[House Report 106-74]
[From the U.S. Government Publishing Office]



106th Congress                                             Rept. 106-74
 1st Session         HOUSE OF REPRESENTATIVES                   Part 1

=======================================================================


 
                     FINANCIAL SERVICES ACT OF 1999

                                _______
                                

                 March 23, 1999.--Ordered to be printed

                                _______
                                

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                      SUPPLEMENTAL, ADDITIONAL AND

                            DISSENTING VIEWS

                         [To accompany H.R. 10]

  The Committee on Banking and Financial Services, to whom was 
referred the bill (H.R. 10) to enhance competition in the 
financial services industry by providing a prudential framework 
for the affiliation of banks, securities firms, and other 
financial service providers, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

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

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

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

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

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public hearings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. Reports on ongoing FTC study of consumer privacy issues.
Sec. 110. GAO study of economic impact on community banks and other 
small financial institutions.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

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

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Safety and soundness firewalls between banks and their 
financial subsidiaries.
Sec. 123. Misrepresentations regarding depository institution liability 
for obligations of affiliates.
Sec. 124. Functional regulation.
Sec. 125. Repeal of stock loan limit in Federal Reserve Act.

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

            Chapter 1--Wholesale Financial Holding Companies

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

              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

               Subtitle E--Preservation of FTC Authority

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

Subtitle F--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.
Sec. 153. Representative offices.

        Subtitle G--Federal Home Loan Bank System Modernization

Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.

                       Subtitle H--ATM Fee Reform

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

          Subtitle I--Customer Service, Education, and Privacy

Sec. 176. Customer protection and education regulations.
Sec. 177. Depository institution privacy policies.
Sec. 178. Confidentiality of health and medical information.
Sec. 179. Financial information privacy.
Sec. 180. Study of current financial privacy laws.

                 Subtitle J--Direct Activities of Banks

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

                  Subtitle K--Deposit Insurance Funds

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

                  Subtitle L--Miscellaneous Provisions

Sec. 191. Termination of ``Know Your Customer'' regulations.
Sec. 192. GAO study of conflicts of interest.
Sec. 193. Clarification of source of strength doctrine.
Sec. 194. Study of cost of all Federal banking regulations.
Sec. 195. Study and report on adapting existing legislative 
requirements to online banking and lending.

                  Subtitle M--Effective Date of Title

Sec. 196. Effective date.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Definition and treatment of banking products.
Sec. 206. Qualified investor defined.
Sec. 207. Government securities defined.
Sec. 208. Effective date.
Sec. 209. Rule of construction.

             Subtitle B--Bank Investment Company Activities

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

Sec. 241. Study of methods to inform investors and consumers of 
uninsured products.
Sec. 242. Study of limitation on fees associated with acquiring 
financial 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. Title insurance activities of national banks and their 
affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal 
regulators.
Sec. 307. Certain State affiliation laws preempted for insurance 
companies and affiliates.

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

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

                        Subtitle A--Affiliations

SEC. 101. GLASS-STEAGALL ACT REFORMED.

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

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

  (a) In General.--Section 4(c)(8) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(c)(8)) is amended to read as follows:
          ``(8) shares of any company the activities of which had been 
        determined by the Board by regulation or order under this 
        paragraph as of the day before the date of the enactment of the 
        Financial Services Act of 1999, to be so closely related to 
        banking as to be a proper incident thereto (subject to such 
        terms and conditions contained in such regulation or order, 
        unless modified by the Board);''.
  (b) Conforming Changes to Other Statutes.--
          (1) Amendment to the bank holding company act amendments of 
        1970.--Section 105 of the Bank Holding Company Act Amendments 
        of 1970 (12 U.S.C. 1850) is amended by 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 1999.''.

SEC. 103. FINANCIAL HOLDING COMPANIES.

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

``SEC. 6. FINANCIAL HOLDING COMPANIES.

  ``(a) Financial Holding Company Defined.--For purposes of this 
section, the term `financial holding company' means a bank holding 
company which meets the requirements of subsection (b).
  ``(b) Eligibility Requirements for Financial Holding Companies.--
          ``(1) In general.--No bank holding company may engage in any 
        activity or directly or indirectly acquire or retain shares of 
        any company under this section unless the bank holding company 
        meets the following requirements:
                  ``(A) All of the subsidiary depository institutions 
                of the bank holding company are well capitalized.
                  ``(B) All of the subsidiary depository institutions 
                of the bank holding company are well managed.
                  ``(C) All of the subsidiary depository institutions 
                of the bank holding company have achieved a rating of 
                `satisfactory record of meeting community credit 
                needs', or better, at the most recent examination of 
                each such institution;
                  ``(D) In the case of any bank holding company which 
                underwrites or sells, or any affiliate of which 
                underwrites or sells, annuities contracts or contracts 
                insuring, guaranteeing, or indemnifying against loss, 
                harm, damage, illness, disability, or death--
                          ``(i) the company or affiliate has not been 
                        adjudicated in any Federal court, and has not 
                        entered into a consent decree filed in a 
                        Federal court or into a settlement agreement, 
                        premised upon a violation of the Fair Housing 
                        Act for the activities described in this 
                        subparagraph;
                          ``(ii) if such company or affiliate has 
                        entered into any such consent decree or 
                        settlement agreement, the company or the 
                        affiliate is not in violation of the decree or 
                        settlement agreement as determined by a court 
                        of competent jurisdiction or the agency with 
                        which the decree or agreement was entered into; 
                        or
                          ``(iii) the company has been exempted from 
                        the requirements of clauses (i) and (ii) by the 
                        Board under paragraph (4).
                  ``(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), (B), (C), and 
                (D).
          ``(2) Foreign banks and companies.--For purposes of paragraph 
        (1), the Board shall establish and apply comparable capital and 
        other operating standards to a foreign bank that operates a 
        branch or agency or owns or controls a bank or commercial 
        lending company in the United States, and any company that owns 
        or controls such foreign bank, giving due regard to the 
        principle of national treatment and equality of competitive 
        opportunity.
          ``(3) Limited exclusions from community needs requirements 
        for newly acquired depository institutions.--Any depository 
        institution acquired by a bank holding company during the 12-
        month period preceding the submission of a notice under 
        paragraph (1)(E) and any depository institution acquired after 
        the submission of such notice may be excluded for purposes of 
        paragraph (1)(C) during the 12-month period beginning on the 
        date of such acquisition if--
                  ``(A) the bank holding company has submitted an 
                affirmative plan to the appropriate Federal banking 
                agency to take such action as may be necessary in order 
                for such institution to achieve a rating of 
                `satisfactory record of meeting community credit 
                needs', or better, at the next examination of the 
                institution; and
                  ``(B) the plan has been accepted by such agency.
          ``(4) Violations of the fair housing act.--The Board may, on 
        a case-by-case basis, exempt a bank holding company from 
        meeting the requirements of clauses (i) and (ii) of paragraph 
        (1)(D).
  ``(c) Engaging in Activities That Are Financial in Nature.--
          ``(1) Financial activities.--
                  ``(A) 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, that the Board has determined (by regulation 
                or order and in accordance with subparagraph (B)) to 
                be--
                          ``(i) financial in nature or incidental to 
                        such financial activities; or
                          ``(ii) complementary to activities authorized 
                        under this subsection to the extent that the 
                        amount of such complementary activities remains 
                        small.
                  ``(B) Coordination between the board and the 
                secretary of the treasury.--
                          ``(i) Proposals raised before the board.--
                                  ``(I) Consultation.--The Board shall 
                                notify the Secretary of the Treasury 
                                of, and consult with the Secretary of 
                                the Treasury concerning, any request, 
                                proposal, or application under this 
                                subsection, including a regulation or 
                                order proposed under paragraph (4), for 
                                a determination of whether an activity 
                                is financial in nature or incidental to 
                                such a financial activity.
                                  ``(II) Treasury view.--The Board 
                                shall not determine that any activity 
                                is financial in nature or incidental to 
                                a financial activity under this 
                                subsection if the Secretary of the 
                                Treasury notifies the Board in writing, 
                                not later than 30 days after the date 
                                of receipt of the notice described in 
                                subclause (I) (or such longer period as 
                                the Board determines to be appropriate 
                                in light of the circumstances) that the 
                                Secretary of the Treasury believes that 
                                the activity is not financial in nature 
                                or incidental to a financial activity.
                          ``(ii) Proposals raised by the treasury.--
                                  ``(I) Treasury recommendation.--The 
                                Secretary of the Treasury may, at any 
                                time, recommend in writing that the 
                                Board find an activity to be financial 
                                in nature or incidental to a financial 
                                activity.
                                  ``(II) Time period for board 
                                action.--Not later than 30 days after 
                                the date of receipt of a written 
                                recommendation from the Secretary of 
                                the Treasury under subclause (I) (or 
                                such longer period as the Secretary of 
                                the Treasury and the Board determine to 
                                be appropriate in light of the 
                                circumstances), the Board shall 
                                determine whether to initiate a public 
                                rulemaking proposing that the subject 
                                recommended activity be found to be 
                                financial in nature or incidental to a 
                                financial activity under this 
                                subsection, and shall notify the 
                                Secretary of the Treasury in writing of 
                                the determination of the Board and, in 
                                the event that the Board determines not 
                                to seek public comment on the proposal, 
                                the reasons for that determination.
          ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Board shall take into account--
                  ``(A) the purposes of this Act and the Financial 
                Services Act of 1999;
                  ``(B) changes or reasonably expected changes in the 
                marketplace in which bank holding companies compete;
                  ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                  ``(D) whether such activity is necessary or 
                appropriate to allow a bank holding company and the 
                affiliates of a bank holding company to--
                          ``(i) compete effectively with any company 
                        seeking to provide financial services in the 
                        United States;
                          ``(ii) use any available or emerging 
                        technological means, including any application 
                        necessary to protect the security or efficacy 
                        of systems for the transmission of data or 
                        financial transactions, in providing financial 
                        services; and
                          ``(iii) offer customers any available or 
                        emerging technological means for using 
                        financial services.
          ``(3) Activities that are financial in nature.--The following 
        activities shall be considered to be financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding money or securities.
                  ``(B) Insuring, guaranteeing, or indemnifying against 
                loss, harm, damage, illness, disability, or death, or 
                providing and issuing annuities, and acting as 
                principal, agent, or broker for purposes of the 
                foregoing.
                  ``(C) Providing financial, investment, or economic 
                advisory services, including advising an investment 
                company (as defined in section 3 of the Investment 
                Company Act of 1940).
                  ``(D) Issuing or selling instruments representing 
                interests in pools of assets permissible for a bank to 
                hold directly.
                  ``(E) Underwriting, dealing in, or making a market in 
                securities.
                  ``(F) Engaging in any activity that the Board has 
                determined, by order or regulation that is in effect on 
                the date of enactment of the Financial Services Act of 
                1999, to be so closely related to banking or managing 
                or controlling banks as to be a proper incident thereto 
                (subject to the same terms and conditions contained in 
                such order or regulation, unless modified by the 
                Board).
                  ``(G) Engaging, in the United States, in any activity 
                that--
                          ``(i) a bank holding company may engage in 
                        outside the United States; and
                          ``(ii) the Board has determined, under 
                        regulations issued pursuant to section 4(c)(13) 
                        of this Act (as in effect on the day before the 
                        date of enactment of the Financial Services Act 
                        of 1999) to be usual in connection with the 
                        transaction of banking or other financial 
                        operations abroad.
                  ``(H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 1 or 
                more entities (including entities, other than a 
                depository institution, that the bank holding company 
                controls) or otherwise, shares, assets, or ownership 
                interests (including without limitation debt or equity 
                securities, partnership interests, trust certificates 
                or other instruments representing ownership) of a 
                company or other entity, whether or not constituting 
                control of such company or entity, engaged in any 
                activity not authorized pursuant to this section if--
                          ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution;
                          ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by an affiliate 
                        of the bank holding company that is a 
                        registered broker or dealer that is engaged in 
                        securities underwriting activities, or an 
                        affiliate of such broker or dealer, as part of 
                        a bona fide underwriting or 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) or providing and 
                        issuing annuities;
                          ``(iii) such shares, assets, or ownership 
                        interests represent an investment made in the 
                        ordinary course of business of such insurance 
                        company in accordance with relevant State law 
                        governing such investments; and
                          ``(iv) during the period such shares, assets, 
                        or ownership interests are held, the bank 
                        holding company does not directly or indirectly 
                        participate in the day-to-day management or 
                        operation of the company or entity except 
                        insofar as necessary to achieve the objectives 
                        of clauses (ii) and (iii).
          ``(4) Authorization of new financial activities.--The Board 
        shall, by regulation or order and in accordance with paragraph 
        (1)(B), define, consistent with the purposes of this Act, the 
        following activities as, and the extent to which such 
        activities are, financial in nature or incidental to activities 
        which are financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding financial assets other than 
                money or securities.
                  ``(B) Providing any device or other instrumentality 
                for transferring money or other financial assets.
                  ``(C) Arranging, effecting, or facilitating financial 
                transactions for the account of third parties.
          ``(5) Post-consummation notification.--
                  ``(A) In general.--A financial holding company 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 or 
                in paragraph (6) of this subsection, 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.
          ``(6) Notice required for large combinations.--
                  ``(A) In general.--No financial holding company or 
                wholesale financial holding company shall directly or 
                indirectly acquire, and no company that becomes a 
                financial holding company or a wholesale financial 
                holding company shall directly or indirectly acquire 
                control of, any company in the United States, including 
                through merger, consolidation, or other type of 
                business combination, that--
                          ``(i) is engaged in activities permitted 
                        under this subsection or subsection (g); and
                          ``(ii) has consolidated total assets in 
                        excess of $40,000,000,000,
                unless such holding company has provided notice to the 
                Board, not later than 60 days prior to such proposed 
                acquisition or prior to becoming a financial holding 
                company or wholesale financial holding company, and 
                during that time period, or such longer time period not 
                exceeding an additional 60 days, as established by the 
                Board, the Board has not issued a notice disapproving 
                the proposed acquisition or retention.
                  ``(B) Factors for consideration.--In reviewing any 
                prior notice filed under this paragraph, the Board 
                shall take into consideration--
                          ``(i) whether the company is in compliance 
                        with all applicable criteria set forth in 
                        subsection (b) and the provisions of subsection 
                        (d);
                          ``(ii) whether the proposed combination 
                        represents an undue aggregation of resources;
                          ``(iii) whether the proposed combination 
                        poses a risk to the deposit insurance system;
                          ``(iv) whether the proposed combination poses 
                        a risk to State insurance guaranty funds;
                          ``(v) whether the proposed combination can 
                        reasonably be expected to be in the best 
                        interests of depositors or policyholders of the 
                        respective entities; and
                          ``(vi) whether the proposed transaction can 
                        reasonably be expected to further the purposes 
                        of this Act and produce benefits to the public.
                  ``(C) Required information.--The Board may disapprove 
                any prior notice filed under this paragraph if the 
                company submitting such notice neglects, fails, or 
                refuses to furnish to the Board all relevant 
                information required by the Board.
                  ``(D) Solicitation of views of other supervisory 
                agencies.--
                          ``(i) In general.--Upon receiving a prior 
                        notice under this paragraph, in order to 
                        provide for the submission of their views and 
                        recommendations, the Board shall give notice of 
                        the proposal to--
                                  ``(I) the appropriate Federal banking 
                                agency of any bank involved;
                                  ``(II) the appropriate functional 
                                regulator of any functionally regulated 
                                nondepository institution (as defined 
                                in section 5(c)(1)(C)) involved; and
                                  ``(III) the Secretary of the 
                                Treasury, the Department of Justice, 
                                and the Federal Trade Commission.
                          ``(ii) Timing.--The views and recommendations 
                        of any agency provided notice under this 
                        paragraph shall be submitted to the Board not 
                        later than 30 calendar days after the date on 
                        which notice to the agency was given, unless 
                        the Board determines that another shorter time 
                        period is appropriate.
  ``(d) Provisions Applicable to Financial Holding Companies That Fail 
To Meet Requirements.--
          ``(1) In general.--If a financial holding company is not in 
        compliance with the requirements of subparagraph (A), (B), or 
        (C) of subsection (b)(1), the appropriate Federal banking 
        agency of the subsidiary depository institution shall notify 
        the Board which shall give notice of such finding to the 
        company.
          ``(2) Agreement to correct conditions required.--Not later 
        than 45 days after receipt by a financial holding company of a 
        notice given under paragraph (1) (or such additional period as 
        the Board may permit), the company and any relevant depository 
        institution shall execute an agreement acceptable to the Board 
        and the appropriate Federal banking agency to comply with the 
        requirements applicable to a financial holding company.
          ``(3) Authority to impose limitations.--Until the conditions 
        described in a notice to a financial holding company under 
        paragraph (1) are corrected--
                  ``(A) the Board may impose such limitations on the 
                conduct or activities of the company or any affiliate 
                of the company (other than a depository institution or 
                a subsidiary of a depository institution) as the Board 
                determines to be appropriate under the circumstances; 
                and
                  ``(B) the appropriate Federal banking agency may 
                impose such limitations on the conduct or activities of 
                an affiliated depository institution or subsidiary of a 
                depository institution as the appropriate Federal 
                banking agency determines to be appropriate under the 
                circumstances.
          ``(4) Failure to correct.--If, after receiving a notice under 
        paragraph (1), a financial holding company or a depository 
        institution affiliate of such 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 on or 
                before the date on which the next examination of the 
                depository institution subsidiary is completed or by 
                the end of such other period as the 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) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
          ``(1) In general.--Notwithstanding section 4(a), a company 
        that is not a bank holding company or a foreign bank (as 
        defined in section 1(b)(7) of the International Banking Act of 
        1978) and becomes a financial holding company after the date of 
        the enactment of the Financial Services Act of 1999 may 
        continue to engage in any activity and retain direct or 
        indirect ownership or control of shares of a company engaged in 
        any activity if--
                  ``(A) the holding company lawfully was engaged in the 
                activity or held the shares of such company on 
                September 30, 1997;
                  ``(B) the holding company is predominantly engaged in 
                financial activities as defined in paragraph (2); and
                  ``(C) the company engaged in such activity continues 
                to engage only in the same activities that such company 
                conducted on September 30, 1997, and other activities 
                permissible under this Act.
          ``(2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in financial 
        activities if the annual gross revenues derived by the holding 
        company and all subsidiaries of the holding company (excluding 
        revenues derived from subsidiary depository institutions), on a 
        consolidated basis, from engaging in activities that are 
        financial in nature or are incidental to activities that are 
        financial in nature under subsection (c) represent at least 85 
        percent of the consolidated annual gross revenues of the 
        company.
          ``(3) No expansion of grandfathered commercial activities 
        through merger or consolidation.--A financial holding company 
        that engages in activities or holds shares pursuant to this 
        subsection, or a subsidiary of such financial holding company, 
        may not acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which is 
        engaged in any activity which the Board has not determined to 
        be financial in nature or incidental to activities that are 
        financial in nature under subsection (c).
          ``(4) Continuing revenue limitation on grandfathered 
        commercial activities.--Notwithstanding any other provision of 
        this subsection, a financial holding company may continue to 
        engage in activities or hold shares in companies pursuant to 
        this subsection only to the extent that the aggregate annual 
        gross revenues derived from all such activities and all such 
        companies does not exceed 15 percent of the consolidated annual 
        gross revenues of the financial holding company (excluding 
        revenues derived from subsidiary depository institutions).
          ``(5) Cross marketing restrictions applicable to commercial 
        activities.--A depository institution controlled by a financial 
        holding company shall not--
                  ``(A) offer or market, directly or through any 
                arrangement, any product or service of a company whose 
                activities are conducted or whose shares are owned or 
                controlled by the financial holding company pursuant to 
                this subsection or subparagraph (H) or (I) of 
                subsection (c)(3); or
                  ``(B) permit any of its products or services to be 
                offered or marketed, directly or through any 
                arrangement, by or through any company described in 
                subparagraph (A).
          ``(6) Transactions with nonfinancial affiliates.--An insured 
        depository institution controlled by a financial holding 
        company or wholesale financial holding company may not engage 
        in a covered transaction (as defined by section 23A(b)(7) of 
        the Federal Reserve Act) with any affiliate controlled by the 
        company pursuant to section 10(c), this subsection, or 
        subparagraph (H) or (I) of subsection (c)(3).
          ``(7) Sunset of grandfather.--A financial holding company 
        engaged in any activity, or retaining direct or indirect 
        ownership or control of shares of a company, pursuant to this 
        subsection, shall terminate such activity and divest ownership 
        or control of the shares of such company before the end of the 
        10-year period beginning on the date of the enactment of the 
        Financial Services Act of 1999. The Board may, upon application 
        by a financial holding company, extend such 10-year period by a 
        period not to exceed an additional 5 years if such extension 
        would not be detrimental to the public interest.
  ``(g) Developing Activities.--A financial holding company 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) neither the Board nor the Secretary of the Treasury has 
        determined that the activity is not financial in nature or 
        incidental to financial activities under subsection (c);
          ``(6) the holding company is not required to provide prior 
        written notice of the transaction to the Board under subsection 
        (c)(6); and
          ``(7) the holding company provides written notification to 
        the Board describing the activity commenced or conducted by the 
        company acquired no later than 10 business days after 
        commencing the activity or consummating the acquisition.''.
  (b) Technical and Conforming Amendment.--Section 4(j) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1843(j)) is amended--
          (1) in paragraph (1)(A), by inserting ``or in any 
        complementary activity under section 6(c)(1)(A)(ii)'' after 
        ``subsection (c)(8) or (a)(2)''; and
          (2) in paragraph (3)--
                  (A) by inserting ``, other than any complementary 
                activity under section 6(c)(1)(A)(ii),'' after ``to 
                engage in any activity''; and
                  (B) by inserting ``or a company engaged in any 
                complementary activity under section 6(c)(1)(A)(ii)'' 
                after ``insured depository institution''.
  (c) Report.--
          (1) In general.--By the end of the 4-year period beginning on 
        the date of the enactment of this Act and every 4 years 
        thereafter, the Board of Governors of the Federal Reserve 
        System and the Secretary of the Treasury shall submit a joint 
        report to the Congress containing a summary of new activities 
        which are financial in nature, including grandfathered 
        commercial activities, in which any financial holding company 
        is engaged pursuant to subsection (c)(1) or (f) of section 6 of 
        the Bank Holding Company Act of 1956 (as added by subsection 
        (a)).
          (2) Other contents.--Each report submitted to the Congress 
        pursuant to paragraph (1) shall also contain the following:
                  (A) A discussion of actions by the Board of Governors 
                of the Federal Reserve System and the Secretary of the 
                Treasury, whether by regulation, order, interpretation, 
                or guideline or by approval or disapproval of an 
                application, with regard to activities of financial 
                holding companies which are incidental to activities 
                financial in nature or complementary to such financial 
                activities.
                  (B) An analysis and discussion of the risks posed by 
                commercial activities of financial holding companies to 
                the safety and soundness of affiliate depository 
                institutions.
                  (C) An analysis and discussion of the effect of 
                mergers and acquisitions under section 6 of the Bank 
                Holding Company Act of 1956 on market concentration in 
                the financial services industry.
                  (D) An analysis and discussion, by the Board and the 
                Secretary in consultation with the other Federal 
                banking agencies (as defined in section 3(z) of the 
                Federal Deposit Insurance Act), of the impact of the 
                implementation of this Act, and the amendments made by 
                this Act, on the extent of meeting community credit 
                needs and capital availability under the Community 
                Reinvestment Act of 1977.

SEC. 104. OPERATION OF STATE LAW.

  (a) Affiliations.--
          (1) In general.--Except as provided in paragraph (2), no 
        State may, by statute, regulation, order, interpretation, or 
        other action, prevent or restrict an insured depository 
        institution or wholesale financial institution, or a subsidiary 
        or affiliate thereof, from being affiliated directly or 
        indirectly or associated with any person or entity, as 
        authorized or permitted by this Act or any other provision of 
        Federal law.
          (2) Insurance.--With respect to affiliations between insured 
        depository institutions or wholesale financial institutions, or 
        any subsidiary or affiliate thereof, and persons or entities 
        engaged in the business of insurance, paragraph (1) does not 
        prohibit any State from--
                  (A) requiring any person or entity that proposes to 
                acquire control of an entity that is engaged in the 
                business of insurance and domiciled in that State 
                (hereafter in this subparagraph referred to as the 
                ``insurer'') to furnish to the insurance regulatory 
                authority of that State, not later than 60 days before 
                the effective date of the proposed acquisition--
                          (i) the name and address of each person by 
                        whom, or on whose behalf, the affiliation 
                        referred to in this subparagraph is to be 
                        effected (hereafter in this subparagraph 
                        referred to as the ``acquiring party'');
                          (ii) if the acquiring party is an individual, 
                        his or her principal occupation and all offices 
                        and positions held during the 5 years preceding 
                        the date of notification, and any conviction of 
                        crimes other than minor traffic violations 
                        during the 10 years preceding the date of 
                        notification;
                          (iii) if the acquiring party is not an 
                        individual--
                                  (I) a report of the nature of its 
                                business operations during the 5 years 
                                preceding the date of notification, or 
                                for such shorter period as such person 
                                and any predecessors thereof shall have 
                                been in existence;
                                  (II) an informative description of 
                                the business intended to be done by the 
                                acquiring party and any subsidiary 
                                thereof; and
                                  (III) a list of all individuals who 
                                are, or who have been selected to 
                                become, directors or executive officers 
                                of the acquiring party or who perform, 
                                or will perform, functions appropriate 
                                to such positions, including, for each 
                                such individual, the information 
                                required by clause (ii);
                          (iv) the source, nature, and amount of the 
                        consideration used, or to be used, in effecting 
                        the merger or other acquisition of control, a 
                        description of any transaction wherein funds 
                        were, or are to be, obtained for any such 
                        purpose, and the identity of persons furnishing 
                        such consideration, except that, if a source of 
                        such consideration is a loan made in the 
                        lender's ordinary course of business, the 
                        identity of the lender shall remain 
                        confidential if the person filing such 
                        statement so requests;
                          (v) fully audited financial information as to 
                        the earnings and financial condition of each 
                        acquiring party for the 5 fiscal years 
                        preceding the date of notification of each such 
                        acquiring party, or for such lesser period as 
                        such acquiring party and any predecessors 
                        thereof shall have been in existence, and 
                        similar unaudited information as of a date not 
                        earlier than 90 days before the date of 
                        notification, except that, in the case of an 
                        acquiring party that is an insurer actively 
                        engaged in the business of insurance, the 
                        financial statements of such insurer need not 
                        be audited, but such audit may be required if 
                        the need therefor is determined by the 
                        insurance regulatory authority of the State;
                          (vi) any plans or proposals that each 
                        acquiring party may have to liquidate such 
                        insurer, to sell its assets, or to merge or 
                        consolidate it with any person or to make any 
                        other material change in its business or 
                        corporate structure or management;
                          (vii) the number of shares of any security of 
                        the insurer that each acquiring party proposes 
                        to acquire, the terms of any offer, request, 
                        invitation, agreement, or acquisition, and a 
                        statement as to the method by which the 
                        fairness of the proposal was arrived at;
                          (viii) the amount of each class of any 
                        security of the insurer that is beneficially 
                        owned or concerning which there is a right to 
                        acquire beneficial ownership by each acquiring 
                        party;
                          (ix) a full description of any contracts, 
                        arrangements, or understandings with respect to 
                        any security of the insurer in which any 
                        acquiring party is involved, including transfer 
                        of any of the securities, joint ventures, loan 
                        or option arrangements, puts or calls, 
                        guarantees of loans, guarantees against loss or 
                        guarantees of profits, division of losses or 
                        profits, or the giving or withholding of 
                        proxies, and identification of the persons with 
                        whom such contracts, arrangements, or 
                        understandings have been entered into;
                          (x) a description of the purchase of any 
                        security of the insurer during the 12-month 
                        period preceding the date of notification by 
                        any acquiring party, including the dates of 
                        purchase, names of the purchasers, and 
                        consideration paid, or agreed to be paid, 
                        therefor;
                          (xi) a description of any recommendations to 
                        purchase any security of the insurer made 
                        during the 12-month period preceding the date 
                        of notification by any acquiring party or by 
                        any person based upon interviews or at the 
                        suggestion of such acquiring party;
                          (xii) copies of all tender offers for, 
                        requests or invitations for tenders of, 
                        exchange offers for and agreements to acquire 
                        or exchange any securities of the insurer and, 
                        if distributed, of additional soliciting 
                        material relating thereto; and
                          (xiii) the terms of any agreement, contract, 
                        or understanding made with any broker-dealer as 
                        to solicitation of securities of the insurer 
                        for tender and the amount of any fees, 
                        commissions, or other compensation to be paid 
                        to broker-dealers with regard thereto;
                  (B) requiring an entity that is acquiring control of 
                an entity that is engaged in the business of insurance 
                and domiciled in that State to maintain or restore the 
                capital requirements of that insurance entity to the 
                level required under the capital regulations of general 
                applicability in that State to avoid the requirement of 
                preparing and filing with the insurance regulatory 
                authority of that State a plan to increase the capital 
                of the entity, except that any determination by the 
                State insurance regulatory authority with respect to 
                such requirement shall be made not later than 60 days 
                after the date of notification under subparagraph (A);
                  (C) taking actions with respect to the receivership 
                or conservatorship of any insurance company; or
                  (D) restricting a change in the ownership of stock in 
                an insurance company, or a company formed for the 
                purpose of controlling such insurance company, for a 
                period of not more than 3 years beginning on the date 
                of the conversion of such company from mutual to stock 
                form.
          (3) Preservation of state antitrust and general corporate 
        laws.--
                  (A) In general.--Subject to subsection (c) and the 
                nondiscrimination provisions contained in such 
                subsection, no provision in paragraph (1) shall be 
                construed as affecting State laws, regulations, orders, 
                interpretations, or other actions of general 
                applicability relating to the governance of 
                corporations, partnerships, limited liability companies 
                or other business associations incorporated or formed 
                under the laws of that State or domiciled in that 
                State, or the applicability of the antitrust laws of 
                any State or any State law that is similar to the 
                antitrust laws.
                  (B) Definition.--The term ``antitrust laws'' has the 
                same meaning as in subsection (a) of the first section 
                of the Clayton Act, and includes section 5 of the 
                Federal Trade Commission Act to the extent that such 
                section 5 relates to unfair methods of competition.
  (b) Activities.--
          (1) In general.--Except as provided in paragraph (3), and 
        except with respect to insurance sales, solicitation, and cross 
        marketing activities, which shall be governed by paragraph (2), 
        no State may, by statute, regulation, order, interpretation, or 
        other action, prevent or restrict an insured depository 
        institution, wholesale financial institution, or subsidiary or 
        affiliate thereof from engaging directly or indirectly, either 
        by itself or in conjunction with a subsidiary, affiliate, or 
        any other entity or person, in any activity authorized or 
        permitted under this Act.
          (2) Insurance sales.--
                  (A) In general.--In accordance with the legal 
                standards for preemption set forth in the decision of 
                the Supreme Court of the United States in Barnett Bank 
                of Marion County N.A. v. Nelson, 116 S. Ct. 1103 
                (1996), no State may, by statute, regulation, order, 
                interpretation, or other action, prevent or 
                significantly interfere with the ability of an insured 
                depository institution or wholesale financial 
                institution, or a subsidiary or affiliate thereof, to 
                engage, directly or indirectly, either by itself or in 
                conjunction with a subsidiary, affiliate, or any other 
                party, in any insurance sales, solicitation, or cross-
                marketing activity.
                  (B) Certain state laws preserved.--Notwithstanding 
                subparagraph (A), a State may impose any of the 
                following restrictions, or restrictions which are 
                substantially the same as but no more burdensome or 
                restrictive than those in each of the following 
                clauses:
                          (i) Restrictions prohibiting the rejection of 
                        an insurance policy solely because the policy 
                        has been issued or underwritten by any person 
                        who is not associated with such insured 
                        depository institution or wholesale financial 
                        institution, or any subsidiary or affiliate 
                        thereof, when such insurance is required in 
                        connection with a loan or extension of credit.
                          (ii) Restrictions prohibiting a requirement 
                        for any debtor, insurer, or insurance agent or 
                        broker to pay a separate charge in connection 
                        with the handling of insurance that is required 
                        in connection with a loan or other extension of 
                        credit or the provision of another traditional 
                        banking product, unless such charge would be 
                        required when the insured depository 
                        institution or wholesale financial institution, 
                        or any subsidiary or affiliate thereof, is the 
                        licensed insurance agent or broker providing 
                        the insurance.
                          (iii) Restrictions prohibiting the use of any 
                        advertisement or other insurance promotional 
                        material by an insured depository institution 
                        or wholesale financial institution, or any 
                        subsidiary or affiliate thereof, that would 
                        cause a reasonable person to believe mistakenly 
                        that--
                                  (I) a State or the Federal Government 
                                is responsible for the insurance sales 
                                activities of, or stands behind the 
                                credit of, the institution, affiliate, 
                                or subsidiary; or
                                  (II) a State, or the Federal 
                                Government guarantees any returns on 
                                insurance products, or is a source of 
                                payment on any insurance obligation of 
                                or sold by the institution, affiliate, 
                                or subsidiary;
                          (iv) Restrictions prohibiting the payment or 
                        receipt of any commission or brokerage fee or 
                        other valuable consideration for services as an 
                        insurance agent or broker to or by any person, 
                        unless such person holds a valid State license 
                        regarding the applicable class of insurance at 
                        the time at which the services are performed, 
                        except that, in this clause, the term 
                        ``services as an insurance agent or broker'' 
                        does not include a referral by an unlicensed 
                        person of a customer or potential customer to a 
                        licensed insurance agent or broker that does 
                        not include a discussion of specific insurance 
                        policy terms and conditions.
                          (v) Restrictions prohibiting any compensation 
                        paid to or received by any individual who is 
                        not licensed to sell insurance, for the 
                        referral of a customer that seeks to purchase, 
                        or seeks an opinion or advice on, any insurance 
                        product to a person that sells or provides 
                        opinions or advice on such product, based on 
                        the purchase of insurance by the customer.
                          (vi) Restrictions prohibiting the release of 
                        the insurance information of a customer 
                        (defined as information concerning the 
                        premiums, terms, and conditions of insurance 
                        coverage, including expiration dates and rates, 
                        and insurance claims of a customer contained in 
                        the records of the insured depository 
                        institution or wholesale financial institution, 
                        or a subsidiary or affiliate thereof) to any 
                        person or entity other than an officer, 
                        director, employee, agent, subsidiary, or 
                        affiliate of an insured depository institution 
                        or a wholesale financial institution, for the 
                        purpose of soliciting or selling insurance, 
                        without the express consent of the customer, 
                        other than a provision that prohibits--
                                  (I) a transfer of insurance 
                                information to an unaffiliated 
                                insurance company, agent, or broker in 
                                connection with transferring insurance 
                                in force on existing insureds of the 
                                insured depository institution or 
                                wholesale financial institution, or 
                                subsidiary or affiliate thereof, or in 
                                connection with a merger with or 
                                acquisition of an unaffiliated 
                                insurance company, agent, or broker; or
                                  (II) the release of information as 
                                otherwise authorized by State or 
                                Federal law.
                          (vii) Restrictions prohibiting the use of 
                        health information obtained from the insurance 
                        records of a customer for any purpose, other 
                        than for its activities as a licensed agent or 
                        broker, without the express consent of the 
                        customer.
                          (viii) Restrictions prohibiting the extension 
                        of credit or any product or service that is 
                        equivalent to an extension of credit, lease or 
                        sale of property of any kind, or furnishing of 
                        any services or fixing or varying the 
                        consideration for any of the foregoing, on the 
                        condition or requirement that the customer 
                        obtain insurance from the insured depository 
                        institution, wholesale financial institution, a 
                        subsidiary or affiliate thereof, or a 
                        particular insurer, agent, or broker, other 
                        than a prohibition that would prevent any 
                        insured depository institution or wholesale 
                        financial institution, or any subsidiary or 
                        affiliate thereof--
                                  (I) from engaging in any activity 
                                that would not violate section 106 of 
                                the Bank Holding Company Act Amendments 
                                of 1970, as interpreted by the Board of 
                                Governors of the Federal Reserve 
                                System; or
                                  (II) from informing a customer or 
                                prospective customer that insurance is 
                                required in order to obtain a loan or 
                                credit, that loan or credit approval is 
                                contingent upon the procurement by the 
                                customer of acceptable insurance, or 
                                that insurance is available from the 
                                insured depository institution or 
                                wholesale financial institution, or any 
                                subsidiary or affiliate thereof.
                          (ix) Restrictions requiring, when an 
                        application by a consumer for a loan or other 
                        extension of credit from an insured depository 
                        institution or wholesale financial institution 
                        is pending, and insurance is offered or sold to 
                        the consumer or is required in connection with 
                        the loan or extension of credit by the insured 
                        depository institution or wholesale financial 
                        institution or any affiliate or subsidiary 
                        thereof, that a written disclosure be provided 
                        to the consumer or prospective customer 
                        indicating that his or her choice of an 
                        insurance provider will not affect the credit 
                        decision or credit terms in any way, except 
                        that the insured depository institution or 
                        wholesale financial institution may 
                        impose reasonable requirements concerning the 
                        creditworthiness of the insurance provider and 
                        scope of coverage chosen.
                          (x) Restrictions requiring clear and 
                        conspicuous disclosure, in writing, where 
                        practicable, to the customer prior to the sale 
                        of any insurance policy that such policy--
                                  (I) is not a deposit;
                                  (II) is not insured by the Federal 
                                Deposit Insurance Corporation;
                                  (III) is not guaranteed by the 
                                insured depository institution or 
                                wholesale financial institution or, if 
                                appropriate, its subsidiaries or 
                                affiliates or any person soliciting the 
                                purchase of or selling insurance on the 
                                premises thereof; and
                                  (IV) where appropriate, involves 
                                investment risk, including potential 
                                loss of principal.
                          (xi) Restrictions requiring that, when a 
                        customer obtains insurance (other than credit 
                        insurance or flood insurance) and credit from 
                        an insured depository institution or wholesale 
                        financial institution, or its subsidiaries or 
                        affiliates, or any person soliciting the 
                        purchase of or selling insurance on the 
                        premises thereof, the credit and insurance 
                        transactions be completed through separate 
                        documents.
                          (xii) Restrictions prohibiting, when a 
                        customer obtains insurance (other than credit 
                        insurance or flood insurance) and credit from 
                        an insured depository institution or wholesale 
                        financial institution or its subsidiaries or 
                        affiliates, or any person soliciting the 
                        purchase of or selling insurance on the 
                        premises thereof, inclusion of the expense of 
                        insurance premiums in the primary credit 
                        transaction without the express written consent 
                        of the customer.
                          (xiii) Restrictions requiring maintenance of 
                        separate and distinct books and records 
                        relating to insurance transactions, including 
                        all files relating to and reflecting consumer 
                        complaints, and requiring that such insurance 
                        books and records be made available to the 
                        appropriate State insurance regulator for 
                        inspection upon reasonable notice.
                  (C) Limitations.--
                          (i) OCC deference.--Section 306(e) does not 
                        apply with respect to any State statute, 
                        regulation, order, interpretation, or other 
                        action regarding insurance sales, solicitation, 
                        or cross marketing activities described in 
                        subparagraph (A) that was issued, adopted, or 
                        enacted before September 3, 1998, and that is 
                        not described in subparagraph (B).
                          (ii) Nondiscrimination.--Subsection (c) does 
                        not apply with respect to any State statute, 
                        regulation, order, interpretation, or other 
                        action regarding insurance sales, solicitation, 
                        or cross marketing activities described in 
                        subparagraph (A) that was issued, adopted, or 
                        enacted before September 3, 1998, and that is 
                        not described in subparagraph (B).
                          (iii) Construction.--Nothing in this 
                        paragraph shall be construed to limit the 
                        applicability of the decision of the Supreme 
                        Court in Barnett Bank of Marion County N.A. v. 
                        Nelson, 116 S. Ct. 1103 (1996) with respect to 
                        a State statute, regulation, order, 
                        interpretation, or other action that is not 
                        described in subparagraph (B).
                          (iv) Limitation on inferences.--Nothing in 
                        this paragraph shall be construed to create any 
                        inference with respect to any State statute, 
                        regulation, order, interpretation, or other 
                        action that is not referred to or described in 
                        this paragraph.
          (3) Insurance activities other than sales.--State statutes, 
        regulations, interpretations, orders, and other actions shall 
        not be preempted under subsection (b)(1) to the extent that 
        they--
                  (A) relate to, or are issued, adopted, or enacted for 
                the purpose of regulating the business of insurance in 
                accordance with the Act of March 9, 1945 (commonly 
                known as the ``McCarran-Ferguson Act'');
                  (B) apply only to persons or entities that are not 
                insured depository institutions or wholesale financial 
                institutions, but that are directly engaged in the 
                business of insurance (except that they may apply to 
                depository institutions engaged in providing savings 
                bank life insurance as principal to the extent of 
                regulating such insurance);
                  (C) do not relate to or directly or indirectly 
                regulate insurance sales, solicitations, or cross-
                marketing activities; and
                  (D) are not prohibited under subsection (c).
          (4) Financial activities other than insurance.--No State 
        statute, regulation, interpretation, order, or other action 
        shall be preempted under subsection (b)(1) to the extent that--
                  (A) it does not relate to, and is not issued and 
                adopted, or enacted for the purpose of regulating, 
                directly or indirectly, insurance sales, solicitations, 
                or cross marketing activities covered under paragraph 
                (2);
                  (B) it does not relate to, and is not issued and 
                adopted, or enacted for the purpose of regulating, 
                directly or indirectly, the business of insurance 
                activities other than sales, solicitations, or cross 
                marketing activities, covered under paragraph (3);
                  (C) it does not relate to securities investigations 
                or enforcement actions referred to in subsection (d); 
                and
                  (D) it--
                          (i) does not distinguish by its terms between 
                        insured depository institutions, wholesale 
                        financial institutions, and subsidiaries and 
                        affiliates thereof engaged in the activity at 
                        issue and other persons or entities engaged in 
                        the same activity in a manner that is in any 
                        way adverse with respect to the conduct of the 
                        activity by any such insured depository 
                        institution, wholesale financial institution, 
                        or subsidiary or affiliate thereof engaged in 
                        the activity at issue;
                          (ii) as interpreted or applied, does not 
                        have, and will not have, an impact on 
                        depository institutions, wholesale financial 
                        institutions, or subsidiaries or affiliates 
                        thereof engaged in the activity at issue, or 
                        any person or entity affiliated therewith, that 
                        is substantially more adverse than its impact 
                        on other persons or entities engaged in the 
                        same activity that are not insured depository 
                        institutions, wholesale financial institutions, 
                        or subsidiaries or affiliates thereof, or 
                        persons or entities affiliated therewith;
                          (iii) does not effectively prevent a 
                        depository institution, wholesale financial 
                        institution, or subsidiary or affiliate thereof 
                        from engaging in activities authorized or 
                        permitted by this Act or any other provision of 
                        Federal law; and
                          (iv) does not conflict with the intent of 
                        this Act generally to permit affiliations that 
                        are authorized or permitted by Federal law.
  (c) Nondiscrimination.--Except as provided in any restrictions 
described in subsection (b)(2)(B), no State may, by statute, 
regulation, order, interpretation, or other action, regulate the 
insurance activities authorized or permitted under this Act or any 
other provision of Federal law of an insured depository institution or 
wholesale financial institution, or subsidiary or affiliate thereof, to 
the extent that such statute, regulation, order, interpretation, or 
other action--
          (1) distinguishes by its terms between insured depository 
        institutions or wholesale financial institutions, or 
        subsidiaries or affiliates thereof, and other persons or 
        entities engaged in such activities, in a manner that is in any 
        way adverse to any such insured depository institution or 
        wholesale financial institution, or subsidiary or affiliate 
        thereof;
          (2) as interpreted or applied, has or will have an impact on 
        depository institutions or wholesale financial institutions, or 
        subsidiaries or affiliates thereof, that is substantially more 
        adverse than its impact on other persons or entities providing 
        the same products or services or engaged in the same activities 
        that are not insured depository institutions, wholesale 
        financial institutions, or subsidiaries or affiliates thereof, 
        or persons or entities affiliated therewith;
          (3) effectively prevents a depository institution or 
        wholesale financial institution, or subsidiary or affiliate 
        thereof, from engaging in insurance activities authorized or 
        permitted by this Act or any other provision of Federal law; or
          (4) conflicts with the intent of this Act generally to permit 
        affiliations that are authorized or permitted by Federal law 
        between insured depository institutions or wholesale financial 
        institutions, or subsidiaries or affiliates thereof, and 
        persons and entities engaged in the business of insurance.
  (d) Limitation.--Subsections (a) and (b) shall not be construed to 
affect the jurisdiction of the securities commission (or any agency or 
office performing like functions) of any State, under the laws of such 
State, 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.
  (e) Definition.--For purposes of this section, the term ``State'' 
means any State of the United States, the District of Columbia, any 
territory of the United States, Puerto Rico, Guam, American Samoa, the 
Trust Territory of the Pacific Islands, the Virgin Islands, and the 
Northern Mariana Islands.

SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

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

SEC. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISITIONS AND MERGERS.

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

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

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

SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

  (a) In General.--Section 109(d) of the Riegle-Neal Interstate Banking 
and Branching Efficiency Act of 1994 (12 U.S.C. 1835a(d)) is amended--
          (1) by inserting ``, the Financial Services Act of 1999,'' 
        after ``pursuant to this title''; and
          (2) by inserting ``or such Act'' after ``made by this 
        title''.
  (b) Technical and Conforming Amendment.--Section 109(e)(4) of the 
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (12 
U.S.C. 1835a(e)(4)) is amended by inserting ``and any branch of a bank 
controlled by an out-of-State bank holding company (as defined in 
section 2(o)(7) of the Bank Holding Company Act of 1956)'' before the 
period.

SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

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

SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

  (a) In General.--Section 4(f) of the Bank Holding Company Act of 1956 
(12 U.S.C. 1843(f)) is amended--
          (1) in paragraph (2)(A)(ii)--
                  (A) by striking ``and'' at the end of subclause (IX);
                  (B) by inserting ``and'' after the semicolon at the 
                end of subclause (X); and
                  (C) by inserting after subclause (X) the following 
                new subclause:
                                  ``(XI) assets that are derived from, 
                                or are incidental to, consumer lending 
                                activities in which institutions 
                                described in subparagraph (F) or (H) of 
                                section 2(c)(2) are permitted to 
                                engage,'';
          (2) in paragraph (2), by striking subparagraph (B) and 
        inserting the following new subparagraphs:
                  ``(B) any bank subsidiary of such company engages in 
                any activity in which the bank was not lawfully engaged 
                as of March 5, 1987, unless the bank is well managed 
                and well capitalized;
                  ``(C) any bank subsidiary of such company both--
                          ``(i) accepts demand deposits or deposits 
                        that the depositor may withdraw by check or 
                        similar means for payment to third parties; and
                          ``(ii) engages in the business of making 
                        commercial loans (and, for purposes of this 
                        clause, loans made in the ordinary course of a 
                        credit card operation shall not be treated as 
                        commercial loans); or
                  ``(D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any bank 
                subsidiary of such company permits any overdraft 
                (including any intraday overdraft), or incurs any such 
                overdraft in such bank's account at a Federal reserve 
                bank, on behalf of an affiliate, other than an 
                overdraft described in paragraph (3).''; and
          (3) by striking paragraphs (3) and (4) and inserting the 
        following new paragraphs:
          ``(3) Permissible overdrafts described.--For purposes of 
        paragraph (2)(D), an overdraft is described in this paragraph 
        if--
                  ``(A) such overdraft results from an inadvertent 
                computer or accounting error that is beyond the control 
                of both the bank and the affiliate;
                  ``(B) such overdraft--
                          ``(i) is permitted or incurred on behalf of 
                        an affiliate which is monitored by, reports to, 
                        and is recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                          ``(ii) is fully secured, as required by the 
                        Board, by bonds, notes, or other obligations 
                        which are direct obligations of the United 
                        States or on which the principal and interest 
                        are fully guaranteed by the United States or by 
                        securities and obligations eligible for 
                        settlement on the Federal Reserve book entry 
                        system; or
                  ``(C) such overdraft--
                          ``(i) is incurred on behalf of an affiliate 
                        solely in connection with an activity that is 
                        so closely related to banking, or managing or 
                        controlling banks, as to be a proper incident 
                        thereto, to the extent the bank incurring the 
                        overdraft and the affiliate on whose behalf the 
                        overdraft is incurred each document that the 
                        overdraft is incurred for such purpose; and
                          ``(ii) does not cause the bank to violate any 
                        provision of section 23A or 23B of the Federal 
                        Reserve Act, either directly, in the case of a 
                        member bank, or by virtue of section 18(j) of 
                        the Federal Deposit Insurance Act, in the case 
                        of a nonmember bank.
          ``(4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such exemption shall cease to apply to such 
        company and such company shall divest control of each bank it 
        controls before the end of the 180-day period beginning on the 
        date that the company receives notice from the Board that the 
        company has failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the company has--
                  ``(A) corrected the condition or ceased the activity 
                that caused the company to fail to continue to qualify 
                for the exemption; and
                  ``(B) implemented procedures that are reasonably 
                adapted to avoid the reoccurrence of such condition or 
                activity.
        The issuance of any notice under this paragraph that relates to 
        the activities of a bank shall not be construed as affecting 
        the authority of the bank to continue to engage in such 
        activities until the expiration of such 180-day period.''.
  (b) Industrial Loan Companies Affiliate Overdrafts.--Section 
2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841(c)(2)(H)) is amended by inserting before the period at the end ``, 
or that is otherwise permissible for a bank controlled by a company 
described in section 4(f)(1)''.

SEC. 109. 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 theCongress 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.

SEC. 110. 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.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.

  Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(c)) is amended to read as follows:
  ``(c) Reports and Examinations.--
          ``(1) Reports.--
                  ``(A) In general.--The Board from time to time may 
                require any bank holding company and any subsidiary of 
                such company to submit reports under oath to keep the 
                Board informed as to--
                          ``(i) its financial condition, systems for 
                        monitoring and controlling financial and 
                        operating risks, and transactions with 
                        depository institution subsidiaries of the 
                        holding company; and
                          ``(ii) compliance by the company or 
                        subsidiary with applicable provisions of this 
                        Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that a bank 
                        holding company or any subsidiary of such 
                        company has provided or been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                          ``(ii) Availability.--A bank holding company 
                        or a subsidiary of such company shall provide 
                        to the Board, at the request of the Board, a 
                        report referred to in clause (i).
                          ``(iii) Required use of publicly reported 
                        information.--The Board shall, to the fullest 
                        extent possible, accept in fulfillment of any 
                        reporting or recordkeeping requirements under 
                        this Act information that is otherwise required 
                        to be reported publicly and externally audited 
                        financial statements.
                          ``(iv) Reports filed with other agencies.--In 
                        the event the Board requires a report from a 
                        functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company of a kind that is not required by 
                        another Federal or State regulator or 
                        appropriate self-regulatory organization, the 
                        Board shall request that the appropriate 
                        regulator or self-regulatory organization 
                        obtain such report. If the report is not made 
                        available to the Board, and the report is 
                        necessary to assess a material risk to the bank 
                        holding company or any of its subsidiary 
                        depository institutions or compliance with this 
                        Act, the Board may require such subsidiary to 
                        provide such a report to the Board.
                  ``(C) Definition.--For purposes of this subsection, 
                the term `functionally regulated nondepository 
                institution' means--
                          ``(i) a broker or dealer registered under the 
                        Securities Exchange Act of 1934;
                          ``(ii) an investment adviser registered under 
                        the Investment Advisers Act of 1940, or with 
                        any State, with respect to the investment 
                        advisory activities of such investment adviser 
                        and activities incidental to such investment 
                        advisory activities;
                          ``(iii) an insurance company subject to 
                        supervision by a State insurance commission, 
                        agency, or similar authority; and
                          ``(iv) an entity subject to regulation by the 
                        Commodity Futures Trading Commission, with 
                        respect to the commodities activities of such 
                        entity and activities incidental to such 
                        commodities activities.
          ``(2) Examinations.--
                  ``(A) Examination authority.--
                          ``(i) In general.--The Board may make 
                        examinations of each bank holding company and 
                        each subsidiary of a bank holding company.
                          ``(ii) Functionally regulated nondepository 
                        institution subsidiaries.--Notwithstanding 
                        clause (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company only if--
                                  ``(I) the Board has reasonable cause 
                                to believe that such subsidiary is 
                                engaged in activities that pose a 
                                material risk to an affiliated 
                                depository institution, or
                                  ``(II) based on reports and other 
                                available information, the Board has 
                                reasonable cause to believe that a 
                                subsidiary is not in compliance with 
                                this Act or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the Board 
                                cannot make such determination through 
                                examination of the affiliated 
                                depository institution or bank holding 
                                company.
                  ``(B) Limitations on examination authority for bank 
                holding companies and subsidiaries.--Subject to 
                subparagraph (A)(ii), the Board may make examinations 
                under subparagraph (A)(i) of each bank holding company 
                and each subsidiary of such holding company in order 
                to--
                          ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        holding company and such subsidiaries;
                          ``(ii) inform the Board of--
                                  ``(I) the financial and operational 
                                risks within the holding company system 
                                that may pose a threat to the safety 
                                and soundness of any subsidiary 
                                depository institution of such holding 
                                company; and
                                  ``(II) the systems for monitoring and 
                                controlling such risks; and
                          ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        subsidiary depository institution and its 
                        affiliates.
                  ``(C) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a bank holding company 
                to--
                          ``(i) the bank holding company; and
                          ``(ii) any subsidiary of the holding company 
                        that, because of--
                                  ``(I) the size, condition, or 
                                activities of the subsidiary; or
                                  ``(II) the nature or size of 
                                transactions between such subsidiary 
                                and any depository institution which is 
                                also a subsidiary of such holding 
                                company,
                        could have a materially adverse effect on the 
                        safety and soundness of any depository 
                        institution affiliate of the holding company.
                  ``(D) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use, for the 
                purposes of this paragraph, the reports of examinations 
                of depository institutions made by the appropriate 
                Federal and State depository institution supervisory 
                authority.
                  ``(E) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examination made 
                of--
                          ``(i) any registered broker or dealer by or 
                        on behalf of the Securities and Exchange 
                        Commission;
                          ``(ii) any registered investment adviser 
                        properly registered by or on behalf of either 
                        the Securities and Exchange Commission or any 
                        State;
                          ``(iii) any licensed insurance company by or 
                        on behalf of any state regulatory authority 
                        responsible for the supervision of insurance 
                        companies; and
                          ``(iv) any other subsidiary that the Board 
                        finds to be comprehensively supervised by a 
                        Federal or State authority.
          ``(3) Capital.--
                  ``(A) In general.--The Board 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 properly registered as an 
                        investment adviser under the Investment 
                        Advisers Act of 1940, or with any State.
                  ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed as preventing the Board from imposing 
                capital or capital adequacy rules, guidelines, 
                standards, or requirements with respect to activities 
                of a registered investment adviser other than 
                investment advisory activities or activities incidental 
                to investment advisory activities.
                  ``(C) Limitations on indirect action.--In developing, 
                establishing, or assessing holding company capital or 
                capital adequacy rules, guidelines, standards, or 
                requirements for purposes of this paragraph, the Board 
                shall not take into account the activities, operations, 
                or investments of an affiliated investment company 
                registered under the Investment Company Act of 1940, if 
                the investment company is not--
                          ``(i) a bank holding company; or
                          ``(ii) controlled by a bank holding company 
                        by reason of ownership by the bank holding 
                        company (including through all of its 
                        affiliates) of 25 percent or more of the shares 
                        of the investment company, where the shares 
                        owned by the bank holding company have a market 
                        value equal to more than $1,000,000.
          ``(4) Transfer of board authority to appropriate federal 
        banking agency.--
                  ``(A) In general.--In the case of any bank holding 
                company which is not significantly engaged in 
                nonbanking activities, the Board, in consultation with 
                the appropriate Federal banking agency, may designate 
                the appropriate Federal banking agency of the lead 
                insured depository institution subsidiary of such 
                holding company as the appropriate Federal banking 
                agency for the bank holding company.
                  ``(B) Authority transferred.--An agency designated by 
                the Board under subparagraph (A) shall have the same 
                authority as the Board under this Act to--
                          ``(i) examine and require reports from the 
                        bank holding company and any affiliate of such 
                        company (other than a depository institution) 
                        under section 5;
                          ``(ii) approve or disapprove applications or 
                        transactions under section 3;
                          ``(iii) take actions and impose penalties 
                        under subsections (e) and (f) of section 5 and 
                        section 8; and
                          ``(iv) take actions regarding the holding 
                        company, any affiliate of the holding company 
                        (other than a depository institution), or any 
                        institution-affiliated party of such company or 
                        affiliate under the Federal Deposit Insurance 
                        Act and any other statute which the Board may 
                        designate.
                  ``(C) Agency orders.--Section 9 of this Act and 
                section 105 of the Bank Holding Company Act Amendments 
                of 1970 shall apply to orders issued by an agency 
                designated under subparagraph (A) in the same manner 
                such sections apply to orders issued by the Board.
          ``(5) Functional regulation of securities and insurance 
        activities.--The Board shall defer to--
                  ``(A) the Securities and Exchange Commission with 
                regard to all interpretations of, and the enforcement 
                of, applicable Federal securities laws (and rules, 
                regulations, orders, and other directives issued 
                thereunder) relating to the activities, conduct, and 
                operations of registered brokers, dealers, investment 
                advisers, and investment companies;
                  ``(B) the relevant State securities authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State securities laws (and rules, 
                regulations, orders, and other directives issued 
                thereunder) relating to the activities, conduct, and 
                operations of registered brokers, dealers, and 
                investment advisers; and
                  ``(C) the relevant State insurance authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws (and rules, 
                regulations, orders, and other directives issued 
                thereunder) relating to the activities, conduct, and 
                operations of insurance companies and insurance 
                agents.''.

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

  (a) Prevention of Duplicative Filings.--Section 5(a) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1844(a)) is amended by adding 
the following new sentence at the end: ``A declaration filed in 
accordance with section 6(b)(1)(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 
        primary supervisor for the bank, which shall be the Comptroller 
        of the Currency in the case of a national bank, and the Federal 
        Deposit Insurance Corporation and the appropriate State 
        supervisor in the case of an insured nonmember bank, to 
        terminate (within 120 days or such longer period as the Board 
        may direct) the ownership or control of any such bank by such 
        company.
``The distribution referred to in subparagraph (A)''.

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

  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 that paragraph, the Board may order the bank holding company 
        to divest the insured depository institution not later than 180 
        days after receiving the notice, or such longer period as the 
        Board determines consistent with the safe and sound operation 
        of the insured depository institution.
          ``(4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by the Board 
        under paragraph (3) to a bank holding company and ending on the 
        date the divestiture is completed, the Board may impose any 
        conditions or restrictions on the holding company's ownership 
        or operation of the insured depository institution, including 
        restricting or prohibiting transactions between the insured 
        depository institution and any affiliate of the institution, 
        as are appropriate under the circumstances.''.

SEC. 114. PRUDENTIAL SAFEGUARDS.

  (a) Comptroller of the Currency.--
          (1) In general.--The Comptroller of the Currency may, by 
        regulation or order, impose restrictions or requirements on 
        relationships or transactions between a national bank and a 
        subsidiary of the national bank which the Comptroller finds are 
        consistent with the public interest, the purposes of this Act, 
        title LXII of the Revised Statutes of the United States, and 
        other Federal law applicable to national banks, and the 
        standards in paragraph (2).
          (2) Standards.--The Comptroller of the Currency may exercise 
        authority under paragraph (1) if the Comptroller finds that 
        such action will have any of the following effects:
                  (A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                  (B) Enhance the financial stability of banks.
                  (C) Avoid conflicts of interest or other abuses.
                  (D) Enhance the privacy of customers of the national 
                bank or any subsidiary of the bank.
                  (E) Promote the application of national treatment and 
                equality of competitive opportunity between 
                subsidiaries owned or controlled by domestic banks and 
                subsidiaries owned or controlled by foreign banks 
                operating in the United States.
          (3) Review.--The Comptroller of the Currency shall 
        regularly--
                  (A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                  (B) modify or eliminate any restriction or 
                requirement the Comptroller finds is no longer required 
                for such purposes.
  (b) Board of Governors of the Federal Reserve System.--
          (1) In general.--The Board of Governors of the Federal 
        Reserve System may, by regulation or order, impose restrictions 
        or requirements on relationships or transactions--
                  (A) between a depository institution subsidiary of a 
                bank holding company and any affiliate of such 
                depository institution (other than a subsidiary of such 
                institution); or
                  (B) between a State member bank and a subsidiary of 
                such bank,
        which the Board finds are consistent with the public interest, 
        the purposes of this Act, the Bank Holding Company Act of 1956, 
        the Federal Reserve Act, and other Federal law applicable to 
        depository institution subsidiaries of bank holding companies 
        or State banks (as the case may be), and the standards in 
        paragraph (2).
          (2) Standards.--The Board of Governors of the Federal Reserve 
        System may exercise authority under paragraph (1) if the Board 
        finds that such action will have any of the following effects:
                  (A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                  (B) Enhance the financial stability of bank holding 
                companies.
                  (C) Avoid conflicts of interest or other abuses.
                  (D) Enhance the privacy of customers of the State 
                member bank or any subsidiary of the bank.
                  (E) Promote the application of national treatment and 
                equality of competitive opportunity between nonbank 
                affiliates owned or controlled by domestic bank holding 
                companies and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
          (3) Review.--The Board of Governors of the Federal Reserve 
        System shall regularly--
                  (A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                  (B) modify or eliminate any restriction or 
                requirement the Board finds is no longer required for 
                such purposes.
          (4) Foreign banks.--
                  (A) In general.--The Board may, by regulation or 
                order, impose restrictions or requirements on 
                relationships or transactions between a branch, agency, 
                or commercial lending company of a foreign bank in the 
                United States and any affiliate in the United States of 
                such foreign bank that the Board finds are consistent 
                with the public interest, the purposes of this Act, the 
                Bank Holding Company Act of 1956, the Federal Reserve 
                Act, and other Federal law applicable to foreign banks 
                and their affiliates in the United States, and the 
                standards in paragraphs (2) and (3).
                  (B) Evasion.--In the event that the Board determines 
                that there may be circumstances that would result in an 
                evasion of this paragraph, the Board may also impose 
                restrictions or requirements on relationships or 
                transactions between operations of a foreign bank 
                outside the United States and any affiliate in the 
                United States of such foreign bank that are consistent 
                with national treatment and equality of competitive 
                opportunity.
  (c) Federal Deposit Insurance Corporation.--
          (1) In general.--The Federal Deposit Insurance Corporation 
        may, by regulation or order, impose restrictions or 
        requirements on relationships or transactions between a State 
        nonmember bank (as defined in section 3 of the Federal Deposit 
        Insurance Act) and a subsidiary of the State nonmember bank 
        which the Corporation finds are consistent with the public 
        interest, the purposes of this Act, the Federal Deposit 
        Insurance Act, or other Federal law applicable to State 
        nonmember banks and the standards in paragraph (2).
          (2) Standards.--The Federal Deposit Insurance Corporation may 
        exercise authority under paragraph (1) if the Corporation finds 
        that such action will have any of the following effects:
                  (A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                  (B) Enhance the financial stability of banks.
                  (C) Avoid conflicts of interest or other abuses.
                  (D) Enhance the privacy of customers of the State 
                nonmember bank or any subsidiary of the bank.
                  (E) Promote the application of national treatment and 
                equality of competitive opportunity between 
                subsidiaries owned or controlled by domestic banks and 
                subsidiaries owned or controlled by foreign banks 
                operating in the United States.
          (3) Review.--The Federal Deposit Insurance Corporation shall 
        regularly--
                  (A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                  (B) modify or eliminate any restriction or 
                requirement the Corporation finds is no longer required 
                for such purposes.

SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

  (a) Exclusive Commission Authority.--
          (1) In general.--Except as provided in paragraphs (3), (4), 
        and (5), the Commission shall be the sole Federal agency with 
        authority to inspect and examine any registered investment 
        company that is not a bank holding company or a savings and 
        loan holding company.
          (2) Prohibition on banking agencies.--Except as provided in 
        paragraph (3), a Federal banking agency may not inspect or 
        examine any registered investment company that is not a bank 
        holding company or a savings and loan holding company.
          (3) Certain examinations authorized.-- Nothing in this 
        subsection prevents the Federal Deposit Insurance Corporation, 
        if the Corporation finds it necessary to determine the 
        condition of an insured depository institution for insurance 
        purposes, from examining an affiliate of any insured depository 
        institution, pursuant to its authority under section 10(b)(4) 
        of the Federal Deposit Insurance Act, as may be necessary to 
        disclose fully the relationship between the depository 
        institution and the affiliate, and the effect of such 
        relationship on the depository institution.
          (4) OTS review of savings associations.--No provision of this 
        section shall be construed as preventing the Director of the 
        Office of Thrift Supervision, where the Director finds it 
        reasonably necessary to determine the financial condition of a 
        savings association, from examining or requiring reports from 
        an affiliate, service company, or subsidiary of any such 
        savings association pursuant to section 5(d) of the Home 
        Owners' Loan Act, solely for the purposes of disclosing fully 
        the transactions or relationships between such association and 
        such entities and their effect on the financial condition of 
        the association.
          (5) OCC review of national banks.--No provision of this 
        section shall be construed as preventing the Comptroller of the 
        Currency, where the Comptroller finds it reasonably necessary 
        to determine the financial condition of a national bank, from 
        examining or requiring reports from an affiliate, service 
        company, or subsidiary of any such national bank pursuant to 
        section 5240 of the Revised Statutes, solely for the purposes 
        of disclosing fully the transactions or relationships between 
        such national bank and such entities and their effect on the 
        financial condition of the national bank.
  (b) Examination Results and Other Information.--The Commission shall 
provide to any Federal banking agency, upon request, the results of any 
examination, reports, records, or other information with respect to any 
registered investment company to the extent necessary for the agency to 
carry out its statutory responsibilities.
  (c) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Bank holding company.--The term ``bank holding company'' 
        has the same meaning as in section 2 of the Bank Holding 
        Company Act of 1956.
          (2) Commission.--The term ``Commission'' means the Securities 
        and Exchange Commission.
          (3) Federal banking agency.--The term ``Federal banking 
        agency'' has the same meaning as in section 3(z) of the Federal 
        Deposit Insurance Act.
          (4) Registered investment company.--The term ``registered 
        investment company'' means an investment company which is 
        registered with the Commission under the Investment Company Act 
        of 1940.
          (5) Savings and loan holding company.--The term ``savings and 
        loan holding company'' has the same meaning as in section 
        10(a)(1)(D) of the Home Owners' Loan Act.

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

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

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

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

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'' have the same meanings 
        as in section 3 of the Federal Deposit Insurance Act.
          (2) Board; financial holding company; and wholesale financial 
        institution.--The terms ``Board'', ``financial holding 
        company'', and ``wholesale financial institution'' have the 
        same meanings as in section 2 of the Bank Holding Company Act 
        of 1956.

SEC. 118. EQUIVALENT REGULATION AND SUPERVISION.

  (a) In General.--Notwithstanding any other provision of law, the 
provisions of--
          (1) section 5(c) of the Bank Holding Company Act of 1956 (as 
        amended by this Act) that limit the authority of the Board of 
        Governors of the Federal Reserve System to require reports 
        from, to make examinations of, or to impose capital 
        requirements on bank holding companies and their nonbank 
        subsidiaries or that require deference to other regulators; and
          (2) section 10A of the Bank Holding Company Act of 1956 (as 
        added by this Act) that limit whatever authority the Board 
        might otherwise have to take direct or indirect action with 
        respect to bank holding companies and their nonbank 
        subsidiaries,
shall also limit whatever authority that a Federal banking agency (as 
defined in section 3(z) of the Federal Deposit Insurance Act) might 
otherwise have under any statute to require reports, make examinations, 
impose capital requirements or take any other direct or indirect action 
with respect to bank holding companies and their nonbank subsidiaries 
(including nonbank subsidiaries of depository institutions), subject to 
the same standards and requirements as are applicable to the Board 
under such provisions.
  (b) Certain Examinations Authorized.--
          (1) FDIC review of depository institutions.--No provision of 
        this section shall be construed as preventing the Federal 
        Deposit Insurance Corporation, if the Corporation finds it 
        necessary to determine the condition of an insured depository 
        institution for insurance purposes, from examining an affiliate 
        of any insured depository institution, pursuant to its 
        authority under section 10(b)(4) of the Federal Deposit 
        Insurance Act, as may be necessary to disclose fully the 
        relationship between the depository institution and the 
        affiliate, and the effect of such relationship on the 
        depository institution.
          (2) OTS review of savings associations.--No provision of this 
        section shall be construed as preventing the Director of the 
        Office of Thrift Supervision, where the Director finds it 
        reasonably necessary to determine the financial condition of a 
        savings association, from examining or requiring reports from 
        an affiliate, service company, or subsidiary of any such 
        savings association pursuant to section 5(d) of the Home 
        Owners' Loan Act, solely for the purposes of disclosing fully 
        the transactions or relationships between such association and 
        such entities and their effect on the financial condition of 
        the association.
          (3) OCC review of national banking associations.--No 
        provision of this section shall be construed as preventing the 
        Comptroller of the Currency, where the Comptroller finds it 
        reasonably necessary to determine the financial condition of a 
        national bank, from examining or requiring reports from an 
        affiliate, service company, or subsidiary of any such national 
        bank pursuant to section 5240 of the Revised Statutes, solely 
        for the purposes of disclosing fully the transactions or 
        relationships between such national bank and such entities and 
        their effect on the financial condition of the national bank.

SEC. 119. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND 
                    SUBSIDIARIES.

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

SEC. 120. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK HOLDING COMPANY 
                    ACT OF 1956.

  Section 3(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1842(f)) is amended to read as follows:
  ``(f) [Repealed].''.

SEC. 120A. TECHNICAL AMENDMENT.

  Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1841(o)(1)(A)) is amended by striking ``section 38(b)'' and inserting 
``section 38''.

