisdiction in an 
                        action brought by the United States or 
                        the Board.
                          ``(iii) Coordination with other 
                        law.--For purposes of section 552 of 
                        title 5, United States Code, this 
                        subparagraph shall be considered to be 
                        a statute described in subsection 
                        (b)(3)(B) of such section.
                          ``(iv) Designation of confidential 
                        information.--In prescribing 
                        regulations to carry out the 
                        requirements of this subsection, the 
                        Board shall designate information 
                        described in or obtained pursuant to 
                        this paragraph as confidential 
                        information.
                  ``(F) Costs.--The cost of any examination 
                conducted by the Board under this section may 
                be assessed against, and made payable by, the 
                wholesale financial holding company.
          ``(4) Capital adequacy guidelines.--
                  ``(A) Capital adequacy provisions.--Subject 
                to the requirements of, and solely in 
                accordance with, the terms of this paragraph, 
                the Board may adopt capital adequacy rules or 
                guidelines for wholesale financial holding 
                companies.
                  ``(B) Method of calculation.--In developing 
                rules or guidelines under this paragraph, the 
                following provisions shall apply:
                          ``(i) Focus on double leverage.--The 
                        Board shall focus on the use by 
                        wholesale financial holding companies 
                        of debt and other liabilities to fund 
                        capital investments in subsidiaries.
                          ``(ii) No unweighted capital ratio.--
                        The Board shall not, by regulation, 
                        guideline, order, or otherwise, impose 
                        under this section a capital ratio that 
                        is not based on appropriate risk-
                        weighting considerations.
                          ``(iii) No capital requirement on 
                        regulated entities.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any 
                        capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that--
                                  ``(I) is not a depository 
                                institution; and
                                  ``(II) is in compliance with 
                                applicable capital requirements 
                                of another Federal regulatory 
                                authority (including the 
                                Securities and Exchange 
                                Commission) or State insurance 
                                authority.
                          ``(iv) Limitation.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any 
                        capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that is not a 
                        depository institution and that is 
                        registered as an investment adviser 
                        under the Investment Advisers Act of 
                        1940, except that this clause shall not 
                        be construed as preventing the Board 
                        from imposing capital or capital 
                        adequacy rules, guidelines, standards, 
                        or requirements with respect to 
                        activities of a registered investment 
                        adviser other than investment advisory 
                        activities or activities incidental to 
                        investment advisory activities.
                          ``(v) 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 
                        wholesale financial holding companies 
                        into its capital adequacy guidelines or 
                        rules and may take account of the 
                        extent to which resources of a 
                        subsidiary depository institution may 
                        be used to service the debt or other 
                        liabilities of the wholesale financial 
                        holding company.
  ``(c) Nonfinancial Activities and Investments.--
          ``(1) Authority for limited amounts of new activities 
        and investments.--
                  ``(A) In general.--Notwithstanding section 
                4(a), a wholesale 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--
                          ``(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 wholesale financial 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 
                        wholesale financial 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 1998, the Board shall submit to the 
                Congress a report regarding the activities 
                conducted and companies held pursuant to this 
                paragraph and the effect, if any, that 
                affiliations permitted under this paragraph 
                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.
          ``(2) Grandfathered activities.--
                  ``(A) In general.--Notwithstanding paragraph 
                (1)(A) and section 4(a), a company that becomes 
                a wholesale financial holding company may 
                continue to engage, directly or indirectly, in 
                any activity and may retain ownership and 
                control of shares of a company engaged in any 
                activity if--
                          ``(i) on the date of the enactment of 
                        the Financial Services Act of 1998, 
                        such wholesale financial holding 
                        company was lawfully engaged in that 
                        nonfinancial activity, held the shares 
                        of such company, or had entered into a 
                        contract to acquire shares of any 
                        company engaged in such activity; and
                          ``(ii) the company engaged in such 
                        activity continues to engage only in 
                        the sameactivities that such company 
conducted on the date of the enactment of the Financial Services Act of 
1998, and other activities permissible under this Act.
                  ``(B) No expansion of grandfathered 
                commercial activities through merger or 
                consolidation.--A wholesale financial holding 
                company that engages in activities or holds 
                shares pursuant to this paragraph, or a 
                subsidiary of such wholesale financial holding 
                company, may not acquire, in any merger, 
                consolidation, or other type of business 
                combination, assets of any other company which 
                is engaged in any activity which the Board has 
                not determined to be financial in nature or 
                incidental to activities that are financial in 
                nature under section 6(c).
                  ``(C) Limitation to single exemption.--No 
                company that engages in any activity or 
                controls any shares under subsection (f) 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), a wholesale financial holding company 
                which was predominately engaged as of January 
                1, 1997, in financial activities in the United 
                States (or any successor to any such company) 
                may engage in, or directly or indirectly own or 
                control shares of a company engaged in, 
                activities related to the trading, sale, or 
                investment in commodities and underlying 
                physical properties that were not permissible 
                for bank holding companies to conduct in the 
                United States as of January 1, 1997, if such 
                wholesale financial holding company, or any 
                subsidiary of such holding company, was engaged 
                directly, indirectly, or through any such 
                company in any of such activities as of January 
                1, 1997, in the United States.
                  ``(B) Limitation.--Notwithstanding paragraph 
                (1)(A)(i), the attributed aggregate 
                consolidated assets of a wholesale financial 
                holding company held under the authority 
                granted under this paragraph and not otherwise 
                permitted to be held by all wholesale financial 
                holding companies under this section may not 
                exceed 5 percent of the total consolidated 
                assets of the wholesale financial holding 
                company, except that the Board may increase 
                such percentage of total consolidated assets by 
                such amounts and under such circumstances as 
                the Board considers appropriate, consistent 
                with the purposes of this Act.
          ``(4) Cross marketing restrictions.--A wholesale 
        financial 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 wholesale financial 
                holding company pursuant to such paragraphs.
  ``(d) Qualification of Foreign Bank as Wholesale Financial 
Holding Company.--
          ``(1) In general.--Any foreign bank, or any company 
        that owns or controls a foreign bank, that--
                  ``(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 wholesale financial 
        holding company for purposes of subsection (c).
          ``(2) Conditions for treatment as a wholesale 
        financial holding company.--A foreign bank and a 
        company that owns or controls a foreign bank may not be 
        treated as a wholesale financial holding company unless 
        the bank and company meet and continue to meet the 
        following criteria:
                  ``(A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an 
                affiliate (other than an institution described 
                in subparagraph (D) or (F) of section 2(c)(2)) 
                are insured under the Federal Deposit Insurance 
                Act.
                  ``(B) Capital standards.--The foreign bank 
                meets risk-based capital standards comparable 
                to the capital standards required for 
awholesale 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 a 
        wholesale financial holding company under this 
        subsection shall be treated as a wholesale financial 
        institution for purposes of subsection (c)(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 a wholesale 
        financial 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 wholesale financial holding company for purposes of 
        subsection (c), except that such bank or company shall 
        be subject to the restrictions of paragraphs (2)(A), 
        (3), and (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 wholesale financial holding company shall 
        be subject to section 9B(b)(11) of the Federal Reserve 
        Act as if the foreign bank were a wholesale financial 
        institution under such section. The Board and the 
        Comptroller of the Currency shall apply the provisions 
        of sections 803(2), 804, and 807(1) of the Community 
        Reinvestment Act of 1977 to branches of foreign banks 
        which receive only such deposits as are permissible for 
        receipt by a corporation organized under section 25A of 
        the Federal Reserve Act, in the same manner and to the 
        same extent such sections apply to such a 
        corporation.''.
  (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 (as 
        added by section 121(a) of this title) the following 
        new section:

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

  ``(a) Authorization of the Comptroller Required.--A national 
bank may apply to the Comptroller on such forms and in 
accordance with such regulations as the Comptroller may 
prescribe, for permission to operate as a national wholesale 
financial institution.
  ``(b) Regulation.--A national wholesale financial institution 
may exercise, in accordance with such institution's articles of 
incorporation and regulations issued by the Comptroller, all 
the powers and privileges of a national bank formed in 
accordance with section 5133 of the Revised Statutes of the 
United States, subject to section 9B of the Federal Reserve Act 
and the limitations and restrictions contained therein.
  ``(c) Community Reinvestment Act of 1977.--A national 
wholesale financial institution shall be subject to the 
Community Reinvestment Act of 1977.
  ``(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 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 
        shall be well capitalized and well managed.
          ``(2) Notice to company.--The Board shall promptly 
        provide notice to a company that controls a wholesale 
        financial institution whenever such wholesale financial 
        institution is not well capitalized or well managed.
          ``(3) Agreement to restore institution.--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) Well managed defined.--For purposes of this 
        subsection, the term `well managed' has the same 
        meaning as in section 2 of the Bank Holding Company Act 
        of 1956.
  ``(e) 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 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.'';
          (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)(E) or which receives a 
                determination under section 10(d)(1) of the 
                Bank Holding Company Act of 1956, any authority 
                conferred by this subsection on any foreign 
                bank or company to engage in any activity which 
                the Board has determined to be permissible for 
                financial holding companies under section 6 of 
                such Act shall terminate immediately.
                  ``(B) Restrictions and requirements 
                authorized.--If a foreign bank or company that 
                engages, directly or through an affiliate 
                pursuant to paragraph (1), in an activity which 
                the Board has determined to be permissible for 
                financial holding companies under section 6 of 
                the Bank Holding Company Act of 1956 has not 
                filed a declaration with the Board of its 
                status as a financial holding company under 
                such section or received a determination under 
                section 10(d)(1) by the end of the 2-year 
                period beginning on the date of enactment of 
                the Financial Services Act of 1998, 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--Federal Home Loan Bank System

SEC. 161. FEDERAL HOME LOAN BANKS.

  The 1st sentence of section 3 of the Federal Home Loan Bank 
Act (12 U.S.C. 1423) is amended--
          (1) by striking ``the continental United States'' and 
        all that follows through the ``eight''; and
          (2) by inserting ``the States into not less than 1'' 
        before ``nor''.

SEC. 162. MEMBERSHIP AND COLLATERAL.

  (a) Subsection (f) of section 5 of the Home Owners' Loan Act 
(12 U.S.C. 1464) is amended to read as follows:
  ``(f) Federal Home Loan Bank Membership.--A Federal savings 
association may become a member, of the Federal Home Loan Bank 
System, and shall qualify for such membership in the manner 
provided by the Federal Home Loan Bank Act, beginning January 
1, 1999.''.
  (b) Section 10(a)(5) of the Federal Home Loan Bank Act (12 
U.S.C. 1430(a)(5)) is amended--
          (1) in the 2d sentence, by striking ``and the 
        Board''; and
          (2) in the 3d sentence, by striking ``Board'' and 
        inserting ``Bank''.
  (c) Section 10(a) of the Federal Home Loan Bank Act (12 
U.S.C. 1430(a)) is amended--
          (1) in the 2d sentence, by striking ``All long-term 
        advances'' and inserting ``Except as provided in the 
        succeeding sentence, all long-term advances'';
          (2) by inserting after the 2d sentence, the following 
        sentence: ``Notwithstanding the preceding sentence, 
        long-term advances may be made to members insured by 
        the Federal Deposit Insurance Corporation which have 
        less than $500,000,000 in total assets for the purpose 
        of funding small businesses, agriculture, rural 
        development, or low-income community development (as 
        defined by the Board).''; and
          (3) by redesignating paragraph (5) as paragraph (6) 
        and inserting after paragraph (4) the following new 
        paragraph:
          ``(5) In the case of any member insured by the 
        Federal Deposit Insurance Corporation which has total 
        assets of less than $500,000,000, secured loans for 
        small business, agriculture, rural development, or low-
        income community development, or securities 
        representing a whole interest in such secured loans.''.
  (d) Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 
1424(a)) is amended by adding at the end the following new 
paragraph:
          ``(3) Eligibility requirements for community 
        financial institutions.--The requirements of paragraph 
        (2) (other than subparagraph (B) of such paragraph) 
        shall not apply to any insured depository institution 
        which has total assets of less than $500,000,000.
  (e) Section 10 of the Federal Home Loan Bank Act (12 U.S.C. 
1430) is amended by striking the 1st of the 2 subsections 
designated as subsection (e) (relating to qualified thrift 
lender status).

SEC. 163. THE OFFICE OF FINANCE.

  The Federal Home Loan Bank Act (12 U.S.C. 1421) is amended by 
inserting after section 4 the following new section:

``SEC. 5. THE OFFICE OF FINANCE.

  ``(a) Operation.--The Federal home loan banks shall operate 
jointly an office of finance (hereafter in this section 
referred to as the `Office') to issue the notes, bonds, and 
debentures of the Federal home loan banks in accordance with 
this Act.
  ``(b) Powers.--Subject to the other provisions of this Act 
and such safety and soundness regulations as the Finance Board 
may prescribe, the Office shall be authorized by the Federal 
home loan banks to act as the agent of such banks to issue 
Federal home loan bank notes, bonds and debentures pursuant to 
section 11 of this Act on behalf of the banks.
  ``(c) Central Board of Directors.--
          ``(1) Establishment.--The Federal home loan banks 
        shall establish a central board of directors of the 
        Office to administer the affairs of the Office in 
        accordance with the provisions of this Act.
          ``(2) Composition of Board.--Each Federal home loan 
        bank shall annually select 1 individual who, as of the 
        time of the election, is an officer or director of such 
        bank to serve as a member of the central board of 
        directors of the Office.
  ``(d) Status.--Except to the extent expressly provided in 
this Act, the Office shall be treated as a Federal home loan 
bank for purposes of any law.''.

SEC. 164. MANAGEMENT OF BANKS.

  (a) Subsections (a) and (b) of section 7 of the Federal Home 
Loan Bank Act (12 U.S.C. 1427(a) and (b)) are amended to read 
as follows:
  ``(a) The management of each Federal home loan bank shall be 
vested in a board of 15 directors, 9 of whom shall be elected 
by the members in accordance with this section, 6 of whom shall 
be appointed by the Board referred to in section 2A, and all of 
whom shall be citizens of the United States and bona fide 
residents of the district in which such bank is located. At 
least 2 of the Federal home loan bank directors who are 
appointed by the Board shall be representatives chosen from 
organizations with more than a 2-year history of representing 
consumer or community interests on banking services, credit 
needs, housing, or financial consumer protections. No Federal 
home loan bank director who is appointed pursuant to this 
subsection may, during such bank director's term of office, 
serve as an officer of any Federal home loan bank or a director 
or officer of any member of a bank, or hold shares, or any 
other financial interest in, any member of a bank.
  ``(b) The elective directors shall be divided into three 
classes, designated as classes A, B, and C, as nearly equal in 
number as possible. Each directorship shall be filled by a 
person who is an officer or director of a member located in 
that bank's district. Each class shall represent members of 
similar asset size, and the Board shall, to the maximum extent 
possible, seek to achieve geographic diversity. The Finance 
Board shall establish the minimum and maximum asset size for 
each class. Any member shall be entitled to nominate and elect 
eligible persons for its class of directorship; such offices 
shall be filled from such nominees by a plurality of the votes 
which members of each class may cast for nominees in their 
corresponding class of directors in an election held for the 
purpose of filling such offices. Each member shall be permitted 
to cast one vote for each share of Federal home loan bank stock 
owned by that member. No person who is an officer or director 
of a member that fails to meet any applicable capital 
requirement is eligible to hold the office of Federal Home Loan 
Bank director. As used in this subsection, the term ``member'' 
means a member of a Federal home loan bank which was a member 
of such Bank as of a record date established by the Bank.''.
  (b) Section 7 of the Federal Home Loan Bank Act (12 U.S.C. 
1427) is amended--
          (1) by striking subsections (c) and (h); and
          (2) by redesignating subsections (d), (e), (f), (g), 
        (i), (j), and (k) as subsections (c), (d), (e), (f), 
        (g), (h), and (i), respectively.
  (c) Subsection (c) of section 7 of the Federal Home Loan Bank 
Act (12 U.S.C. 1427(d)) (as so redesignated by subsection (b) 
of this section) is amended by striking the 1st and 2d 
sentences and inserting the following 2 new sentences: ``The 
term of each position of director shall be 3 years. No director 
serving for 3 consecutive terms, nor any other officer, 
director or that member or any affiliated depository 
institution, shall be eligible for another term earlier than 3 
years after the expiration of the last expiring of said 3-year 
terms. 3 elected directors of different classes as specified by 
the Finance Board shall be elected by ballot annually.''.
  (d) Subsection (d) of section 7 of the Federal Home Loan Bank 
Act (12 U.S.C. 1427(e)) (as so redesignated by subsection (b) 
of this section) is amended to read as follows:
  ``(d) Transition Provision.--In the 1st election after the 
date of the enactment of the Financial Services Act of 1998, 3 
directors shall be elected in each of the 3 classes of elective 
directorship. The Finance Board may, in the 1st election after 
such date of enactment, designate the terms of each elected 
director in each class, not to exceed 3 years, to assure that, 
in each subsequent election, 3 directors from different classes 
of elective directorships are elected each year.''.
  (e) Subsection (g) of section 7 of the Federal Home Loan Bank 
Act (12 U.S.C. 1427(i)) (as so redesignated by subsection (b) 
of this section) is amended by striking ``subject to the 
approval of the board''.

SEC. 165. ADVANCES TO NONMEMBER BORROWERS.

  Section 10b of the Federal Home Loan Bank Act (12 U.S.C. 
1430b) is amended--
          (1) in subsection (a), by striking ``(a) In 
        General.--'';
          (2) by striking the 4th sentence of subsection (a), 
        and inserting ``Notwithstanding the preceding sentence, 
        if an advance is made for the purpose of facilitating 
        mortgage lending that benefits individuals and families 
        that meet the income requirements set forth in section 
        142(d) or 143(f) of the Internal Revenue Code of 1986, 
        the advance may be collateralized as provided in 
        section 10(a) of this Act.''; and
          (3) by striking subsection (b).

SEC. 166. POWERS AND DUTIES OF BANKS.

  (a) Subsection (a) of section 11 of the Federal Home Loan 
Bank Act (12 U.S.C. 1431(a)) is amended--
          (1) by inserting ``through the Office of Finance'' 
        after ``to issue'';
          (2) by striking ``Board'' after ``upon such terms and 
        conditions as the'' and inserting ``board of directors 
        of the bank''.
  (b) Subsection (b) of section 11 of the Federal Home Loan 
Bank Act (12 U.S.C. 1431(b)) is amended to read as follows:
  ``(b) Issuance of Federal Home Loan Bank Consolidated 
Bonds.--
          ``(1) In general.-- The Office of Finance may issue 
        consolidated Federal home loan bank bonds and other 
        consolidated obligations on behalf of the banks.
          ``(2) Joint and several obligation; terms and 
        conditions.--Consolidated obligations issued by the 
        Office of Finance under paragraph (1) shall--
                  ``(A) be the joint and several obligations of 
                all the Federal home loan banks; and
                  ``(B) shall be issued upon such terms and 
                conditions as shall be established by the 
                Office of Finance subject to such rules and 
                regulations as the Finance Board may 
                prescribe.''.
  (c) Section 11(f) of the Federal Home Loan Bank Act (12 
U.S.C. 1430(f) (as designated before the redesignation by 
subsection (e) of this section) is amended by striking both 
commas immediately following ``permit'' and inserting ``or''.
  (d) Subsection (i) of section 11 of the Federal Home Loan 
Bank Act (12 U.S.C. 1431(i)) is amended by striking the 2d 
undesignated paragraph.
  (e) Section 11 of the Federal Home Loan Bank Act (12 U.S.C. 
1431) is amended--
          (1) by striking subsection (c); and
          (2) by redesignating subsections (d) through (k) as 
        subsections (c) through (j), respectively.

SEC. 167. MERGERS AND CONSOLIDATIONS OF FEDERAL HOME LOAN BANKS.

  Section 26 of the Federal Home Loan Bank Act (12 U.S.C. 1446) 
is amended by designating the current paragraph as ``(a)'' and 
adding the following new sections:
  ``(b) Nothing in this section shall preclude voluntary 
mergers, combinations or consolidation by or among the Federal 
home loan banks pursuant to such regulations as the Finance 
Board may prescribe.
  ``(c) Number of Elected Directors of Resulting Bank.-- 
Subject to section 7 of this Act, any bank resulting from a 
merger, combination, or consolidation pursuant to this section 
may have a number of elected directors equal to or less than 
the total number of elected directors of all the banks which 
participated in such transaction (as determined immediately 
before such transaction).
  ``(d) Number of Appointed Directors of Resulting Bank.--The 
number of appointed directors of any bank resulting from a 
merger, combination, or consolidation pursuant to this section 
shall be a number that is three less than the number of elected 
directors.
  ``(e) Adjustment of District Boundaries.--After consummation 
of any merger, combination, or consolidation of 2 or more 
Federal home loan banks, the Finance Board shall adjust the 
districts established in section 3 of this Act to reflect such 
merger, combination, or consolidation.''.

SEC. 168. TECHNICAL AMENDMENTS.

  (a) Repeal of Sections 22A and 27.--The Federal Home Loan 
Bank Act (12 U.S.C. 1421 et seq.) is amended by striking 
sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
  (b) Section 12.--
          (1) Section 12(a) of the Federal Home Loan Bank Act 
        (12 U.S.C. 1432(a)) is amended--
                  (A) by striking ``subject to the approval of 
                the Board'' immediately following ``transaction 
                of its business''; and
                  (B) by striking ``and, by its Board of 
                directors, to prescribe, amend, and repeal by-
                laws, rules, and regulations governing the 
                manner in which its affairs may be 
                administered; and the powers granted to it by 
                law may be exercised and enjoyed subject to the 
                approval of the Board. The president of a 
                Federal Home Loan Bank may also be a member of 
                the Board of directors thereof, but no other 
                officer, employee, attorney, or agent of such 
                bank,'' and inserting ``and, by the board of 
                directors of the bank, to prescribe, amend, and 
                repeal by-laws governing the manner in which 
                its affairs may be administered, consistent 
                with applicable statute and regulation, as 
                administered by the Finance Board. No officer, 
                employee, attorney, or agent of a Federal home 
                loan bank''.
          (2) Section 12 of the Federal Home Loan Bank Act (12 
        U.S.C. 1432) is amended by inserting after subsection 
        (b) the following new subsection:
  ``(c) Prohibition on Excessive Compensation.--
          ``(1) In general.--The Finance Board shall prohibit 
        the Federal home loan banks from providing compensation 
        to any officer, director, or employee that is not 
        reasonable and comparable with the compensation for 
        employment in other similar businesses involving 
        similar duties and responsibilities. However, the 
        Finance Board may not prescribe or set a specific level 
        or range of compensation for any officer, director, or 
        employee.
          ``(2) Regulations.--The Finance Board, by regulation, 
        may provide for the requirements of paragraph (1) to be 
        phased-in over a period not to exceed 3 years.
          ``(3) Exception for existing contracts.--Paragraph 
        (1) shall not apply to any contract entered into before 
        June 1, 1997.''.
  (c) Powers and Duties of Federal Housing Finance Board.--
          (1) Subsection (a)(1) of section 2B of the Federal 
        Home Loan Bank Act (12 U.S.C. 1422b(a)(1)) is amended 
        by striking the period at the end of the sentence and 
        inserting ``; and to have the same powers, rights, and 
        duties to enforce this Act with respect to the Federal 
        home loan banks and the senior officers and directors 
        of such banks as the Office of Federal Housing 
        Enterprise Oversight has over the Federal housing 
        enterprises and the senior officers and directors of 
        such enterprises under the Federal Housing Enterprises 
        Financial Safety and Soundness Act of 1992.''.
          (2) Subsection (b) of section 2B of the Federal Home 
        Loan Bank Act (12 U.S.C. 1422b(b)) is amended--
                  (A) by striking ``(1) Board staff.--'';
                  (B) by striking ``function to any employee, 
                administrative unit'' and inserting ``function 
                to any employee or administrative unit'';
                  (C) by striking the 2d sentence in paragraph 
                (1); and
                  (D) by striking paragraph (2).
          (3) Section 111 of Public Law 93-495 (12 U.S.C. 250) 
        is amended by striking ``Federal Home Loan Bank Board'' 
        and inserting ``Federal Housing Finance Board''.
  (d) Eligibility to Secure Advances.--
          (1) Section 9.--Section 9 of the Federal Home Loan 
        Bank Act (12 U.S.C. 1429) is amended--
                  (A) in the second sentence, by striking 
                ``with the approval of the Board''; and
                  (B) in the third sentence, by striking ``, 
                subject to the approval of the Board,''.
          (2) Section 10.--
                  (A) Subsection (a) of section 10 of the 
                Federal Home Loan Bank Act (12 U.S.C. 1430(a)) 
                is amended in paragraph (3), by striking 
                ``Deposits'' and inserting ``Cash or 
                deposits''.
                  (B) Subsection (c) of section 10 of the 
                Federal Home Loan Bank Act (12 U.S.C. 1430(c)) 
                is amended--
                          (i) in the 1st sentence by striking 
                        ``Board'' and inserting ``Federal home 
                        loan bank''; and
                          (ii) by striking the 2d sentence.
                  (C) Subsection (d) of section 10 of the 
                Federal Home Loan Bank Act (12 U.S.C. 1430(d)) 
                is amended--
                          (i) in the 1st sentence, by striking 
                        ``and the approval of the Board'';
                          (ii) in the last sentence, by 
                        striking ``Subject to the approval of 
                        the Board, any'' and inserting ``Any''.
                  (D) Section 10(j) of the Federal Home Loan 
                Bank Act (12 U.S.C. 1430(j)) is amended--
                          (i) in the 1st sentence of paragraph 
                        (1) by striking ``to subsidize the 
                        interest rate on advances'' and 
                        inserting ``to provide subsidies, 
                        including subsidized interest rates on 
                        advances'';
                          (ii) in paragraphs (2), (3), (4), 
                        (5), (9), (11), and (12) by striking 
                        ``advances'' and ``subsidized 
                        advances'' each place such terms appear 
                        and inserting ``subsidies, including 
                        subsidized advances'';
                          (iii) in paragraph (1), by inserting 
                        ``(A)'' before the 1st sentence, and 
                        inserting the following at the end of 
                        the paragraph:
                  ``(B) Subject to such regulations as the 
                Finance Board may prescribe, the board of 
                directors of each Federal home loan bank may 
                approve or disapprove requests from members for 
                Affordable Housing Program subsidies, and may 
                not delegate such authority.'';
                          (iv) in paragraph (2), by striking 
                        subparagraph (B) and inserting the 
                        following new subparagraph:
                  ``(B) finance the purchase, construction or 
                rehabilitation of rental housing if, for a 
                period of at least 15 years, either 20 percent 
                or more of the units in such housing are 
                occupied by and affordable for households whose 
                income is 50 percent or less of area median 
                income (as determined by the Secretary of 
                Housing and Urban Development, and as adjusted 
                for family size); or 40 percent or more of the 
                units in such housing are occupied by and 
                affordable for households whose income is 60 
                percent or less of area median income (as 
                determined by the Secretary of Housing and 
                Urban Development, and as adjusted for family 
                size).'';
                          (v) in paragraph (5)--
                                  (I) by striking the colon 
                                after ``Affordable Housing 
                                Program'';
                                  (II) by striking 
                                subparagraphs (A) and (B); and
                                  (III) by striking ``(C) In 
                                1995, and subsequent years,'';
                          (vi) in paragraph (11)--
                                  (I) by inserting ``, pursuant 
                                to a nomination process that is 
                                as broad and as participatory 
                                as possible, and giving 
                                consideration to the size of 
                                the District and the diversity 
                                of low- and moderate-income 
                                housing needs and activities 
                                within the District,'' after 
                                ``Advisory Council of 7 to 15 
                                persons'';
                                  (II) by inserting ``a diverse 
                                range of'' before ``community 
                                and nonprofit organizations''; 
                                and
                                  (III) by inserting after the 
                                1st sentence, the following new 
                                sentence: ``Representatives of 
                                no one group shall constitute 
                                an undue proportion of the 
                                membership of the Advisory 
                                Council.''; and
                          (vii) in paragraph (13), by striking 
                        subparagraph (D) and inserting the 
                        following new subparagraph:
                  ``(D) Affordable.--For purposes of paragraph 
                (2)(B), the term ``affordable'' means that the 
                rent with respect to a unit shall not exceed 30 
                percent of the income limitation underparagraph 
(2)(B) applicable to occupants of such unit.''.
  (e) Section 16.--Subsection (a) of section 16 of the Federal 
Home Loan Bank Act (12 U.S.C. 1436) is amended in the 3d 
sentence by striking ``net earnings'' and inserting 
``previously retained earnings or current net earnings''; by 
striking ``, and then only with the approval of the Federal 
Housing Finance Board''; and by striking the 4th sentence.
  (f) Section 18.--Subsection (b) of section 18 of the Federal 
Home Loan Bank Act (12 U.S.C. 1438) is amended by striking 
paragraph (4).
  (g) Section 11.--Section 11 of the Federal Home Loan Bank Act 
(12 U.S.C. 1431) is amended by inserting after subsection (j) 
(as so redesignated by section 166(e) of this subtitle) the 
following subsection:
  ``(k) Prohibition on Other Activities.--
          ``(1) A Federal home loan bank may not engage in any 
        activity other than the activities authorized under 
        this Act and activities incidental to such authorized 
        activities.
          ``(2) All activities specified in paragraph (1) are 
        subject to Finance Board approval.''.

SEC. 169. DEFINITIONS.

  Paragraph (3) of section 2 of the Federal Home Loan Bank Act 
(12 U.S.C. 1422(3)) is amended to read as follows:
          ``(3) The term ``State'' in addition to the states of 
        the United States, includes the District of Columbia, 
        Guam, Puerto Rico, the United States Virgin Islands, 
        American Samoa, and the Commonwealth of the Northern 
        Mariana Islands.''

SEC. 170. RESOLUTION FUNDING CORPORATION

  (a) In General.--Section 21B(f)(2)(C) of the Federal Home 
Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as 
follows:
                  ``(C) Payments by federal home loan banks.--
                To the extent the amounts available pursuant to 
                subparagraphs (A) and (B) are insufficient to 
                cover the amount of interest payments, each 
                Federal home loan bank shall pay to the Funding 
                Corporation each calendar year 20.75 percent of 
                the net earnings of such bank (after deducting 
                expenses relating to subsection (j) of section 
                10 and operating expenses).''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall take effect on January 1, 1999.

SEC. 171. CAPITAL STRUCTURE OF THE FEDERAL HOME LOAN BANKS.

  (a) In General.--Section 6 of the Federal Home Loan Bank Act 
(12 U.S.C. 1426) is amended to read as follows:

``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

  ``(a) Capital Structure Plan.--On or before January 1, 1999, 
the board of directors of each Federal home loan bank shall 
submit for Finance Board approval a plan establishing and 
implementing a capital structure for such bank which--
          ``(1) the board of directors determines is the best 
        suited for the condition and operation of the bank and 
        the interests of the shareholders of the bank;
          ``(2) meets the requirements of subsection (b); and
          ``(3) meets the minimum capital standards and 
        requirements established under subsection (c) and any 
        regulations prescribed by the Finance Board pursuant to 
        such subsection.
  ``(b) Contents of Plan.--The capital structure plan of each 
Federal home loan bank shall meet the following requirements:
          ``(1) Stock purchase requirements.--
                  ``(A) In general.--Each capital structure 
                plan of a Federal home loan bank shall require 
                the shareholders of the bank to maintain an 
                investment in the stock of the bank in amount 
                not less than--
                          ``(i) a minimum percentage of the 
                        total assets of the shareholder; and
                          ``(ii) a minimum percentage of the 
                        outstanding advances from the bank to 
                        the shareholder.
                  ``(B) Minimum percentage levels.--The minimum 
                percentages established pursuant to 
                subparagraph (A) shall be set at levels 
                sufficient to meet the bank's minimum capital 
                requirements established by the Finance Board 
                under subsection (c).
                  ``(C) Maximum asset based capital 
                requirement.--The asset-based capital 
                requirement applicable to any shareholder of a 
                Federal home loan bank in any year shall not 
                exceed the lesser of--
                          ``(i) 0.6 percent of a shareholder's 
                        total assets at the close of the 
                        preceding year; or
                          ``(ii) $300,000,000.
                  ``(D) Maximum advance-based requirement.--The 
                advance-based capital requirement applicable to 
                any shareholder of a Federal home loan bank 
                shall not exceed 6 percent of the total 
                outstanding advances from the bank to the 
                shareholder.
                  ``(E) Minimum stock purchase requirement 
                authorized.--A capital structure plan may 
                establish a minimum dollar amount of stock of a 
                Federal home loan bank in which a shareholder 
                shall be required to invest.
          ``(2) Adjustments to stock purchase requirements.--
        The capital structure plan adopted by each Federal home 
        loan bank shall impose a continuing obligation on the 
        board of directors of the bank to review and adjust as 
        necessary member stock purchase requirements in order 
        to ensure that the bank remains in compliance with 
        applicable minimum capital levels established by the 
        Finance Board.
          ``(3) Transition rule for stock purchase 
        requirements.--
                  ``(A) In general.--A capital structure plan 
                may allow shareholders who were members of a 
                Federal home loan bank on the date of the 
                enactment of the Financial Services Act of 1998 
                to come into compliance with the asset-based 
                stock purchase requirement established under 
                paragraph (1) during a transition period 
                established under the plan of not more than 3 
                years, if such requirement exceeds the asset-
                based stock purchase requirement in effect on 
                such date of enactment.
                  ``(B) Interim purchase requirements.--A 
                capital structure plan may establish interim 
                asset-based stock purchase requirements 
                applicable to members referred to in 
                subparagraph (A) during a transition period 
                established under subparagraph (A).
          ``(4) Classes of stock.--
                  ``(A) In general.--Each capital structure 
                plan shall afford each shareholder of a Federal 
                home loan bank the option of meeting the 
                shareholder's stock purchase requirements 
                through the purchase of any combination of 
                Class A or Class B stock.
                  ``(B) Class a stock.--Class A stock shall be 
                stock of a Federal home loan bank that shall be 
                redeemed in cash and at par by the bank no 
                later than 12 months following submission of a 
                written notice by a shareholder of the 
                shareholder's intention to divest all shares of 
                stock in the bank.
                  ``(C) Class b stock.--Class B stock shall be 
                stock of a Federal home loan bank that shall be 
                redeemed in cash and at par by the bank no 
                later than 5 years following submission of a 
                written notice by a shareholder of the 
                shareholder's intention to divest all shares of 
                stock in the bank.
                  ``(D) Rights requirement.--The Class B stock 
                of a Federal home loan bank may receive a 
                dividend premium over that paid on Class A 
                stock, and may have preferential voting rights 
                in the election of Federal home loan bank 
                directors.
                  ``(E) Lower stock purchase requirements for 
                class b stock.--A capital structure plan may 
                provide for lower stock purchase requirements 
                with respect to those shareholder's that elect 
                to purchase Class B stock in a manner that is 
                consistent with meeting the bank's own minimum 
                capital requirements as established by the 
                Finance Board.
                  ``(F) No other classes of stock permitted.--
                No class of stock other than the Class A and 
                Class B stock described in subparagraphs (B) 
                and (C) may be issued by a Federal home loan 
                bank.
          ``(5) Limited transferability of stock.--Each capital 
        structure plan shall provide that any equity securities 
        issued by the bank shall be available only to, held 
        only by, and tradable only among shareholders of the 
        bank.
  ``(c) Capital Standards.--
          ``(1) In general.--The Finance Board shall prescribe, 
        by regulation, uniform capital standards applicable to 
        each Federal home loan bank which shall include--
                  ``(A) a leverage limit in accordance with 
                paragraph (2); and
                  ``(B) a risk-based capital requirement in 
                accordance with paragraph (3).
          ``(2) Minimum leverage limit.--The leverage limit 
        established by the Finance Board shall require each 
        Federal home loan bank to maintain total capital in an 
        amount not less than 5 percent of the total assets of 
        the bank. In determining compliance with the minimum 
        leverage ratio, the amount of retainedearnings and the 
paid-in value of Class B stock, if any, shall be multiplied by 1.5 and 
such higher amount shall be deemed to be capital for purposes of 
meeting the 5 percent minimum leverage ratio.
          ``(3) Risk-based capital standard.--The risk-based 
        capital requirement shall be composed of the following 
        components:
                  ``(A) Capital sufficient to meet the credit 
                risk to which a Federal home loan bank is 
                subject, based on an amount which is not less 
                than the amount of tier 1, risk-based capital 
                required by regulations prescribed, or 
                guidelines issued under section 38 of the 
                Federal Deposit Insurance Act for a well 
                capitalized insured depository institution.
                  ``(B) Capital sufficient to meet the interest 
                rate risk to which a Federal home loan bank is 
                subject, based on an interest rate stress test 
                applied by the Finance Board that rigorously 
                tests for changes in interest rates, rate 
                volatility, and changes in the shape of the 
                yield curve.
  ``(d) Redemption of Capital.--
          ``(1) In general.--Any shareholder of a Federal home 
        loan bank shall have the right to withdraw the 
        shareholder's membership from a Federal home loan bank 
        and to redeem the shareholder's stock in accordance 
        with the redemption rights associated with the class of 
        stock the shareholder holds, if--
                  ``(A) such shareholder has filed a written 
                notice of an intention to redeem all such 
                shares; and
                  ``(B) the shareholder has no outstanding 
                advances from any Federal home loan bank at the 
                time of such redemption.
          ``(2) Partial redemption.--A shareholder who files 
        notice of intention to redeem all shares of stock in a 
        Federal home loan bank may redeem not more than 1/2 of 
        all such shares, in cash and at par, 6 months before 
        the date by which the bank is required to redeem such 
        stock pursuant to subparagraph (B) or (C) of subsection 
        (b)(4).
          ``(3) Divestiture.--The board of directors of any 
        Federal home loan bank may, after a hearing, order the 
        divestiture by any shareholder of all ownership 
        interests of such shareholder in the bank, if--
                  ``(A) in the opinion of the board of 
                directors, such shareholder has failed to 
                comply with a provision of this Act or any 
                regulation prescribed under this Act; or
                  ``(B) the shareholder has been determined to 
                be insolvent, or otherwise subject to the 
                appointment of a conservator, receiver, or 
                other legal custodian, by a State or Federal 
                authority with regulatory and supervisory 
                responsibility for such shareholder.
          ``(4) Retirement of excess stock.--Any shareholder 
        may--
                  ``(A) retire shares of Class A stock or, at 
                the option of the shareholder, shares of Class 
                B stock, or any combination of Class A and 
                Class B stock, that are excess to the minimum 
                stock purchase requirements applicable to the 
                shareholder; and
                  ``(B) receive from the Federal home loan bank 
                a prompt payment in cash equal to the par value 
                of such stock.
          ``(5) Impairment of capital.--If the Finance Board or 
        the board of directors of a Federal home loan bank 
        determines that the paid-in capital of the bank is, or 
        is likely to be, impaired as a result of losses in or 
        depreciation of the assets of the bank, the Federal 
        home loan bank shall withhold that portion of the 
        amount due any shareholder with respect to any 
        redemption or retirement of any class of stock which 
        bears the same ratio to the total of such amount as the 
        amount of the impaired capital bears to the total 
        amount of capital allocable to such class of stock.
          ``(6) Policies.--Subject to the requirements of this 
        section, the board of directors of each Federal home 
        loan bank shall promptly establish policies, consistent 
        with this Act, governing the capital stock of such bank 
        and other provisions of this section.''.

SEC. 172. INVESTMENTS.

  Subsection (j) of section 11 of the Federal Home Loan Bank 
Act (12 U.S.C. 1431) (as so redesignated by section 166(e) of 
this subtitle) is amended to read as follows:
  ``(j) Investments.--Each bank shall reduce its investments to 
those necessary for liquidity purposes, for safe and sound 
operation of the banks, or for housing finance, as administered 
by the Finance Board.''.

SEC. 173. FEDERAL HOUSING FINANCE BOARD.

  Section 2A(b)(1) of the Federal Home Loan Bank Act (12 U.S.C. 
1422(b)(1)) is amended--
          (1) by redesignating subparagraphs (A) and (B) as 
        subparagraphs (B) and (C), respectively;
          (2) by inserting before subparagraph (B) (as so 
        redesignated by paragraph (1) of this section) the 
        following new subparagraph:
                  ``(A) The Secretary of the Treasury (or the 
                Secretary of the Treasury's designee), who 
                shall serve without additional compensation.''; 
                and
          (3) in subparagraph (C) (as so redesignated by 
        paragraph (1) of this section) by striking ``Four'' and 
        inserting ``3''.