               Subtitle C--Subsidiaries of National Banks

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

  (a) Financial Subsidiaries of National Banks.--Chapter 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 
        of the United States shall be construed as authorizing a 
        subsidiary of a national bank to engage in, or own any share of 
        or any other interest in any company engaged in, any activity 
        that--
                  ``(A) is not permissible for a national bank to 
                engage in directly; or
                  ``(B) is conducted under terms or conditions other 
                than those that would govern the conduct of such 
                activity by a national bank,
        unless a national bank is specifically authorized by the 
        express terms of a Federal statute and not by implication or 
        interpretation to acquire shares of or an interest in, or to 
        control, such subsidiary, such as by paragraph (2) of this 
        subsection and section 25A of the Federal Reserve Act.
          ``(2) Specific authorization to conduct activities which are 
        financial in nature.--Subject to paragraphs (3) and (4), a 
        national bank may control a financial subsidiary, or hold an 
        interest in a financial subsidiary, that is controlled by 
        insured depository institutions or subsidiaries thereof.
          ``(3) Eligibility requirements.--A national bank may control 
        or hold an interest in a company pursuant to paragraph (2) only 
        if--
                  ``(A) the national bank and all depository 
                institution affiliates of the national bank are well 
                capitalized;
                  ``(B) the national bank and all depository 
                institution affiliates of the national bank are well 
                managed;
                  ``(C) the national bank and all depository 
                institution affiliates of such national bank have 
                achieved a rating of `satisfactory record of meeting 
                community credit needs', or better, at the most recent 
                examination of each such bank or institution; and
                  ``(D) the bank has received the approval of the 
                Comptroller of the Currency.
          ``(4) Activity limitations.--In addition to any other 
        limitation imposed on the activity of subsidiaries of national 
        banks, a subsidiary of a national bank may not, pursuant to 
        paragraph (2)--
                  ``(A) engage as principal in insuring, guaranteeing, 
                or indemnifying against loss, harm, damage, illness, 
                disability, or death (other than in connection with 
                credit-related insurance) or in providing or issuing 
                annuities;
                  ``(B) engage in real estate investment or development 
                activities; or
                  ``(C) engage in any activity permissible for a 
                financial holding company under paragraph (3)(I) of 
                section 6(c) of the Bank Holding Company Act of 1956 
                (relating to insurance company investments).
          ``(5) Size factor with regard to free-standing national 
        banks.--Notwithstanding paragraph (2), a national bank which 
        has total assets of $10,000,000,000 or more may not control a 
        subsidiary engaged in financial activities pursuant to such 
        paragraph unless such national bank is a subsidiary of a bank 
        holding company.
          ``(6) Limited exclusions from community needs requirements 
        for newly affiliated depository institutions.--Any depository 
        institution which becomes an affiliate of a national bank 
        during the 12-month period preceding the date of an approval by 
        the Comptroller of the Currency under paragraph (3)(D) for such 
        bank, and any depository institution which becomes an affiliate 
        of the national bank after such date, may be excluded for 
        purposes of paragraph (3)(C) during the 12-month period 
        beginning on the date of such affiliation if--
                  ``(A) the national bank or such depository 
                institution has submitted an affirmative plan to the 
                appropriate Federal banking agency to take such action 
                as may be necessary in order for such institution to 
                achieve a rating of `satisfactory record of meeting 
                community credit needs', or better, at the next 
                examination of the institution; and
                  ``(B) the plan has been accepted by such agency.
          ``(7) Definitions.--For purposes of this section, the 
        following definitions shall apply:
                  ``(A) Company; control; affiliate; subsidiary.--The 
                terms `company', `control', `affiliate', and 
                `subsidiary' have the same meanings as in section 2 of 
                the Bank Holding Company Act of 1956.
                  ``(B) Financial subsidiary.--The term `financial 
                subsidiary' means a company which is a subsidiary of an 
                insured bank and is engaged in financial activities 
                that have been determined to be financial in nature or 
                incidental to such financial activities in accordance 
                with subsection (b) or permitted in accordance with 
                subsection (b)(4), other than activities that are 
                permissible for a national bank to engage in directly 
                or that are authorized under the Bank Service Company 
                Act, section 25 or 25A of the Federal Reserve Act, or 
                any other Federal statute (other than this section) 
                that specifically authorizes the conduct of such 
                activities by its express terms and not by implication 
                or interpretation.
                  ``(C) Well capitalized.--The term `well capitalized' 
                has the same meaning as in section 38 of the Federal 
                Deposit Insurance Act and, for purposes of this 
                section, the Comptroller shall have exclusive 
                jurisdiction to determine whether a national bank is 
                well capitalized.
                  ``(D) Well managed.--The term `well managed' means--
                          ``(i) in the case of a depository institution 
                        that has been examined, unless otherwise 
                        determined in writing by the appropriate 
                        Federal banking agency--
                                  ``(I) the achievement of a composite 
                                rating of 1 or 2 under the Uniform 
                                Financial Institutions Rating System 
                                (or an equivalent rating under an 
                                equivalent rating system) in connection 
                                with the most recent examination or 
                                subsequent review of the depository 
                                institution; and
                                  ``(II) at least a rating of 2 for 
                                management, if that rating is given; or
                          ``(ii) in the case of any depository 
                        institution that has not been examined, the 
                        existence and use of managerial resources that 
                        the appropriate Federal banking agency 
                        determines are satisfactory.
                  ``(E) Incorporated definitions.--The terms 
                `appropriate Federal banking agency' and `depository 
                institution' have the same meanings as in section 3 of 
                the Federal Deposit Insurance Act.
  ``(b) Activities That Are Financial in Nature.--
          ``(1) Financial activities.--
                  ``(A) In general.--For purposes of subsection 
                (a)(7)(B), an activity shall be considered to have been 
                determined to be financial in nature or incidental to 
                such financial activities only if--
                          ``(i) such activity is permitted for a 
                        financial holding company pursuant to section 
                        6(c)(3) of the Bank Holding Company Act of 1956 
                        (to the extent such activity is not otherwise 
                        prohibited under this section or any other 
                        provision of law for a subsidiary of a national 
                        bank engaged in activities pursuant to 
                        subsection (a)(2)); or
                          ``(ii) the Secretary of the Treasury 
                        determines the activity to be financial in 
                        nature or incidental to such financial 
                        activities in accordance with subparagraph (B) 
                        or paragraph (3).
                  ``(B) Coordination between the board and the 
                secretary of the treasury.--
                          ``(i) Proposals raised before the secretary 
                        of the treasury.--
                                  ``(I) Consultation.--The Secretary of 
                                the Treasury shall notify the Board of, 
                                and consult with the Board concerning, 
                                any request, proposal, or application 
                                under this subsection, including any 
                                regulation or order proposed under 
                                paragraph (3), for a determination of 
                                whether an activity is financial in 
                                nature or incidental to such a 
                                financial activity.
                                  ``(II) Board view.--The Secretary of 
                                the Treasury shall not determine that 
                                any activity is financial in nature or 
                                incidental to a financial activity 
                                under this subsection if the Board 
                                notifies the Secretary in writing, not 
                                later than 30 days after the date of 
                                receipt of the notice described in 
                                subclause (I) (or such longer period as 
                                the Secretary determines to be 
                                appropriate in light of the 
                                circumstances) that the Board believes 
                                that the activity is not financial in 
                                nature or incidental to a financial 
                                activity.
                          ``(ii) Proposals raised by the board.--
                                  ``(I) Board recommendation.--The 
                                Board may, at any time, recommend in 
                                writing that the Secretary of the 
                                Treasury find an activity to be 
                                financial in nature or incidental to a 
                                financial activity (other than an 
                                activity which the Board has sole 
                                authority to regulate under 
                                subparagraph (C)).
                                  ``(II) Time period for secretarial 
                                action.--Not later than 30 days after 
                                the date of receipt of a written 
                                recommendation from the Board under 
                                subclause (I) (or such longer period as 
                                the Secretary of the Treasury and the 
                                Board determine to be appropriate in 
                                light of the circumstances), the 
                                Secretary shall determine whether to 
                                initiate a public rulemaking proposing 
                                that the subject recommended activity 
                                be found to be financial in nature or 
                                incidental to a financial activity 
                                under this subsection, and shall notify 
                                the Board in writing of the 
                                determination of the Secretary and, in 
                                the event that the Secretary determines 
                                not to seek public comment on the 
                                proposal, the reasons for that 
                                determination.
                  ``(C) Authority over merchant banking.--The Board 
                shall have sole authority to prescribe regulations and 
                issue interpretations to implement this paragraph with 
                respect to activities described in section 6(c)(3)(H) 
                of the Bank Holding Company Act of 1956.
          ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Secretary shall take into account--
                  ``(A) the purposes of this Act and the Financial 
                Services Act of 1999;
                  ``(B) changes or reasonably expected changes in the 
                marketplace in which banks compete;
                  ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                  ``(D) whether such activity is necessary or 
                appropriate to allow a bank and the subsidiaries of a 
                bank to--
                          ``(i) compete effectively with any company 
                        seeking to provide financial services in the 
                        United States;
                          ``(ii) use any available or emerging 
                        technological means, including any application 
                        necessary to protect the security or efficacy 
                        of systems for the transmission of data or 
                        financial transactions, in providing financial 
                        services; and
                          ``(iii) offer customers any available or 
                        emerging technological means for using 
                        financial services.
          ``(3) Authorization of new financial activities.--The 
        Secretary of the Treasury shall, by regulation or order and in 
        accordance with paragraph (1)(B), define, consistent with the 
        purposes of this Act, the following activities as, and the 
        extent to which such activities are, financial in nature or 
        incidental to activities which are financial in nature:
                  ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding financial assets other than 
                money or securities.
                  ``(B) Providing any device or other instrumentality 
                for transferring money or other financial assets.
                  ``(C) Arranging, effecting, or facilitating financial 
                transactions for the account of third parties.
          ``(4) Developing activities.--Subject to subsection (a)(2), a 
        financial subsidiary of a national bank may engage directly or 
        indirectly, or acquire shares of any company engaged, in any 
        activity that the Secretary has not determined to be financial 
        in nature or incidental to financial activities under this 
        subsection if--
                  ``(A) the subsidiary reasonably concludes that the 
                activity is financial in nature or incidental to 
                financial activities;
                  ``(B) the gross revenues from all activities 
                conducted under this paragraph represent less than 5 
                percent of the consolidated gross revenues of the 
                national bank;
                  ``(C) the aggregate total assets of all companies the 
                shares of which are held under this paragraph do not 
                exceed 5 percent of the national bank's consolidated 
                total assets;
                  ``(D) the total capital invested in activities 
                conducted under this paragraph represents less than 5 
                percent of the consolidated total capital of the 
                national bank;
                  ``(E) neither the Secretary of the Treasury nor the 
                Board has determined that the activity is not financial 
                in nature or incidental to financial activities under 
                this subsection; and
                  ``(F) the national bank provides written notice to 
                the Secretary of the Treasury describing the activity 
                commenced by the subsidiary or conducted by the company 
                acquired no later than 10 business days after 
                commencing the activity or consummating the 
                acquisition.
  ``(c) Provisions Applicable to National Banks That Fail To Meet 
Requirements.--
          ``(1) In general.--If a national bank or depository 
        institution affiliate is not in compliance with the 
        requirements of subparagraph (A), (B), or (C) of subsection 
        (a)(3), the appropriate Federal banking agency shall notify the 
        Comptroller of the Currency, who shall give notice of such 
        finding to the national bank.
          ``(2) Agreement to correct conditions required.--Not later 
        than 45 days after receipt by a national bank of a notice given 
        under paragraph (1) (or such additional period as the 
        Comptroller of the Currency may permit), the national bank and 
        any relevant affiliated depository institution shall execute an 
        agreement acceptable to the Comptroller of the Currency and the 
        other appropriate Federal banking agencies, if any, to comply 
        with the requirements applicable under subsection (a)(3).
          ``(3) Comptroller of the currency may impose limitations.--
        Until the conditions described in a notice to a national bank 
        under paragraph (1) are corrected--
                  ``(A) the Comptroller of the Currency may impose such 
                limitations on the conduct or activities of the 
                national bank or any subsidiary of the bank as the 
                Comptroller of the Currency determines to be 
                appropriate under the circumstances; and
                  ``(B) the appropriate Federal banking agency may 
                impose such limitations on the conduct or activities of 
                an affiliated depository institution or any subsidiary 
                of the depository institution as such agency determines 
                to be appropriate under the circumstances.
          ``(4) Failure to correct.--If, after receiving a notice under 
        paragraph (1), a national bank and other affiliated depository 
        institutions do not--
                  ``(A) execute and implement an agreement in 
                accordance with paragraph (2);
                  ``(B) comply with any limitations imposed under 
                paragraph (3);
                  ``(C) in the case of a notice of failure to comply 
                with subsection (a)(3)(A), restore the national bank or 
                any depository institution affiliate of the bank to 
                well capitalized status before the end of the 180-day 
                period beginning on the date such notice is received by 
                the national bank (or such other period permitted by 
                the Comptroller of the Currency); or
                  ``(D) in the case of a notice of failure to comply 
                with subparagraph (B) or (C) of subsection (a)(3), 
                restore compliance with any such subparagraph on or 
                before the date on which the next examination of the 
                depository institution subsidiary is completed or by the 
                end of such other period as the Comptroller of the 
                Currency determines to be appropriate,
        the Comptroller of the Currency may require such national bank, 
        under such terms and conditions as may be imposed by the 
        Comptroller of the Currency and subject to such extension of 
        time as may be granted in the Comptroller of the Currency's 
        discretion, to divest control of any subsidiary engaged in 
        activities pursuant to subsection (a)(2) or, at the election of 
        the national bank, instead to cease to engage in any activity 
        conducted by a subsidiary of the national bank pursuant to 
        subsection (a)(2).
          ``(5) Consultation.--In taking any action under this 
        subsection, the Comptroller of the Currency shall consult with 
        all relevant Federal and State regulatory agencies.''.
  (b) Clerical Amendment.--The table of sections for chapter 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. Subsidiaries of national banks.''.

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

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

``SEC. 45. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO SUBSIDIARIES OF 
                    BANKS.

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

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

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

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

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

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

SEC. 124. FUNCTIONAL REGULATION.

  The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), is 
amended by inserting after section 45 (as added by section 122 of this 
subtitle) the following new section:

``SEC. 46. FUNCTIONAL REGULATION OF SECURITIES SUBSIDIARIES AND 
                    INSURANCE AGENCY SUBSIDIARIES OF INSURED DEPOSITORY 
                    INSTITUTIONS.

  ``(a) Broker or Dealer Subsidiary.--A broker or dealer that is a 
subsidiary of an insured depository institution shall be subject to 
regulation under the Securities Exchange Act of 1934 in the same manner 
and to the same extent as a broker or dealer that--
          ``(1) is controlled by the same bank holding company as 
        controls the insured depository institution; and
          ``(2) is not an insured depository institution or a 
        subsidiary of an insured depository institution.
  ``(b) Insurance Agency Subsidiary.--An insurance agency or brokerage 
that is a subsidiary of an insured depository institution shall be 
subject to regulation by a State insurance authority in the same manner 
and to the same extent as an insurance agency or brokerage that--
          ``(1) is controlled by the same bank holding company as 
        controls the insured depository institution; and
          ``(2) is not an insured depository institution or a 
        subsidiary of an insured depository institution.
  ``(c) Definitions.--For purposes of this section, the terms `broker' 
and `dealer' have the same meanings as in section 3 of the Securities 
Exchange Act of 1934.''.

SEC. 125. 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(f)(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)(D)(iii), the Board may permit a company that 
        controls a savings association and that otherwise meets the 
        requirements of paragraph (1) to become supervised under 
        paragraph (1), if the company divests control of any such 
        savings association within such period, not to exceed 5 years 
        after becoming supervised under paragraph (1), as permitted by 
        the Board.
  ``(b) Supervision by the Board.--
          ``(1) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital requirements of 
        wholesale financial holding companies.
          ``(2) Reports.--
                  ``(A) In general.--The Board from time to time may 
                require any wholesale financial holding company and any 
                subsidiary of such company to submit reports under oath 
                to keep the Board informed as to--
                          ``(i) the company's or subsidiary's 
                        activities, financial condition, policies, 
                        systems for monitoring and controlling 
                        financial and operational risks, and 
                        transactions with depository institution 
                        subsidiaries of the holding company; and
                          ``(ii) the extent to which the company or 
                        subsidiary has complied with the provisions of 
                        this Act and regulations prescribed and orders 
                        issued under this Act.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that the 
                        wholesale financial holding company or any 
                        subsidiary of such company has provided or been 
                        required to provide to other Federal and State 
                        supervisors or to appropriate self-regulatory 
                        organizations.
                          ``(ii) Availability.--A wholesale financial 
                        holding company or a subsidiary of such company 
                        shall provide to the Board, at the request of 
                        the Board, a report referred to in clause (i).
                  ``(C) Exemptions from reporting requirements.--
                          ``(i) In general.--The Board may, by 
                        regulation or order, exempt any company or 
                        class of companies, under such terms and 
                        conditions and for such periods as the Board 
                        shall provide in such regulation or order, from 
                        the provisions of this paragraph and any 
                        regulation prescribed under this paragraph.
                          ``(ii) Criteria for consideration.--In making 
                        any determination under clause (i) with regard 
                        to any exemption under such clause, the Board 
                        shall consider, among such other factors as the 
                        Board may determine to be appropriate, the 
                        following factors:
                                  ``(I) Whether information of the type 
                                required under this paragraph is 
                                available from a supervisory agency (as 
                                defined in section 1101(7) of the Right 
                                to Financial Privacy Act of 1978) or a 
                                foreign regulatory authority of a 
                                similar type.
                                  ``(II) The primary business of the 
                                company.
                                  ``(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) Certain subsidiaries.--The Board shall 
                        not, by regulation, guideline, order or 
                        otherwise, prescribe or impose any capital or 
                        capital adequacy rules, standards, guidelines, 
                        or requirements upon any subsidiary that is not 
                        a depository institution and that is registered 
                        as an investment adviser under the Investment 
                        Advisers Act of 1940, except that this clause 
                        shall not be construed as preventing the Board 
                        from imposing capital or capital adequacy 
                        rules, guidelines, standards, or requirements 
                        with respect to activities of a registered 
                        investment adviser other than investment 
                        advisory activities or activities incidental to 
                        investment advisory activities.
                          ``(v) Limitations on indirect action.--In 
                        developing, establishing, or assessing holding 
                        company capital or capital adequacy rules, 
                        guidelines, standards, or requirements for 
                        purposes of this paragraph, the Board shall not 
                        take into account the activities, operations, 
                        or investments of an affiliated investment 
                        company registered under the Investment Company 
                        Act of 1940, if the investment company is not--
                                  ``(I) a bank holding company; or
                                  ``(II) controlled by a bank holding 
                                company by reason of ownership by the 
                                bank holding company (including through 
                                all of its affiliates) of 25 percent or 
                                more of the shares of the investment 
                                company, where the shares owned by the 
                                bank holding company have a market 
                                value equal to more than $1,000,000.
                          ``(vi) Appropriate exclusions.--The Board 
                        shall take full account of--
                                  ``(I) the capital requirements made 
                                applicable to any subsidiary that is 
                                not a depository institution by another 
                                Federal regulatory authority or State 
                                insurance authority; and
                                  ``(II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                          ``(vii) Internal risk management models.--The 
                        Board may incorporate internal risk management 
                        models of wholesale financial holding companies 
                        into its capital adequacy guidelines or rules 
                        and may take account of the extent to which 
                        resources of a subsidiary depository 
                        institution may be used to service the debt or 
                        other liabilities of the wholesale financial 
                        holding company.
  ``(c) Nonfinancial Activities and Investments.--
          ``(1) Grandfathered activities.--
                  ``(A) In general.--Notwithstanding section 4(a), a 
                company that becomes a wholesale financial holding 
                company may continue to engage, directly or indirectly, 
                in any activity and may retain ownership and control of 
                shares of a company engaged in any activity if--
                          ``(i) on the date of the enactment of the 
                        Financial Services Act of 1999, such wholesale 
                        financial holding company was lawfully engaged 
                        in that nonfinancial activity, held the shares 
                        of such company, or had entered into a contract 
                        to acquire shares of any company engaged in 
                        such activity; and
                          ``(ii) the company engaged in such activity 
                        continues to engage only in the same activities 
                        that such company conducted on the date of the 
                        enactment of the Financial Services Act of 
                        1999, and other activities permissible under 
                        this Act.
                  ``(B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--A 
                wholesale financial holding company that engages in 
                activities or holds shares pursuant to this paragraph, 
                or a subsidiary of such wholesale financial holding 
                company, may not acquire, in any merger, consolidation, 
                or other type of business combination, assets of any 
                other company which is engaged in any activity which 
                the Board has not determined to be financial in nature 
                or incidental to activities that are financial in 
                nature under section 6(c).
                  ``(C) Limitation to single exemption.--No company 
                that engages in any activity or controls any shares 
                under subsection (f) of section 6 may engage in any 
                activity or own any shares pursuant to this paragraph.
          ``(2) Commodities.--
                  ``(A) In general.--Notwithstanding section 4(a), a 
                wholesale financial holding company which was 
                predominately engaged as of January 1, 1997, in 
                financial activities in the United States (or any 
                successor to any such company) may engage in, or 
                directly or indirectly own or control shares of a 
                company engaged in, activities related to the 
                trading, sale, or investment in commodities and 
                underlying physical properties that were not 
                permissible for bank holding companies to conduct 
                in the United States as of January 1, 1997, if such 
                wholesale financial holding company, or any subsidiary 
                of such holding company, was engaged directly, 
                indirectly, or through any such company in any of such 
                activities as of January 1, 1997, in the United States.
                  ``(B) Limitation.--The attributed aggregate 
                consolidated assets of a wholesale financial holding 
                company held under the authority granted under this 
                paragraph and not otherwise permitted to be held by all 
                wholesale financial holding companies under this 
                section may not exceed 5 percent of the total 
                consolidated assets of the wholesale financial holding 
                company, except that the Board may increase such 
                percentage of total consolidated assets by such amounts 
                and under such circumstances as the Board considers 
                appropriate, consistent with the purposes of this Act.
          ``(3) Cross marketing restrictions.--A wholesale financial 
        holding company shall not permit--
                  ``(A) any company whose shares it owns or controls 
                pursuant to paragraph (1) or (2) to offer or market any 
                product or service of an affiliated wholesale financial 
                institution; or
                  ``(B) any affiliated wholesale financial institution 
                to offer or market any product or service of any 
                company whose shares are owned or controlled by such 
                wholesale financial holding company pursuant to such 
                paragraphs.
  ``(d) Qualification of Foreign Bank as Wholesale Financial Holding 
Company.--
          ``(1) In general.--Any foreign bank, or any company that owns 
        or controls a foreign bank, that operates a branch, agency, or 
        commercial lending company in the United States, including a 
        foreign bank or company that owns or controls a wholesale 
        financial institution, may request a determination from the 
        Board that such bank or company be treated as a wholesale 
        financial holding company (other than for purposes of 
        subsection (c)), subject to such conditions as the Board deems 
        appropriate, giving due regard to the principle of national 
        treatment and equality of competitive opportunity and the 
        requirements imposed on domestic banks and companies.
          ``(2) Conditions for treatment as a wholesale financial 
        holding company.--A foreign bank and a company that owns or 
        controls a foreign bank may not be treated as a wholesale 
        financial holding company unless the bank and company meet and 
        continue to meet the following criteria:
                  ``(A) No insured deposits.--No deposits held directly 
                by a foreign bank or through an affiliate (other than 
                an institution described in subparagraph (D) or (F) of 
                section 2(c)(2)) are insured under the Federal Deposit 
                Insurance Act.
                  ``(B) Capital standards.--The foreign bank meets 
                risk-based capital standards comparable to the capital 
                standards required for a wholesale financial 
                institution, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.
                  ``(C) Transaction with affiliates.--Transactions 
                between a branch, agency, or commercial lending company 
                subsidiary of the foreign bank in the United States, 
                and any securities affiliate or company in which the 
                foreign bank (or any company that owns or controls such 
                foreign bank), has invested and which engages in any 
                activity authorized only as a result of the application 
                of subsection (c) or (g) of section 6, comply with the 
                provisions of sections 23A and 23B of the Federal 
                Reserve Act in the same manner and to the same extent 
                as such transactions would be required to comply with 
                such sections if the foreign 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 paragraphs (1)(C) and (3) of 
        section 9B(c) of the Federal Reserve Act, and any such foreign 
        bank or company shall be subject to paragraphs (3), (4), and 
        (5) of section 9B(d) of the Federal Reserve Act, except that 
        the Board may adopt such modifications, conditions, or 
        exemptions as the Board deems appropriate, giving due regard to 
        the principle of national treatment and equality of competitive 
        opportunity.
          ``(4) Supervision of foreign bank which maintains no banking 
        presence other than control of a wholesale financial 
        institution.--A foreign bank that owns or controls a wholesale 
        financial institution but does notoperate a branch, agency, or 
commercial lending company in the United States (and any company that 
owns or controls such foreign bank) may request a determination from 
the Board that such bank or company be treated as a wholesale financial 
holding company, except that such bank or company shall be subject to 
the restrictions of paragraphs (2)(A) and (3) of this subsection.
          ``(5) No effect on other provisions.--This section shall not 
        be construed as limiting the authority of the Board under the 
        International Banking Act of 1978 with respect to the 
        regulation, supervision, or examination of foreign banks and 
        their offices and affiliates in the United States.''.
  (b) Uninsured Banks.--
          (1) Uninsured state banks.--Section 9 of the Federal Reserve 
        Act (12 U.S.C. 321 et seq.) is amended by adding at the end the 
        following new paragraph:
          ``(24) Enforcement authority over uninsured state member 
        banks.--Section 3(u) of the Federal Deposit Insurance Act, 
        subsections (j) and (k) of section 7 of such Act, and 
        subsections (b) through (n), (s), (u), and (v) of section 8 of 
        such Act shall apply to an uninsured member bank in the same 
        manner and to the same extent such provisions apply to an 
        insured member bank and any reference in any such provision to 
        `insured depository institution' shall be deemed to be a 
        reference to `uninsured member bank' for purposes of this 
        paragraph.''.
          (2) Uninsured national banks.--Section 5239 of the Revised 
        Statutes of the United States (12 U.S.C. 93) is amended--
                  (A) by redesignating the 2d of the 2 subsections 
                designated as subsection (d) as subsection (e); and
                  (B) by adding at the end the following new 
                subsection:
  ``(f) Enforcement Authority Over Uninsured National 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 national bank 
in the same manner and to the same extent such provisions apply to an 
insured national bank and any reference in any such provision to 
`insured depository institution' shall be deemed to be a reference to 
`uninsured national bank' for purposes of this subsection.''.

SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

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

SEC. 133. CONFORMING AMENDMENTS.

  (a) Bank Holding Company Act of 1956.--
          (1) Definitions.--Section 2 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 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 same meaning as 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.--
          (1) Section 3(q)(1) of the Federal Deposit Insurance Act (12 
        U.S.C. 1813(q)(2)(A)) is amended by inserting ``national 
        wholesale financial institution authorized by the Comptroller 
        of the Currency pursuant to section 5136B of the Revised 
        Statutes of the United States,'' after ``District bank,''.
          (2) 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 by the Board 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.--
          ``(1) In general.--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 wholesale financial institution.
          ``(2) National wholesale financial institution.--Any national 
        bank that is approved by the Comptroller of the Currency to 
        operate as a wholesale financial institution under paragraph 
        (1) shall be known 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) Limit on Number.--Not more than 5 national wholesale financial 
institutions may be chartered by the Comptroller of the Currency.''.
          (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) Wholesale Financial Institutions.--The Federal Reserve Act (12 
U.S.C. 221 et seq.) is amended by inserting after section 9A the 
following new section:

``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

  ``(a) Application for Membership as Wholesale Financial 
Institution.--
          ``(1) Application required.--
                  ``(A) In general.--Any bank may apply to the Board of 
                Governors of the Federal Reserve System to become a 
                State wholesale financial institution, or to the 
                Comptroller of the Currency under section 5136B of the 
                Revised Statutes of the United States to be a national 
                wholesale financial institution, and, as a wholesale 
                financial institution, to subscribe to the stock of the 
                Federal reserve bank organized within the district 
                where the applying bank is located.
                  ``(B) Treatment as member bank.--Any application 
                under subparagraph (A) shall be treated as an 
                application under, and shall be subject to the 
                provisions of, section 9.
                  ``(C) Limit on Number.--Not more than 5 wholesale 
                financial institutions may be approved by the Board 
                under this subsection.
          ``(2) Insurance termination.--No bank the deposits of which 
        are insured under the Federal Deposit Insurance Act may become 
        a wholesale financial institution unless it has met all 
        requirements under that Act for voluntary termination of 
        deposit insurance.
  ``(b) General Requirements Applicable to Wholesale Financial 
Institutions.--
          ``(1) Federal reserve act.--Except as otherwise provided in 
        this section, wholesale financial institutions shall be member 
        banks and shall be subject to the provisions of this Act that 
        apply to member banks to the same extent and in the same manner 
        as State member insured banks or national banks, except that a 
        wholesale financial institution may terminate membership under 
        this Act only with the prior written approval of the Board and 
        on terms and conditions that the Board determines are 
        appropriate to carry out the purposes of this Act.
          ``(2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal Deposit 
        Insurance Act except that--
                  ``(A) the relevant capital levels and capital 
                measures for each capital category shall be the levels 
                specified by the Board for wholesale financial 
                institutions;
                  ``(B) subject to subparagraph (A), all references to 
                the appropriate Federal banking agency or to the 
                Corporation in that section shall be deemed to be 
                references to the Comptroller of the Currency, in the 
                case of a national wholesale financial institution 
                authorized under section 5136B(a)(1) of the Revised 
                Statutes of the United States, and to the Board, in the 
                case of other wholesale financial institutions; and
                  ``(C) in the case of wholesale financial 
                institutions, the purpose of prompt corrective action 
                shall be to protect taxpayers and the financial system 
                from risks associated with the operation and activities 
                of wholesale financial institutions.
          ``(3) Enforcement authority.--Section 3(u), subsections (j) 
        and (k) of section 7, subsections (b) through (n), (s), (u), 
        and (v) of section 8, and section 19 of the Federal Deposit 
        Insurance Act shall apply to a wholesale financial institution 
        in the same manner and to the same extent as such provisions 
        apply to State member insured banks or national banks, as the 
        case may be, and any reference in such sections to an insured 
        depository institution shall be deemed to include a reference 
        to a wholesale financial institution.
          ``(4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate Federal 
        banking agency for such bank and all such bank's affiliates, 
        for purposes of the International Lending Supervision Act.
          ``(5) Bank merger act.--A wholesale financial institution 
        shall be subject to sections 18(c) and 44 of the Federal 
        Deposit Insurance Act in the same manner and to the same extent 
        the wholesale financial institution would be subject to such 
        sections if the institution were a State member insured bank or 
        a national bank.
          ``(6) Branching.--Notwithstanding any other provision of law, 
        a wholesale financial institution may establish and operate a 
        branch at any location--
                  ``(A) on such terms and conditions as established, in 
                the case of a State-chartered wholesale financial 
                institution, by the Board or, in the case of a national 
                wholesale financial institution, by the Comptroller of 
                the Currency; and
                  ``(B) 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 to be a State bank and an 
                insured State bank for purposes of paragraphs (1), (2), 
                and (3) of section 24(j) of the Federal Deposit 
                Insurance Act, and a national wholesale financial 
                institution shall be deemed to be a national bank for 
                purposes of section 5155(f) of the Revised Statutes of 
                the United States.
                  ``(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.--Except as otherwise 
                provided in section 8A(f) of the Federal Deposit 
                Insurance Act, no deposits held by a wholesale 
                financial institution shall be insured deposits under 
                the Federal Deposit Insurance Act.
                  ``(C) Advertising and disclosure.--The Board and the 
                Comptroller of the Currency shall prescribe jointly 
                regulations pertaining to advertising and disclosure by 
                wholesale financial institutions to ensure that each 
                depositor is notified that deposits at the wholesale 
                financial institution are not federally insured or 
                otherwise guaranteed by the United States Government.
          ``(2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by regulation, adopt 
        capital requirements for wholesale financial institutions--
                  ``(A) to account for the status of wholesale 
                financial institutions as institutions that accept 
                deposits that are not insured under the Federal Deposit 
                Insurance Act; and
                  ``(B) to provide for the safe and sound operation of 
                the wholesale financial institution without undue risk 
                to creditors or other persons, including Federal 
                reserve banks, engaged in transactions with the bank.
          ``(3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or order, 
        upon wholesale financial institutions--
                  ``(A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                          ``(i) the transfer of risk to the deposit 
                        insurance funds; or
                          ``(ii) an affiliate from gaining access to, 
                        or the benefits of, credit from a Federal 
                        reserve bank, including overdrafts at a Federal 
                        reserve bank;
                  ``(B) special clearing balance requirements; and
                  ``(C) any additional requirements that the Board 
                determines to be appropriate or necessary to--
                          ``(i) promote the safety and soundness of the 
                        wholesale financial institution or any insured 
                        depository institution affiliate of the 
                        wholesale financial institution;
                          ``(ii) prevent the transfer of risk to the 
                        deposit insurance funds; or
                          ``(iii) protect creditors and other persons, 
                        including Federal reserve banks, engaged in 
                        transactions with the wholesale financial 
                        institution.
          ``(4) Exemptions for wholesale financial institutions.--The 
        Board may, by regulation or order, exempt any wholesale 
        financial institution from any provision applicable to a member 
        bank that is not a wholesale financial institution, if the 
        Board finds that such exemption is consistent with--
                  ``(A) the promotion of the safety and soundness of 
                the wholesale financial institution or any insured 
                depository institution affiliate of the wholesale 
                financial institution;
                  ``(B) the protection of the deposit insurance funds; 
                and
                  ``(C) the protection of creditors and other persons, 
                including Federal reserve banks, engaged in 
                transactions with the wholesale financial institution.
          ``(5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For purposes of 
        section 23A(d)(1) of the Federal Reserve Act, a wholesale 
        financial institution that is affiliated with an insured bank 
        shall not be a bank.
          ``(6) No effect on other provisions.--This section shall not 
        be construed as limiting the Board's authority over member 
        banks or the authority of the Comptroller of the Currency over 
        national banks under any other 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, in the case of a State-
        chartered wholesale financial institution, or the Comptroller 
        of the Currency, in the case of a national wholesale financial 
        institution, shall promptly provide notice to a company that 
        controls a wholesale financial institution whenever such 
        wholesale financial institution is not well capitalized or well 
        managed.
          ``(3) Agreement to restore institution.--Not later than 45 
        days after the date of receipt of a notice under paragraph (2) 
        (or such additional period not to exceed 90 days as the Board 
        or the Comptroller of the Currency, as the case may be, may 
        permit), the company shall execute an agreement acceptable to 
        the Board or the Comptroller of the Currency, as the case may 
        be, 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 or the 
        Comptroller of the Currency, as the case may be, may impose 
        such limitations on the conduct or activities of the company or 
        any affiliate of the company as the Board or the Comptroller of 
        the Currency determines to be appropriate under the 
        circumstances.
          ``(5) Failure to restore.--If the company does not execute 
        and implement an agreement in accordance with paragraph (3), 
        comply with any limitation imposed under paragraph (4), restore 
        the wholesale financial institution to well capitalized status 
        not later than 180 days after the date of receipt by the 
        company of the notice described in paragraph (2), or restore 
        the wholesale financial institution to well managed status 
        within such period as the Board may permit, the company shall, 
        under such terms and conditions as may be imposed by the Board 
        or the Comptroller of the Currency, as the case may be and 
        subject to such extension of time as may be granted in the 
        discretion of the Board or the Comptroller of the Currency, 
        divest control of its subsidiary depository institutions.
          ``(6) Well managed defined.--For purposes of this subsection, 
        the term `well managed' has the same meaning as in section 2 of 
        the Bank Holding Company Act of 1956.
  ``(e) Resolution of Wholesale Financial Institutions.--
          ``(1) Conservatorship or receivership.--
                  ``(A) Appointment.--The Board may appoint a 
                conservator or receiver for a State-chartered wholesale 
                financial institution to the same extent and in the 
                same manner as the Comptroller of the Currency may 
                appoint a conservator or receiver for a national bank.
                  ``(B) Powers.--The conservator or receiver for a 
                wholesale financial institution shall exercise the same 
                powers, functions, and duties, subject to the same 
                limitations, as a conservator or receiver for a 
                national bank.
          ``(2) Board authority.--The Board shall have the same 
        authority with respect to any conservator or receiver appointed 
        for a State-chartered wholesale financial institution under 
        paragraph (1), and the wholesale financial institution for 
        which it has been appointed, as the Comptroller of the Currency 
        has with respect to a conservator or receiver for a national 
        bank and the national bank for which the conservator or 
        receiver has been appointed.
          ``(3) Bankruptcy proceedings.--The Comptroller of the 
        Currency (in the case of a national wholesale financial 
        institution approved by the Comptroller of the Currency under 
        section 5136B(a)(1) of the Revised Statutes of the United 
        States) or the Board (in the case of other wholesale financial 
        institutions) may direct the conservator or receiver of a 
        wholesale financial institution to file a petition pursuant to 
        title 11, United States Code, in which case, title 11, United 
        States Code, shall apply to the wholesale financial institution 
        in lieu of otherwise applicable Federal or State insolvency 
        law.
  ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of section 43 
of the Federal Deposit Insurance Act shall not apply to any wholesale 
financial institution.''.
  (c) Voluntary Termination of Insured Status by Certain 
Institutions.--
          (1) Section 8 designations.--Section 8(a) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
                  (A) by striking paragraph (1); and
                  (B) by redesignating paragraphs (2) through (10) as 
                paragraphs (1) through (9), respectively.
          (2) Voluntary termination of insured status.--The Federal 
        Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
        inserting after section 8 the following new section:

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

  ``(a) In General.--Except as provided in subsection (b), an insured 
State bank or a national bank may voluntarily terminate such bank's 
status as an insured depository institution in accordance with 
regulations of the Corporation if--
          ``(1) the bank provides written notice of the bank's intent 
        to terminate such insured status--
                  ``(A) to the Corporation and the Board of Governors 
                of the Federal Reserve System, in the case of an 
                insured State bank, or to the Corporation and the 
                Comptroller of the Currency, in the case of an insured 
                national bank authorized to operate as a wholesale 
                financial institution, not less than 6 months before 
                the effective date of such termination; and
                  ``(B) to all depositors at such bank, not less than 6 
                months before the effective date of the termination of 
                such status; and
          ``(2) either--
                  ``(A) the deposit insurance fund of which such bank 
                is a member equals or exceeds the fund's designated 
                reserve ratio as of the date the bank provides a 
                written notice under paragraph (1) and the Corporation 
                determines that the fund will equal or exceed the 
                applicable designated reserve ratio for the 2 
                semiannual assessment periods immediately following 
                such date; or
                  ``(B) the Corporation and the Board of Governors of 
                the Federal Reserve System, in the case of an insured 
                State bank, or the Corporation and the Comptroller of 
                the Currency, in the case of an insured national bank 
                authorized to operate as a wholesale financial 
                institution, has approved the termination of the bank's 
                insured status and the bank pays an exit fee in 
                accordance with subsection (e).
  ``(b) Exception.--Subsection (a) shall not apply with respect to--
          ``(1) an insured savings association; or
          ``(2) an insured branch that is required to be insured under 
        subsection (a) or (b) of section 6 of the International Banking 
        Act of 1978.
  ``(c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any deposits or 
any assistance authorized under this Act after the period specified in 
subsection (f)(1).
  ``(d) Institution Must Become Wholesale Financial Institution or 
Terminate Deposit-Taking Activities.--Any depository institution which 
voluntarily terminates such institution's status as an insured 
depository institution under this section may not, upon termination of 
insurance, accept any deposits unless the institution is a wholesale 
financial institution subject to section 9B of the Federal Reserve Act.
  ``(e) Exit Fees.--
          ``(1) In general.--Any bank that voluntarily terminates such 
        bank's status as an insured depository institution under this 
        section shall pay an exit fee in an amount that the Corporation 
        determines is sufficient to account for the institution's pro 
        rata share of the amount (if any) which would be required to 
        restore the relevant deposit insurance fund to the fund's 
        designated reserve ratio as of the date the bank provides a 
        written notice under subsection (a)(1).
          ``(2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under this 
        subsection.
  ``(f) Temporary Insurance of Deposits Insured as of Termination.--
          ``(1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the effective 
        date of the voluntary termination of the bank's insured status, 
        less all subsequent withdrawals from any deposits of such 
        depositor, shall continue to be insured for a period of not 
        less than 6 months and not more than 2 years, as determined by 
        the Corporation. During such period, no additions to any such 
        deposits, and no new deposits in the depository institution 
        made after the effective date of such termination shall be 
        insured by the Corporation.
          ``(2) Temporary assessments; obligations and duties.--During 
        the period specified in paragraph (1) with respect to any bank, 
        the bank shall continue to pay assessments under section 7 as 
        if the bank were an insured depository institution. The bank 
        shall, in all other respects, be subject to the authority of 
        the Corporation and the duties and obligations of an insured 
        depository institution under this Act during such period, and 
        in the event that the bank is closed due to an inability to 
        meet the demands of the bank's depositors during such period, 
        the Corporation shall have the same powers and rights with 
        respect to such bank as in the case of an insured depository 
        institution.
  ``(g) Advertisements.--
          ``(1) In general.--A bank that voluntarily terminates the 
        bank's insured status under this section shall not advertise or 
        hold itself out as having insured deposits, except that the 
        bank may advertise the temporary insurance of deposits under 
        subsection (f) if, in connection with any such advertisement, 
        the advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the effective 
        date of the termination are not insured.
          ``(2) Certificates of deposit, obligations, and securities.--
        Any certificate of deposit or other obligation or security 
        issued by a State bank or a national bank after the effective 
        date of the voluntary termination of the bank's insured status 
        under this section shall be accompanied by a conspicuous, 
        prominently displayed notice that such certificate of deposit 
        or other obligation or security is not insured under this Act.
  ``(h) Notice Requirements.--
          ``(1) Notice to the corporation.--The notice required under 
        subsection (a)(1)(A) shall be in such form as the Corporation 
        may require.
          ``(2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                  ``(A) sent to each depositor's last address of record 
                with the bank; and
                  ``(B) in such manner and form as the Corporation 
                finds to be necessary and appropriate for the 
                protection of depositors.''.
          (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by inserting 
        ``, or any wholesale financial institution subject to section 
        9B of this Act'' after ``such Act''.
  (d) Technical and Conforming Amendments to the Bankruptcy Code.--
          (1) Bankruptcy code debtors.--Section 109(b)(2) of title 11, 
        United States Code, is amended by striking ``; or'' and 
        inserting the following: ``, except that--
                  ``(A) a wholesale financial institution established 
                under section 5136B of the Revised Statutes of the 
                United States or section 9B of the Federal Reserve Act 
                may be a debtor if a petition is filed at the direction 
                of the Comptroller of the Currency (in the case of a 
                wholesale financial institution established under 
                section 5136B of the Revised Statutes of the United 
                States) or the Board of Governors of the Federal 
                Reserve System (in the case of any wholesale financial 
                institution); and
                  ``(B) a corporation organized under section 25A of 
                the Federal Reserve Act may be a debtor if a petition 
                is filed at the direction of the Board of Governors of 
                the Federal Reserve System; or''.
          (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
        States Code, is amended to read as follows:
  ``(d) Only a railroad and a person that may be a debtor under chapter 
7 of this title, except that a stockbroker, a wholesale financial 
institution established under section 5136B of the Revised Statutes of 
the United States or section 9B of the Federal Reserve Act, a 
corporation organized under section 25A of the Federal Reserve Act, or 
a commodity broker, may be a debtor under chapter 11 of this title.''.
          (3) Definition of financial institution.--Section 101(22) of 
        title 11, United States Code, is amended to read as follows:
          ``(22) `financial institution' means a person that is a 
        commercial or savings bank, industrial savings bank, savings 
        and loan association, trust company, wholesale financial 
        institution established under section 5136B of the Revised 
        Statutes of the United States or section 9B of the Federal 
        Reserve Act, or corporation organized under section 25A of the 
        Federal Reserve Act and, when any such person is acting as 
        agent or custodian for a customer in connection with a 
        securities contract, as defined in section 741 of this title, 
        such customer,''.
          (4) Subchapter v of chapter 7.--
                  (A) In general.--Section 103 of title 11, United 
                States Code, is amended--
                          (i) by redesignating subsections (e) through 
                        (i) as subsections (f) through (j), 
                        respectively; and
                          (ii) by inserting after subsection (d) the 
                        following:
  ``(e) Subchapter V of chapter 7 of this title applies only in a case 
under such chapter concerning the liquidation of a wholesale financial 
institution established under section 5136B of the Revised Statutes of 
the United States or section 9B of the Federal Reserve Act, or a 
corporation organized under section 25A of the Federal Reserve Act.''.
                  (B) Wholesale bank liquidation.--Chapter 7 of title 
                11, United States Code, is amended by adding at the end 
                the following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

``Sec. 781. Definitions for subchapter

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

``Sec. 782. Selection of trustee

  ``Notwithstanding any other provision of this title, the conservator 
or receiver who files the petition shall be the trustee under this 
chapter, unless the Comptroller of the Currency (in the case of a 
national wholesale financial institution for which it appointed the 
conservator or receiver) or the Board (in the case of any wholesale 
bank for which it appointed the conservator or receiver) designates an 
alternative trustee. The Comptroller of the Currency or the Board (as 
applicable) may designate a successor trustee, if required.

``Sec. 783. Additional powers of trustee

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

``Sec. 784. Right to be heard

  ``The Comptroller of the Currency (in the case of a national 
wholesale financial institution), the Board (in the case of any 
wholesale bank), or a Federal Reserve bank (in the case of a wholesale 
bank that is a member of that bank) may raise and may appear and be 
heard on any issue in a case under this subchapter.

``Sec. 785. Expedited transfers

  ``The trustee may make a transfer pursuant to section 783 without 
prior judicial approval, if the Comptroller of the Currency (in the 
case of a national wholesale financial institution for which it 
appointed the conservator or receiver) or the Board (in the case of any 
wholesale bank for which it appointed the conservator or receiver) 
determines that the transfer would be necessary to avert serious 
adverse effects on economic conditions or financial stability.''.
                  (C) Conforming amendment.--The table of sections for 
                chapter 7 of title 11, United States Code, is amended 
                by adding at the end the following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.
``785. Expedited transfers.''.

  (e) Resolution of Edge Corporations.--The 16th undesignated paragraph 
of section 25A of the Federal Reserve Act (12 U.S.C. 624) is amended to 
read as follows:
          ``(16) Appointment of receiver or conservator.--
                  ``(A) In general.--The Board may appoint a 
                conservator or receiver for a corporation organized 
                under the provisions of this section to the same extent 
                and in the same manner as the Comptroller of the 
                Currency may appoint a conservator or receiver for a 
                national bank, and the conservator or receiver for such 
                corporation shall exercise the same powers, functions, 
                and duties, subject to the same limitations, as a 
                conservator or receiver for a national bank.
                  ``(B) Equivalent authority.--The Board shall have the 
                same authority with respect to any conservator or 
                receiver appointed for a corporation organized under 
                the provisions of this section under this paragraph and 
                any such corporation as the Comptroller of the Currency 
                has with respect to a conservator or receiver of a 
                national bank and the national bank for which a 
                conservator or receiver has been appointed.
                  ``(C) Title 11 petitions.--The Board may direct the 
                conservator or receiver of a corporation organized 
                under the provisions of this section to file a petition 
                pursuant to title 11, United States Code, in which 
                case, title 11, United States Code, shall apply to the 
                corporation in lieu of otherwise applicable Federal or 
                State insolvency law.''.
  (f) Limitation on Access to Discount Window and Payment System.--
Section 19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)) is 
amended by adding at the end the following new subparagraph:
                  ``(G) Limitation on wholesale financial 
                institutions.--Not more than 10 wholesale financial 
                institutions subject to section 9B of the Federal 
                Reserve Act may be treated by the Board as depository 
                institutions, as defined in subparagraph (A), for 
                purposes of this paragraph.''.

               Subtitle E--Preservation of FTC Authority

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

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

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.

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) of 
                the Bank Holding Company Act of 1956, or receives a 
                determination under section 10(d)(1) of the Bank 
                Holding Company Act of 1956, any authority conferred by 
                this subsection on any foreign bank or company to 
                engage in any activity which the Board has determined 
                to be permissible for financial holding companies under 
                section 6 of such Act shall terminate immediately.
                  ``(B) Restrictions and requirements authorized.--If a 
                foreign bank or company that engages, directly or 
                through an affiliate pursuant to paragraph (1), in an 
                activity which the Board has determined to be 
                permissible for financial holding companies under 
                section 6 of the Bank Holding Company Act of 1956 has 
                not filed a declaration with the Board of its status as 
                a financial holding company under such section or 
                received a determination under section 10(d)(1) by the 
                end of the 2-year period beginning on the date of 
                enactment of the Financial Services Act of 1999, the 
                Board, giving due regard to the principle of national 
                treatment and equality of competitive opportunity, may 
                impose such restrictions and requirements on the 
                conduct of such activities by such foreign bank or 
                company as are comparable to those imposed on a 
                financial holding company organized under the laws of 
                the United States, including a requirement to conduct 
                such activities in compliance with any prudential 
                safeguards established under section 114 of the 
                Financial Services Act of 1999.''.

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.''.

SEC. 153. REPRESENTATIVE OFFICES.

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

        Subtitle G--Federal Home Loan Bank System Modernization

SEC. 161. SHORT TITLE.

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

SEC. 162. DEFINITIONS.

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

SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.

  Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 1464(f)) is 
amended to read as follows:
  ``(f) Federal Home Loan Bank Membership.--On and after January 1, 
1999, a Federal savings association may become a member of the Federal 
Home Loan Bank System, and shall qualify for such membership in the 
manner provided by the Federal Home Loan Bank Act.''.

SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.

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

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

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

SEC. 165. ELIGIBILITY CRITERIA.

  Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a)) is 
amended--
          (1) in paragraph (2)(A), by inserting, ``(other than a 
        community financial institution)'' after ``institution''; and
          (2) by adding at the end the following new paragraph:
          ``(3) Limited exemption for community financial 
        institutions.--A community financial institution that otherwise 
        meets the requirements of paragraph (2) may become a member 
        without regard to the percentage of its total assets that is 
        represented by residential mortgage loans, as described in 
        subparagraph (A) of paragraph (2).''.

SEC. 166. MANAGEMENT OF BANKS.

  (a) Board of Directors.--Section 7(d) of the Federal Home Loan Bank 
Act (12 U.S.C. 1427(d)) is amended--
          (1) by striking ``(d) The term'' and inserting the following:
  ``(d) Terms of Office.--The term''; and
          (2) by striking ``shall be two years''.
  (b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act (12 
U.S.C. 1427(i)) is amended by striking ``, subject to the approval of 
the board''.
  (c) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act 
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C. 
1442a) and 27 (12 U.S.C. 1447).
  (d) Section 12.--Section 12 of the Federal Home Loan Bank Act (12 
U.S.C. 1432) is amended--
          (1) in subsection (a)--
                  (A) by striking ``, but, except'' and all that 
                follows through ``ten years'';
                  (B) by striking ``subject to the approval of the 
                Board'' the first place that term appears;
                  (C) by striking ``and, by its Board of directors,'' 
                and all that follows through ``agent of such bank,'' 
                and inserting ``and, by the board of directors of the 
                bank, to prescribe, amend, and repeal by-laws governing 
                the manner in which its affairs may be administered, 
                consistent with applicable laws and regulations, as 
                administered by the Finance Board. No officer, 
                employee, attorney, or agent of a Federal home loan 
                bank''; and
                  (D) by striking ``Board of directors'' where such 
                term appears in the penultimate sentence and inserting 
                ``board of directors''; and
          (2) in subsection (b), by striking ``loans banks'' and 
        inserting ``loan banks''.
  (e) Powers and Duties of Federal Housing Finance Board.--
          (1) Issuance of notices of violations.--Section 2B(a) of the 
        Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is amended by 
        adding at the end the following new paragraphs:
          ``(5) To issue and serve a notice of charges upon a Federal 
        home loan bank or upon any executive officer or director of a 
        Federal home loan bank if, in the determination of the Finance 
        Board, the bank, executive officer, or director isengaging or 
has engaged in, or the Finance Board has reasonable cause to believe 
that the bank, executive officer, or director is about to engage in, 
any conduct that violates any provision of this Act or any law, order, 
rule, or regulation or any condition imposed in writing by the Finance 
Board in connection with the granting of any application or other 
request by the bank, or any written agreement entered into by the bank 
with the agency, in accordance with the procedures provided in section 
1371(c) of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992. Such authority includes the same authority to 
take affirmative action to correct conditions resulting from violations 
or practices or to limit activities of a bank or any executive officer 
or director of a bank as appropriate Federal banking agencies have to 
take with respect to insured depository institutions under paragraphs 
(6) and (7) of section 8(b) of the Federal Deposit Insurance Act, and 
to have all other powers, rights, and duties to enforce this Act with 
respect to the Federal home loan banks and their executive officers and 
directors as the Office of Federal Housing Enterprise Oversight has to 
enforce the Federal Housing Enterprises Financial Safety and Soundness 
Act of 1992, the Federal National Mortgage Association Charter Act, or 
the Federal Home Loan Mortgage Corporation Act with respect to the 
Federal housing enterprises under the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992.
          ``(6) To address any insufficiencies in capital levels 
        resulting from the application of section 5(f) of the Home 
        Owners' Loan Act.
          ``(7) To sue and be sued, by and through its own 
        attorneys.''.
          (2) Technical amendment.--Section 111 of Public Law 93-495 
        (12 U.S.C. 250) is amended by striking ``Federal Home Loan Bank 
        Board,'' and inserting ``Director of the Office of Thrift 
        Supervision, ``the Federal Housing Finance Board,''.
  (f) Eligibility To Secure Advances.--
          (1) Section 9.--Section 9 of the Federal Home Loan Bank Act 
        (12 U.S.C. 1429) is amended--
                  (A) in the 2d sentence, by striking ``with the 
                approval of the Board''; and
                  (B) in the 3d sentence, by striking ``, subject to 
                the approval of the Board,''.
          (2) Section 10.--Section 10 of the Federal Home Loan Bank Act 
        (12 U.S.C. 1430) is amended--
                  (A) in subsection (c)--
                          (i) in the 1st sentence, by striking 
                        ``Board'' and inserting ``Federal home loan 
                        bank''; and
                          (ii) by striking the 2d sentence;
                  (B) in subsection (d)--
                          (i) in the 1st sentence, by striking ``and 
                        the approval of the Board''; and
                          (ii) by striking ``Subject to the approval of 
                        the Board, any'' and inserting ``Any''; and
                  (C) in subsection (j)(1)--
                          (i) by striking ``to subsidize the interest 
                        rate on advances'' and inserting ``to provide 
                        subsidies, including subsidized interest rates 
                        on advances'';
                          (ii) by striking ``Pursuant'' and inserting 
                        the following:
                  ``(A) Establishment.--Pursuant''; and
                          (iii) by adding at the end the following new 
                        subparagraph:
                  ``(B) Nondelegation of approval authority.--Subject 
                to such regulations as the Finance Board may prescribe, 
                the board of directors of each Federal home loan bank 
                may approve or disapprove requests from members for 
                Affordable Housing Program subsidies, and may not 
                delegate such authority.''.
  (g) Section 16.--Section 16(a) of the Federal Home Loan Bank Act (12 
U.S.C. 1436(a)) is amended--
          (1) in the 3d sentence--
                  (A) by striking ``net earnings'' and inserting 
                ``previously retained earnings or current net 
                earnings''; and
                  (B) by striking ``, and then only with the approval 
                of the Federal Housing Finance Board''; and
          (2) by striking the 4th sentence.
  (h) Section 18.--Section 18(b) of the Federal Home Loan Bank Act (12 
U.S.C. 1438(b)) is amended by striking paragraph (4).

SEC. 167. RESOLUTION FUNDING CORPORATION.

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

SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

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

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

  ``(a) Regulations.--
          ``(1) Capital standards.--Not later than 1 year after the 
        date of enactment of the Financial Services Act of 1999, the 
        Finance Board shall issue regulations prescribing uniform 
        capital standards applicable to each Federal home loan bank, 
        which shall require each such bank to meet--
                  ``(A) the leverage requirement specified in paragraph 
                (2); and
                  ``(B) the risk-based capital requirements, in 
                accordance with paragraph (3).
          ``(2) Leverage requirement.--
                  ``(A) In general.--The leverage requirement shall 
                require each Federal home loan bank to maintain a 
                minimum amount of total capital based on the aggregate 
                on-balance sheet assets of the bank and shall be 5 
                percent.
                  ``(B) Treatment of stock and retained earnings.--In 
                determining compliance with the minimum leverage ratio 
                established under subparagraph (A), the paid-in value 
                of the outstanding Class B stock shall be multiplied by 
                1.5, the paid-in value of the outstanding Class C stock 
                and the amount of retained earnings shall be multiplied 
                by 2.0, and such higher amounts shall be deemed to be 
                capital for purposes of meeting the 5 percent minimum 
                leverage ratio.
          ``(3) Risk-based capital standards.--
                  ``(A) In general.--Each Federal home loan bank shall 
                maintain permanent capital in an amount that is 
                sufficient, as determined in accordance with the 
                regulations of the Finance Board, to meet--
                          ``(i) the credit risk to which the Federal 
                        home loan bank is subject; and
                          ``(ii) the market risk, including interest 
                        rate risk, to which the Federal home loan bank 
                        is subject, based on a stress test established 
                        by the Finance Board that rigorously tests for 
                        changes in market variables, including changes 
                        in interest rates, rate volatility, and changes 
                        in the shape of the yield curve.
                  ``(B) Consideration of other risk-based standards.--
                In establishing the risk-based standard under 
                subparagraph (A)(ii), the Finance Board shall take due 
                consideration of any risk-based capital test 
                established pursuant to section 1361 of the Federal 
                Housing Enterprises Financial Safety and Soundness Act 
                of 1992 (12 U.S.C. 4611) for the enterprises (as 
                defined in that Act), with such modifications as the 
                Finance Board determines to be appropriate to reflect 
                differences in operations between the Federal home loan 
                banks and those enterprises.
          ``(4) Other regulatory requirements.--The regulations issued 
        by the Finance Board under paragraph (1) shall--
                  ``(A) permit each Federal home loan bank to issue, 
                with such rights, terms, and preferences, not 
                inconsistent with this Act and the regulations issued 
                hereunder, as the board of directors of that bank may 
                approve, any 1 or more of--
                          ``(i) Class A stock, which shall be 
                        redeemable in cash and at par 6 months 
                        following submission by a member of a written 
                        notice of its intent to redeem such shares;
                          ``(ii) Class B stock, which shall be 
                        redeemable in cash and at par 5 years following 
                        submission by a member of a written notice of 
                        its intent to redeem such shares; and
                          ``(iii) Class C stock, which shall be 
                        nonredeemable;
                  ``(B) provide that the stock of a Federal home loan 
                bank may be issued to and held by only members of the 
                bank, and that a bank may not issue any stock other 
                than as provided in this section;
                  ``(C) prescribe the manner in which stock of a 
                Federal home loan bank may be sold, transferred, 
                redeemed, or repurchased; and
                  ``(D) provide the manner of disposition of 
                outstanding stock held by, and the liquidation of any 
                claims of the Federal home loan bank against, an 
                institution that ceases to be a member of the bank, 
                through merger or otherwise, or that provides notice of 
                intention to withdraw from membership in the bank.--
          ``(5) Definitions of capital.--For purposes of determining 
        compliance with the capital standards established under this 
        subsection--
                  ``(A) permanent capital of a Federal home loan bank 
                shall include (as determined in accordance with 
                generally accepted accounting principles)--
                          ``(i) the amounts paid for the Class C stock 
                        and any other nonredeemable stock approved by 
                        the Finance Board;
                          ``(ii) the amounts paid for the Class B 
                        stock, in an amount not to exceed 1 percent of 
                        the total assets of the bank; and
                          ``(iii) the retained earnings of the bank; 
                        and
                  ``(B) total capital of a Federal home loan bank shall 
                include--
                          ``(i) permanent capital;
                          ``(ii) the amounts paid for the Class A 
                        stock, Class B stock (excluding any amount 
                        treated as permanent capital under subparagraph 
                        (5)(A)(ii)), or any other class of redeemable 
                        stock approved by the Finance Board;
                          ``(iii) consistent with generally accepted 
                        accounting principles, and subject to the 
                        regulation of the Finance Board, a general 
                        allowance for losses, which may not include any 
                        reserves or allowances made or held against 
                        specific assets; and
                          ``(iv) any other amounts from sources 
                        available to absorb losses incurred by the bank 
                        that the Finance Board determines by regulation 
                        to be appropriate to include in determining 
                        total capital.
          ``(6) Transition period.--Notwithstanding any other 
        provisions of this Act, the requirements relating to purchase 
        and retention of capital stock of a Federal home loan bank by 
        any member thereof in effect on the day before the date of 
        enactment of the Federal Home Loan Bank System Modernization 
        Act of 1999, shall continue in effect with respect to each 
        Federal home loan bank until the regulations required by this 
        subsection have taken effect and the capital structure plan 
        required by subsection (b) has been approved by the Finance 
        Board and implemented by such bank.
  ``(b) Capital Structure Plan.--
          ``(1) Approval of plans.--Not later than 270 days after the 
        date of publication by the Finance Board of final regulations 
        in accordance with subsection (a), the board of directors of 
        each Federal home loan bank shall submit for Finance Board 
        approval a plan establishing and implementing a capital 
        structure for such bank that--
                  ``(A) the board of directors determines is best 
                suited for the condition and operation of the bank and 
                the interests of the members of the bank;
                  ``(B) meets the requirements of subsection (c); and
                  ``(C) meets the minimum capital standards and 
                requirements established under subsection (a) and other 
                regulations prescribed by the Finance Board.
          ``(2) Approval of modifications.--The board of directors of a 
        Federal home loan bank shall submit to the Finance Board for 
        approval any modifications that the bank proposes to make to an 
        approved capital structure plan.
  ``(c) Contents of Plan.--The capital structure plan of each Federal 
home loan bank shall contain provisions addressing each of the 
following:
          ``(1) Minimum investment.--
                  ``(A) In general.--Each capital structure plan of a 
                Federal home loan bank shall require each member of the 
                bank to maintain a minimum investment in the stock of 
                the bank, the amount of which shall be determined in a 
                manner to be prescribed by the board of directors of 
                each bank and to be included as part of the plan.
                  ``(B) Investment alternatives.--
                          ``(i) In general.--In establishing the 
                        minimum investment required for each member 
                        under subparagraph (A), a Federal home loan 
                        bank may, in its discretion, include any 1 or 
                        more of the requirements referred to in clause 
                        (ii), or any other provisions approved by the 
                        Finance Board.
                          ``(ii) Authorized requirements.--A 
                        requirement is referred to in this clause if it 
                        is a requirement for--
                                  ``(I) a stock purchase based on a 
                                percentage of the total assets of a 
                                member; or
                                  ``(II) a stock purchase based on a 
                                percentage of the outstanding advances 
                                from the bank to the member.
                  ``(C) Minimum amount.--Each capital structure plan of 
                a Federal home loan bank shall require that the minimum 
                stock investment established for members shall be set 
                at a level that is sufficient for the bank to meet the 
                minimum capital requirements established by the Finance 
                Board under subsection (a).
                  ``(D) Adjustments to minimum required investment.--
                The capital structure plan of each Federal home loan 
                bank shall impose a continuing obligation on the board 
                of directors of the bank to review and adjust the 
                minimum investment required of each member of that 
                bank, as necessary to ensure that the bank remains in 
                compliance with applicable minimum capital levels 
                established by the Finance Board, and shall require 
                each member to comply promptly with any adjustments to 
                the required minimum investment.
          ``(2) Transition rule.--
                  ``(A) In general.--The capital structure plan of each 
                Federal home loan bank shall specify the date on which 
                it shall take effect, and may provide for a transition 
                period of not longer than 3 years to allow the bank to 
                come into compliance with the capital requirements 
                prescribed under subsection (a), and to allow any 
                institution that was a member of the bank on the date 
                of enactment of the Financial Services Act of 1999, to 
                come into compliance with the minimum investment 
                required pursuant to the plan.
                  ``(B) Interim purchase requirements.--The capital 
                structure plan of a Federal home loan bank may allow 
                any member referred to in subparagraph (A) that would 
                be required by the terms of the capital structure plan 
                to increase its investment in the stock of the bank to 
                do so in periodic installments during the transition 
                period.
          ``(3) Disposition of shares.--The capital structure plan of a 
        Federal home loan bank shall provide for the manner of 
        disposition of any stock held by a member of that bank that 
        terminates its membership or that provides notice of its 
        intention to withdraw from membership in that bank.
          ``(4) Classes of stock.--
                  ``(A) In general.--The capital structure plan of a 
                Federal home loan bank shall afford each member of that 
                bank the option of maintaining its required investment 
                in the bank through the purchase of any combination of 
                classes of stock authorized by the board of directors 
                of the bank and approved by the Finance Board in 
                accordance with its regulations.
                  ``(B) Rights requirement.--A Federal home loan bank 
                shall include in its capital structure plan provisions 
                establishing terms, rights, and preferences, including 
                minimum investment, dividends, voting, and liquidation 
                preferences of each class of stock issued by the bank, 
                consistent with Finance Board regulations and market 
                requirements.
                  ``(C) Reduced minimum investment.--The capital 
                structure plan of a Federal home loan bank may provide 
                for a reduced minimum stock investment for any member 
                of that bank that elects to purchase Class B, Class C, 
                or any other class of nonredeemable stock, in a manner 
                that is consistent with meeting the minimum capital 
                requirements of the bank, as established by the Finance 
                Board.
                  ``(D) Liquidation of claims.--The capital structure 
                plan of a Federal home loan bank shall provide for the 
                liquidation in an orderly manner, as determined by the 
                bank, of any claim of that bank against a member, 
                including claims for any applicable prepayment fees or 
                penalties resulting from prepayment of advances prior 
                to stated maturity.
          ``(5) Limited transferability of stock.--The capital 
        structure plan of a Federal home loan bank shall--
                  ``(A) provide that--
                          ``(i) any stock issued by that bank shall be 
                        available only to, held only by, and tradable 
                        only among members of that bank and between 
                        that bank and its members; and
                          ``(ii) a bank has no obligation to repurchase 
                        its outstanding Class C stock but may do so, 
                        provided it is consistent with Finance Board 
                        regulations and is at a price that is mutually 
                        agreeable to the bank and the member; and
                  ``(B) establish standards, criteria, and requirements 
                for the issuance, purchase, transfer, retirement, and 
                redemption of stock issued by that bank.
          ``(6) Bank review of plan.--Before filing a capital structure 
        plan with the Finance Board, each Federal home loan bank shall 
        conduct a review of the plan by--
                  ``(A) an independent certified public accountant, to 
                ensure, to the extent possible, that implementation of 
                the plan would not result in any write-down of the 
                redeemable bank stock investment of its members; and
                  ``(B) at least 1 major credit rating agency, to 
                determine, to the extent possible, whether 
                implementation of the plan would have any material 
                effect on the credit ratings of the bank.
  ``(d) Termination of Membership.--
          ``(1) Voluntary withdrawal.--Any member may withdraw from a 
        Federal home loan bank by providing written notice to the bank 
        of its intent to do so. The applicable stock redemption notice 
        periods shall commence upon receipt of the notice by the bank. 
        Upon the expiration of the applicable notice period for each 
        class of redeemable stock, the member may surrender such stock 
        to the bank, and shall be entitled to receive in cash the par 
        value of the stock. During the applicable notice periods, the 
        member shall be entitled to dividends and other membership 
        rights commensurate with continuing stock ownership.
          ``(2) Involuntary withdrawal.--
                  ``(A) In general.--The board of directors of a 
                Federal home loan bank may terminate the membership of 
                any institution if, subject to Finance Board 
                regulations, it determines that--
                          ``(i) the member has failed to comply with a 
                        provision of this Act or any regulation 
                        prescribed under this Act; or
                          ``(ii) the member has been determined to be 
                        insolvent, or otherwise subject to the 
                        appointment of a conservator, receiver, or 
                        other legal custodian, by a State or Federal 
                        authority with regulatory and supervisory 
                        responsibility for the member.
                  ``(B) Stock disposition.--An institution, the 
                membership of which is terminated in accordance with 
                subparagraph (A)--
                          ``(i) shall surrender redeemable stock to the 
                        Federal home loan bank, and shall receive in 
                        cash the par value of the stock, upon the 
                        expiration of the applicable notice period 
                        under subsection (a)(4)(A);
                          ``(ii) shall receive any dividends declared 
                        on its redeemable stock, during the applicable 
                        notice period under subsection (a)(4)(A); and
                          ``(iii) shall not be entitled to any other 
                        rights or privileges accorded to members after 
                        the date of the termination.
                  ``(C) Commencement of notice period.--With respect to 
                an institution, the membership of which is terminated 
                in accordance with subparagraph (A), the applicable 
                notice period under subsection (a)(4) for each class of 
                redeemable stock shall commence on the earlier of--
                          ``(i) the date of such termination; or
                          ``(ii) the date on which the member has 
                        provided notice of its intent to redeem such 
                        stock.
          ``(3) Liquidation of indebtedness.--Upon the termination of 
        the membership of an institution for any reason, the 
        outstanding indebtedness of the member to the bank shall be 
        liquidated in an orderly manner, as determined by the bank and, 
        upon the extinguishment of all such indebtedness, the bank 
        shall return to the member all collateral pledged to secure the 
        indebtedness.
  ``(e) Redemption of Excess Stock.--
          ``(1) In general.--A Federal home loan bank, in its sole 
        discretion, may redeem or repurchase, as appropriate, any 
        shares of Class A or Class B stock issued by the bank and held 
        by a member that are in excess of the minimum stock investment 
        required of that member.
          ``(2) Excess stock.--Shares of stock held by a member shall 
        not be deemed to be `excess stock' for purposes of this 
        subsection by virtue of a member's submission of a notice of 
        intent to withdraw from membership or termination of its 
        membership in any other manner.
          ``(3) Priority.--A Federal home loan bank may not redeem any 
        excess Class B stock prior to the end of the 5-year notice 
        period, unless the member has no Class A stock outstanding that 
        could be redeemed as excess.
  ``(f) Impairment of Capital.--If the Finance Board or the board of 
directors of a Federal home loan bank determines that the bank has 
incurred or is likely to incur losses that result in or are expected to 
result in charges against the capital of the bank, the bank shall not 
redeem or repurchase any stock of the bank without the prior approval 
of the Finance Board while such charges are continuing or are expected 
to continue. In no case may a bank redeem or repurchase any applicable 
capital stock if, following the redemption, the bank would fail to 
satisfy any minimum capital requirement.
  ``(g) Rejoining After Divestiture of All Shares.--
          ``(1) In general.--Except as provided in paragraph (2), and 
        notwithstanding any other provision of this Act, an institution 
        that divests all shares of stock in a Federal home loan bank 
        may not, after such divestiture, acquire shares of any Federal 
        home loan bank before the end of the 5-year period beginning on 
        the date of the completion of such divestiture, unless the 
        divestiture is a consequence of a transfer of membership on an 
        uninterrupted basis between banks.
          ``(2) Exception for withdrawals from membership before 
        1998.--Any institution that withdrew from membership in any 
        Federal home loan bank before December 31, 1997, may acquire 
        shares of a Federal home loan bank at any time after that date, 
        subject to the approval of the Finance Board and the 
        requirements of this Act.
  ``(h) Treatment of Retained Earnings.--
          ``(1) In general.--The holders of the Class C stock of a 
        Federal home loan bank, and any other classes of nonredeemable 
        stock approved by the Finance Board (to the extent provided in 
        the terms thereof), shall own the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the bank.
          ``(2) No nonredeemable classes of stock.--If a Federal home 
        loan bank has no outstanding Class C or other such 
        nonredeemable stock, then the holders of any other classes of 
        stock of the bank then outstanding shall have ownership in, and 
        a private property right in, the retained earnings, surplus, 
        undivided profits, and equity reserves, if any, of the bank.
          ``(3) Exception.--Except as specifically provided in this 
        section or through the declaration of a dividend or a capital 
        distribution by a Federal home loan bank, or in the event of 
        liquidation of the bank, a member shall have no right to 
        withdraw or otherwise receive distribution of any portion of 
        the retained earnings of the bank.
          ``(4) Limitation.--A Federal home loan bank may not make any 
        distribution of its retained earnings unless, following such 
        distribution, the bank would continue to meet all applicable 
        capital requirements.''.

                       Subtitle H--ATM Fee Reform

SEC. 171. SHORT TITLE.

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

SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST ATM.

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

SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS 
                    ISSUED.

  Section 905(a) of the Electronic Fund Transfer Act (15 U.S.C. 
1693c(a)) is amended--
          (1) by striking ``and'' at the end of paragraph (8);
          (2) by striking the period at the end of paragraph (9) and 
        inserting ``; and''; and
          (3) by inserting after paragraph (9) the following new 
        paragraph:
          ``(10) a notice to the consumer that a fee may be imposed 
        by--
                  ``(A) an automated teller machine operator (as 
                defined in section 904(d)(3)(D)(ii)) if the consumer 
                initiates a transfer from an automated teller machine 
                which is not operated by the person issuing the card or 
                other means of access; and
                  ``(B) any national, regional, or local network 
                utilized to effect the transaction.''.

SEC. 174. FEASIBILITY STUDY.

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

SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.

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

          Subtitle I--Customer Service, Education, and Privacy

SEC. 176. CUSTOMER SERVICE AND EDUCATION REGULATIONS.