                 Subtitle H--Direct Activities of Banks

SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN MUNICIPAL 
                    BONDS

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

                  Subtitle I--Effective Date of Title

SEC. 191. 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 
                                an annual fee (payable on a 
                                monthly, quarterly, or other 
                                basis) or percentage of assets 
                                under management, or both; or
                                  ``(II) effects transactions 
                                in a fiduciary capacity in its 
                                trust department or other 
                                department that is regularly 
                                examined by bank examiners for 
                                compliance with fiduciary 
                                principles and standards and--
                                          ``(aa) is primarily 
                                        compensated on the 
                                        basis of either an 
                                        annual fee (payable on 
                                        a monthly, quarterly, 
                                        or other basis), a 
                                        percentage of assets 
                                        under management, or 
                                        both, and does not 
                                        receive brokerage 
                                        commissions or other 
                                        similar remuneration 
                                        based on effecting 
                                        transactions in 
                                        securities, other than 
                                        the cost incurred by 
                                        the bank in connection 
                                        with executing 
                                        securities transactions 
                                        for fiduciary 
                                        customers; and
                                          ``(bb) does not 
                                        publicly solicit 
                                        brokerage business, 
                                        other than by 
                                        advertising that it 
                                        effects transactions in 
                                        securities in 
                                        conjunction with 
                                        advertising its other 
                                        trust activities.
                          ``(iii) Permissible securities 
                        transactions.--The bank effects 
                        transactions in--
                                  ``(I) commercial paper, 
                                bankers acceptances, or 
                                commercial bills;
                                  ``(II) exempted securities;
                                  ``(III) qualified Canadian 
                                government obligations as 
                                defined in section 5136 of the 
                                Revised Statutes, in conformity 
                                with section 15C of this title 
                                and the rules and regulations 
                                thereunder, or obligations of 
                                the North American Development 
                                Bank; or
                                  ``(IV) any standardized, 
                                credit enhanced debt security 
                                issued by a foreign government 
                                pursuant to the March 1989 plan 
                                of then Secretary of the 
                                Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank 
                                loans.
                          ``(iv) Certain stock purchase 
                        plans.--
                                  ``(I) In general.--The bank 
                                effects transactions, as part 
                                of its transfer agency 
                                activities, in--
                                          ``(aa) the securities 
                                        of an issuer as part of 
                                        any pension, 
                                        retirement, profit-
                                        sharing, bonus, thrift, 
                                        savings, incentive, or 
                                        other similar benefit 
                                        plan for the employees 
                                        of that issuer or its 
                                        subsidiaries, if the 
                                        bank does not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan;
                                          ``(bb) the securities 
                                        of an issuer as part of 
                                        that issuer's dividend 
                                        reinvestment plan, if 
                                        the bank does not--
                                                  ``(AA) 
                                                solicit 
                                                transactions or 
                                                provide 
                                                investment 
                                                advice with 
                                                respect tothe 
purchase or sale of securities in connection with the plan;
                                                  ``(BB) net 
                                                shareholders' 
                                                buy and sell 
                                                orders, other 
                                                than for 
                                                programs for 
                                                odd-lot holders 
                                                or plans 
                                                registered with 
                                                the Commission; 
                                                or
                                          ``(cc) the securities 
                                        of an issuer as part of 
                                        a plan or program for 
                                        the purchase or sale of 
                                        that issuer's shares, 
                                        if--
                                                  ``(AA) the 
                                                bank does not 
                                                solicit 
                                                transactions or 
                                                provide 
                                                investment 
                                                advice with 
                                                respect to the 
                                                purchase or 
                                                sale of 
                                                securities in 
                                                connection with 
                                                the plan or 
                                                program;
                                                  ``(BB) the 
                                                bank does not 
                                                net 
                                                shareholders' 
                                                buy and sell 
                                                orders, other 
                                                than for 
                                                programs for 
                                                odd-lot holders 
                                                or plans 
                                                registered with 
                                                the Commission; 
                                                and
                                                  ``(CC) the 
                                                bank's 
                                                compensation 
                                                for such plan 
                                                or program 
                                                consists of 
                                                administration 
                                                fees, or flat 
                                                or capped per 
                                                order 
                                                processing 
                                                fees, or both, 
                                                plus the cost 
                                                incurred by the 
                                                bank in 
                                                connection with 
                                                executing 
                                                securities 
                                                transactions 
                                                resulting from 
                                                such plan or 
                                                program.
                                  ``(II) Permissible delivery 
                                of materials.--The exception to 
                                being considered a broker for a 
                                bank engaged in activities 
                                described in subclause (I) will 
                                not be affected by a bank's 
                                delivery of written or 
                                electronic plan materials to 
                                employees of the issuer, 
                                shareholders of the issuer, or 
                                members of affinity groups of 
                                the issuer, so long as such 
                                materials are--
                                          ``(aa) comparable in 
                                        scope or nature to that 
                                        permitted by the 
                                        Commission as of the 
                                        date of the enactment 
                                        of the Financial 
                                        Services Act of 1998; 
                                        or
                                          ``(bb) otherwise 
                                        permitted by the 
                                        Commission.
                          ``(v) Sweep accounts.--The bank 
                        effects transactions as part of a 
                        program for the investment or 
                        reinvestment of bank deposit funds into 
                        any no-load, open-end management 
                        investment company registered under the 
                        Investment Company Act of 1940 that 
                        holds itself out as a money market 
                        fund.
                          ``(vi) Affiliate transactions.--The 
                        bank effects transactions for the 
                        account of any affiliate of the bank 
                        (as defined in section 2 of the Bank 
                        Holding Company Act of 1956) other 
                        than--
                                  ``(I) a registered broker or 
                                dealer; or
                                  ``(II) an affiliate that is 
                                engaged in merchant banking, as 
                                described in section 6(c)(3)(H) 
                                of the Bank Holding company Act 
                                of 1956.
                          ``(vii) Private securities 
                        offerings.--The bank--
                                  ``(I) effects sales as part 
                                of a primary offering of 
                                securities not involving a 
                                public offering, pursuant to 
                                section 3(b), 4(2), or 4(6) of 
                                the Securities Act of 1933 or 
                                the rules and regulations 
                                issued thereunder;
                                  ``(II) at any time after one 
                                year after the date of 
                                enactment of the Financial 
                                Services Act of 1998, 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 
                        activities.--
                                  ``(I) In general.--The bank, 
                                as part of customary banking 
                                activities--
                                          ``(aa) provides 
                                        safekeeping or custody 
                                        services with respect 
                                        to securities, 
                                        including the exercise 
                                        of warrants and other 
                                        rights on behalf of 
                                        customers;
                                          ``(bb) facilitates 
                                        the transfer of funds 
                                        or securities, as a 
                                        custodian or a clearing 
                                        agency, in connection 
                                        with the clearance and 
                                        settlement of its 
                                        customers' transactions 
                                        in securities;
                                          ``(cc) effects 
                                        securities lending or 
                                        borrowing transactions 
                                        with or on behalf of 
                                        customers as part of 
                                        services provided to 
                                        customers pursuant to 
                                        division (aa) or (bb) 
                                        or invests cash 
                                        collateral pledged in 
                                        connection with such 
                                        transactions; or
                                          ``(dd) holds 
                                        securities pledged by a 
                                        customer to another 
                                        person or securities 
                                        subject to purchase or 
                                        resale agreements 
                                        involving a customer, 
                                        or facilitates the 
                                        pledging or transfer of 
                                        such securities by book 
                                        entry or as otherwise 
                                        provided under 
                                        applicable law.
                                  ``(II) Exception for carrying 
                                broker activities.--The 
                                exception to being considered a 
                                broker for a bank engaged in 
                                activities described 
insubclause (I) shall not apply if the bank, in connection with such 
activities, acts in the United States as a carrying broker (as such 
term, and different formulations thereof, are used in section 15(c)(3) 
and the rules and regulations thereunder) for any broker or dealer, 
unless such carrying broker activities are engaged in with respect to 
government securities (as defined in paragraph (42) of this 
subsection).
                          ``(ix) Banking products.--The bank 
                        effects transactions in traditional 
                        banking products, as defined in section 
                        206(a) of the Financial Services Act of 
                        1998.
                          ``(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) Broker dealer execution.--The exception 
                to being considered a broker for a bank engaged 
                in activities described in clauses (ii), (iv), 
                and (viii) of subparagraph (B) shall not apply 
                if the activities described in such provisions 
                result in the trade in the United States of any 
                security that is a publicly traded security in 
                the United States, unless--
                          ``(i) the bank directs such trade to 
                        a registered or broker dealer for 
                        execution;
                          ``(ii) the trade is a cross trade or 
                        other substantially similar trade of a 
                        security that--
                                  ``(I) is made by the bank or 
                                between the bank and an 
                                affiliated fiduciary; and
                                  ``(II) is not in 
                                contravention of fiduciary 
                                principles established under 
                                applicable Federal or State 
                                law; or
                          ``(iii) the trade is conducted in 
                        some other manner permitted under 
                        rules, regulations, or orders as the 
                        Commission may prescribe or issue.
                  ``(D) No effect of bank exemptions on other 
                commission authority.--The exception to being 
                considered a broker for a bank engaged in 
                activities described in subparagraphs (B) and 
                (C) shall not affect the commission's authority 
                under any other provision of this Act or any 
                other securities law.
                  ``(E) Fiduciary capacity.--For purposes of 
                subparagraph (B)(ii), the term `fiduciary 
                capacity' means--
                          ``(i) in the capacity as trustee, 
                        executor, administrator, registrar of 
                        stocks and bonds, transfer agent, 
                        guardian, assignee, receiver, or 
                        custodian under a uniform gift to minor 
                        act, or as an investment adviser if the 
                        bank receives a fee for its investment 
                        advice;
                          ``(ii) in any capacity in which the 
                        bank possesses investment discretion on 
                        behalf of another; or
                          ``(iii) in any other similar 
                        capacity.
                  ``(F) Exception for entities subject to 
                section 15(e).--The term `broker' does not 
                include a bank that--
                          ``(i) was, immediately prior to the 
                        enactment of the Financial Services Act 
                        of 1998, 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;
                                  ``(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) Banking products.--The bank 
                        buys or sells traditional banking 
                        products, as defined in section 206(a) 
                        of the Financial Services Act of 1998.
                          ``(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. SALES PRACTICES AND COMPLAINT PROCEDURES.

  Section 18 of the Federal Deposit Insurance Act is amended by 
adding at the end the following new subsection:
  ``(s) Sales Practices and Complaint Procedures With Respect 
to Bank Securities Activities.--
          ``(1) Regulations Required.--Each Federal banking 
        agency shall prescribe and publish in finalform, not 
later than 6 months after the date of enactment of the Financial 
Services Act of 1998, regulations which apply to retail transactions, 
solicitations, advertising, or offers of any security by any insured 
depository institution or any affiliate thereof other than a registered 
broker or dealer or an individual acting on behalf of such a broker or 
dealer who is an associated person of such broker or dealer. Such 
regulations shall include--
                  ``(A) requirements that sales practices 
                comply with just and equitable principles of 
                trade that are substantially similar to the 
                Rules of Fair Practice of the National 
                Association of Securities Dealers; and
                  ``(B) requirements prohibiting (i) 
                conditioning an extension of credit on the 
                purchase or sale of a security; and (ii) any 
                conduct leading a customer to believe that an 
                extension of credit is conditioned upon the 
                purchase or sale of a security.
          ``(2) 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, including a complaint alleging 
        a violation of the regulations prescribed under 
        paragraph (1), but excluding a complaint involving an 
        individual acting on behalf of such a broker or dealer 
        who is an associated person of such broker or dealer. 
        The use of any such procedures and facilities by such a 
        customer shall be at the election of the customer. Such 
        procedures shall include provisions to refer a 
        complaint alleging fraud to the Securities and Exchange 
        Commission and appropriate State securities 
        commissions.
          ``(3) Required actions.--The actions required by the 
        Federal banking agencies under paragraph (2) 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, and permitting customers to 
                investigate, such complaints;
                  ``(C) developing and establishing procedures 
                for informing customers of the rights they may 
                have in connection with such complaints;
                  ``(D) developing and establishing procedures 
                that allow customers a period of at least 6 
                years to make complaints and that do not 
                require customers to pay the costs of the 
                proceeding; and
                  ``(E) developing and establishing procedures 
                for resolving such complaints, including 
                procedures for the recovery of losses to the 
                extent appropriate.
          ``(4) Consultation and joint regulations.--The 
        Federal banking agencies shall consult with each other 
        and prescribe joint regulations pursuant to paragraphs 
        (1) and (2), after consultation with the Securities and 
        Exchange Commission.
          ``(5) 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.
          ``(6) Definition.--As used in this subsection--
                  ``(A) the term `security' has the meaning 
                provided in section 3(a)(10) of the Securities 
                Exchange Act of 1934;
                  ``(B) the term `registered broker or dealer' 
                has the meaning provided in section 3(a)(48) of 
                such Act; and
                  ``(C) the term `associated person' has the 
                meaning provided in section 3(a)(18) of such 
                Act.''.

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. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

  (a) Definition of Traditional Banking Product.--
          (1) In general.--For purposes of paragraphs (4) and 
        (5) of section 3(a) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78c(a)(4), (5)), the term `traditional 
        banking product' means--
                  (A) a deposit account, savings account, 
                certificate of deposit, or other deposit 
                instrument issued by a bank;
                  (B) a banker's acceptance;
                  (C) a letter of credit issued or loan made by 
                a bank;
                  (D) a debit account at a bank arising from a 
                credit card or similar arrangement;
                  (E) 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) to other persons that--
                                  ``(I) have the opportunity to 
                                review and assess any material 
                                information, including 
                                information regarding the 
                                borrower's creditworthiness; 
                                and
                                  ``(II) based on such factors 
                                as financial sophistication, 
                                net worth, and knowledge and 
                                experience in financial 
                                matters, have the capability to 
                                evaluate the information 
                                available, as determined under 
                                generally applicable banking 
                                standards or guidelines; or
                  (F) any derivative instrument, whether or not 
                individually negotiated, involving or relating 
                to--
                          (i) foreign currencies, except 
                        options on foreign currencies that 
                        trade on a national securities 
                        exchange;
                          (ii) interest rates, except interest 
                        rate derivative instruments (I) that 
                        are based on a security; or (II) that 
                        provide for the delivery of one or more 
                        securities; or
                          (iii) commodities, other rates, 
                        indices, or other assets, except 
                        derivative instruments that are 
                        securities or that provide for the 
                        delivery of one or more securities.
          (2) Classification limited.--Classification of a 
        particular product as a traditional banking product 
        pursuant to this subsection shall not be construed as 
        finding or implying that such product is oris 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.
          (3) Definitions.--For purposes of this subsection--
                  (A) the term ``bank'' has the meaning 
                provided in section 3(a)(6) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78c(a)(6);
                  (B) the term ``qualified investor'' has the 
                meaning provided in section 3(a)(55) of such 
                Act; and
                  (C) the term ``Federal banking agency'' has 
                the meaning provided in section 3(z) of the 
                Federal Deposit Insurance Act (12 U.S.C. 
                1813(z)).
  (b) Treatment of New Banking Products for Purposes of Broker/
Dealer Requirements.--Section 15 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78o) is amended by adding at the end the 
following new subsection:
  ``(i) Rulemaking to Extend Requirements to New Banking 
Products.--
          ``(1) Limitation.--The Commission shall not--
                  ``(A) require a bank to register as a broker 
                or dealer under this section because the bank 
                engages in any transaction in, or buys or 
                sells, a new banking product; or
                  ``(B) bring an action against a bank for a 
                failure to comply with a requirement described 
                in subparagraph (A);
        unless the Commission has imposed such requirement by 
        rule or regulation issued in accordance with this 
        section.
          ``(2) Criteria for rulemaking.--The Commission shall 
        not impose a requirement under paragraph (1) of this 
        subsection with respect to any new banking product 
        unless the Commission determines that--
                  ``(A) the new banking product is a security; 
                and
                  ``(B) imposing such requirement is necessary 
                or appropriate in the public interest and for 
                the protection of investors, consistent with 
                the requirements of section 3(f).
          ``(3) New banking product.--For purposes of this 
        subsection, the term `new banking product' means a 
        product that--
                  ``(A) was not subjected to regulation by the 
                Commission as a security prior to the date of 
                enactment of this subsection; and
                  ``(B) is not a traditional banking product, 
                as such term is defined in section 206(a) of 
                the Financial Services Act of 1998.
          ``(4) Consultation.--In promulgating rules under this 
        subsection, the Commission shall consult with and 
        consider the views of the appropriate regulatory 
        agencies concerning the proposed rule and the impact on 
        the banking industry.''.

SEC. 207. 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) 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 
                traditional banking product, as defined in 
                section 206(a) of the Financial Services Act of 
                1998.
                  ``(B) Classification limited.-- 
                Classification of a particular contract as a 
                derivative instrument pursuant to this 
                paragraph shall not be construed as finding or 
                implying that such instrument is or is not a 
                security for any purpose under the securities 
                laws, or is or is not an account, agreement, 
                contract, or transaction for any purpose under 
                the Commodity Exchange Act.
          ``(55) Qualified investor.--
                  ``(A) Definition.--For purposes of this title 
                and section 206(a)(1)(E) of the Financial 
                Services Act of 1998, 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 qualifications defined.--For 
                purposes of paragraphs (4)(B)(vii) and 
                (5)(C)(iii) of this subsection, and section 
                206(a)(1)(E) of the Financial Services Act of 
                1998, the term `qualified investor' also 
                means--
                          ``(i) any corporation, company, or 
                        partnership that owns and invests on a 
                        discretionary basis, not less than 
                        $10,000,000 in investments;
                          ``(ii) any natural person who owns 
                        and invests on a discretionary basis, 
                        not less than $10,000,000 in 
                        investments;
                          ``(iii) any government or political 
                        subdivision, agency, or instrumentality 
                        of a government who owns and invests on 
                        a discretionary basis not less than 
                        $50,000,000 in investments; or
                          ``(iv) any multinational or 
                        supranational entity or any agency or 
                        instrumentality thereof.
                  ``(C) 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. 208. GOVERNMENT SECURITIES DEFINED.

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

SEC. 209. EFFECTIVE DATE.

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

             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 suchrules, 
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 reason of 
        the fact that such person is an underwriter for one or 
        more investment companies.''.

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

  Section 2(a)(11) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(11)) is amended to read as follows:
          ``(11) The term `dealer' has the same meaning 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 isnot 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) Elective supervision of an investment bank 
        holding company not having a bank or savings 
        association affiliate.--
                  ``(A) In general.--An investment bank holding 
                company that is not--
                          ``(i) an affiliate of a wholesale 
                        financial institution, an insured bank 
                        (other than an institution described in 
                        subparagraph (D), (F), or (G) of 
                        section 2(c)(2), or held under section 
                        4(f), of the BankHolding Company Act of 
1956), or a savings association,
                          ``(ii) a foreign bank, foreign 
                        company, or company that is described 
                        in section 8(a) of the International 
                        Banking Act of 1978, or
                          ``(iii) a foreign bank that controls, 
                        directly or indirectly, a corporation 
                        chartered under section 25A of the 
                        Federal Reserve Act,
                may elect to become supervised by filing with 
                the Commission a notice of intention to become 
                supervised, pursuant to subparagraph (B) of 
                this paragraph. Any investment bank holding 
                company filing such a notice shall be 
                supervised in accordance with this section and 
                comply with the rules promulgated by the 
                Commission applicable to supervised investment 
                bank holding companies.
                  ``(B) Notification of status as a supervised 
                investment bank holding company.--An investment 
                bank holding company that elects under 
                subparagraph (A) to become supervised by the 
                Commission shall file with the Commission a 
                written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents 
                concerning such investment bank holding company 
                as the Commission, by rule, may prescribe as 
                necessary or appropriate in furtherance of the 
                purposes of this section. Unless the Commission 
                finds that such supervision is not necessary or 
                appropriate in furtherance of the purposes of 
                this section, such supervision shall become 
                effective 45 days after receipt of such written 
                notice by the Commission or within such shorter 
                time period as the Commission, by rule or 
                order, may determine.
          ``(2) Election not to be supervised by the commission 
        as an investment bank holding company.--
                  ``(A) Voluntary withdrawal.--A supervised 
                investment bank holding company that is 
                supervised pursuant to paragraph (1) may, upon 
                such terms and conditions as the Commission 
                deems necessary or appropriate, elect not to be 
                supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become 
                effective until 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.--If the Commission finds that any 
                supervised investment bank holding company that 
                is supervised pursuant to paragraph (1) is no 
                longer in existence or has ceased to be an 
                investment bank holding company, or if the 
                Commission finds that continued supervision of 
                such a supervised investment bank holding 
                company is not consistent with the purposes of 
                this section, the Commission may discontinue 
                the supervision pursuant to a rule or order, if 
                any, promulgated by the Commission under this 
                section.
          ``(3) Supervision of investment bank holding 
        companies.--
                  ``(A) Recordkeeping and reporting.--
                          ``(i) In general.--Every supervised 
                        investment bank holding company and 
                        each affiliate thereof shall make and 
                        keep for prescribed periods such 
                        records, furnish copies thereof, and 
                        make such reports, as the Commission 
                        may require by rule, in order to keep 
                        the Commission informed as to--
                                  ``(I) the company's or 
                                affiliate's activities, 
                                financial condition, policies, 
                                systems for monitoring and 
                                controlling financial and 
                                operational risks, and 
                                transactions and relationships 
                                between any broker or dealer 
                                affiliate of the supervised 
                                investment bank holding 
                                company; and
                                  ``(II) the extent to which 
                                the company or affiliate has 
                                complied with the provisions of 
                                this Act and regulations 
                                prescribed and orders issued 
                                under this Act.
                          ``(ii) Form and contents.--Such 
                        records and reports shall be prepared 
                        in such form and according to such 
                        specifications (including certification 
                        by an independent public accountant), 
                        as the Commission may require and shall 
                        be providedpromptly at any time upon 
request by the Commission. Such records and reports may include--
                                  ``(I) a balance sheet and 
                                income statement;
                                  ``(II) an assessment of the 
                                consolidated capital of the 
                                supervised investment bank 
                                holding company;
                                  ``(III) an independent 
                                auditor's report attesting to 
                                the supervised investment bank 
                                holding company's compliance 
                                with its internal risk 
                                management and internal control 
                                objectives; and
                                  ``(IV) reports concerning the 
                                extent to which the company or 
                                affiliate has complied with the 
                                provisions of this title and 
                                any regulations prescribed and 
                                orders issued under this title.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Commission 
                        shall, to the fullest extent possible, 
                        accept reports in fulfillment of the 
                        requirements under this paragraph that 
                        the supervised investment bank holding 
                        company or its affiliates have been 
                        required to provide to another 
                        appropriate regulatory agency or self-
                        regulatory organization.
                          ``(ii) Availability.--A supervised 
                        investment bank holding company or an 
                        affiliate of such company shall provide 
                        to the Commission, at the request of 
                        the Commission, any report referred to 
                        in clause (i).
                  ``(C) Examination authority.--
                          ``(i) Focus of examination 
                        authority.--The Commission may make 
                        examinations of any supervised 
                        investment bank holding company and any 
                        affiliate of such company in order to--
                                  ``(I) inform the Commission 
                                regarding--
                                          ``(aa) the nature of 
                                        the operations and 
                                        financial condition of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates;
                                          ``(bb) the financial 
                                        and operational risks 
                                        within the supervised 
                                        investment bank holding 
                                        company that may affect 
                                        any broker or dealer 
                                        controlled by such 
                                        supervised investment 
                                        bank holding company; 
                                        and
                                          ``(cc) the systems of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates for 
                                        monitoring and 
                                        controlling those 
                                        risks; and
                                  ``(II) monitor compliance 
                                with the provisions of this 
                                subsection, provisions 
                                governing transactions and 
                                relationships between any 
                                broker or dealer affiliated 
                                with the supervised investment 
                                bank holding company and any of 
                                the company's other affiliates, 
                                and applicable provisions of 
                                subchapter II of chapter 53, 
                                title 31, United States Code 
                                (commonly referred to as the 
                                `Bank Secrecy Act') and 
                                regulations thereunder.
                          ``(ii) Restricted focus of 
                        examinations.--The Commission shall 
                        limit the focus and scope of any 
                        examination of a supervised investment 
                        bank holding company to--
                                  ``(I) the company; and
                                  ``(II) any affiliate of the 
                                company that, because of its 
                                size, condition, or activities, 
                                the nature or size of the 
                                transactions between such 
                                affiliate and any affiliated 
                                broker or dealer, or the 
                                centralization of functions 
                                within the holding company 
                                system, could, in the 
                                discretion of the Commission, 
                                have a materially adverse 
                                effect on the operational or 
                                financial condition of the 
                                broker or dealer.
                          ``(iii) Deference to other 
                        examinations.--For purposes of this 
                        subparagraph, the Commission shall, to 
                        the fullest extent possible, use the 
                        reports of examination of an 
                        institution described in subparagraph 
                        (D), (F), or (G) of section 2(c)(2), or 
                        held under section 4(f), of the Bank 
                        Holding Company Act of 1956 made by the 
                        appropriate regulatory agency, or of a 
                        licensed insurance company made by the 
                        appropriate State insurance regulator.
          ``(4) Holding company capital.--
                  ``(A) Authority.--If the Commission finds 
                that it is necessary to adequately supervise 
                investment bank holding companies and their 
                broker or dealer affiliates consistent with the 
                purposes of this subsection, the Commission may 
                adopt capital adequacy rules for supervised 
                investment bank holding companies.
                  ``(B) Method of calculation.--In developing 
                rules under this paragraph:
                          ``(i) Double leverage.--The 
                        Commission shall consider the use by 
                        the supervised investment bank holding 
                        company of debt and other liabilities 
                        to fund capital investments in 
                        affiliates.
                          ``(ii) No unweighted capital ratio.--
                        The Commission shall not impose under 
                        this section a capital ratio that is 
                        not based on appropriate risk-weighting 
                        considerations.
                          ``(iii) No capital requirement on 
                        regulated entities.--The Commission 
                        shall not, by rule, regulation, 
                        guideline, order or otherwise, impose 
                        any capital adequacy provision on a 
                        nonbanking affiliate (other than a 
                        broker or dealer) that is in compliance 
                        with applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance authority.
                          ``(iv) Appropriate exclusions.--The 
                        Commission shall take full account of 
                        the applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance regulator.
                  ``(C) Internal risk management models.--The 
                Commission may incorporate internal risk 
                management models into its capital adequacy 
                rules for supervised investment bank holding 
                companies.
          ``(5) Functional regulation of banking and insurance 
        activities of supervised investment bank holding 
        companies.--The Commission shall defer to--
                  ``(A) the appropriate regulatory agency with 
                regard to all interpretations of, and the 
                enforcement of, applicable banking laws 
                relating to the activities, conduct, ownership, 
                and operations of banks, and institutions 
                described in subparagraph (D), (F), and (G) of 
                section 2(c)(2), or held under section 4(f), of 
                the Bank Holding Company Act of 1956; and
                  ``(B) the appropriate State insurance 
                regulators with regard to all interpretations 
                of, and the enforcement of, applicable State 
                insurance laws relating to the activities, 
                conduct, and operations of insurance companies 
                and insurance agents.
          ``(6) Definitions.--For purposes of this subsection--
                  ``(A) The term `investment bank holding 
                company' means--
                          ``(i) any person other than a natural 
                        person that owns or controls one or 
                        more brokers or dealers; and
                          ``(ii) the associated persons of the 
                        investment bank holding company.
                  ``(B) The term `supervised investment bank 
                holding company' means any investment bank 
                holding company that is supervised by the 
                Commission pursuant to this subsection.
                  ``(C) The terms `affiliate', `bank', `bank 
                holding company', `company', `control', and 
                `savings association' have the meanings given 
                to those terms in section 2 of the Bank Holding 
                Company Act of 1956 (12 U.S.C. 1841).
                  ``(D) The term `insured bank' has the meaning 
                given to that term in section 3 of the Federal 
                Deposit Insurance Act.
                  ``(E) The term `foreign bank' has the meaning 
                given to that term in section 1(b)(7) of the 
                International Banking Act of 1978.
                  ``(F) The terms ``person associated with an 
                investment bank holding company' and 
                ``associated person of an investment bank 
                holding company' means any person directly or 
                indirectly controlling, controlled by, or under 
                common control with, an investment bank holding 
                company.
  ``(j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission 
shall not be compelled to disclose any information required to 
be reported under subsection (h) or (i) or any information 
supplied to the Commission by any domestic or foreign 
regulatory agency that relates to the financial or operational 
condition of any associated person of a broker or dealer, 
investment bank holding company, or any affiliate of an 
investment bank holding company. Nothing in this subsection 
shall authorize the Commissionto withhold information from 
Congress, or prevent the Commission from complying with a request for 
information from any other Federal department or agency or any self-
regulatory organization requesting the information for purposes within 
the scope of its jurisdiction, or complying with an order of a court of 
the United States in an action brought by the United States or the 
Commission. For purposes of section 552 of title 5, United States Code, 
this subsection shall be considered a statute described in subsection 
(b)(3)(B) of such section 552. In prescribing regulations to carry out 
the requirements of this subsection, the Commission shall designate 
information described in or obtained pursuant to subparagraphs (A), 
(B), and (C) of subsection (i)(5) as confidential information for 
purposes of section 24(b)(2) of this title.''.
  (b) Conforming Amendments.--
          (1) Section 3(a)(34) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78c(a)(34)) is amended by adding at 
        the end the following new subparagraphs:
                  ``(H) When used with respect to an 
                institution described in subparagraph (D), (F), 
                or (G) of section 2(c)(2), or held under 
                section 4(f), of the Bank Holding Company Act 
                of 1956--
                          ``(i) the Comptroller of the 
                        Currency, in the case of a national 
                        bank or a bank in the District of 
                        Columbia examined by the Comptroller of 
                        the Currency;
                          ``(ii) the Board of Governors of the 
                        Federal Reserve System, in the case of 
                        a State member bank of the Federal 
                        Reserve System or any corporation 
                        chartered under section 25A of the 
                        Federal Reserve Act;
                          ``(iii) the Federal Deposit Insurance 
                        Corporation, in the case of any other 
                        bank the deposits of which are insured 
                        in accordance with the Federal Deposit 
                        Insurance Act; or
                          ``(iv) the Commission in the case of 
                        all other such institutions.''.
          (2) Section 1112(e) of the Right to Financial Privacy 
        Act of 1978 (12 U.S.C. 3412(e)) is amended--
                  (A) by striking ``this title'' and inserting 
                ``law''; and
                  (B) by inserting ``, examination reports'' 
                after ``financial records''.

                           Subtitle D--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 as 
required by the appropriate insurance regulator of such State 
in accordance with the relevant State insurance law, subject to 
section 104 of this Act.

SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

  The insurance sales activity of any person or entity shall be 
functionally regulated by the States, subject to section 104 of 
this Act.

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 bankmay 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, surety bonds, life insurance, 
                health insurance, title insurance, and property 
                and casualty insurance (such as private 
                passenger or commercial automobile, homeowners, 
                mortgage, commercial multiperil, general 
                liability, professional liability, workers' 
                compensation, fire and allied lines, farm 
                owners multiperil, aircraft, fidelity, surety, 
                medical malpractice, ocean marine, inland 
                marine, and boiler and machinery insurance); 
                and
                  (B) is not a product or service of a bank 
                that is--
                          (i) a deposit product;
                          (ii) a loan, discount, letter of 
                        credit, or other extension of credit;
                          (iii) a trust or other fiduciary 
                        service;
                          (iv) a qualified financial contract 
                        (as defined in or determined pursuant 
                        to section 11(e)(8)(D)(i) of the 
                        Federal Deposit Insurance Act); or
                          (v) a financial guaranty, except that 
                        this subparagraph (B) shall not apply 
                        to a product that includes an insurance 
                        component such that if the product is 
                        offered or proposed to be offered by 
                        the bank as principal--
                                  (I) it would be treated as a 
                                life insurance contract under 
                                section 7702 of the Internal 
                                Revenue Code of 1986, 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 subsidiarywas 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) Filing in Court of Appeal.--In the case of a regulatory 
conflict between a State insurance regulator and a Federal 
regulator as to whether any product is or is not insurance as 
defined in section 304(c) of this Act, or whether a State 
statute, regulation, order, or interpretation regarding any 
insurance sales or solicitation activity is properly treated as 
preempted under Federal law, either regulator may seek 
expedited judicial review of such determination by the United 
States Court of Appeals for the circuit in which the State is 
located or in the United States Court of Appeals for the 
District of Columbia Circuit by filing a petition for review in 
such court.
  (b) Expedited Review.--The United States court of appeals in 
which a petition for review is filed in accordance with 
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 
under this section 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.

SEC. 308. CONSUMER PROTECTION REGULATIONS.

  (a) Regulations Required.--
          (1) In general.--The Federal Deposit Insurance Act 
        (12 U.S.C. 1811 et seq.) is amended by adding at the 
        end the following new section:

``SEC. 45. CONSUMER PROTECTION REGULATIONS.

  ``(a) Regulations Required.--
          ``(1) In general.--The Federal banking agencies shall 
        prescribe and publish in final form, before the end of 
        the 1-year period beginning on the date of the 
        enactment of this Act, consumer protection regulations 
        (which the agencies jointly determine to be 
        appropriate) that--
                  ``(A) apply to retail sales, solicitations, 
                advertising, or offers of any insurance product 
                by any insured depository institution or 
                wholesale financial institution or any person 
                who is engaged in such activities at an office 
                of the institution or on behalf of the 
                institution; and
                  ``(B) are consistent with the requirements of 
                this Act and provide such additional 
                protections for consumers to whom such sales, 
                solicitations, advertising, or offers are 
                directed as the agency determines to be 
                appropriate.
          ``(2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiaries ofan insured depository 
institution, as deemed appropriate by the regulators referred to in 
paragraph (3), where such extension is determined to be necessary to 
ensure the consumer protections provided by this section.
          ``(3) Consultation and joint regulations.--The 
        Federal banking agencies shall consult with each other 
        and prescribe joint regulations pursuant to paragraph 
        (1), after consultation with the State insurance 
        regulators, as appropriate.
  ``(b) Sales Practices.--The regulations prescribed pursuant 
to subsection (a) shall include anticoercion rules applicable 
to the sale of insurance products which prohibit an insured 
depository institution from engaging in any practice that would 
lead a consumer to believe an extension of credit, in violation 
of section 106(b) of the Bank Holding Company Act Amendments of 
1970, is conditional upon--
          ``(1) the purchase of an insurance product from the 
        institution or any of its affiliates or 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.
                          ``(iii) Coercion.--The approval of an 
                        extension of credit may not be 
                        conditioned on--
                                  ``(I) the purchase of an 
                                insurance product from the 
                                institution in which the 
                                application for credit is 
                                pending or any of its 
                                affiliates or subsidiaries; or
                                  ``(II) an agreement by the 
                                consumer not to obtain, or a 
                                prohibition on the consumer 
                                from obtaining, an insurance 
                                product from an unaffiliated 
                                entity.
                  ``(B) Making disclosure readily 
                understandable.--Regulations prescribed under 
                subparagraph (A) shall encourage the use of 
                disclosure that is conspicuous, simple, direct, 
                and readily understandable, such as the 
                following:
                          ``(i) `NOT FDIC-INSURED'.
                          ``(ii) `NOT GUARANTEED BY THE BANK'.
                          ``(iii) `MAY GO DOWN IN VALUE'.
                  ``(C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements 
                under subparagraphs (A) and (D), necessary 
                adjustments shall be made for purchase in 
                person, by telephone, or by electronic media to 
                provide for the most appropriate and complete 
                form of disclosure and acknowledgments.
                  ``(D) Consumer acknowledgment.--A requirement 
                that an insured depository institution shall 
                require any person selling an insurance product 
                at any office of, or on behalf of, the 
                institution to obtain, at the time a consumer 
                receives the disclosures required under this 
                paragraph or at the time of the initial 
                purchase by the consumer of such product, an 
                acknowledgment by such consumer of the receipt 
                of the disclosure required under this 
                subsection with respect to such product.
          ``(2) Prohibition on misrepresentations.--A 
        prohibition on any practice, or any advertising, at any 
        office of, or on behalf of, the insured depository 
        institution, or any subsidiary as appropriate, which 
        could mislead any person or otherwise cause a 
        reasonable person to reach an erroneous belief with 
        respect to--
                  ``(A) the uninsured nature of any insurance 
                product sold, or offered for sale, by the 
                institution or any subsidiary of the 
                institution; 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.
                  ``(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) In general.--In the case of an applicant for, 
        or an insured under, any insurance product described in 
        paragraph (2), the status of the applicant or insured 
        as a victim of domestic violence, or as a provider of 
        services to victims of domestic violence, shall not be 
        considered as a criterion in any decision with regard 
        to insurance underwriting, pricing, renewal, or scope 
        of coverage of insurance policies, orpayment of 
insurance claims, except as required or expressly permitted under State 
law.
          ``(2) Scope of application.--The prohibition 
        contained in paragraph (1) shall apply to any insurance 
        product which is sold or offered for sale, as 
        principal, agent, or broker, by any insured depository 
        institution or any person who is engaged in such 
        activities at an office of the institution or on behalf 
        of the institution.
          ``(3) Sense of the congress.--It is the sense of the 
        Congress that, by the end of the 30-month period 
        beginning on the date of the enactment of this Act, the 
        States should enact prohibitions against discrimination 
        with respect to insurance products that are at least as 
        strict as the prohibitions contained in paragraph (1).
          ``(4) Domestic violence defined.--For purposes of 
        this subsection, the term `domestic violence' means the 
        occurrence of 1 or more of the following acts by a 
        current or former family member, household member, 
        intimate partner, or caretaker:
                  ``(A) Attempting to cause or causing or 
                threatening another person physical harm, 
                severe emotional distress, psychological 
                trauma, rape, or sexual assault.
                  ``(B) Engaging in a course of conduct or 
                repeatedly committing acts toward another 
                person, including following the person without 
                proper authority, under circumstances that 
                place the person in reasonable fear of bodily 
                injury or physical harm.
                  ``(C) Subjecting another person to false 
                imprisonment.
                  ``(D) Attempting to cause or cause damage to 
                property so as to intimidate or attempt to 
                control the behavior of another person.
  ``(f) Consumer Grievance Process.--The Federal banking 
agencies shall jointly establish a consumer complaint 
mechanism, for receiving and expeditiously addressing consumer 
complaints alleging a violation of regulations issued under the 
section, which shall--
          ``(1) establish a group within each regulatory agency 
        to receive such complaints;
          ``(2) develop procedures for investigating such 
        complaints;
          ``(3) develop procedures for informing consumers of 
        rights they may have in connection with such 
        complaints; and
          ``(4) develop procedures for addressing concerns 
        raised by such complaints, as appropriate, including 
        procedures for the recovery of losses to the extent 
        appropriate.
  ``(g) Effect on Other Authority.--
          ``(1) No provision of this section shall be construed 
        as granting, limiting, or otherwise affecting--
                  ``(A) any authority of the Securities and 
                Exchange Commission, any self-regulatory 
                organization, the Municipal Securities 
                Rulemaking Board, or the Secretary of the 
                Treasury under any Federal securities law; or
                  ``(B) any authority of any State insurance 
                commissioner or other State authority under any 
                State law.
          ``(2) Regulations prescribed by a Federal banking 
        agency under this section shall not apply to retail 
        sales, solicitations, advertising, or offers of any 
        insurance product by any insured depository institution 
        or wholesale financial institution or to any person who 
        is engaged in such activities at an office of such 
        institution or on behalf of the institution, in a State 
        where the State has in effect statutes, regulations, 
        orders, or interpretations, that are inconsistent with 
        or contrary to the regulations prescribed by the 
        Federal banking agencies.
  ``(h) Insurance Product Defined.--For purposes of this 
section, the term `insurance product' includes an annuity 
contract the income of which is subject to tax treatment under 
section 72 of the Internal Revenue Code of 1986.''.

SEC. 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 bea 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 redomesticatinginsurer 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 insurance regulator, and the 
                Association concludes that retention of 
                membership in the Association would not be in 
                the public interest.
  (i) Office of Consumer Complaints.--
          (1) In general.--The Association shall establish an 
        office of consumer complaints that shall--
                  (A) receive and investigate complaints from 
                both consumers and State insurance regulators 
                related to members of the Association; and
                  (B) recommend to the Association any 
                disciplinary actions that the office considers 
                appropriate, to the extent that any such 
                recommendation is not inconsistent with State 
                law.
          (2) Records and referrals.--The office of consumer 
        complaints of the Association shall--
                  (A) maintain records of all complaints 
                received in accordance with paragraph (1) and 
                make such records available to the NAIC and to 
                each State insurance regulator for the State of 
                residence of the consumer who filed the 
                complaint; and
                  (B) refer, when appropriate, any such 
                complaint to any appropriate State insurance 
                regulator.
          (3) Telephone and other access.--The office of 
        consumer complaints shall maintain a toll-free 
        telephone number for the purpose of this subsection 
        and, as practicable, other alternative means of 
        communication with consumers, such as an Internet home 
        page.

 SEC. 326. BOARD OF DIRECTORS.

  (a) Establishment.--There is established the board of 
directors of the Association (hereafter in this subtitle 
referred to as the ``Board'') for the purpose of governing and 
supervising the activities of the Association and the members 
of the Association.
  (b) Powers.--The Board shall have such powers and authority 
as may be specified in the bylaws of the Association.
  (c) Composition.--
          (1) Members.--The Board shall be composed of 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 Associationshall 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 
                on the 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 theissuance 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--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

SEC. 401. TERMINATION OF EXPANDED POWERS FOR NEW UNITARY S&L HOLDING 
                    COMPANIES.

  (a) In General.--Section 10(c) of the Home Owners' Loan Act 
(12 U.S.C. 1467a(c)) is amended by adding at the end the 
following new paragraph:
          ``(9) Termination of expanded powers for new unitary 
        s&l holding company.--
                  ``(A) In general.--Subject to subparagraph 
                (B), paragraph (3) shall not apply with respect 
                to any company that becomes a savings and loan 
                holding company pursuant to an application 
                filed after March 31, 1998.
                  ``(B) Existing unitary s&l holding companies 
                and the successors to such companies.--
                Subparagraph (A) shall not apply, and paragraph 
                (3) shall continue to apply, to a company (or 
                any subsidiary of such company) that--
                          ``(i) either--
                                  ``(I) acquired 1 or more 
                                savings associations described 
                                in paragraph (3) pursuant to 
                                applications at least 1 of 
                                which was filed before April 1, 
                                1998; or
                                  ``(II) became a savings and 
                                loan holding company by 
                                acquiring ownership or control 
                                of the company described in 
                                subclause (I); and
                          ``(ii) continues to control the 
                        savings associations referred to in 
                        clause (i)(I) or the successor to any 
                        such savings association.''.
  (b) Technical and Conforming Amendment.--Section 10(c)(3) of 
the Home Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is amended by 
striking ``Notwithstanding'' and inserting ``Except as provided 
in paragraph (9) and notwithstanding''.