  The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended 
by inserting after section 46 (as added by section 124 of this title) 
the following new section:

``SEC. 47. CUSTOMER SERVICE AND EDUCATION 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 enactment of the Financial 
        Services Act of 1999, customer protection regulations (which 
        the agencies jointly determine to be appropriate) that--
                  ``(A) apply to retail sales practices, solicitations, 
                advertising, or offers of any nondeposit product by any 
                insured depository institution or any person who is 
                engaged in such activities at an office of the 
                institution or on behalf of the institution; and
                  ``(B) are consistent with the requirements of this 
                Act and provide such additional protections for 
                customers to whom such sales, solicitations, 
                advertising, or offers are directed as the agency 
                determines to be appropriate.
          ``(2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiary of an insured depository 
        institution, as deemed appropriate by the regulators referred 
        to in paragraph (3), where such extension is determined to be 
        necessary to ensure the customer protections provided by this 
        section.
          ``(3) Consultation and joint regulations.--The Federal 
        banking agencies shall consult with each other and prescribe 
        joint regulations pursuant to paragraph (1), after consultation 
        with the Securities and Exchange Commission and the State 
        insurance regulators, as appropriate.
          ``(4) Nondeposit product defined.--For purposes of this 
        section, the term `nondeposit product'--
                  ``(A) means any investment and insurance product 
                which is not a deposit;
                  ``(B) includes shares issued by a registered 
                investment company; and
                  ``(C) does not include--
                          ``(i) any loan or any other extension of 
                        credit by an insured depository institution;
                          ``(ii) any letter of credit;
                          ``(iii) any trust services;
                          ``(iv) any discount; or
                          ``(v) any other instrument or insurance or 
                        investment product specifically excluded from 
                        the definition of such term by regulations 
                        prescribed jointly by the Federal banking 
                        agencies, to the extent necessary to carry out 
                        the purposes of this Act.
          ``(5) 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.
  ``(b) Sales Practices.--
          ``(1) Anticoercion rules.--The regulations prescribed 
        pursuant to subsection (a) shall include anticoercion rules 
        applicable to the sale of nondeposit products which prohibit an 
        insured depository institution from engaging in any practice 
        that would lead a customer to believe an extension of credit, 
        in violation of section 106(b) of the Bank Holding Company Act 
        Amendments of 1970, is conditional upon--
                  ``(A) the purchase of a nondeposit product from the 
                institution or any of its affiliates; or
                  ``(B) an agreement by the customer not to obtain, or 
                a prohibition on the customer from obtaining, a 
                nondeposit product from an unaffiliated entity.
          ``(2) Suitability of product.--
                  ``(A) In general.--The regulations prescribed 
                pursuant to subsection (a) with respect to the sale of 
                nondeposit products shall include standards to ensure 
                that an investment product sold to a customer is 
                suitable and any other nondeposit product is 
                appropriate for the customer based on financial 
                information disclosed by the customer.
                  ``(B) Rules of fair practice.--In prescribing the 
                standards under subparagraph (A) with respect to the 
                sale of investments, the Federal banking agencies shall 
                take into account the Rules of Fair Practice of the 
                National Association of Securities Dealers.
  ``(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 a nondeposit 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) Insurance product.--In the case of an 
                        insurance policy which is sold by the 
                        depository institution, or any affiliate of the 
                        institution, as agent, the product is not an 
                        obligation of or guaranteed by the depository 
                        institution.
                          ``(iii) Investment risk.--In the case of an 
                        investment product, variable annuity, or other 
                        product which involves an investment risk, that 
                        there is an investment risk associated with the 
                        product, including possible loss of value.
                          ``(iv) Coercion.--The approval of an 
                        extension of credit may not be conditioned on--
                                  ``(I) the purchase of a nondeposit 
                                product from the institution in which 
                                the application for credit is pending 
                                or any of affiliate of the institution; 
                                or
                                  ``(II) an agreement by the customer 
                                not to obtain, or a prohibition on the 
                                customer from obtaining, a nondeposit 
                                product from an unaffiliated entity.
                  ``(B) Making disclosure readily understandable.--
                Regulations prescribed under subparagraph (A) shall 
                encourage the use of disclosure that is conspicuous, 
                simple, direct, and readily understandable, such as the 
                following:
                          ``(i) `NOT FDIC-INSURED'.
                          ``(ii) `NOT GUARANTEED BY THE BANK'.
                          ``(iii) `MAY GO DOWN IN VALUE'.
                          ``(iv) `NOT INSURED BY ANY GOVERNMENT 
                        AGENCY'.
                  ``(C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements under 
                subparagraphs (A) and (D), necessary adjustments shall 
                be made for purchase in person, by telephone, or by 
                electronic media to provide for the most appropriate 
                and complete form of disclosure and acknowledgments.
                  ``(D) Customer acknowledgment.--A requirement that an 
                insured depository institution shall require any person 
                selling a nondeposit product at any office of, or on 
                behalf of, the institution to obtain, at the time a 
                customer receives the disclosures required under this 
                paragraph or at the time of the initial purchase by the 
                customer of such product, an acknowledgment by such 
                customer of the receipt of the disclosure required 
                under this paragraph with respect to such product.
          ``(2) Prohibition on misrepresentations.--A prohibition on 
        any practice, or any advertising, at any office of, or on 
        behalf of, the insured depository institution, or any 
        subsidiary as appropriate, 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 nondeposit product 
                sold, or offered for sale, by the institution or any 
                subsidiary of the institution;
                  ``(B) in the case of a nondeposit product that 
                involves an investment risk, the investment risk 
                associated with any such product; or
                  ``(C) in the case of a nondeposit product, the 
                approval of an extension of credit is not conditioned 
                on the purchase of such nondeposit product and the 
                customer is not prohibited from purchasing such 
                nondeposit product from another institution.
  ``(d) Separation of Banking and Nonbanking Activities.--
          ``(1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such provisions as the 
        Federal banking agencies consider appropriate to ensure that 
        the routine acceptance of deposits is kept, to the extent 
        practicable, physically segregated from nondeposit 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 nondeposit products should be 
                conducted in a location physically segregated from an 
                area where retail deposits are routinely accepted.
                  ``(B) Referrals.--Standards which permit any person 
                accepting deposits from the public in an area where 
                such transactions are routinely conducted in an insured 
                depository institution to refer a customer who seeks to 
                purchase any nondeposit 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 nondeposit product in any part of any 
                office of theinstitution, or on behalf of the 
institution, unless such person is appropriately qualified and 
licensed.
  ``(e) Customer Grievance Process.--The Federal banking agencies shall 
jointly establish a customer complaint mechanism, for receiving and 
expeditiously addressing customer complaints alleging a violation of 
regulations issued under this section, which mechanism 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 customers 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.
  ``(f) Effect on Other Authority.--
          ``(1) In general.--No provision of this section shall be 
        construed as granting, limiting, or otherwise affecting--
                  ``(A) any authority of the Securities and Exchange 
                Commission, any self-regulatory organization, the 
                Municipal Securities Rulemaking Board, or the Secretary 
                of the Treasury under any Federal securities law; or
                  ``(B) except as provided in paragraph (2), any 
                authority of any State insurance commissioner or other 
                State authority under any State law.
          ``(2) Coordination with state law.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), regulations prescribed by a Federal banking agency 
                under this section shall not apply to retail sales, 
                solicitations, advertising, or offers of any nondeposit 
                product by any insured depository institution or to any 
                person who is engaged in such activities at an office 
                of such institution or on behalf of the institution, in 
                a State where the State has in effect statutes, 
                regulations, orders, or interpretations, that are 
                inconsistent with or contrary to the regulations 
                prescribed by the Federal banking agencies.
                  ``(B) Preemption.--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, the Director of the Office 
                of Thrift Supervision, 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.''.

SEC. 177. DEPOSITORY INSTITUTION PRIVACY POLICIES.

  Section 6 of the Bank Holding Company Act of 1956 (as added by 
section 103 of this title) is amended by adding at the end the 
following new subsection:
  ``(h) Depository Institution Privacy Policies.--
          ``(1) Disclosure required.--In the case of any insured 
        depository institution which becomes affiliated under this 
        section with a financial holding company, the privacy policy of 
        such depository institution shall be clearly and conspicuously 
        disclosed--
                  ``(A) with respect to any person who becomes a 
                customer of the depository institution any time after 
                the depository institution becomes affiliated with such 
                company, to such person at the time at which the 
                business relationship between the customer and the 
                institution is initiated; and
                  ``(B) with respect to any person who already is a 
                customer of the depository institution at the time the 
                depository institution becomes affiliated with such 
                company, to such person within a reasonable time after 
                the affiliation is consummated.
          ``(2) Information to be included.--The privacy policy of an 
        insured depository institution which is disclosed pursuant to 
        paragraph (1) shall include--
                  ``(A) the policy of the institution with respect to 
                disclosing customer information to third parties, other 
                than agents of the depository institution, for 
                marketing purposes; and
                  ``(B) the disclosures required under section 
                603(d)(2)(A)(iii) of the Fair Credit Reporting Act with 
                regard to the right of the customer, at any time, to 
                direct that information referred to in such section not 
                be shared with affiliates of the depository 
                institution.
          ``(3) Applicability.--For purposes of section 10 of the Home 
        Owners' Loan Act, this subsection and subsection (i) shall 
        apply with regard to a savings and loan holding company and any 
        affiliate or insured depository institution subsidiary of such 
        holding company to the same extent and in the same manner this 
        subsection and subsection (i) apply with respect to a financial 
        holding company, affiliate of a financial holding company, or 
        insured depository institution subsidiary of a financial 
        holding company.''.

SEC. 178. CONFIDENTIALITY OF HEALTH AND MEDICAL INFORMATION.

  (a) In General.--Section 6 of the Bank Holding Company Act of 1956 is 
amended by inserting after subsection (h) (as added by section 171 of 
this subtitle) the following new subsection:
  ``(i) Confidentiality of Health and Medical Information.--
          ``(1) In general.--If a company which underwrites or sells 
        annuities contracts or contracts insuring, guaranteeing, or 
        indemnifying against loss, harm, damage, illness, disability, 
        or death (other than credit-related insurance) is or becomes a 
        financial holding company or an affiliate of a financial 
        holding company, such company shall maintain a practice of 
        protecting the confidentiality of individually identifiable 
        customer health and medical information and may disclose such 
        information only--
                  ``(A) with the consent, or at the direction, of the 
                customer;
                  ``(B) for insurance underwriting and reinsuring 
                policies, account administration, reporting, 
                investigating, or preventing fraud or material 
                misrepresentation, processing premium payments, 
                processing insurance claims or defending any action 
                relating to such claims, administering insurance 
                benefits (including utilization review activities), 
                providing information to the customer's physician or 
                other health care provider, participating in research 
                projects, enabling the purchase, transfer, merger, or 
                sale of any insurance-related business, or as otherwise 
                required or specifically permitted by Federal or State 
                law; or
                  ``(C) in connection with--
                          ``(i) the authorization, settlement, billing, 
                        processing, clearing, transferring, 
                        reconciling, or collection of amounts charged, 
                        debited, or otherwise paid using a debit, 
                        credit, or other payment card or account 
                        number, or by other payment means;
                          ``(ii) the transfer of receivables, accounts, 
                        or interest therein;
                          ``(iii) the audit of the debit, credit, or 
                        other payment information;
                          ``(iv) compliance with Federal, State, or 
                        local law;
                          ``(v) compliance with a properly authorized 
                        civil, criminal, or regulatory investigation by 
                        Federal, State, or local authorities as 
                        governed by the requirements of this section; 
                        or
                          ``(vi) fraud protection, risk control, 
                        resolving customer disputes or inquiries, 
                        communicating with the person to whom the 
                        information relates, or reporting to consumer 
                        reporting agencies.
          ``(2) Effective date; sunset.--
                  ``(A) Effective date.--Except as provided in 
                subparagraph (B), paragraph (1) shall take effect on 
                February 1, 2000.
                  ``(B) Sunset.--Paragraph (1) shall not take effect 
                if, or shall cease to be effective on and after the 
                date on which, legislation is enacted that satisfies 
                the requirements in section 264(c)(1) of the Health 
                Insurance Portability and Accountability Act of 1996 
                (Public Law 104-191; 110 Stat. 2033).
          ``(3) Consultation.--While paragraph (1) is in effect, the 
        Board shall consult with the Secretary of Health and Human 
        Services in connection with the administration of such 
        paragraph.''.

SEC. 179. FINANCIAL INFORMATION PRIVACY.

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

          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

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

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

          ``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

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

``SEC. 1002. DEFINITIONS.

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

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

  ``(a) Prohibition on Obtaining Customer Information by False 
Pretenses.--It shall be a violation of this title for any person to 
obtain or attempt to obtain, or cause to be disclosed or attempt to 
cause to be disclosed to any person, customer information of a 
financial institution relating to another person--
          ``(1) by knowingly making a false, fictitious, or fraudulent 
        statement or representation to an officer, employee, or agent 
        of a financial institution with the intent to deceive the 
        officer, employee, or agent into relying on that statement or 
        representation for purposes of releasing the customer 
        information;
          ``(2) by knowingly making a false, fictitious, or fraudulent 
        statement or representation to a customer of a financial 
        institution with the intent to deceive the customer into 
        relying on that statement or representation for purposes of 
        releasing the customer information or authorizing the release 
        of such information; or
          ``(3) by knowingly providing any document to an officer, 
        employee, or agent of a financial institution, knowing that the 
        document is forged, counterfeit, lost, or stolen, was 
        fraudulently obtained, or contains a false, fictitious, or 
        fraudulent statement or representation, if the document is 
        provided with the intent to deceive the officer, employee, or 
        agent into relying on that document for purposes of releasing 
        the customer information.
  ``(b) Prohibition on Solicitation of a Person To Obtain Customer 
Information From a Financial Institution Under False Pretenses.--It 
shall be a violation of this title to request a person to obtain 
customer information of a financial institution, knowing or consciously 
avoiding knowing that the person will obtain, or attempt to obtain, the 
information from the institution in any manner described in subsection 
(a).
  ``(c) Non Applicability to Law Enforcement Agencies.--No provision of 
this section shall be construed so as to prevent any action by a law 
enforcement agency, or any officer, employee, or agent of such agency, 
to obtain customer information of a financial institution in connection 
with the performance of the official duties of the agency.
  ``(d) Non Applicability to Financial Institutions in Certain Cases.--
No provision of this section shall be construed to prevent any 
financial institution, or any officer, employee, or agent of a 
financial institution, from obtaining customer information of such 
financial institution in the course of--
          ``(1) testing the security procedures or systems of such 
        institution for maintaining the confidentiality of customer 
        information;
          ``(2) investigating allegations of misconduct or negligence 
        on the part of any officer, employee, or agent of the financial 
        institution; or
          ``(3) recovering customer information of the financial 
        institution which was obtained or received by another person in 
        any manner described in subsection (a) or (b).
  ``(e) Non Applicability to Certain Types of Customer Information of 
Financial Institutions.--No provision of this section shall be 
construed to prevent any person from obtaining customer information of 
a financial institution that otherwise is available as a public record 
filed pursuant to the securities laws (as defined in section 3(a)(47) 
of the Securities Exchange Act of 1934).
  ``(f) Non Applicability to Collection of Child Support Judgments.--No 
provision of this section shall be construed to prevent any State-
licensed private investigator, or any officer, employee, or agent of 
such private investigator, from obtaining customer information of a 
financial institution, to the extent reasonably necessary to collect 
child support from a person adjudged to have been delinquent in his or 
her obligations by a Federal or State court, and to the extent that 
such action by a State-licensed private investigator is not unlawful 
under any other Federal or State law or regulation.

``SEC. 1004. ADMINISTRATIVE ENFORCEMENT.

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

``SEC. 1005. CIVIL LIABILITY.

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

``SEC. 1006. CRIMINAL PENALTY.

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

``SEC. 1007. RELATION TO STATE LAWS.

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

``SEC. 1008. AGENCY GUIDANCE.

  ``In furtherance of the objectives of this title, each Federal 
banking agency (as defined in section 3(z) of the Federal Deposit 
Insurance Act) shall issue advisories to depository institutions under 
the jurisdiction of the agency, in order to assist such depository 
institutions in deterring and detecting activities proscribed under 
section 1003.''.
  (b) Report to Congress on Financial Privacy.--Not later than 18 
months after the date of enactment of this Act, the Comptroller General 
of the United States, in consultation with the Federal Trade 
Commission, the Federal banking agencies, and other appropriate Federal 
law enforcement agencies, shall submit to the Congress a report on--
          (1) the efficacy and adequacy of the remedies provided in the 
        amendments made by subsection (a) in addressing attempts to 
        obtain financial information by fraudulent means or by false 
        pretenses; and
          (2) any recommendations for additional legislative or 
        regulatory action to address threats to the privacy of 
        financial information created by attempts to obtain information 
        by fraudulent means or false pretenses.

SEC. 180. STUDY OF CURRENT FINANCIAL PRIVACY LAWS.

  (a) In General.--The Federal banking agencies shall conduct a study 
of whether existing laws which regulate the sharing of customer 
information by insured depository institutions with affiliates of such 
institutions adequately protect the privacy rights of customers of such 
institutions.
  (b) Report.--Before the end of the 6-month period beginning on the 
date of the enactment of this Act, the Federal banking agencies shall 
submit a report to the Congress containing the findings and conclusions 
of the agency with respect to the study required under subsection (a), 
together with such recommendations for legislative or administrative 
action as the agencies may determine to be appropriate.
  (c) Definitions.--For purposes of this section, the terms 
``affiliate'', ``Federal banking agency'', and ``insured depository 
institution'' have the meanings given to such terms in section 3 of the 
Federal Deposit Insurance Act.

                 Subtitle J--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 K--Deposit Insurance Funds

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

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

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

  (a) SAIF Special Reserves.--Section 11(a)(6) of the Federal Deposit 
Insurance Act (12 U.S.C. 1821(a)(6)) is amended by striking 
subparagraph (L).
  (b) IF Special Reserves.--Section 2704 of the Deposit Insurance Funds 
Act of 1996 (12 U.S.C. 1821 note) is amended--
          (1) by striking subsection (b); and
          (2) in subsection (d)--
                  (A) by striking paragraph (4);
                  (B) in paragraph (6)(C)(i), by striking ``(6) and 
                (7)'' and inserting ``(5), (6), and (7)''; and
                  (C) in paragraph (6)(C), by striking clause (ii) and 
                inserting the following:
                          ``(ii) by redesignating paragraph (8) as 
                        paragraph (5).''.

                  Subtitle L--Miscellaneous Provisions

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

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

SEC. 192. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF INTEREST

  (a) Study Required.--The Comptroller General of the United States 
shall conduct a study analyzing the conflict of interest faced by the 
Board of Governors of the Federal Reserve System between its role as a 
primary regulator of the banking industry and its role as a vendor of 
services to the banking and financial services industry.
  (b) Specific Conflict Required To Be Addressed.--In the course of the 
study required under subsection (a), the Comptroller General shall 
address the conflict of interest faced by the Board of Governors of the 
Federal Reserve System between the role of the Board as a regulator of 
the payment system, generally, and its participation in the payment 
system as a competitor with private entities who are providing payment 
services.
  (c) Report to Congress.--Before the end of the 1-year period 
beginning on the date of the enactment of this Act, the Comptroller 
General shall submit a report to the Congress containing the findings 
and conclusions of the Comptroller General in connection with the study 
required under this section, together with such recommendations for 
such legislative or administrative actions as the Comptroller General 
may determine to be appropriate, including recommendations for 
resolving any such conflict of interest.

SEC. 193. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.

  Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is 
amended by adding at the end the following new subsection:
  ``(t) Limitation on Claims.--
          ``(1) In general.--Notwithstanding any other provision of 
        law, no person shall have any claim against any Federal banking 
        agency, in any capacity, or against any conservator or receiver 
        appointed by any Federal banking agency (including the 
        Corporation as conservator or receiver), arising from or 
        relating to the transfer of money, assets, or other property to 
        a depository institution by a controlling stockholder or a 
        depository institution holding company, or any affiliate or 
        subsidiary of such depository institution holding company, if, 
        at the time of the transfer, the depository institution--
                  ``(A) is subject to a direction by a Federal banking 
                agency to increase its capital; or
                  ``(B) is undercapitalized, significantly 
                undercapitalized, or critically undercapitalized as 
                defined in section 38.
          ``(2) Exception.--No provision of this subsection shall be 
        construed as limiting the right of a depository institution, a 
        controlling stockholder, or a depository institution holding 
        company to seek direct review of an order or directive issued 
        by a Federal banking agency in accordance with the procedures 
        provided by this Act, the National Bank Receivership Act, the 
        Bank Conservation Act, or the Home Owner's Loan Act.''.

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

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

SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE 
                    REQUIREMENTS TO ONLINE BANKING AND LENDING.

  (a) Study Required.--The Federal banking agencies shall conduct a 
study of banking regulations regarding the delivery of financial 
services, including those regulations that may assume that there will 
be person-to-person contact during the course of a financial services 
transaction, and report their recommendations on adapting those 
existing requirements to online banking and lending.
  (b) Report Required.--Within 1 year of the date of the enactment of 
this Act, the Federal banking agencies shall submit a report to the 
Congress on the findings and conclusions of the agencies with respect 
to the study required under subsection (a), together with such 
recommendations for legislative or regulatory action as the agencies 
may determine to be appropriate.
  (c) Definition.--For purposes of this section, the term ``Federal 
banking agencies'' means each Federal banking agency (as defined in 
section 3(z) of the Federal Deposit Insurance Act).

                  Subtitle M--Effective Date of Title

SEC. 196. 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 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 for 
                                such transactions on the basis of an 
                                administration or annual fee (payable 
                                on a monthly, quarterly, or other 
                                basis), a percentage of assets under 
                                management, or a flat or capped per 
                                order processing fee equal to not more 
                                than the cost incurred by the bank in 
                                connection with executing securities 
                                transactions for trustee and fiduciary 
                                customers, or any combination of such 
                                fees, consistent with fiduciary 
                                principles and standards; 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.
                          ``(iii) Permissible securities 
                        transactions.--The bank effects transactions 
                        in--
                                  ``(I) commercial paper, bankers 
                                acceptances, or commercial bills;
                                  ``(II) exempted securities;
                                  ``(III) qualified Canadian government 
                                obligations as defined in section 5136 
                                of the Revised Statutes, in conformity 
                                with section 15C of this title and the 
                                rules and regulations thereunder, or 
                                obligations of the North American 
                                Development Bank; or
                                  ``(IV) any standardized, credit 
                                enhanced debt security issued by a 
                                foreign government pursuant to the 
                                March 1989 plan of then Secretary of 
                                the Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank loans.
                          ``(iv) Certain stock purchase plans.--
                                  ``(I) Employee benefit plans.--The 
                                bank effects transactions, as 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 primarily of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                  ``(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 primarily of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                  ``(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 primarily of 
                                        administration fees, or flat or 
                                        capped per order processing 
                                        fees, or both.
                                  ``(IV) Permissible delivery of 
                                materials.--The exception to being 
                                considered a broker for a bank engaged 
                                in activities described in subclauses 
                                (I), (II), and (III) will not be 
                                affected by a bank's delivery of 
                                written or electronic plan materials to 
                                employees of the issuer, shareholders 
                                of the issuer, or members of affinity 
                                groups of the issuer, so long as such 
                                materials are--
                                          ``(aa) comparable in scope or 
                                        nature to that permitted by the 
                                        Commission as of the date of 
                                        the enactment of the Financial 
                                        Services Act of 1999; or
                                          ``(bb) otherwise permitted by 
                                        the Commission.
                          ``(v) Sweep accounts.--The bank effects 
                        transactions as part of a program for the 
                        investment or reinvestment of 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 the date 
                                that is 1 year after the date of 
                                enactment of the Financial Services Act 
                                of 1999, is not affiliated with a 
                                broker or dealer that has been 
                                registered for more than 1 year in 
                                accordance with this Act, and engages 
                                in dealing, market making, or 
                                underwriting activities, other than 
                                with respect to exempted securities; 
                                and
                                  ``(III) effects transactions 
                                exclusively with qualified investors.
                          ``(viii) Safekeeping and custody 
                        activities.--
                                  ``(I) In general.--The bank, as part 
                                of customary banking activities--
                                          ``(aa) provides safekeeping 
                                        or custody services with 
                                        respect to securities, 
                                        including the exercise of 
                                        warrants and other rights on 
                                        behalf of customers;
                                          ``(bb) facilitates the 
                                        transfer of funds or 
                                        securities, as a custodian or a 
                                        clearing agency, in connection 
                                        with the clearance and 
                                        settlement of its customers' 
                                        transactions in securities;
                                          ``(cc) effects securities 
                                        lending or borrowing 
                                        transactions with or on behalf 
                                        of customers as part of 
                                        services provided to customers 
                                        pursuant to division (aa) or 
                                        (bb) or invests cash collateral 
                                        pledged in connection with such 
                                        transactions; or
                                          ``(dd) holds securities 
                                        pledged by a customer to 
                                        another person or securities 
                                        subject to purchase or resale 
                                        agreements involving a customer, 
                                        or facilitates the pledging or 
                                        transfer of such securities by book 
                                        entry or as otherwise provided under 
                                        applicable law.
                                  ``(II) Exception for carrying broker 
                                activities.--The exception to being 
                                considered a broker for a bank engaged 
                                in activities described in subclause 
                                (I) shall not apply if the bank, in 
                                connection with such activities, acts 
                                in the United States as a carrying 
                                broker (as such term, and different 
                                formulations thereof, are used in 
                                section 15(c)(3) and the rules and 
                                regulations thereunder) for any broker 
                                or dealer, unless such carrying broker 
                                activities are engaged in with respect 
                                to government securities (as defined in 
                                paragraph (42) of this subsection).
                          ``(ix) Banking products.--The bank effects 
                        transactions in traditional banking products, 
                        as defined in section 205(a) of the Financial 
                        Services Act of 1999.
                          ``(x) De minimis exception.--The bank 
                        effects, other than in transactions referred to 
                        in clauses (i) through (ix), not more than 500 
                        transactions in securities in any calendar 
                        year, and such transactions are not effected by 
                        an employee of the bank who is also an employee 
                        of a broker or dealer.
                  ``(C) Broker dealer execution.--The exception to 
                being considered a broker for a bank engaged in 
                activities described in clauses (ii), (iv), and (viii) 
                of subparagraph (B) shall not apply if the activities 
                described in such provisions result in the trade in the 
                United States of any security that is a publicly traded 
                security in the United States, unless--
                          ``(i) the bank directs such trade to a 
                        registered broker or dealer for execution;
                          ``(ii) the trade is a cross trade or other 
                        substantially similar trade of a security 
                        that--
                                  ``(I) is made by the bank or between 
                                the bank and an affiliated fiduciary; 
                                and
                                  ``(II) is not in contravention of 
                                fiduciary principles established under 
                                applicable Federal or State law; or
                          ``(iii) the trade is conducted in some other 
                        manner permitted under rules, regulations, or 
                        orders as the Commission may prescribe or 
                        issue.
                  ``(D) No effect of bank exemptions on other 
                commission authority.--The exception to being 
                considered a broker for a bank engaged in activities 
                described in subparagraphs (B) and (C) shall not affect 
                the authority of the Commission under any other 
                provision of this 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 1999, 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 205(a) of the Financial Services Act 
                        of 1999.''.

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. INFORMATION SHARING.

  Section 18 of the Federal Deposit Insurance Act is amended by adding 
at the end the following new subsection:
  ``(u) Recordkeeping Requirements.--
          ``(1) Requirements.--Each appropriate Federal banking agency, 
        after consultation with and consideration of the views of the 
        Commission, shall establish recordkeeping requirements for 
        banks relying on exceptions contained in paragraphs (4) and (5) 
        of section 3(a) of the Securities Exchange Act of 1934. Such 
        recordkeeping requirements shall be sufficient to demonstrate 
        compliance with the terms of such exceptions and be designed to 
        facilitate compliance with such exceptions. Each appropriate 
        Federal banking agency shall make any such information 
        available to the Commission upon request.
          ``(2) Definitions.--As used in this subsection the term 
        `Commission' means the Securities and Exchange Commission.''.

SEC. 205. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

  (a) Definition of Traditional Banking Product.--For purposes of 
paragraphs (4) and (5) of section 3(a) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78c(a) (4), (5)), the term ``traditional banking 
product'' means--
          (1) a deposit account, savings account, certificate of 
        deposit, or other deposit instrument issued by a bank;
          (2) a banker's acceptance;
          (3) a letter of credit issued or loan made by a bank;
          (4) a debit account at a bank arising from a credit card or 
        similar arrangement;
          (5) a participation in a loan which the bank or an affiliate 
        of the bank (other than a broker or dealer) funds, participates 
        in, or owns that is sold--
                  (A) to qualified investors; or
                  (B) to other persons that--
                          (i) have the opportunity to review and assess 
                        any material information, including information 
                        regarding the borrower's creditworthiness; and
                          (ii) based on such factors as financial 
                        sophistication, net worth, and knowledge and 
                        experience in financial matters, have the 
                        capability to evaluate the information 
                        available, as determined under generally 
                        applicable banking standards or guidelines; and
          (6) any swap agreement (as defined in section 11(e)(8)(D)(vi) 
        of the Federal Deposit Insurance Act) including credit and 
        equity swaps, unless the appropriate Federal banking agency 
        determines that credit and equity swaps shall not be included 
        within the definition of such term for purposes of paragraphs 
        (4) and (5) of section 3(a) of the Securities Exchange Act of 
        1934, except that the appropriate Federal banking agency shall 
        presume, absent a finding to the contrary, that equity swaps 
        shall not be sold to any person other than a qualified investor 
        (as defined in section 3(a)(54) of the Securities Act of 1934).
  (b) Amendment to the Securities Exchange Act of 1934.--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) Transactions Involving Hybrid Products.--
          ``(1) Commission authority.--
                  ``(A) In general.--The Commission may, after 
                consultation with the Board, determine, by regulation 
                published in the Federal Register, that a bank that 
                effects transactions in, or buys or sells, a new 
                product should be subject to the registration 
                requirements of this section.
                  ``(B) Limitation.--The Commission may not impose the 
                registration requirements of this section on any bank 
                that effects transactions in, or buys or sells, a 
                product under this subsection unless the Commission 
                determines in the regulations described in subparagraph 
                (A) that--
                          ``(i) the subject product is a new product;
                          ``(ii) the subject product is a security; and
                          ``(iii) imposing the registration 
                        requirements of this section is necessary or 
                        appropriate in the public interest and for the 
                        protection of investors.
          ``(2) Objection to commission regulation.--
                  ``(A) Filing of petition for review.--The Board, or 
                any aggrieved party, may obtain review of any final 
                regulation described in paragraph (1) in the United 
                States Court of Appeals for the District of Columbia 
                Circuit by filing in such court, not later than 60 days 
                after the date of publication of the final regulation, 
                a written petition requesting that the regulation be 
                set aside.
                  ``(B) Transmittal of petition and record.--A copy of 
                a petition described in subparagraph (A) shall be 
                transmitted as soon as possible by the Clerk of the 
                Court to an officer or employee of the Commission 
                designated for that purpose. Upon receipt of the 
                petition, the Commission shall file with the court the 
                regulation under review and any documents referred to 
                therein, and any other relevant materials prescribed by 
                the court.
                  ``(C) Exclusive jurisdiction.--On the date of the 
                filing of the petition under subparagraph (A), the 
                court has jurisdiction, which becomes exclusive on the 
                filing of the materials set forth in subparagraph (B), 
                to affirm and enforce or to set aside the regulation at 
                issue.
                  ``(D) Standard of review.--
                          ``(i) In general.--The court shall determine 
                        to affirm and enforce or set aside a regulation 
                        of the Commission under this subsection, based 
                        on the determination of the court as to whether 
                        the subject product--
                                  ``(I) is a new product, as defined in 
                                this subsection;
                                  ``(II) is a security; and
                                  ``(III) would be more appropriately 
                                regulated under the Federal securities 
                                laws or the Federal banking laws, 
                                giving equal deference to the views of 
                                the Commission and the Board.
                          ``(ii) Considerations.--In making a 
                        determination under clause (i)(III), the court 
                        shall consider--
                                  ``(I) the nature of the subject new 
                                product;
                                  ``(II) the history, purpose, extent, 
                                and appropriateness of the regulation 
                                of the new product under the Federal 
                                securities laws; and
                                  ``(III) the history, purpose, extent, 
                                and appropriateness of the regulation 
                                of the new product under the Federal 
                                banking laws.
                  ``(E) Judicial stay.--The filing of a petition by the 
                Board or an aggrieved party pursuant to subparagraph 
                (A) shall operate as a judicial stay, until the date on 
                which the court makes a final determination under this 
                paragraph, of--
                          ``(i) any Commission requirement that a bank 
                        register as a broker or dealer under this 
                        section, because the bank engages in any 
                        transaction in, or buys or sells, the new 
                        product that is the subject of the petition; 
                        and
                          ``(ii) any Commission action against a bank 
                        for a failure to comply with a requirement 
                        described in clause (i).
          ``(3) Definitions.--For purposes of this subsection--
                  ``(A) the term `Board' means the Board of Governors 
                of the Federal Reserve System; and
                  ``(B) the term `new product' means a product or 
                instrument offered or provided by a bank that--
                          ``(i) was not subject to regulation by the 
                        Commission as a security under this Act before 
                        the date of enactment of this subsection; and
                          ``(ii) is not a traditional banking product, 
                        as defined in paragraphs (1) through (6) of 
                        section 205(a) of the Financial Services Act of 
                        1999.''.
  (c) Classification Limited.--Classification of a particular product 
or instrument as a traditional banking product pursuant to this section 
or the amendments made by this section shall not be construed as 
finding or implying that such product or instrument is or is not a 
security for any purpose under the securities laws, or is or is not an 
account, agreement, contract, or transaction for any purpose under the 
Commodity Exchange Act.
  (d) No Limitation on Other Authority To Challenge.--Nothing in this 
section or the amendments made by this section shall affect the right 
or authority of the Board of Governors of the Federal Reserve System, 
any appropriate Federal banking agency, or any interested party under 
any other provision of law to object to or seek judicial review as to 
whether a product or instrument is or is not appropriately classified 
as a traditional banking product under paragraphs (1) through (6) of 
section 205(a).
  (e) Incorporated Definitions.--For purposes of this section--
          (1) the term ``appropriate Federal banking agency'' has the 
        same meaning as in section 3 of the Federal Deposit Insurance 
        Act;
          (2) the term ``bank'' has the same meaning as in section 
        3(a)(6) of the Securities Exchange Act of 1934;
          (3) the term ``Board'' means the Board of Governors of the 
        Federal Reserve System;
          (4) the term ``government securities'' has the same meaning 
        as in section 3(a)(42) of the Securities Exchange Act of 1934, 
        and, for purposes of this subsection, commercial paper, bankers 
        acceptances, and commercial bills shall be treated in the same 
        manner as government securities; and
          (5) the term ``qualified investor'' has the same meaning as 
        in section 3(a)(54) of the Securities Exchange Act of 1934, as 
        amended by this Act.

SEC. 206. QUALIFIED INVESTOR DEFINED.

  Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)) is amended by adding at the end the following new paragraph:
          ``(54) Qualified investor.--
                  ``(A) Definition.--For purposes of this title, the 
                term `qualified investor' means--
                          ``(i) any investment company registered with 
                        the Commission under section 8 of the 
                        Investment Company Act of 1940;
                          ``(ii) any issuer eligible for an exclusion 
                        from the definition of investment company 
                        pursuant to section 3(c)(7) of the Investment 
                        Company Act of 1940;
                          ``(iii) any bank (as defined in paragraph (6) 
                        of this subsection), savings association (as 
                        defined in section 3(b) of the Federal Deposit 
                        Insurance Act), broker, dealer, insurance 
                        company (as defined in section 2(a)(13) of the 
                        Securities Act of 1933), or business 
                        development company (as defined in section 
                        2(a)(48) of the Investment Company Act of 1940);
                          ``(iv) any small business investment company 
                        licensed by the United States Small Business 
                        Administration under section 301 (c) or (d) of 
                        the Small Business Investment Act of 1958;
                          ``(v) any State sponsored employee benefit 
                        plan, or any other employee benefit plan, 
                        within the meaning of the Employee Retirement 
                        Income Security Act of 1974, other than an 
                        individual retirement account, if the 
                        investment decisions are made by a plan 
                        fiduciary, as defined in section 3(21) of that 
                        Act, which is either a bank, savings and loan 
                        association, insurance company, or registered 
                        investment adviser;
                          ``(vi) any trust whose purchases of 
                        securities are directed by a person described 
                        in clauses (i) through (v) of this 
                        subparagraph;
                          ``(vii) any market intermediary exempt under 
                        section 3(c)(2) of the Investment Company Act 
                        of 1940;
                          ``(viii) any associated person of a broker or 
                        dealer other than a natural person;
                          ``(ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International Banking 
                        Act of 1978);
                          ``(x) the government of any foreign country;
                          ``(xi) any corporation, company, or 
                        partnership that owns and invests on a 
                        discretionary basis, not less than $10,000,000 
                        in investments;
                          ``(xii) any natural person who owns and 
                        invests on a discretionary basis, not less than 
                        $10,000,000 in investments;
                          ``(xiii) any government or political 
                        subdivision, agency, or instrumentality of a 
                        government who owns and invests on a 
                        discretionary basis not less than $50,000,000 
                        in investments; or
                          ``(xiv) any multinational or supranational 
                        entity or any agency or instrumentality 
                        thereof.
                  ``(B) Additional authority.--The Commission may, by 
                rule or order, define a `qualified investor' as any 
                other person, taking into consideration such factors as 
                the financial sophistication of the person, net worth, 
                and knowledge and experience in financial matters.''.

SEC. 207. GOVERNMENT SECURITIES DEFINED.

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

SEC. 208. EFFECTIVE DATE.

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

SEC. 209. 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.).

             Subtitle B--Bank Investment Company Activities

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

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

SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

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

SEC. 213. INDEPENDENT DIRECTORS.

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

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

  Section 35(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
34(a)) is amended to read as follows:
  ``(a) Misrepresentation of Guarantees.--
          ``(1) In general.--It shall be unlawful for any person, 
        issuing or selling any security of which a registered 
        investment company is the issuer, to represent or imply in any 
        manner whatsoever that such security or company--
                  ``(A) has been guaranteed, sponsored, recommended, or 
                approved by the United States, or any agency, 
                instrumentality or officer of the United States;
                  ``(B) has been insured by the Federal Deposit 
                Insurance Corporation; or
                  ``(C) is guaranteed by or is otherwise an obligation 
                of any bank or insured depository institution.
          ``(2) Disclosures.--Any person issuing or selling the 
        securities of a registered investment company that is advised 
        by, or sold through, a bank shall prominently disclose that an 
        investment in the company is not insured by the Federal Deposit 
        Insurance Corporation or any other government agency. The 
        Commission may adopt rules and regulations, and issue orders, 
        consistent with the protection of investors, prescribing the 
        manner in which the disclosure under this paragraph shall be 
        provided.
          ``(3) Definitions.--The terms `insured depository 
        institution' and `appropriate Federal banking agency' have the 
        same meanings as 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 section 3 
        of the Securities Exchange Act of 1934, except that such term 
        does not include any personsolely 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 section 3 
        of 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 section 3 
        of the Securities Exchange Act of 1934.''.