  AMENDMENTS TO BE MADE IN ORDER TO H.R. 10 FINANCIAL SERVICES ACT OF 
                                  1998

    33. Bliley, Dingell, Leach: (Revised) 30 minutes--Managers' 
Amendment. Directs the Federal regulators to review the 
adequacy of consumer fees disclosures and consider improving 
their accuracy, simplicity, completeness, and consistency. 
Provides the Securities and Exchange Commission with explicit 
securities regulatory backup authority over wholesale financial 
holding companies (WFIs). Includes a savings clause preserving 
the authority of the CFTC under the Commodity Exchange Act 
(included at the request of Chairman Smith). Modifies the 
language in the consumer protection provision coordinating 
Federal and State law governing bank insurance sales; it 
formerly provided that State law would preempt inconsistent 
Federal regulations issued under that section; the provision 
now allows the Federal regulators to jointly preempt State law 
if they determine the joint Federal regulations are more 
protective of consumers. H.R. 10 currently requires financial 
holding companies to provide low cost banking accounts upon 
affiliation; the provision changed to require ongoing 
compliance. General preemption Standard--H.R. 10 currently 
preempts State laws which ``prevent or restrict'' affiliations 
or national bank activities; the managers' amendment changes 
this standard to ``prevent or significantly interfere'', to 
make the language more consistent with current law and the 
Barnett Supreme Court case. Language governing allowable State 
regulation of bank insurances sales is also changed, from ``As 
stated by the U.S. Supreme Court in Barnett * * * no State may 
* * * prevent or significantly interfere with [a bank] * * * '' 
to ``In accordance with the decision of the U.S. Supreme Court 
in Barnett * * *''; this change helps preserve the current 
legal standards governing bank insurance sales issued by the 
Supreme Court. H.R. 10 also includes language stating that any 
State law which is no more restrictive than the recent 
consensus Illinois law (praised by the OCC) governing bank 
insurance sales shall be safe harbored from preemption. The 
managers' amendment changes language stating that no inference 
shall be drawn about the preemption of laws that are more 
restrictive than Illinois (under a ``prevent or significantly 
interfere'' standard) and replaces it with a new provision 
stating that the safe harbor shall not create any inference in 
the Courts regarding State laws other than those described in 
the safe harbor. A carve-out from the general preemption 
standard is added for state regulation that meets 5 tests--(A) 
relates to the business of insurance under McCarran-Ferguson; 
(B) applies only companies engaged in insurance activities that 
are not banks (banks are prohibited elsewhere from underwriting 
insurance); (C) does not relate to cross-marketing or other 
sales activities; (D) are applied in a nondiscriminatory 
manner; (E) does not prevent or significantly interfere with 
the bank's authorized activities (as opposed to the 
underwriters'). A carve-out is also added to protect State 
regulation of securities fraud or deceit or unlawful 
transaction in connection with the Securities Act. Federal 
banking and State insurance regulators are directed that they 
may share information regarding financial holding companies 
(that own insurance companies), although such information may 
be subject to confidentiality and other privileges, and that 
the banking regulators must consult with the insurance 
regulators before making any determinations regarding 
affiliations with an insurance company. The standard for 
preemption of State law governing the ability of insurance 
companies to affiliate with banks is change from ``prevent or 
restrict'' to ``prevent or significantly interfere'' to make 
these provisions consistent with Barnett and the preemption of 
State laws restricting affiliations by banks. Permits banks to 
charge unlimited fees for services provided in their trust 
department, and in connection with stock purchase plans, like 
401(k) plans, as long as they do not otherwise charge brokerage 
commissions. Deletes substantially all of Subtitle E of Title I 
regarding streamlining antitrust authority, and replaces it 
with language preserving the authority of the appropriate 
antitrust regulators (the FTC and the Attorney General). 
Additional provisions are provided for interagency data 
sharing, requiring a GAO report on concentration in the 
financial services industry and its impact on consumers, and 
clarifying that acquisitions of insurance companies and 
securities firms under new Section 6 of the Bank Holding 
Company Act are subject to Hart-Scott-Rodino antitrust review. 
Includes a technical provision clarifying the types of 
derivative instruments that banks can sell (effectively the 
same provision as was in the earlier Managers' Amendment, with 
one technical change regarding the definition of security). 
Expands the definition of qualified investors for banks to 
include the governments of foreign countries. Provides for a 
study by the Treasury Secretary of the extent to which adequate 
services are being provided as intended by the Community 
Reinvestment Act (CRA), including a report to Congress for 
appropriate action with respect to institutions covered by CRA. 
Requires the Federal Trade Commission (FTC) to submit to 
Congress an interim report on its existing ongoing study of 
consumer privacy issues. Retains a technical correction from 
the earlier managers amendment on NARAB, requested by the Ways 
and Means Committee.
    21. LaFalce, Vento: (Revised) 40 minutes--Revises section 
104 governing insurance sales. Permits all financial activities 
with the exception of insurance underwriting and real estate 
development to be performed through an operating subsidiary 
structure. Revises the consumer protection amendment (section 
308) to ensure that the stronger of state or federal consumer 
protection law governs. Includes enforcement provisions for 
lifeline banking. Eliminates the reference to deference in 
section 307(e) governing the standard of review. Includes an 
antitrust study and a privacy trust study.
    40. Baker: 40 minutes--Insurance title: three year sunset 
on the requirement that a bank buy an existing Insurance agency 
that is at least two years old; state insurance commissioner 
can exempt a bank from the requirement to acquire an existing 
insurance agency; cross reference sections 104 and 308 of the 
amendment in the nature of a substitute; a study 3 years after 
enactment by the National Association of Insurance 
Commissioners and the Office of the Comptroller of the Currency 
on the effectiveness of the Illinois law as a safe harbor. 
Thrift title: prohibit the sale of a unitary thrift to an 
unregulated nonfinancial company. CRA: elimination of CRA 
requirements for FDIC-insured depository institutions with 
assets of less than $100 million. Operating subsidiary: 
operating subsidiary language identical to Lazio amendment on 
the operating subsidiaries.
    41. Baker: 10 minutes--Requires the FDIC to rebate reserves 
in excess of 1.50% of insured deposits to member banks after 
the Bank Insurance Fund and the Savings Association Insurance 
Fund are merged.
    19. Roukema, Vento, Baker, McCollum, LaFalce: 30 minutes--
Commercial basket amendment. Increases from 5% to 10% the 
amount of annual gross revenue which a financial holding 
company would be permitted to derive from commercial 
activities. Growth above 10% commercial revenue cap would be at 
the discretion of the Federal Reserve Board. The Federal 
Reserve Board would be permitted to let, on a case by case 
basis, the revenue of a financial holding company derives from 
existing commercial investments and activities grow an 
additional 5%. No new commercial investments or activities 
would be permitted above the 10% cap.
    24. Leach, Bereuter, Campbell: 30 minutes--Amendment to the 
Roukema Amendment. Eliminates the 5% commercial basket for 
financial holding companies. Provides that the grandfathered 
commercial basket of no more than 15% of the annual gross 
revenues of the holding company in the proposed substitute is 
subject to a sunset after 10 years. The Federal Reserve Board 
is granted the authority to extend the 10 year period for one 
additional 5-year period. Eliminates the 5% basket for 
wholesale financial services holding companies; however, the 
grandfather and commodities baskets are retained. An additional 
change is made to how the grandfather basket is calculated. 
Provides that revenues derived from subsidiary depository 
institutions of a holding company must be excluded from the 
annual gross revenues of the holding company when that figure 
is used to calculate the size of the grandfathered and 
commodities baskets.
    22. Kingston: 10 minutes--Requires a study to be conducted 
by the Comptroller General of the United States on the 
projected economic impact that the enactment of H.R. 10 will 
have on banks and other financial institutions which have total 
assets of $100 million or less. The Comptroller General is to 
report to Congress before the end of the 6-month period 
beginning on the date of the enactment of H.R. 10.
    11. Roukema: 10 minutes--BIf/SAIF Study amendment. Requires 
the FDIC to conduct a study regarding the two deposit insurance 
funds: the Bank Insurance Fund and the Savings Association 
Insurance Fund. The FDIC would look at the number of 
institutions in each fund and the risk posed by the 
concentration of deposits in individual institutions or in 
certain regions. The FDIC would be required to address how the 
funds might be merged, how long such a merger would take to 
effect, and how such a merger would be paid for. The FDIC would 
be required to file a written report with the Congress within 9 
months after enactment.
    29. Sanders: 10 minutes--Commissions a study by the 
Comptroller General of the United States concerning the 
limitation of costs incurred by customers associated with the 
acquisition of financial products.
    28. Markey: 10 minutes--Assures that the Federal Trade 
Commission (FTC) is able to obtain access to copies of 
applications relating to mergers and acquisitions of bank 
holding companies which involve nonbanking interests. Requires 
that where a merger or acquisition of a bank holding company 
which raises competitive issues involving nonbanking interests, 
the particular anti-trust agency responsible for reviewing the 
matter will receive notice of Federal Reserve Board approval of 
the merger or acquisition application and will have an 
opportunity to bring a suit under the antitrust laws prior to 
consummation of a transaction which raises competitive 
concerns.
    15. Metcalf: 10 minutes--Allows a financial institution to 
retain its name if the word `federal' is issued when the 
charter is converted from that of a Federal savings association 
to a national bank or a State bank.
    27. Moran: 10 minutes (Revised)--Provides a 5 year sunset 
on the requirement that a bank purchase an insurance agency in 
order to engage in new insurance activities in a new state.

                                PART II

    The amendments made in order by the rule are as follows:

1. An Amendment To Be Offered by Representative Bliley of Virginia, or 
 Representative Leach of Iowa, or a Designee, Debatable for 30 Minutes

                      [1. Customer Fee Disclosure]

  At the end of title II of the Amendment in the Nature of a 
Substitute, insert the following new subtitle (and conform the 
table of contents accordingly):

    Subtitle E--Disclosure of Customer Costs of Acquiring Financial 
                                Products

SEC. 251. IMPROVED AND CONSISTENT DISCLOSURE.

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

                       [2. SEC Backup Authority]

  In section 17(i)(6) of the Securities Exchange Act of 1934, 
as amended by section 231(a) of the Amendment in the Nature of 
a Substitute, after ``For purposes of this subsection'' insert 
``and subsection (j)''.
  In section 17 of the Securities Exchange Act of 1934, as 
amended by section 231(a) of the Amendment in the Nature of a 
Substitute, redesignate subsection (j) as subsection (k) and 
before such redesignated subsection (k) insert the following 
new subsection:
  ``(j) Commission Backup Authority.--
          ``(1) Authority.--The Commission may make inspections 
        of any wholesale financial holding company that--
                  ``(A) controls a wholesale financial 
                institution,
                  ``(B) is not a foreign bank, and
                  ``(C) does not control an insured bank (other 
                than an institution permitted under 
                subparagraph (D), (F), or (G) of section 
                2(c)(2), or held under section 4(f), of the 
                Bank Holding Company Act of 1956) or a savings 
                association,
        and any affiliate of such company, for the purpose of 
        monitoring and enforcing compliance by the wholesale 
        financial holding company with the Federal securities 
        laws.
          ``(2) Limitation.--The Commission shall limit the 
        focus and scope of any inspection under paragraph (1) 
        to those transactions, policies, procedures, or records 
        that are reasonably necessary to monitor and enforce 
        compliance by the wholesale financial holding company 
        or any affiliate with the Federal securities laws.
          ``(3) Deference to examinations.--To the fullest 
        extent possible, the Commission shall use, for the 
        purposes of this subsection, the reports of 
        examinations--
                  ``(A) made by the Board of Governors of the 
                Federal Reserve System of any wholesale 
                financial holding company that is supervised by 
                the Board;
                  ``(B) made by or on behalf of any State 
                regulatory agency responsible for the 
                supervision of an insurance company of any 
                licensed insurance company; and
                  ``(C) 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), or held under section 4(f), of the 
                Bank Holding Company Act of 1956.
          ``(4) 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), or 
        held under section 4(f), of the Bank Holding Company 
        Act of 1956.

                      [3. Savings Clause for CFTC]

  At the end of subtitle A of title II of the Amendment in the 
Nature of a Substitute, insert the following new section (and 
conform the table of contents accordingly):

SEC. 210. RULE OF CONSTRUCTION.

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

                        [4. Consumer protection]

  In subparagraph (A) of section 45(a)(1) of the Federal 
Deposit Insurance Act, as added by section 308(a) of the 
Amendment in the Nature of a Substitute, insert ``practices'' 
after ``retail sales''.
  In paragraph (1) of section 45(g) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, strike ``(1) No provision'' and 
insert ``(1) In general.--No provision''.
  In paragraph (1)(B) of section 45(g) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, insert ``except as provided in 
paragraph (2),'' after ``(B)''.
  In paragraph (2) of section 45(g) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, strike ``(2) Regulations'' and 
insert `` `(2) Coordination with state law.--
                  `(A) In general.--Except as provided in 
                subparagraph (B), regulations''.
  At the end of paragraph (2) of section 45(g) of the Federal 
Deposit Insurance Act, as added by section 308(a) of the 
Amendment in the Nature of a Substitute, add the following new 
subparagraph:
                  (B) Preemption.--If, with respect to any 
                provision of the regulations prescribed under 
                this section, the Board of Governors of the 
                Federal Reserve System, the Comptroller of the 
                Currency, and the Board of Directors of the 
                Federal Deposit Insurance Corporation determine 
                jointly that the protection afforded by such 
                provision for consumers is greater than the 
                protection provided by a comparable provision 
                of the statutes, regulations, orders, or 
                interpretations referred to in subparagraph (A) 
                of any State, such provision of the regulations 
                prescribed under this section shall supersede 
                the comparable provision of such State statute, 
                regulation, order, or interpretation.

                         [5. Lifeline banking]

  In paragraph (1) of section 6(d) of the Bank Holding Company 
Act of 1956, as added by section 103(a) of the Amendment in the 
Nature of a Substitute, strike ``or (C)'' and insert ``(C), or 
(D)''.
  In paragraph (4)(D) of section 6(d) of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute, strike ``or (C)'' and 
insert ``(C), or (D)''.

                  [6. State Securities and Insurance]

  In section 104(a)(1) of the Amendment in the Nature of a 
Substitute, strike ``restrict'' and insert ``significantly 
interfere with the ability of''.
  In section 104(a)(1) of the Amendment in the Nature of a 
Substitute, strike ``from being'' and insert ``to be''.
  In section 104(b)(1) of the Amendment in the Nature of a 
Substitute, strike ``paragraphs (2) and (3) and subject to 
section 18(c) of the Securities Act of 1933'' and insert 
``paragraphs (2), (3), and (4)''.
  In section 104(b)(1) of the Amendment in the Nature of a 
Substitute, strike ``restrict'' and insert ``significantly 
interfere with the ability of''.
  In section 104(b)(1) of the Amendment in the Nature of a 
Substitute, strike ``from engaging,'' and insert ``to 
engage,''.
  In section 104(b)(2) of the Amendment in the Nature of a 
Substitute, strike ``As stated by the United States Supreme 
Court'' and insert ``In accordance with the decision of the 
Supreme Court of the United States''.
  In section 104(b)(2) of the Amendment in the Nature of a 
Substitute, strike subparagraph (B) and insert the following 
new subparagraph:
                  (B) subparagraph (A) shall not create any 
                inference regarding State statutes and 
                regulations governing insurance sales and 
                solicitations other than State statutes and 
                regulations described in subparagraph (A).
  In section 104(b) of the Amendment in the Nature of a 
Substitute, strike paragraph (3) and insert the following new 
paragraph:
          (3) State statutes, regulations, orders, and 
        interpretations or otherwise shall not be preempted 
        under paragraph (1) if they--
                  (A) relate to, or are enacted or issued for 
                the purpose of regulating, the business of 
                insurance in accordance with the McCarran-
                Ferguson Act;
                  (B) apply only to entities that are not 
                insured depository institutions or wholesale 
                financial institutions but which are engaged in 
                the business of insurance;
                  (C) do not relate to, and are not enacted or 
                issued for the purpose of regulating--
                          (i) cross-marketing; or
                          (ii) activities, including cross-
                        marketing, which are subject to 
                        paragraph (2);
                  (D) are applicable to and are applied in the 
                same manner with respect to an affiliate of an 
                insured depository institution or a wholesale 
                financial institution as they are applicable to 
                and are applied to those entities that are not 
                affiliated with an insured depository 
                institution or a wholesale financial 
                institution; and
                  (E) do not prevent or significantly interfere 
                with the ability of an insured depository 
                institution or wholesale financial institution 
                to engage in activities authorized for such 
                institution under this Act or any other 
                provision of Federal law.
  In section 104(b) of the Amendment in the Nature of a 
Substitute, after paragraph (3) insert the following new 
paragraph:
          (4) Paragraphs (1) and (2) shall not be construed as 
        affecting the jurisdiction of the securities commission 
        (or any agency or office performing like functions) of 
        any State, under the laws of such State, to investigate 
        and bring enforcement actions, consistent with section 
        18(c) of the Securities Act of 1933, with respect to 
        fraud or deceit or unlawful conduct by any person, in 
        connection with securities or securities transactions.
  After section 116 of the Amendment in the Nature of a 
Substitute, insert the following new section (and amend the 
table of contents accordingly):

SEC. 117. INTERAGENCY CONSULTATION.

  (a) Purpose.--It is the intention of Congress that the Board 
of Governors of the Federal Reserve System, as the umbrella 
supervisor for financial holding companies, and the State 
insurance regulators, as the functional regulators of companies 
engaged in insurance activities, coordinate efforts to 
supervise companies that control both a depository institution 
and a company engaged in insurance activities regulated under 
State law. In particular, Congress believes that the Board and 
the State insurance regulators should share, on a confidential 
basis, information relevant to the supervision of companies 
that control both a depository institution and a company 
engaged in insurance activities, including information 
regarding the financial health of the consolidated organization 
and information regarding transactions and relationships 
between insurance companies and affiliated depository 
institutions. The appropriate Federal banking agencies for 
depository institutions should also share, on a confidential 
basis, information with the relevant State insurance regulators 
regarding transactions and relationships between depository 
institutions and affiliated companies engaged in insurance 
activities. The purpose of this section is to encourage this 
coordination and confidential sharing of information, and to 
thereby improve both the efficiency and the quality of the 
supervision of financial holding companies and their affiliated 
depository institutions and companies engaged in insurance 
activities.
  (b) Examination Results and Other Information.--
          (1) Information of the board.--Upon the request of 
        the appropriate insurance regulator of any State, the 
        Board may provide any information of the Board 
        regarding the financial condition, risk management 
        policies, and operations of any financial holding 
        company that controls a company that is engaged in 
        insurance activities and is regulated by such State 
        insurance regulator, and regarding any transaction or 
        relationship between such an insurance company and any 
        affiliated depository institution. The Board may 
        provide any other information to the appropriate State 
        insurance regulator that the Board believes is 
        necessary or appropriate to permit the State insurance 
        regulator to administer and enforce applicable State 
        insurance laws.
          (2) Banking agency information.--Upon the request of 
        the appropriate insurance regulator of any State, the 
        appropriate Federal banking agency may provide any 
        information of the agency regarding any transaction or 
        relationship between a depository institution 
        supervised by such Federal banking agency and any 
        affiliated company that is engaged in insurance 
        activities regulated by such State insurance regulator. 
        The appropriate Federal banking agency may provide any 
        other information to the appropriate State insurance 
        regulator that the agency believes is necessary or 
        appropriate to permit the State insurance regulator to 
        administer and enforce applicable State insurance laws.
          (3) State insurance regulator information.--Upon the 
        request of the Board or the appropriate Federal banking 
        agency, a State insurance regulator may provide any 
        examination or other reports, records, or other 
        information to which such insurance regulator may have 
        access with respect to a company which--
                  (A) is engaged in insurance activities and 
                regulated by such insurance regulator; and
                  (B) is an affiliate of an insured depository 
                institution, wholesale financial institution, 
                or financial holding company.
  (c) Consultation.--Before making any determination relating 
to the initial affiliation of, or the continuing affiliation 
of, an insured depository institution, wholesale financial 
institution, or financial holding company with a company 
engaged in insurance activities, the appropriate Federal 
banking agency shall consult with the appropriate State 
insurance regulator of such company and take the views of such 
insurance regulator into account in making such determination.
  (d) Effect on Other Authority.--Nothing in this section shall 
limit in any respect the authority of the appropriate Federal 
banking agency with respect to an insured depository 
institution, wholesale financial institution, or bank holding 
company or any affiliate thereof under any provision of law.
  (e) Confidentiality and Privilege.--
          (1) Confidentiality.--The appropriate Federal banking 
        agency shall not provide any information or material 
        that is entitled to confidential treatment under 
        applicable Federal banking agency regulations, or other 
        applicable law, to a State insurance regulator unless 
        such regulator agrees to maintain the information or 
        material in confidence and to take all reasonable steps 
        to oppose any effort to secure disclosure of the 
        information or material by the regulator. The 
        appropriate Federal banking agency shall treat as 
        confidential any information or material obtained from 
        a State insurance regulator that is entitled to 
        confidential treatment under applicable State 
        regulations, or other applicable law, and take all 
        reasonable steps to oppose any effort to secure 
        disclosure of the information or material by the 
        Federal banking agency.
          (2) Privilege.--The provision pursuant to this 
        section of information or material by a Federal banking 
        agency or State insurance regulator shall not 
        constitute a waiver of, or otherwise affect, any 
        privilege to which the information or material is 
        otherwise subject.
  (f) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Appropriate federal banking agency; insured 
        depository institution.--The terms ``appropriate 
        Federal banking agency'' and ``insured depository 
        institution'' shall have the same meanings as in 
        section 3 of the Federal Deposit Insurance Act.
          (2) Board; financial holding company; and wholesale 
        financial institution.--The terms ``Board'', 
        ``financial holding company'', and ``wholesale 
        financial institution'' shall have the same meanings as 
        in section 2 of the Bank Holding Company Act of 1956.

  In paragraph (1) of section 309 of the Amendment in the 
Nature of a Substitute, strike ``restrict'' and insert 
``significantly interfere with the ability of''.

  In paragraph (1) of section 309 of the Amendment in the 
Nature of a Substitute, strike ``from becoming'' and insert 
``to become''.
  In paragraph (1) of section 309 of the Amendment in the 
Nature of a Substitute, strike ``from acquiring'' and insert 
``to acquire''.
  In paragraph (3) of section 309 of the Amendment in the 
Nature of a Substitute, strike ``restrict'' and insert 
``significantly interfere with''.

                       [7. Brokerage Commissions]

  In section 3(a)(4)(B) of the Securities Exchange Act of 1934, 
as amended by section 201 of the Amendment in the Nature of a 
Substitute, strike clause (ii) (relating to trust activities) 
and insert the following:
                          ``(ii) Trust activities.--The bank 
                        effects transactions in a trustee 
                        capacity, or effects transactions in a 
                        fiduciary capacity in its trust 
                        department or other department that is 
                        regularly examined by bank examiners 
                        for compliance with fiduciary 
                        principles and standards, and (in 
                        either case)--
                                  ``(I) is primarily 
                                compensated on the basis of an 
                                administration or annual fee 
                                (payable on a monthly, 
                                quarterly, or other basis), a 
                                percentage of assets under 
                                management, or a flat or capped 
                                per order processing fee, or 
                                any combination of such fees, 
                                but does not otherwise receive 
                                brokerage commissions, or other 
                                similar remuneration based on 
                                effecting transactions in 
                                securities, that exceed the 
                                cost incurred by the bank in 
                                connection with executing 
                                securities transactions for 
                                trustee or fiduciary customers; 
                                and
                                  ``(II) does not publicly 
                                solicit brokerage business, 
                                other than by advertising that 
                                it effects transactions in 
                                securities in conjunction with 
                                advertising its other trust 
                                activities.
  In section 3(a)(4)(B) of the Securities Exchange Act of 1934, 
as amended by section 201 of the Amendment in the Nature of a 
Substitute, strike clause (iv) (relating to certain stock 
purchase plans) and insert the following:
                          ``(iv) Certain stock purchase 
                        plans.--
                                  ``(I) Employee benefit 
                                plans.--The bank effects 
                                transactions, as part of its 
                                transfer agency activities, in 
                                the securities of an issuer as 
                                part of any pension, 
                                retirement, profit-sharing, 
                                bonus, thrift, savings, 
                                incentive, or other similar 
                                benefit plan for the employees 
                                of that issuer or its 
                                subsidiaries, if--
                                          ``(aa) the bank does 
                                        not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan; and
                                          ``(bb) the bank's 
                                        compensation for such 
                                        plan or program 
                                        consists of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both, but the bank 
                                        does not otherwise 
                                        receive brokerage 
                                        commissions, or other 
                                        similar remuneration 
                                        based on effecting 
                                        transactions in 
                                        securities, that exceed 
                                        the cost incurred by 
                                        the bank in connection 
                                        with executing 
                                        securities transactions 
                                        under this subclause 
                                        (I).
                                  ``(II) Dividend reinvestment 
                                plans.--The bank effects 
                                transactions, as part of its 
                                transfer agency activities, in 
                                the securities of an issuer as 
                                part of that issuer's dividend 
                                reinvestment plan, if--
                                          ``(aa) the bank does 
                                        not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan;
                                          ``(bb) the bank does 
                                        not net shareholders' 
                                        buy and sell orders, 
                                        other than for programs 
                                        for odd-lot holders or 
                                        plans registered with 
                                        the Commission; and
                                          ``(cc) the bank's 
                                        compensation for such 
                                        plan or program 
                                        consists of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both, but the bank 
                                        does not otherwise 
                                        receive brokerage 
                                        commissions, or other 
                                        similar remuneration 
                                        based on effecting 
                                        transactions in 
                                        securities, that exceed 
                                        the cost incurred by 
                                        the bank in connection 
                                        with executing 
                                        securities transactions 
                                        under this subclause 
                                        (II).
                                  ``(III) Issuer plans.--The 
                                bank effects transactions, as 
                                part of its transfer agency 
                                activities, in the securities 
                                of an issuer as part of a plan 
                                or program for the purchase or 
                                sale of that issuer's shares, 
                                if--
                                          ``(aa) the bank does 
                                        not solicit 
                                        transactions or provide 
                                        investment advice with 
                                        respect to the purchase 
                                        or sale of securities 
                                        in connection with the 
                                        plan or program;
                                          ``(bb) the bank does 
                                        not net shareholders' 
                                        buy and sell orders, 
                                        other than for programs 
                                        for odd-lot holders or 
                                        plans registered with 
                                        the Commission; and
                                          ``(cc) the bank's 
                                        compensation for such 
                                        plan or program 
                                        consists of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both, but the bank 
                                        does not otherwise 
                                        receive brokerage 
                                        commissions, or other 
                                        similar remuneration 
                                        based on effecting 
                                        transactions in 
                                        securities, that exceed 
                                        the cost incurred by 
                                        the bank in connection 
                                        with executing 
                                        securities transactions 
                                        under this subclause 
                                        (III).
                                  ``(IV) Permissible delivery 
                                of materials.--The exception to 
                                being considered a broker for a 
                                bank engaged in activities 
                                described in subclauses (I), 
                                (II), and (III) will not be 
                                affected by a bank's delivery 
                                of written or electronic plan 
                                materials to employees of the 
                                issuer, shareholders of the 
                                issuer, or members of affinity 
                                groups of the issuer, so long 
                                as such materials are--
                                          ``(aa) comparable in 
                                        scope or nature to that 
                                        permitted by the 
                                        Commission as of the 
                                        date of the enactment 
                                        of the Financial 
                                        Services Act of 1998; 
                                        or
                                          ``(bb) otherwise 
                                        permitted by the 
                                        Commission.

                             [8. Antitrust]

  Strike subtitle E of title I of the Amendment in the Nature 
of a Substitute and insert the following new subtitle (and 
conform the table of contents accordingly):

               Subtitle E--Preservation of FTC Authority

SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 TO MODIFY 
                    NOTIFICATION AND POST-APPROVAL WAITING PERIOD FOR 
                    SECTION 3 TRANSACTIONS.

  Section 11(b)(1) of the Bank Holding Company Act of 1956 (12 
U.S.C. 1849(b)(1)) is amended by inserting ``and, if the 
transaction also involves an acquisition under section 4 or 
section 6, the Board shall also notify the Federal Trade 
Commission of such approval'' before the period at the end of 
the 1st sentence.

SEC. 142. INTERAGENCY DATA SHARING.

  To the extent not prohibited by other law, the Comptroller of 
the Currency, the Director of the Office of Thrift Supervision, 
the Federal Deposit Insurance Corporation, and the Board of 
Governors of the Federal Reserve System shall make available to 
the Attorney General and the Federal Trade Commission any data 
in the possession of any such banking agency that the antitrust 
agency deems necessary for antitrust review of any transaction 
requiring notice to any such antitrust agency or the approval 
of such agency under section 3, 4, or 6 of the Bank Holding 
Company Act of 1956, section 18(c) of the Federal Deposit 
Insurance Act, the National Bank Consolidation and Merger Act, 
section 10 of the Home Owners' Loan Act, or the antitrust laws.

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

  (a) Clarification of Federal Trade Commission Jurisdiction.--
Any person which directly or indirectly controls, is controlled 
directly or indirectly by, or is directly or indirectly under 
common control with, any bank or savings association (as such 
terms are defined in section 3 of the Federal Deposit Insurance 
Act) and is not itself a bank or savings association shall not 
be deemed to be a bank or savings association for purposes of 
the Federal Trade Commission Act or any other law enforced by 
the Federal Trade Commission.
  (b) Savings Provision.--No provision of this section shall be 
construed as restricting the authority of any Federal banking 
agency (as defined in section 3 of the Federal Deposit 
Insurance Act) under any Federal banking law, including section 
8 of the Federal Deposit Insurance Act.
  (c) Hart-Scott-Rodino Amendment.--Section 7A(c)(7) of the 
Clayton Act (15 U.S.C. 18a(c)(7)) is amended by inserting 
before the semicolon at the end thereof the following: ``, 
except that a portion of a transaction is not exempt under this 
paragraph if such portion of the transaction (A) requires 
notice under section 6 of the Bank Holding Company Act of 1956; 
and (B) does not require approval under section 3 or 4 of the 
Bank Holding Company Act of 1956''.

SEC. 144. ANNUAL GAO REPORT.

  (a) In General.--By the end of the 1-year period beginning on 
the date of the enactment of this Act and annually thereafter, 
the Comptroller General of the United States shall submit a 
report to the Congress on market concentration in the financial 
services industry and its impact on consumers.
  (b) Analysis.--Each report submitted under subsection (a) 
shall contain an analysis of--
          (1) the positive and negative effects of affiliations 
        between various types of financial companies, and of 
        acquisitions pursuant to this Act and the amendments 
        made by this Act to other provisions of law, including 
        any positive or negative effects on consumers, area 
        markets, and submarkets thereof or on registered 
        securities brokers and dealers which have been 
        purchased by depository institutions or depository 
        institution holding companies;
          (2) the changes in business practices and the effects 
        of any such changes on the availability of venture 
        capital, consumer credit, and other financial services 
        or products and the availability of capital and credit 
        for small businesses; and
          (3) the acquisition patterns among depository 
        institutions, depository institution holding companies, 
        securities firms, and insurance companies including 
        acquisitions among the largest 20 percent of firms and 
        acquisitions within regions or other limited 
        geographical areas.

                      [9. Derivative Instruments]

  In section 206(a)(1)(F) of the Amendment in the Nature of a 
Substitute, strike clauses (ii) and (iii), and insert the 
following:
                          (ii) interest rates, except interest 
                        rate derivative instruments (I) that 
                        are based on a security or a group or 
                        index of securities (other than 
                        government securities or a group or 
                        index of government securities); (II) 
                        that provide for the delivery of one or 
                        more securities (other than government 
                        securities); or (III) that trade on a 
                        national securities exchange; or
                          (iii) commodities, other rates, 
                        indices, or other assets, except 
                        derivative instruments (I) that are 
                        securities or that are based on a group 
                        or index of securities (other than 
                        government securities or a group or 
                        index of government securities); (II) 
                        that provide for the delivery of one or 
                        more securities (other than government 
                        securities); or (III) that trade on a 
                        national securities exchange.
  In section 206(a)(3) of the Amendment in the Nature of a 
Substitute, strike ``and'' at the end of subparagraph (B); 
redesignate subparagraph (C) as subparagraph (D); and after 
subparagraph (B), insert the following new subparagraph:
                  (C) the term ``government securities'' has 
                the meaning provided in section 3(a)(42) of 
                such Act, and, for purposes of this subsection, 
                commercial paper, bankers acceptances, and 
                commercial bills shall be treated in the same 
                manner as government securities; and

                        [10. Qualified investor]

  In paragraph (55)(A) of section 3(a) of the Securities 
Exchange Act of 1934, as added by section 207 of the Amendment 
in the Nature of a Substitute, strike ``or'' at the end of 
clause (viii).
  In paragraph (55)(A) of section 3(a) of the Securities 
Exchange Act of 1934, as added by section 207 of the Amendment 
in the Nature of a Substitute, strike the period at the end of 
clause (ix) and insert ``; or''.
  In paragraph (55)(A) of section 3(a) of the Securities 
Exchange Act of 1934, as added by section 207 of the Amendment 
in the Nature of a Substitute, insert the following new clause 
after clause (ix):
                          ``(x) the government of any foreign 
                        country.

                         [11. Community Needs]

  At the end of subtitle A of title I of the Amendment in the 
Nature of a Substitute, insert the following new section (and 
amend the table of contents accordingly):

SEC. 109. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL SERVICES.

  (a) Study.--The Secretary of the Treasury, in consultation 
with the Federal banking agencies (as defined in section 3(z) 
of the Federal Deposit Insurance Act) and the Securities and 
Exchange Commission, shall conduct a study of the extent to 
which adequate services are being provided as intended by the 
Community Reinvestment Act of 1977, including services in low- 
and moderate-income neighborhoods and for persons of modest 
means, as a result of the enactment of this Act.
  (b) Report.--Before the end of the 2-year period beginning on 
the date of the enactment of this Act, the Secretary of the 
Treasury, in consultation with the Federal banking agencies and 
the Securities and Exchange Commission, shall submit a report 
to the Congress on the study conducted pursuant to subsection 
(a) and shall include such recommendations as the Secretary 
determines to be appropriate for administrative and legislative 
action with respect to institutions covered under the Community 
Reinvestment Act of 1977.

                          [12. Privacy study]

  After section 109 (as so added) of the Amendment in the 
Nature of a Substitute, insert the following new section (and 
amend the table of contents accordingly):

SEC. 110. REPORTS ON ONGOING FTC STUDY OF CONSUMER PRIVACY ISSUES.

  With respect to the ongoing multistage study being conducted 
by the Federal Trade Commission on consumer privacy issues, the 
Commission shall submit to the Congress an interim report on 
the findings and conclusions of the Commission, together with 
such recommendations for legislative and administrative action 
as the Commission determines to be appropriate, at the 
conclusion of each stage of such study and a final report at 
the conclusion of the study.

                       [13. Technical correction]

  In section 322(b) of the Amendment in the Nature of a 
Substitute, strike paragraph (1) and insert the following:
          (1) be a nonprofit corporation;
                              ----------                              


2. An Amendment To Be Offered by Representative LaFalce of New York, or 
  Representative Vento of Minnesota, or a Designee, Debatable for 40 
                                Minutes

                             [1. Insurance]

  In section 104(b)(2) of the Amendment in the Nature of a 
Substitute, strike ``As stated by the United States Supreme 
Court'' and insert ``In accordance with the decision of the 
Supreme Court of the United States''.
  In section 104(b)(2) of the Amendment in the Nature of a 
Substitute, strike ``to engage'' each place such term appears 
and insert ``, or any subsidiary or other affiliate thereof, 
from engaging''.
  In section 104(b)(2) of the Amendment in the Nature of a 
Substitute, strike subparagraph (B) and insert the following 
new subparagraph:
                  (B) subparagraph (A) shall not apply after 
                the end of the 5-year period beginning on the 
                date of the enactment of this Act.
  In section 104(b)(3) of the Amendment in the Nature of a 
Substitute, insert ``not relating to crossmarketing activities 
subject to paragraph (2)'' after ``orders, and 
interpretations''.
  In section 104(b)(3) of the Amendment in the Nature of a 
Substitute, insert ``to the extent that such statutes, 
regulations, orders, and interpretations do not have a 
disparate impact on insurance underwriters affiliated with an 
insured depository institution or wholesale financial 
institution'' before the period at the end.

                              [2. Op-subs]

  Strike the heading for subtitle C of title I of the Amendment 
in the Nature of a Substitute and insert the following new 
heading:

      Subtitle C--Subsidiaries of Insured Depository Institutions

  Strike section 121 of the Amendment in the Nature of a 
Substitute and insert the following new sections (and 
redesignate subsequent sections and amend the table of contents 
accordingly):

SEC. 121. SUBSIDIARIES OF NATIONAL BANKS AUTHORIZED TO ENGAGE IN 
                    FINANCIAL ACTIVITIES.

  (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. FINANCIAL SUBSIDIARIES OF NATIONAL BANKS.

  ``(a) Subsidiaries of National Banks Authorized to Engage in 
Financial Activities.--
          ``(1) In general.--A subsidiary of a national bank 
        may engage in an activity that is not permissible for a 
        national bank to engage in directly, but only if--
                  ``(A) the activity is a financial activity 
                (as defined in paragraph (4));
                  ``(B) the national bank is well capitalized, 
                well managed, and achieved a rating of 
                `satisfactory record of meeting community 
                credit needs', or better, at the most recent 
                examination of the bank;
                  ``(C) all depository institution affiliates 
                of such national bank are well capitalized, 
                well managed, and have achieved a rating of 
                `satisfactory record of meeting community 
                credit needs', or better, at the most recent 
                examination of each such institution; and
                  ``(D) the bank has received the approval of 
                the Comptroller of the Currency.
          ``(2) No effect on edge act or agreement 
        corporations.--Paragraph (1) shall not apply with 
        respect to any subsidiary which is a corporation 
        organized under section 25A of the Federal Reserve Act 
        or a corporation operating under section 25 of such 
        Act.
          ``(3) Other subsidiaries prohibited.--A national bank 
        may not control any subsidiary other than a 
        subsidiary--
                  ``(A) which engages solely in activities that 
                are permissible for a national bank to engage 
                in directly or are authorized under paragraph 
                (1); or
                  ``(B) which a national bank may control 
                pursuant to section 25 or 25A of the Federal 
                Reserve Act, the Bank Service Company Act, or 
                any other Act that expressly by its terms 
                authorizes national banks to control 
                subsidiaries.
          ``(4) Financial activity defined.--For purposes of 
        this section and subject to paragraph (5), the term 
        `financial activity' means any 1 or more of the 
        following:
                  ``(A) Receiving money subject to a deposit or 
                other repayment obligation.
                  ``(B) Lending, exchanging, transferring, 
                investing, or safeguarding money or other 
                financial assets.
                  ``(C) Providing any device or other 
                instrumentality for transferring money or other 
                financial assets.
                  ``(D) Acting as agent or broker in the 
                placement of annuities contracts or contracts 
                insuring, guaranteeing, or indemnifying against 
                loss, harm, damage, illness, disability, or 
                death.
                  ``(E) Providing financial, investment, or 
                economic advisory or information services, 
                including advising an investment company (as 
                defined in section 3 of the Investment Company 
                Act of 1940).
                  ``(F) Issuing or selling instruments 
                representing interests in pools of assets 
                permissible for a bank to hold directly.
                  ``(G) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
                  ``(H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 
                1 or more entities (including entities that the 
                financial subsidiary controls) or otherwise, 
                shares, assets, or ownership interests 
                (including without limitation debt or equity 
                securities, partnership interests, trust 
                certificates or other instruments representing 
                ownership) of a company or other entity, 
                whether or not constituting control of such 
                company or entity, engaged in any activity not 
                authorized pursuant to this section if--
                          ``(i) the shares, assets, or 
                        ownership interests are not acquired or 
                        held by a depository institution;
                          ``(ii) such shares, assets, or 
                        ownership interests are acquired and 
                        held by 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 financial subsidiary 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) Underwriting, dealing in, or making a 
                market in securities.
                  ``(J) Engaging in any activity that was, by 
                regulation or order, permissible for a bank 
                holding company pursuant to section 4(c)(8) of 
                the Bank Holding Company Act of 1956 (as in 
                effect on the day before the date of enactment 
                of the Financial Services Act of 1998).
                  ``(K) 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 of Governors of the 
                        Federal Reserve System determined, 
                        under regulations issued pursuant to 
                        section 4(c)(13) of the Bank Holding 
                        Company Act of 1956 (as in effect on 
                        the day before the date of enactment of 
                        the Financial Services Act of 1998) to 
                        be usual in connection with the 
                        transaction of banking or other 
                        financial operations abroad;
                  ``(L) Owning shares of a company to the 
                extent permissible under section 4(c)(7) of the 
                Bank Holding Company Act of 1956 (as in effect 
                on the day before the date of enactment of the 
                Financial Services Act of 1998).
                  ``(M) Engaging in any activity that the 
                Comptroller of the Currency determines by 
                regulation or order is the functional 
                equivalent of any activity described in 1 or 
                more of subparagraphs (A) through (K).
                  ``(N) Engaging in any activity that the 
                Comptroller of the Currency determines by 
                regulation or order to be financial, or related 
                to a financial activity, having taken into 
                account--
                          ``(i) the purposes of this title and 
                        the Financial Services Act of 1998;
                          ``(ii) changes or reasonably expected 
                        changes in the market in which bank 
                        subsidiaries compete;
                          ``(iii) changes or reasonable 
                        expected changes in the technology 
                        delivering financial services; and
                          ``(iv) whether such activity is 
                        necessary or appropriate to allow a 
                        bank and the subsidiaries of a bank 
                        to--
                                  ``(I) compete effectively 
                                with any company seeking to 
                                provide financial services in 
                                the United States;
                                  ``(II) use any available or 
                                emerging technological means, 
                                including any application 
                                necessary to protect the 
                                security or efficacy of systems 
                                for the transmission of data or 
                                financial transactions, in 
                                providing financial services; 
                                and
                                  ``(III) offer customers any 
                                available or emerging 
                                technological means for using 
                                financial services.
          ``(5) Other definitions.--For purposes of this 
        section, the following definitions shall apply:
                  ``(A) Financial subsidiary.--The term 
                `financial subsidiary' means a company which--
                          ``(i) is a subsidiary of a national 
                        bank (other than a corporation 
                        organized under section 25A of the 
                        Federal Reserve Act or a corporation 
                        operating under section 25 of such 
                        Act); and
                          ``(ii) is engaged in a financial 
                        activity pursuant to paragraph (1) that 
                        is not a permissible activity for a 
                        national bank to engage in directly.
                  ``(B) Subsidiary.--The term `subsidiary' has 
                the meaning given to such term in section 2 of 
                the Bank Holding Company Act of 1956.
                  ``(C) Well capitalized.--The term `well 
                capitalized' has the same meaning as in section 
                38 of the Federal Deposit Insurance Act and, 
                for purposes of this section, the Comptroller 
                shall have exclusive jurisdiction to determine 
                whether a national bank is well capitalized.
                  ``(D) Well managed.--The term `well managed' 
                means--
                          ``(i) in the case of a bank that has 
                        been examined, unless otherwise 
                        determined in writing by the 
                        Comptroller, the achievement of--
                                  ``(I) 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.
          ``(6) Insurance underwriting and direct investment.--
        Except as provided in title III of the Financial 
        Services Act of 1998, no subsidiary of a national bank 
        (other than a corporation organized under section 25A 
        of the Federal Reserve Act or a corporation operating 
        under section 25 of such Act) may underwrite noncredit-
        related insurance or engage in real estate investment 
        or development activities (except to the extent a 
        national bank is specifically authorized by statute to 
        engage in any such activity directly).
          ``(7) Limited exclusions from community needs 
        requirements for newly acquired depository 
        institutions.--Any depository institution which becomes 
        affiliated with a national bank during the 12-month 
        period preceding the submission of an application to 
        acquire a financial subsidiary and any depository 
        institution which becomes so affiliated after the 
        approval of such application may be excluded for 
        purposes of paragraph (1)(C) during the 12-month period 
        beginning on the date of such acquisition if--
                  ``(A) the national bank has submitted an 
                affirmative plan to the Comptroller of the 
                Currency 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, during the 
                most next examination of the institution; and
                  ``(B) the plan has been accepted by the 
                Comptroller.
  ``(b) Capital Deduction Required.--
          ``(1) In general.--In determining compliance with 
        applicable capital standards--
                  ``(A) the amount of a national bank's equity 
                investment in a financial subsidiary shall be 
                deducted from the national bank's assets and 
                tangible equity; and
                  ``(B) the financial subsidiary's assets and 
                liabilities shall not be consolidated with 
                those of the national bank.
          ``(2) Regulations required.--The Comptroller shall 
        prescribe regulations implementing this subsection.
  ``(c) Safeguards for the Bank.--A national bank that 
establishes or maintains a financial subsidiary shall assure 
that--
          ``(1) the bank's procedures for identifying and 
        managing financial and operational risks within the 
        bank and financial subsidiaries of the bank adequately 
        protect the bank from such risks;
          ``(2) the bank has, for the protection of the bank, 
        reasonable policies and procedures to preserve the 
        separate corporate identity and limited liability of 
        the bank and subsidiaries of the bank; and
          ``(3) the bank complies with this section.
  ``(d) National Banks Which Do Not Comply With Requirements of 
This Section.--
          ``(1) In general.--If the Comptroller determines that 
        a national bank which controls a financial subsidiary, 
        or a depository institution affiliate of such national 
        bank, does not continue to meet the requirements of 
        subsection (a), the Comptroller shall give notice to 
        the bank to that effect, describing the conditions 
        giving rise to the notice.
          ``(2) Agreement to correct conditions required.--
                  ``(A) Content of agreement.--Within 45 days 
                of the receipt by a depository institution of a 
                notice given under paragraph (1) (or such 
                additional period as the Comptroller may 
                permit), the depository institution failing to 
                meet the requirements of subsection (a) shall 
                execute an agreement with the appropriate 
                Federal banking agency for such institution to 
                correct the conditions described in the notice.
                  ``(B) Comptroller may impose limitations.--
                Until the conditions giving rise to the notice 
                are corrected, the Comptroller may impose such 
                limitations on the conduct of the business of 
                the national bank or subsidiary of such bank as 
                the Comptroller determines to be appropriate 
                under the circumstances.
          ``(3) Failure to correct.--If the conditions 
        described in the notice are not corrected within 180 
        days after the bank receives the notice, the 
        Comptroller may require, under such terms and 
        conditions as may be imposed by the Comptroller and 
        subject to such extensions of time as may be granted in 
        the discretion of the Comptroller--
                  (A) the national bank to divest control of 
                each subsidiary engaged in an activity that is 
                not permissible for the bank to engage in 
                directly; or
                  ``(B) each subsidiary of the national bank to 
                cease any activity that is not permissible for 
                the bank to engage in directly.''.
  (b) 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. ACTIVITIES OF SUBSIDIARIES OF INSURED STATE BANKS.