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

  Section 202(a)(7) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(7)) is amended to read as follows:
          ``(7) The term `dealer' has the same meaning as in section 3 
        of the Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 220. INTERAGENCY CONSULTATION.

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

``SEC. 210A. CONSULTATION.

  ``(a) Examination Results and Other Information.--
          ``(1) The appropriate Federal banking agency shall provide 
        the Commission upon request the results of any examination, 
        reports, records, or other information to which such agency may 
        have access with respect to the investment advisory 
        activities--
                  ``(A) of any--
                          ``(i) bank holding company;
                          ``(ii) bank; or
                          ``(iii) separately identifiable department or 
                        division of a bank, that is registered under 
                        section 203 of this title; and
                  ``(B) in the case of a bank holding company or bank 
                that has a subsidiary or a separately identifiable 
                department or division registered under that section, 
                of such bank or bank holding company.
          ``(2) The Commission shall provide to the appropriate Federal 
        banking agency upon request the results of any examination, 
        reports, records, or other information with respect to the 
        investment advisory activities of any bank holding company, 
        bank, or separately identifiable department or division of a 
        bank, 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' has the same meaning as in section 
3 of the Federal Deposit Insurance Act.''.

SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

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

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

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

SEC. 223. CONFORMING CHANGE IN DEFINITION.

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

SEC. 224. CONFORMING AMENDMENT.

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

SEC. 225. EFFECTIVE DATE.

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

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

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

  (a) Amendment.--Section 17 of the Securities Exchange Act of 1934 (15 
U.S.C. 78q) is amended--
          (1) by redesignating subsection (i) as subsection (k); 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 an insured bank (other 
                        than an institution described in subparagraph 
                        (D), (F), or (G) of section 2(c)(2), or held 
                        under section 4(f), of the Bank Holding Company 
                        Act of 1956) or a savings association;
                          ``(ii) a foreign bank, foreign company, or 
                        company that is described in section 8(a) of 
                        the International Banking Act of 1978; or
                          ``(iii) a foreign bank that controls, 
                        directly or indirectly, a corporation chartered 
                        under section 25A of the Federal Reserve Act,
                may elect to become supervised by filing with the 
                Commission a notice of intention to become supervised, 
                pursuant to subparagraph (B) of this paragraph. Any 
                investment bank holding company filing such a notice 
                shall be supervised in accordance with this section and 
                comply with the rules promulgated by the Commission 
                applicable to supervised investment bank holding 
                companies.
                  ``(B) Notification of status as a supervised 
                investment bank holding company.--An investment bank 
                holding company that elects under subparagraph (A) to 
                become supervised by the Commission shall file with the 
                Commission a written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents concerning 
                such investment bank holding company as the Commission, 
                by rule, may prescribe as necessary or appropriate in 
                furtherance of the purposes of this section. Unless the 
                Commission finds that such supervision is not necessary 
                or appropriate in furtherance of the purposes of this 
                section, such supervision shall become effective 45 
                days after the date of receipt of such written notice 
                by the Commission, or within such shorter time period 
                as the Commission, by rule or order, may determine.
          ``(2) Election not to be supervised by the commission as an 
        investment bank holding company.--
                  ``(A) Voluntary withdrawal.--A supervised investment 
                bank holding company that is supervised pursuant to 
                paragraph (1) may, upon such terms and conditions as 
                the Commission deems necessary or appropriate, elect 
                not to be supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become effective 
                until 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 provided promptly at any time upon 
                        request by the Commission. Such records and 
                        reports may include--
                                  ``(I) a balance sheet and income 
                                statement;
                                  ``(II) an assessment of the 
                                consolidated capital of the supervised 
                                investment bank holding company;
                                  ``(III) an independent auditor's 
                                report attesting to the supervised 
                                investment bank holding company's 
                                compliance with its internal risk 
                                management and internal control 
                                objectives; and
                                  ``(IV) reports concerning the extent 
                                to which the company or affiliate has 
                                complied with the provisions of this 
                                title and any regulations prescribed 
                                and orders issued under this title.
                  ``(B) Use of existing reports.--
                          ``(i) In general.--The Commission shall, to 
                        the fullest extent possible, accept reports in 
                        fulfillment of the requirements under this 
                        paragraph that the supervised investment bank 
                        holding company or its affiliates have been 
                        required to provide to another appropriate 
                        regulatory agency or self-regulatory 
                        organization.
                          ``(ii) Availability.--A supervised investment 
                        bank holding company or an affiliate of such 
                        company shall provide to the Commission, at the 
                        request of the Commission, any report referred 
                        to in clause (i).
                  ``(C) Examination authority.--
                          ``(i) Focus of examination authority.--The 
                        Commission may make examinations of any 
                        supervised investment bank holding company and 
                        any affiliate of such company in order to--
                                  ``(I) inform the Commission 
                                regarding--
                                          ``(aa) the nature of the 
                                        operations and financial 
                                        condition of the supervised 
                                        investment bank holding company 
                                        and its affiliates;
                                          ``(bb) the financial and 
                                        operational risks within the 
                                        supervised investment bank 
                                        holding company that may affect 
                                        any broker or dealer controlled 
                                        by such supervised investment 
                                        bank holding company; and
                                          ``(cc) the systems of the 
                                        supervised investment bank 
                                        holding company and its 
                                        affiliates for monitoring and 
                                        controlling those risks; and
                                  ``(II) monitor compliance with the 
                                provisions of this subsection, 
                                provisions governing transactions and 
                                relationships between any broker or 
                                dealer affiliated with the supervised 
                                investment bank holding company and any 
                                of the company's other affiliates, and 
                                applicable provisions of subchapter II 
                                of chapter 53, title 31, United States 
                                Code (commonly referred to as the `Bank 
                                Secrecy Act') and regulations 
                                thereunder.
                          ``(ii) Restricted focus of examinations.--The 
                        Commission shall limit the focus and scope of 
                        any examination of a supervised investment bank 
                        holding company to--
                                  ``(I) the company; and
                                  ``(II) any affiliate of the company 
                                that, because of its size, condition, 
                                or activities, the nature or size of 
                                the transactions between such affiliate 
                                and any affiliated broker or dealer, or 
                                the centralization of functions within 
                                the holding company system, could, in 
                                the discretion of the Commission, have 
                                a materially adverse effect on the 
                                operational or financial condition of 
                                the broker or dealer.
                          ``(iii) Deference to other examinations.--For 
                        purposes of this subparagraph, the Commission 
                        shall, to the fullest extent possible, use the 
                        reports of examination of an institution 
                        described in subparagraph (D), (F), or (G) of 
                        section 2(c)(2), or held under section 4(f), of 
                        the Bank Holding Company Act of 1956 made by 
                        the appropriate regulatory agency, or of a 
                        licensed insurance company made by the 
                        appropriate State insurance regulator.
          ``(4) Holding company capital.--
                  ``(A) Authority.--If the Commission finds that it is 
                necessary to adequately supervise investment bank 
                holding companies and their broker or dealer affiliates 
                consistent with the purposes of this subsection, the 
                Commission may adopt capital adequacy rules for 
                supervised investment bank holding companies.
                  ``(B) Method of calculation.--In developing rules 
                under this paragraph:
                          ``(i) Double leverage.--The Commission shall 
                        consider the use by the supervised investment 
                        bank holding company of debt and other 
                        liabilities to fund capital investments in 
                        affiliates.
                          ``(ii) No unweighted capital ratio.--The 
                        Commission shall not impose under this section 
                        a capital ratio that is not based on 
                        appropriate risk-weighting considerations.
                          ``(iii) No capital requirement on regulated 
                        entities.--The Commission shall not, by rule, 
                        regulation, guideline, order or otherwise, 
                        impose any capital adequacy provision on a 
                        nonbanking affiliate (other than a broker or 
                        dealer) that is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority or State insurance 
                        authority.
                          ``(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 and 
        subsection (j)--
                  ``(A) the term `investment bank holding company' 
                means--
                          ``(i) any person other than a natural person 
                        that owns or controls one or more brokers or 
                        dealers; and
                          ``(ii) the associated persons of the 
                        investment bank holding company;
                  ``(B) the term `supervised investment bank holding 
                company' means any investment bank holding company that 
                is supervised by the Commission pursuant to this 
                subsection;
                  ``(C) the terms `affiliate', `bank', `bank holding 
                company', `company', `control', and `savings 
                association' have the same meanings as in section 2 of 
                the Bank Holding Company Act of 1956;
                  ``(D) the term `insured bank' has the same meaning as 
                in section 3 of the Federal Deposit Insurance Act;
                  ``(E) the term `foreign bank' has the same meaning as 
                in section 1(b)(7) of the International Banking Act of 
                1978; and
                  ``(F) the terms `person associated with an investment 
                bank holding company' and `associated person of an 
                investment bank holding company' mean any person 
                directly or indirectly controlling, controlled by, or 
                under common control with, an investment bank holding 
                company.
  ``(j) Authority To Limit Disclosure of Information.--Notwithstanding 
any other provision of law, the Commission shall not be compelled to 
disclose any information required to be reported under subsection (h) 
or (i) or any information supplied to the Commission by any domestic or 
foreign regulatory agency that relates to the financial or operational 
condition of any associated person of a broker or dealer, investment 
bank holding company, or any affiliate of an investment bank holding 
company. Nothing in this subsection shall authorize the Commission to 
withhold information from Congress, or prevent the Commission from 
complying with a request for information from any other Federal 
department or agency or any self-regulatory organization requesting the 
information for purposes within the scope of its jurisdiction, or 
complying with an order of a court of the United States in an action 
brought by the United States or the Commission. For purposes of section 
552 of title 5, United States Code, this subsection shall be considered 
a statute described in subsection (b)(3)(B) of such section 552. In 
prescribing regulations to carry out the requirements of this 
subsection, the Commission shall designate information described in or 
obtained pursuant to subparagraphs (A), (B), and (C) of subsection 
(i)(5) as confidential information for purposes of section 24(b)(2) of 
this title.''.
  (b) Conforming Amendments.--
          (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
        following new subparagraph:
                  ``(H) When used with respect to an institution 
                described in subparagraph (D), (F), or (G) of section 
                2(c)(2), or held under section 4(f), of the Bank 
                Holding Company Act of 1956--
                          ``(i) the Comptroller of the Currency, in the 
                        case of a national bank or a bank in the 
                        District of Columbia examined by the 
                        Comptroller of the Currency;
                          ``(ii) the Board of Governors of the Federal 
                        Reserve System, in the case of a State member 
                        bank of the Federal Reserve System or any 
                        corporation chartered under section 25A of the 
                        Federal Reserve Act;
                          ``(iii) the Federal Deposit Insurance 
                        Corporation, in the case of any other bank the 
                        deposits of which are insured in accordance 
                        with the Federal Deposit Insurance Act; or
                          ``(iv) the Commission in the case of all 
                        other such institutions.''.
          (2) Section 1112(e) of the Right to Financial Privacy Act of 
        1978 (12 U.S.C. 3412(e)) is amended--
                  (A) by striking ``this title'' and inserting ``law''; 
                and
                  (B) by inserting ``, examination reports'' after 
                ``financial records''.

                          Subtitle D--Studies

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

  Not later than 1 year after the date of enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress 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.

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

  Not later than 1 year after the date of enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress regarding the impact of regulations limiting any commissions, 
fees, markups, or other costs incurred by customers in the acquisition 
of financial products.

                          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.

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.

SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

  (a) In General.--Except as provided in section 305, a national bank 
and the subsidiaries of a national bank may not provide insurance in a 
State as principal except that this prohibition shall not apply to 
authorized products.
  (b) Authorized Products.--For the purposes of this section, a product 
is authorized if--
          (1) as of January 1, 1999, the Comptroller of the Currency 
        had determined in writing that national banks may provide such 
        product as principal, or national banks were in fact lawfully 
        providing such product as principal;
          (2) no court of relevant jurisdiction had, by final judgment, 
        overturned a determination of the Comptroller of the Currency 
        that national banks may provide such product as principal; and
          (3) the product is not title insurance, or an annuity 
        contract the income of which is subject to tax treatment under 
        section 72 of the Internal Revenue Code of 1986.
  (c) Definition.--For purposes of this section, the term ``insurance'' 
means--
          (1) any product regulated as insurance as of January 1, 1999, 
        in accordance with the relevant State insurance law, in the 
        State in which the product is provided;
          (2) any product first offered after January 1, 1999, which--
                  (A) a State insurance regulator determines shall be 
                regulated as insurance in the State in which the 
                product is provided because the product insures, 
                guarantees, or indemnifies against liability, loss of 
                life, loss of health, or loss through damage to or 
                destruction of property, including, but notlimited to, 
                surety bonds, life insurance, health insurance, title 
                insurance, and property and casualty insurance (such as 
                private passenger or commercial automobile, homeowners, 
                mortgage, commercial multiperil, general liability, 
                professional liability, workers' compensation, fire 
                and allied lines, farm owners multiperil, aircraft, 
                fidelity, surety, medical malpractice, ocean marine, 
                inland marine, and boiler and machinery insurance); and
                  (B) is not a product or service of a bank that is--
                          (i) a deposit product;
                          (ii) a loan, discount, letter of credit, or 
                        other extension of credit;
                          (iii) a trust or other fiduciary service;
                          (iv) a qualified financial contract (as 
                        defined in or determined pursuant to section 
                        11(e)(8)(D)(i) of the Federal Deposit Insurance 
                        Act); or
                          (v) a financial guaranty, except that this 
                        subparagraph (B) shall not apply to a product 
                        that includes an insurance component such that 
                        if the product is offered or proposed to be 
                        offered by the bank as principal--
                                  (I) it would be treated as a life 
                                insurance contract under section 7702 
                                of the Internal Revenue Code of 1986; 
                                or
                                  (II) in the event that the product is 
                                not a letter of credit or other similar 
                                extension of credit, a qualified 
                                financial contract, or a financial 
                                guaranty, it would qualify for 
                                treatment for losses incurred with 
                                respect to such product under section 
                                832(b)(5) of the Internal Revenue Code 
                                of 1986, if the bank were subject to 
                                tax as an insurance company under 
                                section 831 of that Code; or
          (3) any annuity contract, the income on which is subject to 
        tax treatment under section 72 of the Internal Revenue Code of 
        1986.

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

  (a) Authority.--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 of title 
insurance, other than title insurance underwriting activities in which 
such national bank or subsidiary was actively and lawfully engaged 
before the date of the enactment of this Act.
  (b) 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 of title 
insurance pursuant to subsection (a).
  (c) 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 
of title insurance pursuant to subsection (a).
  (d) Limitation on Other Title Insurance Activities.--Notwithstanding 
any other provision of law, no national bank may engage, directly or 
indirectly, in any activity involving the sale of title insurance, 
other than title insurance sales activities in which such national bank 
was actively and lawfully engaged, directly or through a subsidiary, as 
of the date of the enactment of this Act.
  (e) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes of this 
section, the terms ``affiliate'' and ``subsidiary'' have the same 
meanings as in section 2 of the Bank Holding Company Act of 1956.
  (f) Rule of Construction.--No provision of this Act or any other 
Federal law shall be construed as superseding or affecting a State law 
which was in effect before the date of the enactment of this Act and 
which prohibits title insurance from being offered, provided, or sold 
in such State, or from being underwritten with respect to real property 
in such State, by any person whatsoever.

SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FEDERAL 
                    REGULATORS.

  (a) Filing in Court of Appeals.--In the case of a regulatory conflict 
between a State insurance regulator and a Federal regulator as to 
whether any product is or is not insurance, as defined in section 
304(c) of this Act, or whether a State statute, regulation, order, or 
interpretation regarding any insurance sales or solicitation activity 
is properly treated as preempted under Federal law, either regulator 
may seek expedited judicial review of such determination by the United 
States Court of Appeals for the circuit in which the State is located 
or in the United States Court of Appeals for the District of Columbia 
Circuit by filing a petition for review in such court.
  (b) Expedited Review.--The United States Court of Appeals in which a 
petition for review is filed in accordance with subsection (a) shall 
complete all action on such petition, including rendering a judgment, 
before the end of the 60-day periodbeginning on the date on which such 
petition is filed, unless all parties to such proceeding agree to any 
extension of such period.
  (c) Supreme Court Review.--Any request for certiorari to the Supreme 
Court of the United States of any judgment of a United States Court of 
Appeals with respect to a petition for review under this section shall 
be filed with the Supreme Court of the United States as soon as 
practicable after such judgment is issued.
  (d) Statute of Limitation.--No action may be filed under this section 
challenging an order, ruling, determination, or other action of a 
Federal regulator or State insurance regulator after the later of--
          (1) the end of the 12-month period beginning on the date on 
        which the first public notice is made of such order, ruling, 
        determination or other action in its final form; or
          (2) the end of the 6-month period beginning on the date on 
        which such order, ruling, determination, or other action takes 
        effect.
  (e) Standard of Review.--The court shall decide an action filed under 
this section based on its review on the merits of all questions 
presented under State and Federal law, including the nature of the 
product or activity and the history and purpose of its regulation under 
State and Federal law, without unequal deference.

SEC. 307. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE 
                    COMPANIES AND AFFILIATES.

  Except as provided in section 104(a)(2), no State may, by law, 
regulation, order, interpretation, or otherwise--
          (1) prevent or significantly interfere with the ability of 
        any insurer, or any affiliate of an insurer (whether such 
        affiliate is organized as a stock company, mutual holding 
        company, or otherwise), to become a financial holding company 
        or to acquire control of an insured depository institution;
          (2) limit the amount of an insurer's assets that may be 
        invested in the voting securities of an insured depository 
        institution (or any company which controls such institution), 
        except that the laws of an insurer's State of domicile may 
        limit the amount of such investment to an amount that is not 
        less than 5 percent of the insurer's admitted assets; or
          (3) prevent, significantly interfere with, or have the 
        authority to review, approve, or disapprove a plan of 
        reorganization by which an insurer proposes to reorganize from 
        mutual form to become a stock insurer (whether as a direct or 
        indirect subsidiary of a mutual holding company or otherwise) 
        unless such State is the State of domicile of the insurer.

   Subtitle B--National Association of Registered Agents and Brokers

SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.

   (a) In General.--The provisions of this subtitle shall take effect 
unless, not later than 3 years after the date of enactment of this Act, 
at least a majority of the States--
          (1) have enacted uniform laws and regulations governing the 
        licensure of individuals and entities authorized to sell and 
        solicit the purchase of insurance within the State; or
          (2) have enacted reciprocity laws and regulations governing 
        the licensure of nonresident individuals and entities 
        authorized to sell and solicit insurance within those States.
  (b) Uniformity Required.--States shall be deemed to have established 
the uniformity necessary to satisfy subsection (a)(1) if the States--
          (1) establish uniform criteria regarding the integrity, 
        personal qualifications, education, training, and experience of 
        licensed insurance producers, including the qualification and 
        training of sales personnel in ascertaining the appropriateness 
        of a particular insurance product for a prospective customer;
          (2) establish uniform continuing education requirements for 
        licensed insurance producers;
          (3) establish uniform ethics course requirements for licensed 
        insurance producers in conjunction with the continuing 
        education requirements under paragraph (2);
          (4) establish uniform criteria to ensure that an insurance 
        product, including any annuity contract, sold to a consumer is 
        suitable and appropriate for the consumer based on financial 
        information disclosed by the consumer; and
          (5) do not impose any requirement upon any insurance producer 
        to be licensed or otherwise qualified to do business as a 
        nonresident that has the effect of limiting or conditioning 
        that producer's activities because of its residence or place of 
        operations, except that counter-signature requirements imposed 
        on nonresident producers shall not be deemed to have the effect 
        of limiting or conditioning a producer's activities because of 
        its residence or place of operations under this section.
  (c) Reciprocity Required.--States shall be deemed to have established 
the reciprocity required to satisfy subsection (a)(2) if the following 
conditions are met:
          (1) Administrative licensing procedures.--At least a majority 
        of the States permit a producer that has a resident license for 
        selling or soliciting the purchase of insurance in its home 
        State to receive a license to sell or solicit the purchase of 
        insurance in such majority of States as a nonresident to the 
        same extent that such producer is permitted to sell or solicit 
        the purchase of insurance in its State, if the producer's home 
        State also awards such licenses on such a reciprocal basis, 
        without satisfying any additional requirements other than 
        submitting--
                  (A) a request for licensure;
                  (B) the application for licensure that the producer 
                submitted to its home State;
                  (C) proof that the producer is licensed and in good 
                standing in its home State; and
                  (D) the payment of any requisite fee to the 
                appropriate authority.
          (2) Continuing education requirements.--A majority of the 
        States accept an insurance producer's satisfaction of its home 
        State's continuing education requirements for licensed 
        insurance producers to satisfy the States' own continuing 
        education requirements if the producer's home State also 
        recognizes the satisfaction of continuing education 
        requirements on such a reciprocal basis.
          (3) No limiting nonresident requirements.--A majority of the 
        States do not impose any requirement upon any insurance 
        producer to be licensed or otherwise qualified to do business 
        as a nonresident that has the effect of limiting or 
        conditioning that producer's activities because of its 
        residence or place of operations, except that countersignature 
        requirements imposed on nonresident producers shall not be 
        deemed to have the effect of limiting or conditioning a 
        producer's activities because of its residence or place of 
        operations under this section.
          (4) Reciprocal reciprocity.--Each of the States that 
        satisfies paragraphs (1), (2), and (3) grants reciprocity to 
        residents of all of the other States that satisfy such 
        paragraphs.
  (d) Determination.--
          (1) NAIC determination.--At the end of the 3-year period 
        beginning on the date of the enactment of this Act, the 
        National Association of Insurance Commissioners shall 
        determine, in consultation with the insurance commissioners or 
        chief insurance regulatory officials of the States, whether the 
        uniformity or reciprocity required by subsections (b) and (c) 
        has been achieved.
          (2) Judicial review.--The appropriate United States district 
        court shall have exclusive jurisdiction over any challenge to 
        the National Association of Insurance Commissioners' 
        determination under this section and such court shall apply the 
        standards set forth in section 706 of title 5, United States 
        Code, when reviewing any such challenge.
  (e) Continued Application.--If, at any time, the uniformity or 
reciprocity required by subsections (b) and (c) no longer exists, the 
provisions of this subtitle shall take effect 2 years after the date on 
which such uniformity or reciprocity ceases to exist, unless the 
uniformity or reciprocity required by those provisions is satisfied 
before the expiration of that 2-year period.
  (f) Savings Provision.--No provision of this section shall be 
construed as requiring that any law, regulation, provision, or action 
of any State which purports to regulate insurance producers, including 
any such law, regulation, provision, or action which purports to 
regulate unfair trade practices or establish consumer protections, 
including countersignature laws, be altered or amended in order to 
satisfy the uniformity or reciprocity required by subsections (b) and 
(c), unless any such law, regulation, provision, or action is 
inconsistent with a specific requirement of any such subsection and 
then only to the extent of such inconsistency.
  (g) Uniform Licensing.--Nothing in this section shall be construed to 
require any State to adopt new or additional licensing requirements to 
achieve the uniformity necessary to satisfy subsection (a)(1).

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

  (a) Establishment.--There is established the National Association of 
Registered Agents and Brokers (hereafter in this subtitle referred to 
as the ``Association'').
  (b) Status.--The Association shall--
          (1) be a nonprofit corporation;
          (2) have succession until dissolved by an Act of Congress;
          (3) not be an agent or instrumentality of the United States 
        Government; and
          (4) except as otherwise provided in this Act, be subject to, 
        and have all the powers conferred upon a nonprofit corporation 
        by the District of Columbia Nonprofit Corporation Act (D.C. 
        Code, sec. 29y-1001 et seq.).

SEC. 323. PURPOSE.

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

SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

  The Association shall be subject to the supervision and oversight of 
the National Association of Insurance Commissioners (hereafter in this 
subtitle referred to as the ``NAIC'').

SEC. 325. MEMBERSHIP.

  (a) Eligibility.--
          (1) In general.--Any State-licensed insurance producer shall 
        be eligible to become a member in the Association.
          (2) Ineligibility for suspension or revocation of license.--
        Notwithstanding paragraph (1), a State-licensed insurance 
        producer shall not be eligible to become a member if a State 
        insurance regulator has suspended or revoked such producer's 
        license in that State during the 3-year period preceding the 
        date on which such producer applies for membership.
          (3) Resumption of eligibility.--Paragraph (2) shall cease to 
        apply to any insurance producer if--
                  (A) the State insurance regulator renews the license 
                of such producer in the State in which the license was 
                suspended or revoked; or
                  (B) the suspension or revocation is subsequently 
                overturned.
  (b) Authority To Establish Membership Criteria.--The Association 
shall have the authority to establish membership criteria that--
          (1) bear a reasonable relationship to the purposes for which 
        the Association was established; and
          (2) do not unfairly limit the access of smaller agencies to 
        the Association membership.
  (c) Establishment of Classes and Categories.--
          (1) Classes of membership.--The Association may establish 
        separate classes of membership, with separate criteria, if the 
        Association reasonably determines that performance of different 
        duties requires different levels of education, training, or 
        experience.
          (2) Categories.--The Association may establish separate 
        categories of membership for individuals and for other persons. 
        The establishment of any such categories of membership shall be 
        based either on the types of licensing categories that exist 
        under State laws or on the aggregate amount of business handled 
        by an insurance producer. No special categories of membership, 
        and no distinct membership criteria, shall be established for 
        members which are insured depository institutions or wholesale 
        financial institutions or for their employees, agents, or 
        affiliates.
  (d) Membership Criteria.--
          (1) In general.--The Association may establish criteria for 
        membership which shall include standards for integrity, 
        personal qualifications, education, training, and experience.
          (2) Minimum standard.--In establishing criteria under 
        paragraph (1), the Association 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 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 NAIC shall be eligible to serve as the chairperson of the board of 
directors.

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

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

SEC. 329. ASSESSMENTS.

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

SEC. 330. FUNCTIONS OF THE NAIC.

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

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

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

SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

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

SEC. 333. RELATIONSHIP TO STATE LAW.

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

SEC. 334. COORDINATION WITH OTHER REGULATORS.

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

SEC. 335. JUDICIAL REVIEW.

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

SEC. 336. DEFINITIONS.

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

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

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

  (a) In General.--Section 10(c) of the Home Owners' Loan Act (12 
U.S.C. 1467a(c)) is amended by adding at the end the following new 
paragraph:
          ``(9) Termination of expanded powers for new unitary holding 
        company.--
                  ``(A) In general.--Subject to subparagraph (B) and 
                notwithstanding paragraph (3), no company may directly 
                or indirectly, including through any merger, 
                consolidation, or other type of business combination, 
                acquire control of a savings association after March 4, 
                1999, unless the company is engaged, directly or 
                indirectly (including through a subsidiary other than a 
                savings association), only in activities that are 
                permitted--
                          ``(i) under paragraph (1)(C) or (2); or
                          ``(ii) for financial holding companies under 
                        section 6(c) of the Bank Holding Company Act of 
                        1956.
                  ``(B) Existing unitary holding companies and the 
                successors to such companies.--Subparagraph (A) shall 
                not apply, and paragraph (3) shall continue to apply, 
                to a company (or any subsidiary of such company) that--
                          ``(i) either--
                                  ``(I) acquired 1 or more savings 
                                associations described in paragraph (3) 
                                pursuant to applications at least 1 of 
                                which was filed on or before March 4, 
                                1999; or
                                  ``(II) became a savings and loan 
                                holding company by acquiring control of 
                                the company described in subclause (I); 
                                and
                          ``(ii) continues to control the savings 
                        association referred to in clause (i)(II) or 
                        the successor to any such savings 
                        association.''.
  (b) Technical and Conforming Amendment.--Section 10(c)(3) of the Home 
Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is amended by striking 
``Notwithstanding'' and inserting ``Except as provided in paragraph (9) 
and notwithstanding''.
  (c) Conforming Amendment.--Section 10(o)(5) of the Home Owners' Loan 
Act (12 U.S.C. 1467a(o)(5)) is amended--
          (1) in subparagraph (E), by striking ``, except subparagraph 
        (B)''; and
          (2) by adding at the end the following new subparagraph:
                  ``(F) In the case of a mutual holding company which 
                is a savings and loan holding company described in 
                subsection (c)(3), engaging in the activities permitted 
                for financial holding companies under section 6(c) of 
                the Bank Holding Company Act of 1956.''.

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

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

                          Purpose and Summary

    The purpose of H.R. 10, the ``Financial Services Act of 
1999'' (the ``Act''), as reported out of the Committee on 
Banking and Financial Services with an amendment, is to 
modernize the laws governing our nation's financial system by 
establishing a comprehensive framework to permit affiliations 
between and among commercial banks, securities firms, insurance 
companies, and other financial services providers. The primary 
objective of allowing such affiliations is to enhance consumer 
choice in the financial services marketplace, level the playing 
field among providers of financial services, and increase 
competition. The only way to level the competitive playing 
field--particularly for small banks, insurance agents and 
regional securities firms--is through legislation empowering 
all financial services providers, as proposed in the Act. The 
Act contains a number of prudential safeguards designed to 
avoid risk to the federal deposit insurance funds and the 
payment system, enhance the safety and soundness of insured 
depository institutions, and protect consumers.
    While there have been significant changes in the type of 
savings, investment, and financing products available and the 
companies offering those products during the last two decades 
because of technology, interest rate deregulation, and 
increased corporate and consumer access to the equity and 
credit markets, there has not been a corresponding change in 
the statutory framework governing the financial marketplace. 
This tension has forced the regulators, banks, securities 
firms, and insurance companies to creatively use laws that have 
not evolved as fast as the market. In this regard, the Act 
provides for a more rational regulatory system with similar 
rules being applied to all financial institutions. In addition, 
the objective of the legislation is to enhance the ability of 
financial institutions to meet the capital and credit needs of 
the communities in which they operate, including underserved 
communities and populations, as well as to make U.S. financial 
firms more competitive both domestically and internationally.
    Due to technological and marketplace innovations, the 
traditional role of banks as financial intermediaries turning 
short term deposits into longer term loans is becoming 
obsolete. For example, corporate borrowers are relying less on 
traditional bank loans for their funding needs and more on 
securities issued directly in the marketplace. If Congress 
fails to enact legislation of this nature, American 
international preeminence in financial markets will come into 
question, American consumers will be denied the benefits which 
would flow from greater comeptition within the financial arena, 
and many rural areas and small communities will be precluded 
access to a broad range of financial products.

                                title I

    Title I establishes the statutory framework pursuant to 
which banks, insurance companies, securities firms, and other 
financial entities may affiliate. Recognizing that financial 
organizations may desire to structure their operations in 
different ways, it authorizes most new activities and 
affiliations to take place for the most part in either a 
holding company structure or in an operating subsidiary 
controlled by a bank. To avoid regulatory arbitrage, Title I 
establishes a mechanism for coordination of the approval of new 
financial activities by the Board ofGovernors of the Federal 
Reserve and the Secretary of the Treasury. Allowing new affiliations 
also calls for a functional regulation model that is efficient and 
effective in permitting the new affiliations to work while at the same 
time allowing the regulators to insure both safety and soundness and 
consumer protections. Title I incorporates such a functional regulation 
approach to supervision.
    To achieve the new affiliations, Title I repeals the 
outdated and artificial restrictions contained in the Glass-
Steagall Act of 1933. Specifically, the Act repeals the 
prohibitions on banks affiliating with securities firms, 
permitting banks to be affiliated with securities firms engaged 
in securities underwriting and dealing without restriction and 
sponsoring and distributing mutual funds. The Act also repeals 
the Bank Holding Company Act prohibitions on insurance 
underwriting, allowing holding companies to underwrite and 
broker any type of insurance product. In addition to 
authorizing securities and insurance activities, Title I 
contains a list of other activities that are deemed to be 
financial. This list includes merchant banking and insurance 
company portfolio investment activities. These activities may 
be engaged in without seeking the prior approval of the Federal 
Reserve. The framework for permitting new financial 
affiliations incorporates functional regulation with the 
Federal Reserve serving as an umbrella regulator to oversee the 
new financial holding company structure. The Federal Reserve 
would be required to defer to the Securities and Exchange 
Commission (``SEC'') and state regulators on interpretation of 
state securities law and to state insurance regulators on 
interpretation of state insurance law as it relates to 
functionally-regulated nonbank affiliates.
    One of the significant issues faced by the Committee in 
constructing a new framework for the financial system is the 
appropriate role of the Secretary of the Treasury. As the 
Cabinet secretary who attends to the financial condition of the 
country, the Secretary of the Treasury clearly should play a 
role in the evolution of the financial system. In order to 
achieve the appropriate balance and to limit regulatory 
arbitrage that could occur as expanded affiliations are allowed 
to take place in either the holding company or in an operating 
subsidiary, Title I establishes a system of coordination 
between the Federal Reserve and the Secretary of the Treasury 
for the approval of new financial activities. Under this 
system, both the Federal Reserve and the Secretary of the 
Treasury may approve new financial activities for holding 
companies and national bank operating subsidiaries, 
respectively, after consultation with each other. Both agencies 
are given the right to propose to each other that an activity 
be deemed to be financial or to object to a determination that 
an activity is financial. Under this structure, an objection by 
one will have the effect of prohibiting the determination by 
the other.
    Consideration was given to establishing a joint rulemaking 
process rather than a coordination mechanism. After review, it 
was determined that a joint rulemaking process would result in 
a significant restructuring of the current application 
procedures for authorizing new activities. For a joint 
rulemaking process to be effective, an application would have 
to be reviewed by both agencies and published for notice and 
comment. The effect would have been the addition of significant 
burden and delay to the applicant and the elimination of many 
of the benefits that have already been achieved in streamlining 
the application process. As such, the Committee believes that 
the same result can be achieved through a coordination process 
and thatgiving the agencies the ability to essentially veto a 
determination made by the other will cause the agencies to consult, 
achieving the goal of coordination without constructing a process that 
is burdensome and unnecessary. In addition to the above mentioned 
concerns, the Committee also noted the problems of precedent associated 
with joint rulemaking as it applies to the independent structure of the 
Federal Reserve Board. While the Treasury Department was open to 
proceeding with joint rulemaking, the Federal Reserve objected and the 
Committee gave deference to the Federal Reserve's concerns on this 
issue.
    The Committee also addressed the difficult question of the 
appropriate location within a banking organization for the 
conduct of the newly authorized financial activities. In 
weighing this decision, the Committee considered many factors 
including the question of corporate flexibility and choice, 
safety and soundness, the potential for spreading any subsidy 
associated with the Federal safety net, and regulatory 
jurisdiction and arbitrage.
    In testimony before the Committee, the Treasury Department 
and representatives from the banking industry advocated giving 
banking organizations the option of conducting activities in 
the structure that they find would best serve their customers. 
The Federal Deposit Insurance Corporation (``FDIC'') also 
supported that choice. Chairman Tanoue, echoing testimony and 
statements from three of her predecessors, testified that:

          The properly insulated operating subsidiary structure 
        and the holding company structure can provide similar 
        safety and soundness protection when the bank is sound 
        and the affiliate/subsidiary is financially troubled. 
        However, when it is the bank that is financially 
        troubled and the affiliate/subsidiary is sound, the 
        value of the subsidiary serves to directly reduce the 
        exposure of the FDIC. If the firm is a nonbank 
        subsidiary of the parent holding company, none of these 
        values is available to insured bank subsidiaries, or to 
        the FDIC if the bank should fail. Thus, the subsidiary 
        structure can provide superior safety and soundness 
        protection.\1\
---------------------------------------------------------------------------
    \1\ Testimony of Donna Tanoue, Chairman, FDIC, before the Committee 
on Banking and Financial Services, U.S. House of Representatives, 
February 12, 1999.