  Section 24(d) of the Federal Deposit Insurance Act (12 U.S.C. 
1831a(d)) is amended--
          (1) by adding at the end the following new 
        paragraphs:
          ``(3) Conditions on certain activities.--
                  ``(A) In general.--Subject to the approval of 
                the appropriate Federal banking agency, a 
                subsidiary of a State bank may engage in an 
                activity in which a subsidiary of a national 
                bank may engage as principal pursuant to 
                subsection (a)(1) of section 5136A of the 
                Revised Statutes of the United States but only 
                if the State bank meets the same requirements 
                which are applicable to national banks under 
                subparagraphs (B) and (C) of such subsection 
                and subsections (b) and (c) of such section.
                  ``(B) Application of section 5136a of revised 
                statutes.--For purposes of applying section 
                5136A of the Revised Statutes of the United 
                States with regard to the activities of a 
                subsidiary of a State bank, all references in 
                such section to the Comptroller of the 
                Currency, or regulations and orders of the 
                Comptroller, shall be deemed to be references 
                to theappropriate Federal banking agency with 
respect to such State bank, and regulations and orders of such agency.
          ``(4) State banks which fail to comply with paragraph 
        (3) conditions.--
                  ``(A) In general.--If the appropriate Federal 
                banking agency determines that a State bank 
                that controls a subsidiary which is engaged as 
                principal in financial activities pursuant to 
                paragraph (3) does not meet the requirements of 
                subparagraph (A) of such paragraph, the 
                appropriate Federal banking agency shall give 
                notice to the bank to that effect, describing 
                the conditions giving rise to the notice.
                  ``(A) Agreement to correct conditions 
                required.--
                          ``(i) Content of agreement.--Within 
                        45 days of the receipt by a bank of a 
                        notice given under paragraph (1) (or 
                        such additional period as the 
                        appropriate Federal banking agency for 
                        such bank may permit), the bank failing 
                        to meet the requirements of paragraph 
                        (3)(A) shall execute an agreement with 
                        the appropriate Federal banking agency 
                        for such bank to correct the conditions 
                        described in the notice.
                  ``(B) Agency may impose limitations.--Until 
                the conditions giving rise to the notice are 
                corrected, the appropriate Federal banking 
                agency for the State bank may impose such 
                limitations on the conduct of the business of 
                the bank or a subsidiary of the bank as the 
                agency determines to be appropriate under the 
                circumstances.
                  ``(C) Failure to correct.--If the conditions 
                described in the notice are not corrected 
                within 180 days after the bank receives the 
                notice, the appropriate Federal banking agency 
                for the State may require, under such terms and 
                conditions as may be imposed by such agency and 
                subject to such extensions of time as may be 
                granted in the discretion of the agency--
                          ``(i) the bank to divest control of 
                        each subsidiary engaged in an activity 
                        as principal that is not permissible 
                        for the bank to engage in directly; or
                          ``(ii) each subsidiary of the bank to 
                        cease any activity as principal that is 
                        not permissible for the bank to engage 
                        in directly.''.

SEC. 123. RULES APPLICABLE TO FINANCIAL SUBSIDIARIES.

  (a) Transactions Between Financial Subsidiaries and Other 
Affiliates.--Section 23A of the Federal Reserve Act (12 U.S.C. 
371c) is amended--
          (1) by redesignating subsection (e) as subsection 
        (f); and
          (2) by inserting after subsection (d), the following 
        new subsection:
  ``(e) Rules Relating to Banks With Financial Subsidiaries.--
          ``(1) Financial subsidiary defined.--For purposes of 
        this section and section 23B, the term `financial 
        subsidiary' means a company which--
                  ``(A) is a subsidiary of a bank (other than a 
                corporation organized under section 25A of the 
                Federal Reserve Act or a corporation operating 
                under section 25 of such Act); and
                  ``(B) is engaged in a financial activity (as 
                defined in section 5136A(a)(4)) that is not a 
                permissible activity for a national bank to 
                engage in directly.
          ``(2) Application to transactions between a financial 
        subsidiary of a bank and the bank.--For purposes of 
        applying this section and section 23B to a transaction 
        between a financial subsidiary of a bank and the bank 
        (or between such financial subsidiary and any other 
        subsidiary of the bank which is not a financial 
        subsidiary) and notwithstanding subsection (b)(2) and 
        section 23B(d)(1), the financial subsidiary of the 
        bank--
                  ``(A) shall be an affiliate of the bank and 
                any other subsidiary of the bank which is not a 
                financial subsidiary; and
                  ``(B) shall not be treated as a subsidiary of 
                the bank.
          ``(3) Application to transactions between financial 
        subsidiary and nonbank affiliates.--
                  ``(A) In general.--A transaction between a 
                financial subsidiary and an affiliate of the 
                financial subsidiary shall not be deemed to be 
                a transaction between a subsidiary of a 
                national bank and an affiliate of the bank for 
                purposes of section 23A or section 23B of the 
                Federal Reserve Act.
                  ``(B) Certain affiliates excluded.--For 
                purposes of subparagraph (A) and 
                notwithstanding paragraph (4), the term 
                `affiliate' shall not include a bank, or a 
                subsidiary of a bank, which is engaged 
                exclusively in activities permissible for a 
                national bank to engage in directly.
          ``(4) Equity investments excluded subject to the 
        approval of the banking agency.--Subsection (a)(1) 
        shall not apply so as to limit the equity investment of 
        a bank in a financial subsidiary of such bank, except 
        that any investment that exceeds the amount of a 
        dividend that the bank could pay at the time of the 
        investment without obtaining prior approval of the 
        appropriate Federal banking agency and is in excess of 
        the limitation which would apply under subsection 
        (a)(1), but for this paragraph, may be made only with 
        the approval of the appropriate Federal banking agency 
        (as defined in section 3(q) of the Federal Deposit 
        Insurance Act) with respect to such bank.''.
  (b) Treatment of Financial Subsidiaries Under Other 
Provisions of Law.--
          (1) Bank Holding Company Act Amendments of 1970.--
        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 financial subsidiary (as defined in section 
        5136A(a)(5)(A) of the Revised Statutes of the United 
        States or referenced in the 20th undesignated paragraph 
        of section 9 of the Federal Reserve Act or section 
        24(d)(3)(A) of the Federal Deposit Insurance Act) shall 
        be deemed to be a subsidiary of a bank holding company, 
        and not a subsidiary of a bank.''; and
          (2) Federal Reserve Act.--The 20th undesignated 
        paragraph of section 9 of the Federal Reserve Act (12 
        U.S.C. 335) is amended by adding at the end of the 
        following new sentence: ``To the extent permitted under 
        State law, a State member bank may acquire or establish 
        and retain a financial subsidiary (as defined in 
        section 5136A(a)(3)(A) of the Revised Statutes of the 
        United States, except that all references in that 
        section to the Comptroller of the Currency, the 
        Comptroller, or regulations or orders of the 
        Comptroller shall be deemed to be references to the 
        Board or regulations or orders of the Board.''.

                        [3. Consumer protection]

  In paragraph (1) of section 45(a) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, insert ``governing sales 
practices'' after ``regulations'' in the portion of such 
paragraph which precedes subparagraph (A).
  In paragraph (1) of section 45(d) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, strike ``and the making of loans''.
  Strike paragraph (2) of section 45(g) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, and insert the following new 
paragraph:
          ``(2) Effect on other laws.--Subject to section 104, 
        regulations prescribed by a Federal banking agency 
        under this section shall not be construed as 
        superseding, altering, or affecting the statutes, 
        regulations, orders, or interpretations in effect in 
        any State, except to the extent that such statutes, 
        regulations, orders, or interpretations are 
        inconsistent with the regulations prescribed by a 
        Federal banking agency under this section and then only 
        to the extent of the inconsistency. For purposes of 
        this paragraph, a State statute, regulation, order, or 
        interpretation is not inconsistent with the regulations 
        prescribed by a Federal banking agency under this 
        section if the protection such statute, regulation, 
        order, or interpretation affords any consumer is 
        greater than the protection provided by the regulations 
        under this section.

                         [4. Lifeline banking]

  In paragraph (1) of section 6(d) of the Bank Holding Company 
Act of 1956, as added by section 103(a) of the Amendment in the 
Nature of a Substitute, strike ``or (C)'' and insert ``(C), or 
(D)''.
  In paragraph (4)(D) of section 6(d) of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute, strike ``or (C)'' and 
insert ``(C), or (D)''.

                             [5. Deference]

  In section 307(e) of the Amendment in the Nature of a 
Substitute, strike ``, without unequal deference''.

                       [6. GAO study--antitrust]

  After section 145 of the Amendment in the Nature of a 
Substitute, insert the following new section (and redesignate 
the subsequent section and conform the table of contents 
accordingly):

SEC. 146. ANNUAL GAO REPORT.

  (a) In General.--By the end of the 1-year period beginning on 
the date of the enactment of this Act and annually thereafter, 
the Comptroller General of the United States shall submit a 
report to the Congress on market concentration in the financial 
services industry and its impact on consumers.
  (b) Analysis.--Each report submitted under subsection (a) 
shall contain an analysis of--
          (1) the positive and negative effects of affiliations 
        between various types of financial companies, and of 
        acquisitions pursuant to this Act and the amendments 
        made by this Act to other provisions of law, including 
        any positive or negative effects on consumers, area 
        markets, and submarkets thereof or on registered 
        securities brokers and dealers which have been 
        purchased by depository institutions or depository 
        institution holding companies;
          (2) the changes in business practices and the effects 
        of any such changes on the availability of venture 
        capital, consumer credit, and other financial services 
        or products and the availability of capital and credit 
        for small businesses; and
          (3) the acquisition patterns among depository 
        institutions, depository institution holding companies, 
        securities firms, and insurance companies including 
        acquisitions among the largest 20 percent of firms and 
        acquisitions within regions or other limited 
        geographical areas.

                           [7. Privacy study]

  After section 108 of the Amendment in the Nature of a 
Substitute, insert the following new section (and amend the 
table of contents accordingly):

SEC. 110. REPORTS ON ONGOING FTC STUDY OF CONSUMER PRIVACY ISSUES.

  With respect to the ongoing multistage study being conducted 
by the Federal Trade Commission on consumer privacy issues, the 
Commission shall submit an interim report on the findings and 
conclusions of the Commission, together with such 
recommendations for legislative and administrative action as 
the Commission determines to be appropriate, to the Committee 
on Commerce and the Committee on Banking and Financial Services 
of the House of Representatives and the Committee on Banking, 
Housing, and Urban Affairs of the Senate at the conclusion of 
each stage of such study and a final report at the conclusion 
of the study.
                              ----------                              


3. An Amendment To Be Offered by Representative Baker of Louisiana, or 
                  a Designee, Debatable for 40 Minutes

  After section 181, insert the following new sections (and 
conform the table of contents accordingly):

SEC. 182. CRA AMENDMENT.

  Section 803(2) of the Community Reinvestment Act of 1977 (12 
U.S.C. 2902(2)) is amended by inserting ``which has total 
assets of more than $100,000,000'' before the semicolon at the 
end.
  In section 305 of the Amendment in the Nature of a 
Substitute, strike ``If a national bank'' and insert ``(a) In 
General.--If a national bank''.
  In section 305 of the Amendment in the Nature of a 
Substitute, insert the following new subsections after 
subsection (a) (as so redesignated):
  (b) State Waiver.--If, in any community served by a national 
bank or a subsidiary of a national bank, there is no company 
licensed by the appropriate State regulator to provide 
insurance as agent which is available for acquisition, the 
State insurance regulator may, upon application by the national 
bank or subsidiary, waive the limitation of subsection (a) with 
respect to the provision of insurance as agent by such bank or 
subsidiary within such community.
  (c) Sunset.--This section shall cease to be effective at the 
end of the 3-year period beginning on the date of the enactment 
of this Act.
  In paragraph (1) of section 45(d) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, strike ``and the making of loans''.
  In paragraph (2) of section 45(g) of the Federal Deposit 
Insurance Act, as added by section 308(a) of the Amendment in 
the Nature of a Substitute, strike ``Regulations prescribed'' 
and insert ``Subject to section 104, regulations prescribed''.
  After section 309 of the Amendment in the Nature of a 
Substitute, add the following new section (and conform the 
table of contents accordingly):

SEC. 310. STUDY OF EFFECTIVENESS OF SAFE HARBOR.

  (a) Study Required.--3 years after the date of the enactment 
of this Act, the Comptroller of the Currency shall study, in 
conjunction with the National Association of Insurance 
Commissioners should such Association choose to participate, 
the effectiveness of the provisions of section 104(b)(2)(A) in 
establishing a safe harbor for the regulation by States of 
insurance sales and solicitation activity.
  (b) Report.--The Comptroller of the Currency, together with 
the National Association of Insurance Commissioners should such 
Association choose to participate, shall submit a report to the 
Congress before the end of the 6-month period beginning 3 years 
after the date of the enactment of this Act on findings made 
and conclusions reached with regard to the study required under 
subsection (a), together with such recommendations for 
legislative or administrative action as the Comptroller and the 
Association determine to be appropriate.
  Paragraph (9) of section 10(c) of the Home Owners' Loan Act, 
as added by section 401 of the Amendment in the Nature of a 
Substitute, is amended by adding at the end the following new 
subparagraph:
                  ``(C) No acquisition of grandfathered 
                unitaries by unregulated nonfinancial 
                companies.--Notwithstanding subparagraph (B), 
                paragraph (3) shall not apply to any company 
                described in subparagraph (B)(i)(II) which is 
                not, at the time of the acquisition referred to 
                in such subparagraph, subject to licensing, 
                regulation, or examination by a Federal banking 
                agency, the Securities and Exchange Commission, 
                the Commodities Futures Trading Commission, or 
                a State insurance regulator.''.
  Strike the heading of subtitle C of title I of the Amendment 
in the Nature of a Substitute and insert the following new 
heading (and amend the table of contents accordingly):

      Subtitle C--Subsidiaries of Insured Depository Institutions

  Strike section 121 of the Amendment in the Nature of a 
Substitute and insert the following new sections (and 
redesignate subsequent sections and amend the table of contents 
accordingly):

SEC. 121. SUBSIDIARIES OF NATIONAL BANKS AUTHORIZED TO ENGAGE IN 
                    FINANCIAL ACTIVITIES.

  (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. FINANCIAL SUBSIDIARIES OF NATIONAL BANKS.

  ``(a) Subsidiaries of National Banks Authorized to Engage in 
Financial Activities.--
          ``(1) In general.--A subsidiary of a national bank 
        may engage in an activity that is not permissible for a 
        national bank to engage in directly, but only if--
                  ``(A) the activity is a financial activity 
                (as defined in paragraph (4));
                  ``(B) the national bank is well capitalized, 
                well managed, and achieved a rating of 
                `satisfactory record of meeting community 
                credit needs', or better, at the most recent 
                examination of the bank;
                  ``(C) all depository institution affiliates 
                of such national bank are well capitalized, 
                well managed, and have achieved a rating of 
                `satisfactory record of meeting community 
                credit needs', or better, at the most recent 
                examination of each such institution; and
                  ``(D) the bank has received the approval of 
                the Comptroller of the Currency.
          ``(2) No effect on edge act or agreement 
        corporations.--Paragraph (1) shall not apply with 
        respect to any subsidiary which is a corporation 
        organized under section 25A of the Federal Reserve Act 
        or a corporation operating under section 25 of such 
        Act.
          ``(3) Other subsidiaries prohibited.--A national bank 
        may not control any subsidiary other than a 
        subsidiary--
                  ``(A) which engages solely in activities that 
                are permissible for a national bank to engage 
                in directly or are authorized under paragraph 
                (1); or
                  ``(B) which a national bank may control 
                pursuant to section 25 or 25A of the Federal 
                Reserve Act, the Bank Service Company Act, or 
                any other Act that expressly by its terms 
                authorizes national banks to control 
                subsidiaries.
          ``(4) Financial activity defined.--For purposes of 
        this section and subject to paragraphs (5) and (6), the 
        term `financial activity' means any activity determined 
        under section 6(c) of the Bank Holding Company Act of 
        1956 to be financial in nature or incidental to 
        financial activities.
          ``(5) Other definitions.--For purposes of this 
        section, the following definitions shall apply:
                  ``(A) Financial subsidiary.--The term 
                `financial subsidiary' means a company which--
                          ``(i) is a subsidiary of a national 
                        bank (other than a corporation 
                        organized under section 25A of the 
                        Federal Reserve Act or a corporation 
                        operating under section 25 of such 
                        Act); and
                          ``(ii) is engaged in a financial 
                        activity pursuant to paragraph (1) that 
                        is not a permissible activity for a 
                        national bank to engage in directly.
                  ``(B) Subsidiary.--The term `subsidiary' has 
                the meaning given to such term in section 2 of 
                the Bank Holding Company Act of 1956.
                  ``(C) Well capitalized.--The term `well 
                capitalized' has the same meaning as in section 
                38 of the Federal Deposit Insurance Act and, 
                for purposes of this section, the Comptroller 
                shall have exclusive jurisdiction to determine 
                whether a national bank is well capitalized.
                  ``(D) Well managed.--The term `well managed' 
                means--
                          ``(i) in the case of a bank that has 
                        been examined, unless otherwise 
                        determined in writing by the 
                        Comptroller, the achievement of--
                                  ``(I) 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.
          ``(6) Insurance underwriting, merchant banking, and 
        direct investment.--Except asprovided in title III of 
the Financial Services Act of 1998, no subsidiary of a national bank 
(other than a corporation organized under section 25A of the Federal 
Reserve Act or a corporation operating under section 25 of such Act) 
may underwrite noncredit-related insurance, engage in real estate 
investment or development activities (except to the extent a national 
bank is specifically authorized by statute to engage in any such 
activity directly), or engage in merchant banking (as described in 
section 6(c)(3)(H) of the Bank Holding Company Act of 1956).
          ``(7) Limited exclusions from community needs 
        requirements for newly acquired depository 
        institutions.--Any depository institution which becomes 
        affiliated with a national bank during the 12-month 
        period preceding the submission of an application to 
        acquire a financial subsidiary and any depository 
        institution which becomes so affiliated after the 
        approval of such application may be excluded for 
        purposes of paragraph (1)(C) during the 12-month period 
        beginning on the date of such acquisition if--
                  ``(A) the national bank has submitted an 
                affirmative plan to the Comptroller of the 
                Currency 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, during the 
                most next examination of the institution; and
                  ``(B) the plan has been accepted by the 
                Comptroller.
  ``(b) Capital Deduction Required.--
          ``(1) In general.--In determining compliance with 
        applicable capital standards--
                  ``(A) the amount of a national bank's equity 
                investment in a financial subsidiary shall be 
                deducted from the national bank's assets and 
                tangible equity; and
                  ``(B) the financial subsidiary's assets and 
                liabilities shall not be consolidated with 
                those of the national bank.
          ``(2) Regulations required.--The Comptroller shall 
        prescribe regulations implementing this subsection.
  ``(c) Safeguards for the Bank.--A national bank that 
establishes or maintains a financial subsidiary shall assure 
that--
          ``(1) the bank's procedures for identifying and 
        managing financial and operational risks within the 
        bank and financial subsidiaries of the bank adequately 
        protect the bank from such risks;
          ``(2) the bank has, for the protection of the bank, 
        reasonable policies and procedures to preserve the 
        separate corporate identity and limited liability of 
        the bank and subsidiaries of the bank; and
          ``(3) the bank complies with this section.
  ``(d) National Banks Which Do Not Comply With Requirements of 
This Section.--
          ``(1) In general.--If the Comptroller determines that 
        a national bank which controls a financial subsidiary, 
        or a depository institution affiliate of such national 
        bank, does not continue to meet the requirements of 
        subsection (a), the Comptroller shall give notice to 
        the bank to that effect, describing the conditions 
        giving rise to the notice.
          ``(2) Agreement to correct conditions required.--
                  ``(A) Content of agreement.--Within 45 days 
                of the receipt by a depository institution of a 
                notice given under paragraph (1) (or such 
                additional period as the Comptroller may 
                permit), the depository institution failing to 
                meet the requirements of subsection (a) shall 
                execute an agreement with the appropriate 
                Federal banking agency for such institution to 
                correct the conditions described in the notice.
                  ``(B) Comptroller may impose limitations.--
                Until the conditions giving rise to the notice 
                are corrected, the Comptroller may impose such 
                limitations on the conduct of the business of 
                the national bank or subsidiary of such bank as 
                the Comptroller determines to be appropriate 
                under the circumstances.
          ``(3) Failure to correct.--If the conditions 
        described in the notice are not corrected within 180 
        days after the bank receives the notice, the 
        Comptroller may require, under such terms and 
        conditions as may be imposed by the Comptroller and 
        subject to such extensions of time as may be granted in 
        the discretion of the Comptroller--
                  (A) the national bank to divest control of 
                each subsidiary engaged in an activity that is 
                not permissible for the bank to engage in 
                directly; or
                  ``(B) each subsidiary of the national bank to 
                cease any activity that is not permissible for 
                the bank to engage in directly.
  ``(e) Functional Regulation.--
          ``(1) In general.--A financial subsidiary of a 
        national bank shall not be treated as a bank for 
        purposes of any definition of bank in the Federal 
        securities laws.
          ``(2) Deference to sec.--The Comptroller shall defer 
        to 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.
          ``(3) Deference to examinations.--In the case of a 
        financial subsidiary of a national bank which is a 
        registered broker or dealer or a registered investment 
        adviser, the Comptroller shall, to the fullest extent 
        possible, address the circumstances which might 
        otherwise permit or require an examination by the 
        Comptroller by forgoing an examination and instead 
        reviewing the reports of examination made of such 
        subsidiary by or on behalf of the Securities and 
        Exchange Commission.''.
  (b) 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. ACTIVITIES OF SUBSIDIARIES OF INSURED STATE BANKS.

  Section 24(d) of the Federal Deposit Insurance Act (12 U.S.C. 
1831a(d)) is amended--
          (1) by adding at the end the following new 
        paragraphs:
          ``(3) Conditions on certain activities.--
                  ``(A) In general.--A subsidiary of a State 
                bank may engage in an activity in which a 
                subsidiary of a national bank may engage as 
                principal pursuant to subsection (a)(1) of 
                section 5136A of the Revised Statutes of the 
                United States but only if the State bank meets 
                the same requirements which are applicable to 
                national banks under subparagraphs (B) and (C) 
                of such subsection and subsections (b) and (c) 
                of such section.
                  ``(B) Application of section 5136a of revised 
                statutes.--For purposes of applying section 
                5136A of the Revised Statutes of the United 
                States with regard to the activities of a 
                subsidiary of a State bank, all references in 
                such section to the Comptroller of the 
                Currency, or regulations and orders of the 
                Comptroller, shall be deemed to be references 
                to the appropriate Federal banking agency with 
                respect to such State bank, and regulations and 
                orders of such agency.
          ``(4) State banks which fail to comply with paragraph 
        (3) conditions.--
                  ``(A) In general.--If the appropriate Federal 
                banking agency determines that a State bank 
                that controls a subsidiary which is engaged as 
                principal in financial activities pursuant to 
                paragraph (3) does not meet the requirements of 
                subparagraph (A) of such paragraph, the 
                appropriate Federal banking agency shall give 
                notice to the bank to that effect, describing 
                the conditions giving rise to the notice.
                  ``(A) Agreement to correct conditions 
                required.--
                          ``(i) Content of agreement.--Within 
                        45 days of the receipt by a bank of a 
                        notice given under paragraph (1) (or 
                        such additional period as the 
                        appropriate Federal banking agency for 
                        such bank may permit), the bank failing 
                        to meet the requirements of paragraph 
                        (3)(A) shall execute an agreement with 
                        the appropriate Federal banking agency 
                        for such bank to correct the conditions 
                        described in the notice.
                  ``(B) Agency may impose limitations.--Until 
                the conditions giving rise to the notice are 
                corrected, the appropriate Federal banking 
                agency for the State bank may impose such 
                limitations on the conduct of the business of 
                the bank or a subsidiary of the bank as the 
                agency determines to be appropriate under the 
                circumstances.
                  ``(C) Failure to correct.--If the conditions 
                described in the notice are not corrected 
                within 180 days after the bank receives the 
                notice, the appropriate Federal banking agency 
                for the State may require, under such terms and 
                conditions as may be imposed by such agency and 
                subject to such extensions of time as may be 
                granted in the discretion of the agency--
                          ``(i) the bank to divest control of 
                        each subsidiary engaged in an activity 
                        as principal that is not permissible 
                        for the bank to engage in directly; or
                          ``(ii) each subsidiary of the bank to 
                        cease any activity as principal that is 
                        not permissible for the bank to engage 
                        in directly.''.

SEC. 123. RULES APPLICABLE TO FINANCIAL SUBSIDIARIES.

  (a) Transactions Between Financial Subsidiaries and Other 
Affiliates.--Section 23A of the Federal Reserve Act (12 U.S.C. 
371c) is amended--
          (1) by redesignating subsection (e) as subsection 
        (f); and
          (2) by inserting after subsection (d), the following 
        new subsection:
  ``(e) Rules Relating to Banks With Financial Subsidiaries.--
          ``(1) Financial subsidiary defined.--For purposes of 
        this section and section 23B, the term `financial 
        subsidiary' means a company which--
                  ``(A) is a subsidiary of a bank (other than a 
                corporation organized under section 25A of the 
                Federal Reserve Act or a corporation operating 
                under section 25 of such Act); and
                  ``(B) is engaged in a financial activity (as 
                defined in section 5136A(a)(4)) that is not a 
                permissible activity for a national bank to 
                engage in directly.
          ``(2) Application to transactions between a financial 
        subsidiary of a bank and the bank.--For purposes of 
        applying this section and section 23B to a transaction 
        between a financial subsidiary of a bank and the bank 
        (or between such financial subsidiary and any other 
        subsidiary of the bank which is not a financial 
        subsidiary) and notwithstanding subsection (b)(2) and 
        section 23B(d)(1), the financial subsidiary of the 
        bank--
                  ``(A) shall be an affiliate of the bank and 
                any other subsidiary of the bank which is not a 
                financial subsidiary; and
                  ``(B) shall not be treated as a subsidiary of 
                the bank.
          ``(3) Application to transactions between financial 
        subsidiary and nonbank affiliates.--
                  ``(A) In general.--A transaction between a 
                financial subsidiary and an affiliate of the 
                financial subsidiary shall not be deemed to be 
                a transaction between a subsidiary of a 
                national bank and an affiliate of the bank for 
                purposes of section 23A or section 23B of the 
                Federal Reserve Act.
                  ``(B) Certain affiliates excluded.--For 
                purposes of subparagraph (A) and 
                notwithstanding paragraph (4), the term 
                `affiliate' shall not include a bank, or a 
                subsidiary of a bank, which is engaged 
                exclusively in activities permissible for a 
                national bank to engage in directly.
          ``(4) Equity investments excluded subject to the 
        approval of the banking agency.--Subsection (a)(1) 
        shall not apply so as to limit the equity investment of 
        a bank in a financial subsidiary of such bank, except 
        that any investment that exceeds the amount of a 
        dividend that the bank could pay at the time of the 
        investment without obtaining prior approval of the 
        appropriate Federal banking agency and is in excess of 
        the limitation which would apply under subsection 
        (a)(1), but for this paragraph, may be made only with 
        the approval of the appropriate Federal banking agency 
        (as defined in section 3(q) of the Federal Deposit 
        Insurance Act) with respect to such bank.''.
  (b) Treatment of Financial Subsidiaries Under Other 
Provisions of Law.--
          (1) Bank Holding Company Act Amendments of 1970.--
        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 financial subsidiary (as defined in section 
        5136A(a)(5)(A) of the Revised Statutes of the United 
        States or referenced in the 20th undesignated paragraph 
        of section 9 of the Federal Reserve Act or section 
        24(d)(3)(A) of the Federal Deposit Insurance Act) shall 
        be deemed to be a subsidiary of a bank holding company, 
        and not a subsidiary of a bank.''; and
          (2) Federal Reserve Act.--The 20th undesignated 
        paragraph of section 9 of the Federal Reserve Act (12 
        U.S.C. 335) is amended by adding at the end of the 
        following new sentence: ``To the extent permitted under 
        State law, a State member bank may acquire or establish 
        and retain a financial subsidiary (as defined in 
        section 5136A(a)(3)(A) of the Revised Statutes of the 
        United States, except that all references in that 
        section to the Comptroller of the Currency, the 
        Comptroller, or regulations or orders of the 
        Comptroller shall be deemed to be references to the 
        Board or regulations or orders of the Board.''.
                              ----------                              


4. An Amendment To Be Offered by Representative Baker of Louisiana, or 
                  a Designee, Debatable for 10 Minutes

  After section 181 of the Amendment in the Nature of a 
Substitute, insert the following section (and conform the table 
of contents accordingly):

SEC. 182. REFUND OF CERTAIN AMOUNTS IN DEPOSIT INSURANCE FUND.

  Subsection (e) of section 7 of the Federal Deposit Insurance 
Act (12 U.S.C. 1817(e)) is amended to read as follows:
  ``(e) Refunds.--
          ``(1) Overpayments.--In the case of any payment of an 
        assessment by an insured depository institution in 
        excess of the amount due to the Corporation, the 
        Corporation may--
                  ``(A) refund the amount of the excess payment 
                to the insured depository institution; or
                  ``(B) credit such excess amount toward the 
                payment of subsequent semiannual assessments 
                until such credit is exhausted.
          ``(2) Balance in insurance fund in excess of 1.5 
        percent of estimated insured deposits.--
                  ``(A) In general.--Subject to subparagraphs 
                (B) and (C), if, as of the end of any 
                semiannual assessment period which begins after 
                the merger of the Bank Insurance Fund and the 
                Savings Association Insurance Fund into the 
                deposit insurance fund, the amount of the 
                actual reserves in the deposit insurance fund 
                (after such merger) exceeds 1.5 percent of 
                estimated insured deposits, such excess amount 
                shall be refunded to members of the fund by the 
                Corporation on such basis as the Board of 
                Directors determines to be appropriate, taking 
                into account the factors considered under the 
                risk-based assessment system.
                  ``(B) Refund not to exceed previous 
                semiannual assessment.--The amount of any 
                refund under this paragraph to any member of 
                the deposit insurance fund for any semiannual 
                assessment period may not exceed the total 
                amount of assessments paid by such member to 
                the insurance fund with respect to such period.
                  ``(C) Refund limitation for certain 
                institutions.--No refund may be made under this 
                paragraph with respect to the amount of any 
                assessment paid for any semiannual assessment 
                period by any insured depository institution 
                described in clause (v) of subsection 
                (b)(2)(A).''.
                              ----------                              


5. An Amendment To Be Offered by Representative Roukema of New Jersey, 
or a Representative Vento of Minnesota, or a Designee, Debatable for 30 
                                Minutes

  Strike subparagraph (A) of section 6(f)(1) of the Bank 
Holding Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute, and insert the 
following new subparagraph:
                  ``(A) the aggregate annual gross revenues 
                derived from all such activities and all such 
                companies does not exceed 10 percent of the 
                consolidated annual gross revenues of the 
                financial holding company;''.
  Strike paragraph (2) of section 6(f) of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute
  Strike paragraph (3) of section 6(f) of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute, and insert the 
following new paragraph:
          ``(2) 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 10 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.''.
  Strike paragraph (4) of section 6(f) of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute and insert the 
following new paragraph:
          ``(3) Financial holding company growth beyond cap.--
        Notwithstanding paragraph (1), the Board may, on a case 
        by case basis, allow the aggregate annual gross 
        revenues derived by a financial holding company from 
        activities engaged in, or companies the shares of which 
        such holding company owns or controls, under this 
        subsection to exceed the 10 percent limitation 
        contained in subparagraph (A) of such paragraph so long 
        as--
                  ``(A) such aggregate annual gross revenues do 
                not exceed 15 percent of the consolidated 
                annual gross revenues of the financial holding 
                company; and
                  ``(B) the financial holding company does not 
                commence any new activity, or acquire ownership 
                or control of shares of a company, under this 
                subsection after the date on which such gross 
                revenues first exceed 10 percent of the 
                consolidated annual gross revenues.''
  After paragraph (3) (as so redesignated) of section 6(f) of 
the Bank Holding Company Act of 1956, as added by section 
103(a) of the Amendment in the Nature of a Substitute insert 
the following new paragraph:
          ``(4) Domestic growth of foreign bank beyond cap.--
        Notwithstanding paragraph (2), the Board may, on a case 
        by case basis, allow the aggregate annual gross 
        revenues derived by a foreign bank from activities 
        engaged in, or companies the shares of which such 
        foreign bank owns or controls, in the United States 
        under this subsection to exceed the 10 percent 
        limitation contained in such paragraph so long as--
                  ``(A) such aggregate annual gross revenues do 
                not exceed 15 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; and
                  ``(B) the foreign bank does not commence any 
                new activity, or acquire ownership or control 
                of shares of a company, under this subsection 
                after the date on which such aggregate annual 
                gross revenues first exceed the 10 percent 
                limitation contained in paragraph (2).''
  Strike subsection (g) of section 6 of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
Amendment in the Nature of a Substitute (and redesignate the 
subsequent subsection and amend any cross reference to any such 
subsection accordingly).
                              ----------                              


6. A Substitute Amendment To Be Offered by Representative Leach of Iowa 
or Representative Bereuter of Nebraska, or a Designee to the Amendment 
   Offered by Representative Roukema of New Jersey, Debatable for 30 
                                Minutes

  Strike subsection (f) of section 6 of the Bank Holding 
Company Act of 1956, as added by section 103(a) of the 
amendment in the nature of a substitute (and redesignate 
subsequent subsections and any cross reference to any such 
subsection accordingly).
  In paragraph (1) of subsection (f) (as so redesignated) of 
section 6 of the Bank Holding Company Act of 1956, as added by 
section 103(a) of the amendment in the nature of a substitute, 
strike ``subsection (f)(1) and''.
  In paragraph (2) of subsection (f) (as so redesignated) of 
section 6 of the Bank Holding Company Act of 1956, as added by 
section 103(a) of the amendment in the nature of a substitute--
          (1) strike ``, as of the day before the company 
        becomes a financial holding company,''; and
          (2) insert ``(excluding revenues derived from 
        subsidiary depository institutions)'' before ``, on a 
        consolidated basis''.
  In paragraph (4) of subsection (f) (as so redesignated) of 
section 6 of the Bank Holding Company Act of 1956, as added by 
section 103(a) of the amendment in the nature of a substitute, 
insert ``(excluding revenues derived from subsidiary depository 
institutions)'' before the period at the end.
  In paragraph (5) of subsection (f) (as so redesignated) of 
section 6 of the Bank Holding Company Act of 1956, as added by 
section 103(a) of the amendment in the nature of a substitute, 
strike ``, subsection (f),''.
  In paragraph (6) of subsection (f) (as so redesignated) of 
section 6 of the Bank Holding Company Act of 1956, as added by 
section 103(a) of the amendment in the nature of a substitute, 
strike ``, subsection (f),''.
  After paragraph (6) of subsection (f) (as so redesignated) of 
section 6 of the Bank Holding Company Act of 1956, as added by 
section 103(a) of the amendment in the nature of a substitute, 
insert the following new paragraph:

          ``(7) Sunset of grandfather.--A financial holding 
        company engaged in any activity, or retaining direct or 
        indirect ownership or control of shares of a company, 
        pursuant to this subsection, shall terminate such 
        activity and divest ownership or control of the shares 
        of such company before the end of the 10-year period 
        beginning on the date of the enactment of the Financial 
        Services Act of 1998. The Board may, upon application 
        by a financial holding company, extend such 10-year 
        period by not to exceed an additional 5 years if such 
        extension would not be detrimental to the public 
        interest.
  Strike paragraph (1) of section 10(c) of the Bank Holding 
Company Act of 1956, as added by section 131(a) of the 
amendment in the nature of a substitute (and redesignate 
subsequent paragraphs and any cross reference to any such 
paragraph accordingly).
  In subparagraph (A) of paragraph (1) (as so redesignated) of 
section 10(c) of the Bank Holding Company Act of 1956, as added 
by section 131(a) of the amendment in the nature of a 
substitute, strike ``paragraph (1)(A) and''.
  In subparagraph (C) of paragraph (1) (as so redesignated) of 
section 10(c) of the Bank Holding Company Act of 1956, as added 
by section 131(a) of the amendment in the nature of a 
substitute, strike ``or (g)''.
  In subparagraph (B) of paragraph (2) (as so redesignated) of 
section 10(c) of the Bank Holding Company Act of 1956, as added 
by section 131(a) of the amendment in the nature of a 
substitute, strike ``Notwithstanding paragraph (1)(A)(i), the'' 
and insert ``The''.
  In subparagraph (A) of paragraph (3) (as so redesignated) of 
section 10(c) of the Bank Holding Company Act of 1956, as added 
by section 131(a) of the amendment in the nature of a 
substitute, strike ``, (2), or (3)'' and insert ``or (2)''.
                              ----------                              


  7. An Amendment To Be Offered by Representative Kingston of Georgia, 
                or a Designee, Debatable for 10 minutes

  After section 108 of the Amendment in the Nature of a 
Substitute, insert the following new section (and conform the 
table of contents accordingly):

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

  (a) Study Required.--The Comptroller General of the United 
States shall conduct a study of the projected economic impact 
that the enactment of this Act will have on financial 
institutions which have total assets of $100,000,000 or less.
  (b) Report to the Congress.--The Comptroller General of the 
United States shall submit a report to the Congress before the 
end of the 6-month period beginning on the date of the date of 
the enactment of this Act containing the findings and 
conclusions of the Comptroller General with regard to the study 
required under subsection (a) and such recommendations for 
legislative or administrative action as the Comptroller General 
may determine to be appropriate.
                              ----------                              


8. An Amendment To Be Offered by Representative Roukema of New Jersey, 
                or a Designee, Debatable for 10 minutes

  After subtitle H of title I, insert the following new 
subtitle (and redesignate the subsequent subtitle and conform 
the table of contents accordingly):

                  Subtitle I--Deposit Insurance Funds

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

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


9. An Amendment To Be Offered by Representative Sanders of Vermont, or 
                  a Designee, Debatable for 10 minutes

    After section 241 of the Amendment in the Nature of a 
Substitute, insert the following new section (and conform the 
table of contents accordingly):

SEC. 242. STUDY OF LIMITATION ON FEES ASSOCIATED WITH ACQUIRING 
                    FINANCIAL PRODUCTS.

    Before the end of the 1-year period beginning on the date 
of the enactment of this Act, the Comptroller General of the 
United States shall submit a report to the Congress regarding 
the efficacy and benefits of uniformly limiting any 
commissions, fees, markups, or other costs incurred by 
customers in the acquisition of financial products.
                              ----------                              


      10. An Amendment To Be Offered by Representative Markey of 
         Massachusetts, or a Designee, Debatable for 10 Minutes

  Strike the heading for subtitle E of title I of the Amendment 
in the Nature of a Substitute and insert the following new 
heading (and conform the table of contents accordingly):

               Subtitle E--Preservation of FTC Authority

  Strike sections 141, 142, 143, and 144 of the Amendment in 
the Nature of a Substitute and insert the following new 
sections (and redesignate the subsequent section and conform 
the table of contents accordingly):

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

  (a) Amendment to Section 3 To Require Filing of Application 
Copies With Antitrust Agencies.--Section 3(b) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1842(b)) is amended 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 section 6, with the 
        Federal Trade Commission, copies of any documents 
        regarding the proposed transactions required by the 
        Board.''.
  (b) Amendments to Section 11 To Modify 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) by striking ``the Attorney 
        General'' and ``the Attorney General of the United 
        States'' wherever it appears and inserting ``the 
        appropriate antitrust agency''.
          (2) in subsection (e) by striking ``the Attorney 
        General'' and inserting ``an antitrust agency''.
  (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. INTERAGENCY DATA SHARING.

  To the extent not prohibited by other law, the Federal 
banking agencies (as defined in section 3(z) of the Federal 
Deposit Insurance Act) shall make available to the appropriate 
antitrust agency any data in their possession that the 
antitrust agency deems necessary for antitrust review of any 
transaction requiring approval under section 3 of the Bank 
Holding Company Act of 1956 or section 18(c) of the Federal 
Deposit Insurance Act.
                              ----------                              


11. An Amendment To Be Offered by Representative Metcalf of Washington, 
                or a Designee, Debatable for 10 Minutes

  After section 401 of the Amendment in the Nature of a 
Substitute, insert the following new section (and conform the 
table of contents accordingly):

SEC. 402. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED FEDERAL SAVINGS 
                    ASSOCIATION.

  Section 2 of the Act entitled ``An Act to enable national 
banking associations to increase their capital stock and to 
change their names or locations.'' 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 1998 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.''.
                              ----------                              


12. An Amendment To Be Offered by Representative Moran of Virginia, or 
                  a Designee, Debatable for 10 Minutes

    At the end of section 305 of the Amendment in the Nature of 
a Substitute insert the following new sentence: ``This section 
shall cease to have effect 5 years after the date of enactment 
of this Act.''.