    The Federal Reserve Board, along with insurance companies 
and the Independent Bankers Association of America advocated 
prohibiting subsidiaries of banks from conducting newly 
authorized financial activities as principal. The Federal 
Reserve expressed concern that a subsidiary would receive a 
subsidy because of its relationship with its parent bank and 
thereby derive a competitive advantage that could skew the 
financial markets. The Federal Reserve also voiced a concern 
that bank subsidiaries would pose risks to the safety and 
soundness of their parent banks in a way that affiliates would 
not.
    The Treasury noted that there is disagreement among 
independent economists regarding whether such a subsidy exists 
and, in the event that a subsidy does exist, the limitations 
and restrictions on funds transfers between a parent bank and a 
subsidiary protect against such a subsidy transfer. Treasury 
also argued that if there is a net subsidy, a bank can 
currently pass italong to its holding company parent which can 
directly or indirectly benefit a nonbank affiliate.
    With regard to the subsidy issue, the Committee concluded 
that while there was a degree of validity to the Federal 
Reserve's concerns, the issue was economically de minimis. 
Given the stipulation of Chairman Greenspan that the cost of 
regulation exceeded the cost of funds advantage a federally 
insured institution enjoys, and given the marginality of the 
case, if one exists, that the cost of funds for affiliates 
might be higher than costs for operating subsidiaries, the 
Committee opted for greater financial institution flexibility, 
with the understanding that it was important to ensure 
maintenance of the dual banking system rather than instill that 
system with disincentives for an institution to charter as a 
national bank.
    The Committee decided to authorize national bank operating 
subsidiaries to engage in activities that are financial in 
nature, with the exception of insurance underwriting and real 
estate investment and development. The Committee's decision was 
based in part on the fact that there has been some limited 
experience with operating subsidiaries of banks. Subsidiaries 
of national banks can currently engage overseas in some of the 
same activities which this Act would permit domestically, such 
as securities underwriting and dealing. In addition, a number 
of states have authorized subsidiaries of state banks to engage 
as principal in a range of activities. The FDIC has had the 
primary federal supervisory role over these state bank 
operating subsidiaries and has not presented any evidence of a 
safety and soundness concern.
    Because the experience of the regulators with operating 
subsidiaries has been relatively limited and to provide 
additional safety and soundness protection for a parent bank, 
the Act reported by the Committee contains restrictions on the 
funding of subsidiaries which the Treasury Department 
recommended. These restrictions are:
          Every dollar of a bank's equity investment in a 
        subsidiary would be deducted from the bank's capital--
        and the bank would have to remain well-capitalized even 
        after the deduction. Thus, even if a subsidiary were to 
        fail and the parent bank's equity investment in it were 
        totally lost, the bank would remain well-capitalized.
          A bank could not make an equity investment in a 
        subsidiary that would exceed the amount that the bank 
        could pay as a dividend to its holding company without 
        regulatory authorization.
          The bank could lend no more to a subsidiary than to 
        an affiliate: 10 percent of its capital to any one such 
        subsidiary (or affiliate), 20 percent to all 
        subsidiaries and affiliates combined. Also in keeping 
        with current law, any such loans would have to be on an 
        arm's length basis, subject to market terms, and fully 
        secured by high quality collateral.
    The Committee also adopted an amendment offered by Rep. 
Marge Roukema which clarifies that the required capital 
deduction includes an operating subsidiary's retained earnings 
in addition to the original equity investment in the operating 
subsidiary. This amendment reflects the current capital 
treatment required by the FDIC for state nonmember bank 
operating subsidiaries.
    During committee consideration, concern was also expressed 
that banks would end up being liable for the debts of their 
subsidiaries--beyond their own investment and loans. The Office 
of the Comptroller of the Currency (``OCC'') believes that this 
concern is addressed for the following reasons. First, as a 
general matter under corporate law, a shareholder is not liable 
for the debts of a company in which it owns stock. This is true 
regardless of whether the shareholder is an individual or 
another corporation. Second, it is unlikely that courts will 
``pierce the corporate veil'' and require the bank to repay 
creditors of the subsidiary. According to the OCC, studies have 
shown that ``piercing the corporate veil'' is a rarely used 
exception to the rule of limited shareholder liability, and it 
generally applies only where there is some combination of fraud 
and a failure to follow corporate formalities, such that 
creditors thought they were dealing with the shareholder (i.e. 
the parent bank). In addition, the system of supervision and 
examination provides protection against inadequate capital and 
the disregard of corporate formalities that can lead to 
piercing the corporate veil. H.R. 10 expressly directs the 
agencies to ensure that corporate formalities are observed.
    The Committee also notes that permitting operating 
subsidiaries to engage in financial activities is consistent 
with functional regulation. Although banks currently enjoy an 
exemption from broker-dealer registration, the exemption does 
not apply to subsidiaries of banks. Thus, subsidiaries of banks 
currently engaged in securities brokerage or underwriting 
activities are required to be registered broker-dealers 
supervised under the securities laws today. Under H.R. 10, a 
subsidiary engaging in any such securities activities would 
have to register as a broker-dealer and be subject to full SEC 
supervision and regulation. To leave no ambiguity on this 
point, section 124 of H.R. 10 specifies that the SEC has 
exactly the same authority over a subsidiary as over an 
affiliate.
    Title I also includes several provisions that will preserve 
the jurisdiction of the Federal Reserve Board regardless of how 
banking organizations decided to structure themselves. First, 
any bank with more than $10 billion in assets must establish or 
retain a holding company, with the Federal Reserve as umbrella 
supervisor. Second, regardless of the size of the bank, if a 
financial services firm that includes a bank wishes to 
underwrite insurance, it must do so through a holding company 
affiliate. Third, the Federal Reserve has sole authority to 
issue all rules and interpretations regarding merchant banking, 
whether conducted in an affiliate or bank operating subsidiary. 
Fourth, the Federal Reserve will continue to be the exclusive 
regulator of overseas subsidiaries of national banks.
    To facilitate the new affiliation rights provided for in 
this Act, Title I preempts state anti-affiliation laws which 
prevent banks from affiliating with financial companies. In 
addition, except with respect to insurance sales, the title 
preempts state laws related to activities authorized or 
permitted by the Act. This general preemption standard provides 
that no state may take any action to ``prevent or restrict'' 
the ability of an insured depository institution, or subsidiary 
or affiliate thereof, from engaging, directly or indirectly, 
either by itself or in conjunction with a subsidiary, 
affiliate, or any other entity or person, in an activity 
authorized by this Act.
    Because of the long history of state regulation of 
insurance, Title I establishes separatepreemption standards for 
determining whether state insurance sales, solicitation, and cross-
marketing laws are to be preempted. First, the title distinguishes 
between those state laws enacted prior to September 3, 1998, and those 
enacted on or after that date. Second, the title lists thirteen kinds 
of state laws which are protected from this preemption framework. 
Third, the title mandates that the preemption analysis for state 
insurance sales, solicitation, and cross-marketing laws be conducted in 
accordance with the legal standards for preemption set forth in the 
U.S. Supreme Court decision in Barnett Bank of Marion County N.A. v. 
Nelson, 116 S.Ct. 1103 (1996). The Supreme Court held in the Barnett 
case that states cannot ``prevent or significantly interfere'' with a 
national bank from exercising insurance agency activities authorized 
under section 92 of the National Bank Act (12 U.S.C. 992). Finally, 
under Title I, state laws regulating the insurance activities of 
depository institutions or their subsidiaries or affiliates are 
preempted to the extent they unfairly discriminate against such 
depository institutions. The title lists four kinds of state laws which 
would constitute discrimination and therefore would be impermissible.
    Under this preemption framework, Title I provides that 
state laws enacted prior to September 3, 1998, and not covered 
by the thirteen safe harbors, are preempted if they ``prevent 
or significantly interfere'' with the ability of a national 
bank or any other depository institution to engage directly or 
indirectly in any insurance sales, solicitation, or cross-
marketing activities. The standard of review requiring 
``without unequal deference'' established in title III for 
disputes between state insurance and federal regulators does 
not apply in determining whether these state laws are 
preempted. State laws on insurance sales enacted on or after 
September 3, 1998, and that are not also covered by the 
thirteen safe harbors, are subject to the Barnett preemption 
standard, the ``without unequal deference'' standard 
established in Title III, and the nondiscrimination test 
established in Title I.
    Title I creates a new type of uninsured bank charter known 
as a wholesale financial institution (``WFIs'') which can 
either be a national or state bank. WFIs may not receive 
initial deposits of $100,000 or less (except on an incidental 
basis). WFIs would be subject to the Community Reinvestment 
Act.
    Reforms are made in Title I to the Federal Home Loan Bank 
System (``FHLBS''). Specifically, Title I provides small 
community banks with greater access to FHLBank advances. Banks 
with less than $500 million in assets are permitted to pledge 
small business, agriculture, rural development, and community 
development loans as collateral and use the advances to fund 
these types of loans. The 10% residential mortgage asset test 
for such banks to become members is waived. Title I makes 
FHLBank membership voluntary for federal savings associations. 
A new capital structure is established for the FHLBanks, 
including a leverage limit and a risk based capital requirement 
met with permanent capital. The FHLBanks' Resolution Funding 
Corporation obligation is converted from a stated dollar amount 
to a fixed percentage of each Bank's earnings. Significant 
management authority is transferred from the Federal Housing 
Finance Board to the FHLBanks.
    Given that banks will now be able to affiliate with a wide 
array of financial services providers, the Committee was 
concerned that the financial and medical information of 
customersof these new financial holding companies be accorded 
certain basic privacy protections. To ensure that consumers are able to 
make informed choices among the options available to them in the new 
financial services marketplace, Title I requires insured depository 
institutions affiliated with financial or savings and loan holding 
companies to provide their customers with clear and conspicuous 
statements of their privacy policies, including the institution's 
policy on divulging customer information to third parties for marketing 
purposes, and the disclosures required under the Fair Credit Reporting 
Act relating to the customer's right to ``opt out'' of having certain 
information shared among affiliates of a holding company. In instances 
where an insurance company becomes part of a financial or savings and 
loan holding company, it may disclose individually identifiable health 
or medical information only with the consent, or at the direction of 
the customer, or in certain other narrowly-circumscribed circumstances.
    The legislation also incorporates the provisions of the 
Financial Information Privacy Act, making it a crime to obtain 
or solicit account information from a financial institution or 
one of its customers under false pretenses. Similar legislation 
was approved by the Committee in the 105th Congress on a broad 
bipartisan basis, after oversight hearings examining the 
privacy threat posed by an emerging industry of so-called 
``information brokers,'' who employ fraud and other forms of 
deception to collect personal financial information from 
consumers and their financial services providers.
    To address the concerns of many Committee members regarding 
the sharing of customer information among affiliates of a 
financial services holding company, this Title directs the 
federal banking agencies to study whether current laws 
governing such disclosures adequately protect consumers' 
privacy rights, and to report the agencies' findings to 
Congress within six months of the legislation's enactment.

                                title ii

    Title II of the Act amends the securities laws in order to 
provide for the functional regulation of bank securities 
activities. The Act lists specific activities that banks are 
exempt from regulation as a broker-dealer under the Securities 
Exchange Act. Title II adopts a new procedure for determining 
whether a product is a banking product or a security that must 
be forced out of the bank. The SEC, after consultation with the 
Federal Reserve, may determine by regulation that a new product 
a bank offers is a security and as a result should be pushed 
out of the bank. The Federal Reserve, or an aggrieved party, 
would than be ale to initiate an expedited judicial appeal 
process to challenge the SEC's rulemaking.

                               title iii

    Title III ensures state functional regulation of insurance, 
addresses the insurance powers of national banks, and 
establishes a scheme for the creation of uniform, national 
licensingstandards for insurance agents.
    The precept of state functional regulation of insurance is 
ensured by restating that the McCarran-Ferguson Act remains the 
law of the United States, that no person can provide insurance 
in a state unless such person is licensed by the appropriate 
state insurance authority and that insurance activities of any 
entity or person are to be functionally regulated by the state. 
This precept of state regulation of insurance as it relates to 
depository institutions and their affiliates and subsidiaries, 
however, is subject to the state preemption provisions 
contained in Title I of the bill. In addition, Title III 
provides for the preemption of certain state laws which prevent 
or place certain limitations on affiliations between insurance 
underwriters and insured depository institutions.
    With regard to national bank insurance powers, Title III 
clarifies that national banks cannot underwrite insurance 
within the bank, except for those products which national banks 
were authorized to engage in as of January 1, 1999. For 
purposes of this clarification, insurance is defined as those 
products regulated as insurance as of January 1, 1999 with new 
products after that date being treated as insurance if 
regulated as insurance, unless the product has a banking 
component and is not treated as insurance under the tax code.
    The title also prohibits national banks from underwriting 
or selling title insurance unless the national bank or its 
subsidiary was actively and lawfully engaged in doing so before 
the date of enactment of this Act.
    Because of the unique regulatory framework in which states 
primarily regulate the insurance activities of federally 
insured or federally chartered financial institutions, an 
expedited and equalized dispute resolution process is 
established for judicial review of disputes concerning 
depository institution insurance activities. This expedited 
dispute resolution process covers those conflicts arising 
between a state insurance regulator and a federal regulator on 
whether a product is insurance for purposes of the bank on 
insurance underwriting within a national bank and whether state 
laws regulating bank insurance agency activities should be 
preempted. The dispute resolution process is equalized by 
providing that the court in reviewing conflicts between state 
insurance and federal regulators shall decide the case ``based 
on its review on the merits of all questions presented under 
state and federal law . . . without unequal deference.''
    Finally, Title III creates the National Association of 
Registered Agents and Brokers for the purpose of establishing 
uniform standards for qualification, training, and education of 
insurance agents. Meeting these standards would permit an agent 
to sell insurance in any state.

                                title iv

    Title IV is a continuation of efforts to provide a more 
uniform regulatory framework among federally insured depository 
institutions. In that regard, Title IV provides that a 
commercial entity cannot own or affiliate with a savings 
association after March 4, 1999, unlesssuch commercial entity 
had owned (or applied to acquire) a savings association on or before 
March 4, 1999, or such commercial entity acquired control of an 
existing unitary saving and loan holding company.

                  Legislative Background and Hearings

    During the last ten years, the Committee has made a number 
of attempts to modernize the nation's banking laws. In 1988, 
the Senate passed S. 1886, the ``Financial Modernization Act of 
1988,'' which would have repealed the provisions of the Glass-
Steagall Act that prohibit affiliations between commercial 
banks and investment banks. That same year the House Banking 
Committee reported out H.R. 5094, the ``Depository Institutions 
Act of 1988.'' This legislation never reached the House floor. 
In 1991, in response to the Bush Administration's call for 
financial services reform, the Senate passed S. 534, the 
``Comprehensive Deposit Insurance Reform and Taxpayer 
Protection Act of 1991.'' On the House side, the Committee 
voted to favorably report H.R. 6, the ``Financial Institutions 
Safety and Consumer Choice Act of 1991,'' which allowed banks 
to affiliate with securities firms, insurance companies, and 
commercial entities under a diversified holding company 
structure. H.R. 6, however, was defeated on the House floor on 
November 11, 1991 by a vote of 89-324. In 1995, the Committee 
reported out H.R. 1062, the ``Financial Services 
Competitiveness Act of 1995'' which allowed banks to affiliate 
with securities firms and engage in activities that are 
financial in nature. Later that year, as part of H.R. 1858, the 
``Financial Institutions Regulatory Relief Act of 1995,'' the 
Committee approved an amendment to the Bank Holding Company Act 
allowing banks to affiliate with insurance companies. Neither 
H.R. 1062 nor the Bank Holding Company Act amendment was 
considered by the full House in the 104th Congress. In 1997, 
the Committee again reported financial services modernization 
legislation as provided for in H.R. 10, the ``Financial 
Services Competitiveness Act of 1997.'' The full House passed 
H.R. 10 on May 13, 1998. The legislation did not reach the 
Senate Floor. On January 6, 1999, Chairman Leach and other 
senior committee Republicans introduced H.R. 10, the 
``Financial Services Act of 1999.'' This legislation built on 
the regulatory framework developed during consideration of H.R. 
10 in the 105th Congress.
    The full Committee held three days of hearings on H.R. 10. 
Testifying before the Committee on February 10, 1999, were 
David H. Komansky, Chairman and CEO, Merrill Lynch & Co., Inc.; 
Michael Patterson, Vice Chairman, J.P. Morgan & Co. and 
Chairman, Financial Services Council; John B. McCoy, President, 
and CEO, Aetna Inc.; Roy J. Zuckerberg, Limited Partner, 
Goldman, Sachs & Co. and Chairman, Securities Industry 
Association; R. Scott Jones, Chairman and CEO, Goodhue County 
National Bank, Red Wing, MN and President, American Bankers 
Association; William L. Quillan, Chairman, President and CEO, 
The City National Bank, Greeley, NE and President, Independent 
Bankers Association of America; E. Lee Beard, President and 
CEO, First Federal Bank, Hazelton, PA and Chair, America's 
Community Bankers; Matthew P. Fink, President, Investment 
Company Institute; Michael P. Smith, President, New York 
Bankers Association; William B. Greenwood, President, Lawton 
Insurance, Central City, KY and President, Independent 
Insurance Agents of America; Mark A. Pope, Vice President and 
Director of Federal Relations, Lincoln National Corporation, 
Fort Wayne, IN on behalf of the American Insurance Association; 
James J. Kilbride, Chairman and CEO, Morse, Payson & Noyes 
Insurance, Portland, ME and Chairman, Council of Insurance 
Agents and Brokers; W. Neal Menefee, President and CEO, 
Rockingham Group of Insurance Companies, on behalf of the 
National Association of Mutual Insurance Companies; and David 
O. Creighton, Sr., President, Bryton Companies, West Des 
Moines, IA, on behalf of the National Association of 
Professional Insurance Agents.
    On February 11, 1999, the following testified before the 
Committee: Alan Greenspan, Chairman, Board of Governors of the 
Federal Reserve System; Thomas J. Curry, Commissioner of Banks 
for the Commonwealth of Massachusetts, on behalf of the 
Conference of State Bank Supervisors; Thomas E. Geyer, 
Commissioner of Ohio Division of Securities, on behalf of North 
American Securities Administrators Association; George Reider, 
Jr., Connecticut Commissioner of Insurance and President, 
National Association of Insurance Commissioners; Mary Griffin, 
Insurance Counsel, Consumers Union; Edmund Mierzwinski, 
Consumer Program Director, U.S. Public Interest Research Group; 
Ralph Nader, Consumer Advocate; John Taylor, President and CEO, 
National Community Reinvestment Coalition; and Debbie Goldberg, 
Reinvestment Specialist, Center for Community Change.
    Testifying before the Committee on February 12, 1999, were: 
Robert E. Rubin, Secretary, Department of the Treasury; Donna 
Tanoue, Chairman, Federal Deposit Insurance Corporation; John 
D. Hawke, Jr., Comptroller, Office of the Comptroller of the 
Currency; Ellen Seidman, Director, Office of Thrift 
Supervision; and Harvey Goldschmid, General Counsel, Securities 
and Exchange Commission.

                   Committee Consideration and Votes

    On March 4, 1999, the Committee met in open session to mark 
up H.R. 10. The Committee considered as original text for 
purposes of amendment a Committee Print. The Committee 
considered a number of amendments to the print, accepting many 
of them by voice vote. Roll call votes were taken on the 
following amendments.
    The Committee adopted by recorded vote an amendment offered 
by Rep. Lee to provide that a bank holding company would not be 
eligible to become a financial holding company if any of its 
affiliates engaging in insurance underwriting are in violation 
of the Fair Housing Act of settlement agreements under such 
act. The amendment passed 28-27.
        YEAS                          NAYS
Mr. Leach                           Mrs. Roukema
Mr. Bachus                          Mr. Bereuter
Mr. Campbell                        Mr. Baker
Mr. LaFalce                         Mr. Lazio
Mr. Vento                           Mr. Castle
Mr. Frank                           Mr. King
Mr. Kanjorski                       Mr. Royce
Ms. Waters                          Mr. Lucas
Mr. Sanders                         Mr. Metcalf
Mrs. Maloney                        Mr. Ney
Mr. Gutierrez                       Mr. Barr
Ms. Velazquez                       Dr. Paul
Mr. Watt                            Dr. Weldon
Mr. Ackerman                        Mr. Ryun (KS)
Mr. Bentsen                         Mr. Cook
Mr. Maloney                         Mr. Riley
Ms. Hooley                          Mr. LaTourette
Mr. Weygand                         Mr. Manzullo
Mr. Sherman                         Mr. Jones
Mr. Sandlin                         Mr. Ryan (WI)
Ms. Lee                             Mr. Ose
Mr. Mascara                         Mr. Sweeney
Mr. Inslee                          Mrs. Biggert
Ms. Schakowsky                      Mr. Terry
Mr. Moore                           Mr. Green
Mr. Gonzalez                        Mr. Toomey
Mrs. Jones                          Mr. Goode
Mr. Capuano

    The Committee defeated an amendment offered by Rep. Waters 
to require insured depository institutions of a holding company 
to offer low-cost bank accounts as an eligibility requirement 
for becoming a financial holding company. The amendment failed 
by a vote of 27-31.
        YEAS                          NAYS
Mr. LaFalce                         Mr. Leach
Mr. Vento                           Mrs. Roukema
Mr. Frank                           Mr. Bereuter
Mr. Kanjorski                       Mr. Baker
Ms. Waters                          Mr. Lazio
Mr. Sanders                         Mr. Bachus
Mrs. Maloney                        Mr. Castle
Mr. Gutierrez                       Mr. King
Ms. Velazquez                       Mr. Campbell
Mr. Watt                            Mr. Royce
Mr. Ackerman                        Mr. Lucas
Mr. Bentsen                         Mr. Metcalf
Mr. Maloney                         Mr. Ney
Ms. Hooley                          Mr. Barr
Ms. Carson                          Mrs. Kelly
Mr. Weygand                         Dr. Paul
Mr. Sherman                         Dr. Weldon
Mr. Sandlin                         Mr. Ryun (KS)
Mr. Meeks                           Mr. Cook
Ms. Lee                             Mr. Riley
Mr. Mascara                         Mr. LaTourette
Mr. Inslee                          Mr. Manzullo
Ms. Schakowsky                      Mr. Jones
Mr. Moore                           Mr. Ryan (WI)
Mr. Gonzalez                        Mr. Ose
Mrs. Jones                          Mr. Sweeney
Mr. Capuano                         Mrs. Biggert
                                    Mr. Terry
                                    Mr. Green
                                    Mr. Toomey
                                    Mr. Goode

    The Committee defeated an amendment offered by Reps. 
Gutierrez, Waters, Sanders, and Capuano to require that all of 
the nonbank affiliates of the bank holding company are meeting 
community credit, capital, investment and consumer needs as a 
condition for becoming a financial holding company. The 
amendment failed by a roll call vote of 17-39.
        YEAS                          NAYS
Mr. LaFalce                         Mr. Leach
Mr. Vento                           Mrs. Roukema
Mr. Frank                           Mr. Bereuter
Mr. Kanjorski                       Mr. Baker
Ms. Waters                          Mr. Lazio
Mr. Sanders                         Mr. Bachus
Mr. Gutierrez                       Mr. Castle
Ms. Velazquez                       Mr. King
Mr. Watt                            Mr. Campbell
Ms. Carson                          Mr. Royce
Mr. Meeks                           Mr. Lucas
Ms. Lee                             Mr. Metcalf
Mr. Mascara                         Mr. Ney
Ms. Schakowsky                      Mr. Barr
Mr. Gonzalez                        Mrs. Kelly
Mrs. Jones                          Mr. Weldon
Mr. Capuano                         Mr. Ryun (KS)
                                    Mr. Cook
                                    Mr. Riley
                                    Mr. Hill
                                    Mr. LaTourette
                                    Mr. Manzullo
                                    Mr. Jones
                                    Mr. Ryan (WI)
                                    Mr. Ose
                                    Mr. Sweeney
                                    Mrs. Biggert
                                    Mr. Terry
                                    Mr. Green
                                    Mr. Toomey
                                    Mr. Ackerman
                                    Mr. Bentsen
                                    Mr. Maloney
                                    Ms. Hooley
                                    Mr. Sherman
                                    Mr. Sandlin
                                    Mr. Goode
                                    Mr. Inslee
                                    Mr. Moore

    An amendment offered by Rep. Gutierrez to require banks and 
bank affiliates that underwrite or sell insurance to collect 
information on the race, gender, ethnicity, income leveland 
census tract of the applicants and purchasers of their products was 
defeated by a vote of 22-28-1.


         YEAS                    NAYS                    PRESENT

Mr. LaFalce             Mr. Leach               Mrs. Roukema
Mr. Frank               Mr. Bereuter
Mr. Kanjorski           Mr. Baker
Ms. Waters              Mr. Bachus
Mr. Sanders             Mr. Castle
Mr. Gutierrez           Mr. King
Ms. Velazquez           Mr. Campbell
Mr. Watt                Mr. Royce
Mr. Bentsen             Mr. Lucas
Mr. Maloney             Mr. Metcalf
Ms. Hooley              Mr. Barr
Ms. Carson              Mrs. Kelly
Mr. Weygand             Dr. Paul
Mr. Sherman             Dr. Weldon
Mr. Sandlin             Mr. Ryun (KS)
Mr. Meeks               Mr. Cook
Ms. Lee                 Mr. Riley
Mr. Mascara             Mr. LaTourette
Mr. Inslee              Mr. Manzullo
Ms. Schakowsky          Mr. Jones
Mr. Moore               Mr. Ryan (WI)
Mr. Capuano             Mr. Ose
                        Mr. Sweeney
                        Mrs. Biggert
                        Mr. Terry
                        Mr. Green
                        Mr. Toomey
                        Mr. Goode.


    An amendment offered by Rep. Vento to require the Federal 
Reserve Board to hold public hearings in the case where a 
merger, acquisition, or consolidation involves one or more 
insured depository institutions with assets in excess of $1 
billion was approved by the Committee 22-21.
        YEAS                          NAYS
Mr. Leach                           Mr. Lazio
Mr. Bereuter                        Mr. Castle
Mr. Bachus                          Mr. King
Mr. Metcalf                         Mr. Campbell
Mr. LaFalce                         Mr. Royce
Mr. Vento                           Mr. Lucas
Mr. Kaniorski                       Mrs. Kelly
Ms. Waters                          Dr. Weldon
Mr. Sanders                         Mr. Ryun (KS)
Mrs. Maloney                        Mr. Cook
Mr. Gutierrez                       Mr. Riley
Mr. Watt                            Mr. Manzullo
Mr. Maloney                         Mr. Ryan (WI)
Ms. Carson                          Mr. Ose
Mr. Meeks                           Mr. Sweeney
Ms. Lee                             Mrs. Biggert
Mr. Goode                           Mr. Terry
Mr. Inslee                          Mr. Green
Ms. Schakowsky                      Mr. Toomey
Mr. Moore                           Mr. Bentsen
Mrs. Jones                          Mr. Sherman
Mr. Capuano

    On March 10, 1999, Reps. Sanders, Lee, and Schakowsky 
offered an amendment to prohibit the imposition of surcharges 
in connection with the use of automatic teller machines (ATMs). 
Reps. Leach, Roukema, and LaFalce offered a substitute to the 
amendment to require disclosures on ATMs that impose 
surcharges. The substitute amendment passed by a vote of 35-10.
        YEAS                          NAYS
Mr. Leach                           Mrs. Biggert
Mr. McCollum                        Mr. Frank
Mr. Bereuter                        Mr. Kanjorski
Mr. Baker                           Mr. Sanders
Mr. Lazio                           Ms. Carson
Mr. Bachus                          Ms. Lee
Mr. King                            Mr. Mascara
Mr. Campbell                        Ms. Schakowsky
Mr. Royce                           Mrs. Jones
Mr. Metcalf                         Mr. Capuano
Mrs. Kelly
Dr. Paul
Dr. Weldon
Mr. Ryun (KS)
Mr. Cook
Mr. Riley
Mr. Hill
Mr. LaTaureette
Mr. Manzullo
Mr. Jones
Mr. Ryan (WIS)
Mr. Ose
Mr. Terry
Mr. Green
Mr. Toomey
Mr. LaFalce
Mr. Vento
Mr. Watt
Mr. Maloney
Ms. Hooley
Mr. Sandlin
Mr. Goode
Mr. Inslee
Mr. Moore
Mr. Gonzalez

    The Committee approved the Sanders, Lee, Schakowsky 
amendment, as amended, by a vote of 48-1.
        YEAS                          NAYS
Mr. Leach                           Mrs. Biggert
Mr. Bereuter
Mr. Baker
Mr. Lazio
Mr. Bachus
Mr. King
Mr. Royce
Mr. Metcalf
Mrs. Kelly
Dr. Paul
Dr. Weldon
Mr. Ryun (KS)
Mr. Cook
Mr. Riley
Mr. Hill
Mr. LaTourette
Mr. Manzullo
Mr. Jones
Mr. Ryan (WI)
Mr. Ose
Mr. Sweeney
Mr. Terry
Mr. Green
Mr. Toomey
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Sanders
Mrs. Maloney
Mr. Gutierrez
Ms. Velazquez
Mr. Watt
Mr. Ackerman
Mr. Bentsen
Mr. Maloney
Ms. Hooley
Ms. Carson
Mr. Sandlin
Ms. Lee
Mr. Goode
Mr. Mascara
Mr. Inslee
Ms. Schakowsky
Mr. Moore
Mr. Gonzalez
Mrs. Jones
Mr. Capuano

    Reps. Sweeney and Ryan offered an amendment to provide that 
the Federal Reserve may conduct public meetings in major 
metropolitan areas which may be affected by the merger, 
consolidation or acquisition of one or more insured depository 
institutions with assets of $1 billion or more. This amendment 
amended Mr. Vento's amendment adopted March 4. The amendment 
passed 30-28.
        YEAS                          NAYS
Mr. McCollum                        Mr. Leach
Mrs. Roukema                        Mr. Bereuter
Mr. Baker                           Mr. LaFalce
Mr. Lazio                           Mr. Vento
Mr. Bachus                          Mr. Frank
Mr. Castle                          Mr. Kanjorski
Mr. King                            Ms. Waters
Mr. Campbell                        Mr. Sanders
Mr. Royce                           Mrs. Maloney
Mr. Lucas                           Mr. Gutierrez
Mr. Metcalf                         Ms. Velazquez
Mr. Ney                             Mr. Watt
Mrs. Kelly                          Mr. Ackerman
Dr. Paul                            Mr. Bentsen
Dr. Weldon                          Mr. Maloney
Mr. Ryun (KS)                       Ms. Hooley
Mr. Cook                            Ms. Carson
Mr. Riley                           Mr. Weygand
Mr. Hill                            Mr. Sandlin
Mr. LaTourette                      Mr. Meeks
Mr. Manzullo                        Ms. Lee
Mr. Jones                           Mr. Mascara
Mr. Ryan (WI)                       Mr. Inslee
Mr. Ose                             Ms. Schakowsky
Mr. Sweeney                         Mr. Moore
Mrs. Biggert                        Mr. Gonzalez
Mr. Terry                           Mrs. Jones
Mr. Green                           Mr. Capuano
Mr. Toomey
Mr. Goode

    On March 11, 1999, Reps. Royce, LaFalce, McCollum, Frank, 
Metcalf, Jones, Gonzalez, Inslee, and Carson offered an 
amendment to strike Title IV of the Committee Print (which 
provided for a ban on future commercial affiliations with 
thrifts), replacing it with language to allow a savings and 
loan holding company organized as a mutual holding company to 
engage in the same activities as bank holding companies. The 
amendment was defeated 29-30.
        YEAS                          NAYS
Mr. McCollum                        Mr. Leach
Mr. Bachus                          Mrs. Roukema
Mr. King                            Mr. Bereuter
Mr. Royce                           Mr. Baker
Mr. Metcalf                         Mr. Castle
Mr. Ney                             Mr. Campbell
Dr. Paul                            Mr. Lucas
Dr. Weldon                          Mr. Barr
Mr. Hill                            Mrs. Kelly
Mr. LaTourette                      Mr. Ryun (KS)
Mr. Jones                           Mr. Cook
Mr. Ose                             Mr. Riley
Mr. Sweeney                         Mr. Manzullo
Mr. LaFalce                         Mr. Ryan (WI)
Mr. Frank                           Mrs. Biggert
Mr. Kanjorski                       Mr. Terry
Ms. Waters                          Mr. Green
Mr. Gutierrez                       Mr. Toomey
Mr. Ackerman                        Mr. Vento
Mr. Bentsen                         Mr. Sanders
Ms. Carson                          Mrs. Maloney
Mr. Weygand                         Ms. Velazquez
Mr. Meeks                           Mr. Watt
Ms. Lee                             Mr. Maloney
Mr. Mascara                         Ms. Hooley
Mr. Inslee                          Mr. Sherman
Mr. Gonzalez                        Mr. Sandlin
Mrs. Jones                          Mrs. Goode
Mr. Capuano                         Ms. Schakowsky
                                    Mr. Moore

    Rep. Bentsen offered an amendment to permit the 
transferability of grandfathered unitary thrifts to 
nonfinancial companies. Rep. Baker offered an amendment to the 
amendment to exempt the first $100,000,000 of the Bank 
Insurance Fund (``BIF'') assessable deposits of any BIF member 
with consolidated total assets of $500 million or less from the 
FICO assessment. The Baker amendment to the Bentsen amendment 
failed 22-31.
        YEAS                          NAYS
Mr. Leach                           Mrs. Roukema
Mr. McCollum                        Mr. King
Mr. Baker                           Mr. Royce
Mr. Lazio                           Mr. Ney
Mr. Bachus                          Mr. Barr
Mr. Campbell                        Mr. Manzullo
Mr. Lucas                           Mr. Ryan (WI)
Mr. Metcalf                         Mr. Ose
Mrs. Kelly                          Mrs. Biggert
Mr. Paul                            Mr. Green
Dr. Weldon                          Mr. Toomey
Mr. Ryun (KS)                       Mr. Vento
Mr. Cook                            Ms. Waters
Mr. Riley                           Mrs. Maloney
Mr. Hill                            Ms. Velazquez
Mr. LaTourette                      Mr. Ackerman
Mr. Jones                           Mr. Maloney
Mr. Terry                           Ms. Hooley
Mr. LaFalce                         Ms. Carson
Mr. Watt                            Mr. Weygand
Mr. Bentsen                         Mr. Sherman
Mr. Goode                           Mr. Sandlin
                                    Mr. Meeks
                                    Ms. Lee
                                    Mr. Mascara
                                    Mr. Inslee
                                    Ms. Schakowsky
                                    Mr. Moore
                                    Mr. Gonzalez
                                    Mrs. Jones
                                    Mr. Capuano

    Rep. Bentsen's amendment was approved by a vote of 29-26.
        YEAS                          NAYS
Mr. McCollum                        Mr. Leach
Mr. Baker                           Mrs. Roukema
Mr. Bachus                          Mr. Lazio
Mr. King                            Mr. Castle
Mr. Royce                           Mr. Campbell
Mr. Metcalf                         Mr. Lucas
Mr. Ney                             Mr. Barr
Dr. Paul                            Mrs. Kelly
Dr. Weldon                          Mr. Cook
Mr. Hill                            Mr. Riley
Mr. LaTourette                      Mr. Manzullo
Mr. Jones                           Mrs. Biggert
Mr. Ryan (WI)                       Mr. Terry
Mr. Ose                             Mr. Toomey
Mr. Sweeney                         Mr. Vento
Mr. Green                           Mr. Sanders
Mr. LaFalce                         Ms. Velazquez
Mr. Frank                           Mr. Watt
Ms. Waters                          Mr. Maloney
Mrs. Maloney                        Ms. Carson
Mr. Ackerman                        Mr. Weygand
Mr. Bentsen                         Mr. Sherman
Ms. Hooley                          Mr. Sandlin
Mr. Meeks                           Mr. Goode
Ms. Lee                             Ms. Schakowsky
Mr. Mascara                         Mr. Moore
Mr. Inslee
Mr. Gonzalez
Mrs. Jones

    Rep. Inslee offered an amendment to restrict the sharing of 
a customer's information among affiliates of a financial 
holding company and to restrict the sharing of a customer's 
health and medical information generally. Reps. Leach and Vento 
offered a substitute to the amendment to require depository 
institutions of financial holding companies to disclose their 
privacy policies, to require insurance companies which 
affiliate with a bank to keep confidential customer health and 
medical information, and to prohibit the obtaining of financial 
information from financial institutions by false means. Rep. 
Ose offered an amendment to Mr. Leach's substitute to strike 
all parts except for the study, which was defeated by a vote of 
25-31.
        YEAS                          NAYS
Mr. McCollum                        Mr. Leach
Mr. Baker                           Mrs. Roukema
Mr. Bachus                          Mr. Bereuter
Mr. King                            Mr. Lazio
Mr. Royce                           Mr. Castle
Mr. Lucas                           Mr. Campbell
Mr. Ney                             Mrs. Biggert
Mr. Barr                            Mr. LaFalce
Mrs. Kelly                          Mr. Vento
Dr. Paul                            Mr. Kanjorski
Dr. Weldon                          Ms. Waters
Mr. Cook                            Mr. Sanders
Mr. Riley                           Mrs. Maloney
Mr. Hill                            Mr. Gutierrez
Mr. LaTourette                      Ms. Velazquez
Mr. Manzullo                        Mr. Ackerman
Mr. Jones                           Mr. Bentsen
Mr. Ryan (WI)                       Mr. Maloney
Mr. Ose                             Ms. Carson
Mr. Sweeney                         Mr. Weygand
Mr. Terry                           Mr. Sherman
Mr. Green                           Mr. Sandlin
Mr. Toomey                          Mr. Meeks
Mr. Watt                            Ms. Lee
Mr. Goode                           Mr. Mascara
                                    Mr. Inslee
                                    Ms. Schakowsky
                                    Mr. Moore
                                    Mr. Gonzalez
                                    Mrs. Jones
                                    Mr. Capuano

    The Committee approved the Leach substitute by a vote of 
34-22.
        YEAS                          NAYS
Mr. Leach                           Mrs. Roukema
Mr. McCollum                        Dr. Paul
Mr. Bereuter                        Mr. LaFalce
Mr. Baker                           Mr. Kanjorski
Mr. Lazio                           Ms. Waters
Mr. Bachus                          Mr. Sanders
Mr. Castle                          Mr. Gutierrez
Mr. King                            Ms. Velazquez
Mr. Campbell                        Mr. Watt
Mr. Royce                           Mr. Ackerman
Mr. Lucas                           Ms. Carson
Mr. Ney                             Mr. Weygand
Mr. Barr                            Mr. Sandlin
Mrs. Kelly                          Mr. Meeks
Dr. Weldon                          Ms. Lee
Mr. Cook                            Mr. Mascara
Mr. Riley                           Mr. Inslee
Mr. Hill                            Ms. Schakowsky
Mr. LaTourette                      Mr. Moore
Mr. Manzullo                        Mr. Gonzalez
Mr. Jones                           Mrs. Jones
Mr. Ryan (WI)                       Mr. Capuano
Mr. Ose
Mr. Sweeney
Mrs. Biggert
Mr. Terry
Mr. Green
Mr. Toomey
Mr. Vento
Mrs. Maloney
Mr. Bentsen
Mr. Maloney
Mr. Sherman
Mr. Goode

    Rep. Inslee's amendment, as amended, passed by a vote of 
52-6.
        YEAS                          NAYS
Mr. Leach                           Mr. Royce
Mr. McCollum                        Mr. Ney
Mrs. Roukema                        Mr. Barr
Mr. Bereuter                        Mrs. Kelly
Mr. Baker                           Dr. Paul
Mr. Lazio                           Mr. Manzullo
Mr. Bachus
Mr. Castle
Mr. King
Mr. Campbell
Mr. Lucas
Dr. Weldon
Mr. Ryun (KS)
Mr. Cook
Mr. Riley
Mr. Hill
Mr. LaTourette
Mr. Jones
Mr. Ryan (WI)
Mr. Ose
Mr. Sweeney
Mrs. Biggert
Mr. Terry
Mr. Green
Mr. Toomey
Mr. LaFalce
Mr. Vento
Mr. Kanjorski
Ms. Waters
Mr. Sanders
Mrs. Maloney
Mr. Gutierrez
Ms. Velazquez
Mr. Watt
Mr. Ackerman
Mr. Bentsen
Mr. Maloney
Ms. Hooley
Ms. Carson
Mr. Weygand
Mr. Sherman
Mr. Sandlin
Mr. Meeks
Ms. Lee
Mr. Goode
Mr. Mascara
Mr. Inslee
Ms. Schakowsky
Mr. Moore
Mr. Gonzalez
Mrs. Jones
Mr. Capuano

    The Committee brought up H.R. 10 and struck everything 
after the enacting clause and inserted in lieu thereof the 
Committee Print, as amended. The motion passed by voice vote. 
The Committee favorably reported H.R. 10 as amended to the full 
House by a vote of 51-8.
        YEAS                          NAYS
Mr. Leach                           Mr. Campbell
Mr. McCollum                        Dr. Paul
Mrs. Roukema                        Ms. Waters
Mr. Bereuter                        Mr. Sanders
Mr. Baker                           Ms. Carson
Mr. Lazio                           Mr. Meeks
Mr. Bachus                          Ms. Lee
Mr. Castle                          Ms. Schakowsky
Mr. King
Mr. Royce
Mr. Lucas
Mr. Metcalf
Mr. Ney
Mr. Barr
Mrs. Kelly
Dr. Weldon
Mr. Ryun (KS)
Mr. Cook
Mr. Riley
Mr. Hill
Mr. LaTourette
Mr. Manzullo
Mr. Jones
Mr. Ryan (WI)
Mr. Ose
Mr. Sweeney
Mrs. Biggert
Mr. Terry
Mr. Green
Mr. Toomey
Mr. LaFalce
Mr. Vento
Mr. Kanjorski
Mr. Maloney
Mr. Gutierrez
Ms. Velazquez
Mr. Watt
Mr. Ackerman
Mr. Bentsen
Mrs. Maloney
Mr. Hooley
Mr. Weygand
Mr. Sherman
Mr. Sandlin
Mr. Goode
Mr. Mascara
Mr. Inslee
Mr. Moore
Mr. Gonzalez
Mrs. Jones
Mr. Capuano

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                     Committee on Government Reform

    No findings and recommendations of the Committee on 
Government Reform were received as referred to in clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives.

                        Constitutional Authority

    In compliance with clause 3(d)(1) of rule XIII of the Rules 
of the House of Representatives, the constitutional authority 
for Congress to enact this legislation is derived from the 
interstate commerce clause (Clause 3, Article I). In addition, 
the power ``to coin money'' and ``regulate the value thereof'' 
provided for in Clause 5, Article I, has been broadly construed 
to allow for the Federal regulation of the provision of credit 
via the financial services industry.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

                      Advisory Committee Statement

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

                    Congressional Accountability Act

    The reporting requirement under section 102(b)(3) of the 
Congressional Accountability Act (P.L. 104-1) is inapplicable 
because this legislation does not relate to terms and 
conditions of employment or access to public services or 
accommodations.

    Congressional Budget Office Cost Estimate and Unfunded Mandates 
                                Analysis

    The cost estimate pursuant to clause 3(c)(3) of rule XIII 
of the Rules of the House of Representatives and section 402 of 
the Congressional Budget Act of 1974 had been requested but not 
prepared as of the filing of volume I of this report. The 
estimate will be contained in a future volume.

                      Section-by-Section Analysis


                    section 1. short title; purposes

    Section 1 designates the bill as the ``Financial Services 
Act of 1999'' (the ``Act''). Further, the section states that 
the purposes of the Act are: (1) to enhance competition in the 
financial services industry in order to foster innovation and 
efficiency; (2) to ensure the continued safety and soundness of 
depository institutions; (3) to provide necessary and 
appropriate protections for investors and ensure fair and 
honest markets in the delivery of financial services; (4) to 
avoid duplicative, potentially conflicting, and overly 
burdensome regulatory requirements through the creation of a 
regulatory framework for financial holding companies that 
respects the divergent requirements of each of the component 
businesses of the holding company, and that is based upon 
principles of strong functional regulation and enhanced 
regulatory coordination; (5) to reduce and, to the maximum 
extent practicable, to eliminate the legal barriers to 
affiliations between depository institutions, securities firms, 
insurance companies, and other financial services providers 
through a prudential framework; (6) to enhance the availability 
of financial services to citizens of all economic circumstances 
and all geographic areas; (7) to enhance the competitiveness of 
United States financial service providers internationally; and 
(8) to ensure compliance by depository institutions with the 
provisions of the Community Reinvestment Act (``CRA'').

 title i--facilitating affiliations among securities firms, insurance 
                 companies, and depository institutions

                        subtitle a--affiliations

                section 101. Glass-steagall act reformed

    Section 101 repeals section 20 and amends section 32 of the 
Banking Act of 1933. (Sections 16, 20, 21, and 32 of the 
Banking Act of 1933 are known as the ``Glass-Steagall Act.'')
    Section 20 currently prohibits any bank that is a member of 
the Federal Reserve System from affiliating with any company 
that is ``engaged principally in the issue, floatation, 
underwriting, public sale or distribution'' of securities. 12 
U.S.C. Sec. 377. The effect of repealing section 20 is to 
permit affiliations between banks and securities firms 
regardless of the type or volume of securities activities 
conducted by the firm. Under this Act, affiliations between 
banks and securities firms are permitted through either a 
nonbank subsidiary of a holding company oran operating 
subsidiary of a bank.
    Section 32 currently prohibits any officer, director, or 
employee of a company ``primarily engaged in the issue, 
floatation, underwriting, public sale, or distribution'' of 
securities from serving simultaneously as an officer, director, 
or employee of any member bank, except as allowed by the Board 
of Governors of the Federal Reserve System (the ``Board''). 12 
U.S.C. Sec. 78. Repealing section 32 will permit banks and 
securities firms to have interlocking officers, directors, and 
employees.

section 102. activity restrictions applicable to bank holding companies 
               which are not financial holding companies

    Section 102 amends the Bank Holding Company Act of 1956 
(``BHCA'') to permit bank holding companies (``BHCs'') to 
continue to engage in activities that the Board had found to be 
so closely related to banking as to be a proper incident 
thereto under section 4(c)(8) as of the day before the date of 
enactment of this Act.

                section 103. financial holding companies

    Section 103 creates a new section 6 of the BHCA, entitled 
``financial Holding Companies.'' Section 6 establishes the 
framework for affiliations between banks and securities firms, 
insurance companies, and other financial entities. The 
framework adopted in section 6 is significantly different than 
that currently found in section 4 of the BHCA. Recognizing that 
banks, securities firms, insurance companies, and other 
financial services providers are frequently offering the same 
or functionally similar products and services, section 6 
greatly expands permissible affiliations for BHCs from the 
current requirement in section 4 that affiliations mut be 
``closely related to banking'' to those that are ``financial in 
nature.'' Section 6 contains a broad list of activities that 
are deemed by statute to be ``financial in nature.'' These 
expanded financial affiliations are permissible for holding 
companies that meet the criteria set forth to be financial 
holding companies (``FHCs''). BHCs that wish to limit their 
activities to those that are permissible under section 4 of the 
BHCA as of the date of enactment may do so without meeting the 
requirements for being a FHC.

a. Financial holding companies

    As set forth in section 6(a), an FHC must meet the 
following criteria. All of the holding company's subsidiary 
depository institutions must be well capitalized, well managed, 
and have a satisfactory or better rating under the CRA as of 
the most recent examination of the depository institution. In 
addition, a holding company and any of its affiliates that 
underwrite or sell annuities or insurance must be in compliance 
with any applicable consent decree filed in federal court or 
any settlement agreement relating to a violation of the Fair 
Housing Act. This sectiongrants the Board the authority to 
exempt, on a case-by-case basis, FHCs from meeting the condition 
relating to the Fair Housing Act.
    A BHC that meets the requirements set forth above must file 
a declaration with the Board that it meets the criteria for 
being an FHC.

b. Financial activities

    FHCs may engage in a broad range of activities that are 
``financial in nature'' or incidental to financial activities 
or complementary to activities authorized under subsection 6 to 
the extent that the amount of such complementary activities 
remain small. Section 6(a)(3) contains a list of activities 
that are deemed to be ``financial'' which includes:
          Lending and other traditional bank activities;
          Insurance underwriting and agency activities;
          Providing financial, investment, or economic advisory 
        services;
          Issuing instruments representing interests in pools 
        of assets that a bank may own directly;
          Securities underwriting and dealing, and mutual fund 
        distribution;
          Insurance company portfolio investments as permitted 
        by applicable state insurance laws;
          Merchant banking;
          Any activity that the Board has deemed ``closely 
        related to banking'' under the BHCA; and
          Any activity that the Board has already approved for 
        U.S. banks operating abroad.
    In addition, the Board may determine by regulation or order 
that activities are financial in nature, incidental to 
financial activities, or complementary. In determining whether 
an activity is financial in nature or incidental to financial 
activities, the Board must take into account the purposes of 
the Act, changes in the market in which BHCs compete, changes 
in technology for delivering financial services, and whether 
such activity is necessary to allow BHCs and their affiliates 
to: (1) compete effectively with any company seeking to provide 
financial services in the U.S.; (2) 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; and (3) 
offer customers any available or emerging technological means 
for using financial services. Activities such as administering, 
marketing, advising or assisting with health, welfare, 
compensation, retirement or similar plans, or claim 
administration or similar programs shall be deemed to be 
incidental to insurance activities as described in section 
6(c)(3)(B).
    The Board must coordinate and consult with the Secretary of 
the Treasury (the ``Secretary'') concerning any request for a 
determination regarding whether an activity is financialor 
incidental to a financial activity. The Board may not make such a 
determination if the Secretary believes that it is not financial or 
incidental to a financial activity and provides written notice to the 
Board to that effect as provided in the Act. The Secretary may also 
recommend that an activity be deemed financial, and the Board must 
determine within 30 days whether to initiate a public rulemaking 
regarding the proposal. A similar procedure is included in section 
5136A(b)(1)(B) of the Revised Statutes regarding determinations by the 
Secretary that activities are financial and therefore permissible for 
national bank financial subsidiaries. The Board has sole authority to 
issue regulations and interpretations regarding merchant banking 
activities conducted by FHCs and national bank financial subsidiaries.
            Merchant banking
    The authorization of merchant banking activities as 
provided in section 6(c)(3)(H) is designed to recognize the 
essential role that investment banking, also known as merchant 
banking, plays in modern finance and permits an FHC that has a 
broker-dealer subsidiary engaged in securities underwriting or 
a national bank financial subsidiary that has an affiliated 
broker-dealer engaged in securities underwriting to conduct 
such activities so long as these investments do not result in 
breaching the barrier between banking and commerce. Under this 
provision, the FHC or a national bank financial subsidiary may 
directly or indirectly acquire or control any kind of ownership 
interest (including debt and equity securities, partnership 
interests, trust certificates, or other instruments 
representing ownership) in an entity engaged in any kind of 
trade or business whatsoever. (Such entities are customarily 
referred to as portfolio companies). The FHC or national bank 
financial subsidiary may make such an acquisition whether 
acting as principal, on behalf of one or more entities (e.g., 
as adviser to a fund, regardless of whether the FHC or national 
bank financial subsidiary is also an investor in the fund), 
including entities that the FHC controls (other than a 
depository institution), or otherwise.
    The Committee recognizes that the investment may result in 
the FHC, affiliate, or national bank financial subsidiary 
acquiring control of a portfolio company or employees of the 
FHC, an affiliate, or a national bank financial subsidiary 
constituting a majority of the board of directors of a 
portfolio company. However, section 6(c)(3)(H) imposes on all 
investments three conditions designed to maintain the 
separation between banking and commerce. First, the ownership 
interests in question may not be acquired or held by a 
depository institution. Only a broker-dealer affiliate engaged 
in securities underwriting, a nonbanking affiliate, or a 
national bank financial subsidiary may make such investments. 
In this regard, section 6(f)(5) restricts any joint marketing 
and lending activities between a depository institution and 
portfolio companies. Second, the ownership interests must be 
acquired or held for the purpose of appreciation and ultimate 
resale or other disposition and for such a period of time as 
will permit the sale or disposition of the investment on a 
reasonable basis consistent with the nature of the investment 
activity. The Committee recognizes that this broad language 
contemplates a variety of factors which may affect the decision 
to sell or dispose of the investment, including but not limited 
to overall conditions in the financial or other markets, the 
nature of the portfolio company's business, the financial 
condition and results of operation of the portfolio company, 
opportunities for selling or disposing of all or part of the 
investment or portfolio company in a manner whichwill maximize 
investment return, and any fiduciary, contractual, or other duties to 
co-investors and advisory clients. In this regard, the Committee also 
recognizes that the nature of certain investments is such that they 
must often be held for a considerable period of time in order to 
realize their potential value. Third, during the period such ownership 
interests are held, the FHC, an affiliate, or a national bank financial 
subsidiary may not actively manage or operate portfolio company except 
insofar as necessary to achieve the investment objectives. The 
Committee anticipates that employees of the FHC, affiliate, or national 
bank financial subsidiary may have certain dealings with the management 
of a portfolio company. The Committee recognizes that there may be 
special circumstances when active, day-to-day management or operation 
may be necessary to achieve the objectives of the investment.
    The Committee believes that compliance with these 
requirements of section 6(c)(3)(H) can be ascertained either by 
periodic reports from or by examination of the FHC, affiliate, 
or national bank financial subsidiary making the investment and 
that no reporting by or examination of the portfolio company 
itself is necessary or appropriate other than in the unusual 
case in which reports or examinations are necessary to assure 
compliance with the BHCA and other statutory restrictions 
governing transactions involving depository institutions and 
portfolio companies.
    Furthermore, the Committee intends section 6(c)(3)(H) to 
permit investment banking firms to continue to conduct their 
principal investing in substantially the same manner as at 
present. The Board shall take into account that investment 
banking firms affiliated with depository institutions should be 
able to compete on an equal basis for principal investments 
with firms unaffiliated with any depository institutions so 
that the effectiveness of these organizations in their 
investment banking activities is not compromised. For this 
reason, the Committee intends that the Board not require, even 
informally, any pre-clearance of principal investments and not 
impose unduly restrictive limitations on the holding period for 
such investments. The Committee intends that the Board may 
adopt appropriate rules governing activities under section 
6(c)(3)(H) and section 5135A(b)(1)(C) to assure that the 
purposes of this Act, including the separation of banking and 
commerce and the protection of affiliated depository 
institutions, are carried out.
            Insurance company portfolio investments
    Section 6(c)(3)(I) recognizes that as part of the ordinary 
course of business, insurance companies frequently invest funds 
received from policyholders by acquiring most or all the shares 
of stock of a company not engaged in the insurance business. 
These investments are made in the ordinary course of business 
pursuant to state insurance laws governing investments by 
insurance companies, and are subject to ongoing review and 
approval by the applicable state regulator. Section 6(c)(3)(I) 
permits an insurance company that is affiliated with a 
depository institution to continue to directly or indirectly 
acquire or control any kind of ownership interest in any 
company if certain requirements are met. The shares held by 
such a company: (i) must not be acquired or held by a 
depository institution or a subsidiary of a depository 
institution; (ii) must be acquired and held by an insurance 
company that is predominantly engaged in underwriting life, 
accident and health, or property casualty (other than credit-
relatedinsurance) or in providing and issuing annuities; and 
(iii) must represent an investment made in the ordinary course of 
business of such insurance company in accordance with relevant state 
law governing such investments. In addition, during the period such 
ownership interests are held, the FHC must not directly or indirectly 
participate in the day-to-day management or operation of the company 
except insofar as necessary to achieve the objectives of the 
requirements in clauses (ii) and (iii).
    In the FHC structure envisioned by H.R. 10, in which the 
BHC is not an insurance company, it is unlikely that the FHC 
itself would participate in the day-to-day management or 
operation of a company in which the insurance company 
subsidiary has invested (``portfolio company''). Instead, the 
FHC would leave to its insurance company subsidiary the 
responsibility of oversight of its investments, subject, of 
course, to state regulation. To the extent that the FHC might 
actually participate in the management or operation of a 
portfolio company, such participation would ordinarily be for 
the purpose of safeguarding its indirect investment in 
accordance with the applicable requirements of state insurance 
law. This is true irrespective of any overlap between board 
members and nominal officers of the FHC and the portfolio 
company. If the FHC should be an insurance company, similar 
principles should apply.

c. Authority to engage in financial activities

    Section 6(c) provides that in most cases, an FHC and a 
wholesale financial holding company can engage in any activity 
to the extent permissible under section 6 without giving prior 
notice to or receiving approval from the Board. An FHC and a 
wholesale financial holding company are required to provide 
notice to the Board within 30 days after commencing the 
activity or acquiring a company engaged in the activity. Prior 
notice is required for acquisitions of financial firms by an 
FHC or a wholesale financial holding company if the firm to be 
acquired has consolidated total assets in excess of $40 
billion. The notice must be filed no later than 60 days prior 
to the proposed acquisition. Prior notice and approval is 
required pursuant to section 4(j) of the BHCA for an FHC to 
engage in complementary activities. Acquisitions of depository 
institutions remain subject to the approval requirements under 
section 3 of the BHCA.

d. Noncompliance with the criteria for qualifying bank holding 
        companies

    Section 6(d) sets out the procedures to be followed if the 
subsidiary depository institutions of an FHC fail to meet the 
requirements set out in section 6(a) for such companies. This 
section is specifically intended to address situations in which 
a BHC and its subsidiary depository institutions were in 
compliance with the requirements set out in section 6(a) at the 
time the company became an FHC but subsequently falls out of 
compliance. If a subsidiary depository institution of an FHC is 
not in compliance with those requirements, the appropriate 
federal banking agency for the subsidiary depository 
institution must notify the Board who will then notify the 
company. The company and any relevant subsidiary depository 
institution must, within 45 days of receipt of such notice (or 
such additional period as the Board may permit), execute an 
agreement with the Board and the appropriate federal banking 
agency to comply with the requirements. Until the condition is 
corrected, the board may impose restrictions on theconduct or 
activities of the company or any affiliate of the company (other than a 
depository institution or a subsidiary of the institution) and the 
appropriate Federal banking agency may impose limitations on a 
subsidiary depository institution or a subsidiary of the institution. 
After receiving notice from the Board, the company or a subsidiary 
depository institution must execute and implement an agreement, comply 
with the restrictions imposed, if any, and restore the capital of the 
relevant subsidiary depository institution within 180 days of receiving 
the notice, or come into compliance with the requirement to be well-
managed and have a satisfactory CRA rating at the time of the next 
examination. If a company or affiliated depository institution fails to 
meet these requirements, the Board can require a company to either 
divest control of any subsidiary depository institution or cease 
activities (other than through a depository institution or subsidiary 
thereof) that are broader than the activities that were permissible 
under section 4(c) of the BHCA. During this period, a BHC may continue 
to engage in financial activities authorized for FHCs unless ordered by 
the Board to restrict or to cease engaging in such activities.

e. Safeguards for bank subsidiaries

    Section 6(e) requires an FHC to have appropriate internal 
controls to assure that its procedures for identifying 
financial and operational risks within the company and its 
subsidiaries adequately protect the company's subsidiary 
insured depository institutions from such risks and that it has 
reasonable policies and procedures to preserve the separate 
corporate identity and limited liability of the company and its 
subsidiaries for the protection of the subsidiary insured 
depository institutions.

f. Authority to retain limited nonfinancial activities

    Section 6(f) permits a company (other than a BHC) that 
becomes an FHC to continue to engage in any activity and retain 
control of any company engaged in nonfinancial activities 
provided certain conditions are met. The company must have been 
engaged in the activity as of September 30, 1997. The holding 
company must derive at least 85% of its consolidated gross 
revenues from financial activities (excluding depository 
institution revenues), and the company may engage only in the 
same nonfinancial activities that it conducted on September 30, 
1997 and activities permissible under this Act. The company may 
continue to conduct such nonfinancial activities for a 10-year 
period beginning on the date of enactment of this Act. The 
Board may permit a 5-year extension if such extension would not 
be detrimental to the public interest. During the grandfather 
period, the company may not engage in new nonfinancial 
activities through the acquisition of another company and may 
not expand the grandfathered commercial activity through a 
merger or acquisition. The section also contains prohibitions 
on cross-marketing between subsidiary depository institutions 
and grandfathered nonfinancial affiliates as well as companies 
held under the merchant banking and insurance company 
investment provisions found in sections 6(c)(3) (H) and (I). 
Finally, an insured depository institution may not engage in 
any transactions with an affiliate engaged in nonfinancial 
activities pursuant to sections 6(f), 6(c)(3)(H) and (I) or 
10(c).

g. Developing activities

    Section 6(g) permits an FHC and a wholesale financial 
company to engage in any activity that the Board has not 
determined to be financial in nature or incidental to financial 
activities provided certain conditions are met. The company 
must reasonably believe that the activity is financial, the 
gross revenues from all such activities must represent less 
than 5% of the consolidated gross revenues of the company, the 
aggregate total assets of the companies engaged in developing 
activities under this subsection must not exceed 5% of the 
holding company's consolidated total assets, the total capital 
invested in developing activities under this subsection must 
represent less than 5% of the consolidated total capital of the 
holding company, and neither the Board nor the Secretary have 
determined that the activity is not financial. In addition, the 
holding company may not acquire a firm under this subsection 
that would require prior approval by the Board under section 
6(c)(6) and the holding company must provide the Board with 
written notice within 10 days of commencing the activity or 
consummating the acquisition.

h. Report

    The Board and the Secretary are required to prepare and 
submit a joint report to Congress by the end of the 4-year 
period beginning on the date of the enactment of this Act, and 
every 4 years thereafter. The report is to contain a summary of 
new activities which are financial in nature, including 
grandfathered commercial activities. Each report shall also 
contain a discussion of (1) actions by the Board and the 
Secretary with regard to activities which are incidental or 
complementary to financial activities, (2) an analysis and 
discussion of the risks posed by commercial activities of FHCs 
to the safety and soundness of affiliate depository 
institutions, (3) an analysis and discussion of the effect of 
mergers and acquisitions on market concentration in the 
financial services industry, and (4) an analysis and discussion 
by the Board and the Secretary, in consultation with the other 
federal banking agencies, of the impact of the implementation 
of this Act on the extent of meeting community credit needs and 
capital availability by the CRA.

                  section 104. operation of state law

    Section 104(a), in general, pre-empts a state's ability to 
prevent or restrict affiliations between financial entities, 
except that a state insurance regulatory may continue to 
require, not later than 60 days before the effective date of 
the proposed acquisition, notice and specified information 
about potential purchasers of insurance companies in order to 
ensure that all mandated capital requirements are met and 
maintained; to place an insurance company into receivership or 
conservatorship; and to restrict a change in the ownership for 
a period of three years for recently demutualized insurers. In 
addition, state anti-trust and general corporate laws are not 
subject to the preemption provision of section 104(a)(1), but 
are subject to the antidiscrimination provisions of section 
104(c).
    Section 104(b)(1), in general, pre-empts a state's ability 
to prevent or restrict the sales activities authorized under 
this Act of an insured depository institution with the 
exception ofinsurance sales and other insurance activities.
    Section 104(b)(2) governs state regulation of insurance 
sales so that states may not prevent or significantly interfere 
with the insurance sales of a depository institution, except 
that a state may enact restrictions contained in the thirteen 
harbors listed in section 104(b)(2)(B).
    With respect to state laws on insurance sales enacted prior 
to September 3, 1998, but which fall outside the provisions of 
104(b)(2)(B), those laws are subject to the Supreme Court's 
Barnett decision and, in connection with those laws, section 
307(e) (which provides for a standard of judicial review of 
``without unequal deference'') will not apply.
    With respect to state laws on insurance sales enacted on or 
after September 3, 1998, but which fall outside the provisions 
of 104(b)(2)(B), those laws are subject to the anti-
discrimination test contained in section 104(c) and can also be 
subject to the Supreme Court's Barnett decision. However, the 
standard of review provided under Section 307(e) will apply.
    Section 104(b)(3) ensures that insurance companies 
affiliated with depository institutions continue to be 
regulated by the domiciliary state as envisioned under the 
McCarran-Ferguson Act, provided that the laws are consistent 
with the provisions of Section 104(c).
    Section 104(b)(4) preserves the right of states to regulate 
the non-insurance affiliates of banks.
    Section 104(c) creates a standard for state regulation of 
insurance that prevents a state from discriminating against the 
insurance activities of depository institutions. This 
nondiscrimination standard does not apply to state laws on 
insurance sales enacted prior to September 3, 1998.
    Section 104(d) clarifies that subsections (a) and (b) shall 
not be construed to affect the jurisdiction of the securities 
commission of any state to investigate and bring enforcement 
actions in connection with securities or securities 
transactions.

         section 105. mutual bank holding companies authorized

    Section 105 amends the BHCA to expand the types of BHCs 
organized in mutual form to which the BHCA applies. Such mutual 
bank holding companies will be regulated similarly to other 
BHCs.

 section 105a. public meetings for large bank acquisitions and mergers

    Section 105A amends section 3 of the BHCA to require that 
in each case involving one or more insured depository 
institutions each of which has total assets of more than $1 
billion, theBoard shall, as necessary and on a timely basis, 
conduct public meetings in one or more areas where the Board believes 
there will be a substantial public impact. This section contains 
similar amendments to the Bank Merger Act, the National Bank Act, and 
the Home Owners' Loan Act.

         SECTION 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICE

    Section 106 applies the provisions of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act of 1994 
regarding deposit production offices and out-of-state lending 
to any interstate branch established or acquired under this 
Act. In addition, this section expands the definition of 
interstate branch for purposes of the deposit production 
provisions to include all branches of a bank owned by an out-
of-state holding company.

       section 107. clarification of branch closure requirements

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

       SECTION 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS

    Section 108(a) amends Section 4(f) of the BHCA. Section 
4(f) provides that certain companies that control banks are not 
treated as BHCs. These are companies that control banks that, 
prior to the Competitive Equality Banking Act of 1987 
(``CEBA''), either made commercial loans or accepted demand 
deposits but did not do both. These banks are known as ``CEBA 
banks.'' Under Section 4(f)(2)(A)(ii), such companies may not 
acquire control of more than 5 percent of the shares or assets 
of an additional bank or savings association, other than 
pursuant to certain enumerated exception. Section 108(a) amends 
Section 4(f)(2)(a)(ii) to allow these companies to acquire 
assets derived from or incidental to consumer lending 
activities in which credit card banks or industrial loan 
companies are permitted to engage, without losing their 
exemption from treatment as BHCs under the BHCA.
    Section 108(a) also lifts the activities restrictions 
imposed on CEBA banks provided the bank is well managed and 
well capitalized but maintains the restriction whereby CEBA 
banks are permitted to either accept demand deposits or make 
commercial loans, but not both. CEBA banks that accept demand 
deposits would continue to be restricted in their ability 
engage in making traditional commercial loans, but the section 
would permit them to issue corporate credit cards (e.g. cards 
used by business employees for travel and entertainment 
expenses). This section also amends current law to permit 
limited purpose banks to cross market affiliate products.
    In addition, section 108(a) establishes an 180-day cure 
period for CEBA banks and their parent companies to correct 
violations of the conditions of their exception. The authority 
of a CEBA bank to conduct expanded activities is not affected 
so long as any violation is corrected by the end of the cure 
period.
    This section also expands the types of overdrafts which 
CEBA banks may incur on behalf of an affiliate to include 
overdrafts that are solely in connection with an activity that 
is so closely related to banking, or managing or controlling 
banks, as to be a proper incident thereto, to the extent the 
bank incurring the overdraft and the affiliate on whose behalf 
the overdraft is incurred each document that the overdraft is 
for that purpose.
    Section 108(b) amends Section 2(c)(2)(H) of the BHCA. 
Section 2(c)(2)(H) exempts industrial loan companies from the 
definition of ``bank'' for purposes of the BHCA. Under Section 
2(c)(2)(H), the exemption is conditioned on an industrial loan 
company's not permitting an overdraft on behalf of an 
affiliate, or incurring an overdraft on behalf of an affiliate 
at its account at a Federal Reserve bank, unless such overdraft 
is the result of an inadvertent computer or accounting error. 
Section 108(b) amends Section 2(c)(2)(H) to allow industrial 
loan companies to incur the same overdrafts on behalf of 
affiliates as are permitted for CEBA banks described in Section 
4(f)(1) of the BHCA (banks that, prior to the enactment of the 
CEBA, either made commercial loans or accepted insured deposits 
but did not do both).

   section 109. reports on ongoing federal trade commission study or 
                        consumer privacy issues

    Section 109 requires the Federal Trade Commission (``FTC'') 
to submit interim reports on its study of consumer privacy 
issues.

  section 110. general accounting office study of economic impact on 
         community banks and other small financial institutions

    Section 110 requires the General Accounting Office 
(``GAO'') to study the projected impact of this Act on 
financial institutions with assets of $100 million or less.

  subtitle b--streamlining supervision of financial holding companies

    section 111. streamlining financial holding company supervision

    Section 111 provides that the Board may require any BHC or 
subsidiary thereof to submit reports informing the Board of its 
financial condition, financial systems and statutory 
compliance. The Board is directed to use existing examination 
reports prepared by other regulators, publicly reported 
information and reports filed with other agencies to the 
fullest extent possible.
    The Board is authorized to examine each BHC and its 
subsidiaries. However, it may examine functionally-regulated 
nondepository institution holding company subsidiaries only if 
the Board has reasonable cause to believe that the subsidiary 
is engaged in activities that pose a material risk to the 
depository institution or is not in compliance with certain 
statutory and regulatory restrictions. The Board is directed to 
use the fullest extent possible examinations made by 
appropriate federal and state regulators.
    If a BHC is not ``significantly engaged'' in non-banking 
activities (e.g., a shell holding company), the bill would 
authorize the Board to designate the appropriate bank 
regulatory agency of the lead depository institution subsidiary 
as the appropriate federal banking agency for the BHC.
    The Board is required to defer:
         to the Securities and Exchange Commission (``SEC'') to 
        interpret all federal securities laws applicable to the 
        activities, conduct, and operations of registered 
        brokers, dealers, investment advisers, and investment 
        companies;
         to the relevant state securities authorities to 
        interpret state securities laws relating to the 
        activities, conduct and operations of registered 
        brokers, dealers, and investment advisers; and
         to the relevant state insurance regulators to 
        interpret insurance laws relating to the activities, 
        conduct and operations of insurance companies and 
        insurance agents.
    The Board is not authorized to prescribe capital 
requirements for any functionally-related nondepository 
subsidiary of an FHC. In development, establishing, and 
assessing holding company capital or capital adequacy rules, 
guidelines, standards, or requirements, the Board also has been 
prohibited from taking into account the activities, operations, 
or investments of an affiliated investment company, unless the 
investment company is a bank holding company or a bank holding 
company owns more than 25 percent of the shares of the 
investment company (other than certain small investment 
companies). Investment companies are regulated entities that 
must meet diversification, liquidity, and other requirements 
specifically suited to their role as investment vehicles. 
Consequently, the Committee believed that it was important to 
ensure that the Board not indirectly regulate these entities 
through the imposition of capital requirements at the holding 
company level, except in the very limited circumstances noted 
above.

   SECTION 112. ELIMINATION OF APPLICATION REQUIREMENT FOR FINANCIAL 
                           HOLDING COMPANIES

    Section 112 amends Section 5(a) of the BHCA to provide that 
a declaration filed in accordance with Section 6(b)(1)(E) will 
satisfy the requirements of Section 5(a) with regard to the 
registration of a BHC, but not a requirement to file an 
application pursuant to Section 3. This eliminates duplicative 
filing requirements.

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

    Section 113 amends Section 5 of the BHCA to prohibit the 
Board from requiring a broker-dealer or insurance company that 
is a BHC to infuse funds into an insured depository subsidiary 
if the holding company's functional regulator, the SEC or state 
insurance company or the broker or dealer, as the case may 
be.'' If the SEC or state insurance regulator makes such a 
determination, the Board can order the holding company to 
divest the insured depository institution.

                   SECTION 114. PRUDENTIAL SAFEGUARDS

    Section 114 permits the Office of the Comptroller of the 
Currency (``OCC''), the Board, and the Federal Deposit 
Insurance Corporation (``FDIC'') to impose restrictions on 
transactions between a bank and a subsidiary and the Board to 
impose restrictions on transactions between a bank and 
affiliate. Such restrictions may be imposed if the effect would 
be to avoid significant risk to the safety and soundness of a 
bank or to the federal deposit insurance fund. Restrictions 
also may be imposed for the purpose of enhancing the financial 
stability of BHCs, avoiding conflicts of interest, enhancing 
the privacy of customers, and promoting the application of 
national treatment and equality of competitive opportunity 
between domestic and foreign bank holding companies. Each 
agency is required to regulatory review the continuing need for 
any such restrictions that have been imposed.

            SECTION 115. EXAMINATION OF INVESTMENT COMPANIES

    Section 115 authorizes the SEC to be the sole federal 
agency with authority to inspect and examine any registered 
investment company that is not a BHC or savings and loan 
holding company, except when a designated banking agency finds 
that an examination of transactions and relationships with 
affiliated investment companies is reasonably necessary to 
determine the financial condition of specific depository 
institutions. In addition, the FDIC is authorized to examine to 
an affiliate of any insured depository institution as necessary 
to determine the financial condition of specific depository 
institutions. The FDIC may examine any affiliate of an insured 
depository institution if such an examination is necessary to 
disclose fully the relationship between the depository 
institution and affiliate and the effect of such relationship 
on the institution so that the FDIC may determine the condition 
of the institution for insurance purposes.

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

    Section 116 adds a new Section 10A to the BHCA. Section 10A 
is intended to protect regulated subsidiaries, which already 
are subject to extensive regulation at the hands of their 
functional regulators, from additional and duplicative 
regulation by the Board. Section 10A prohibits the Board from 
becoming involved in or interfering with the regular, day-to-
day business and operations of regulated subsidiaries. Section 
10A also prohibits the Board from taking any action under 
specified statutes where the purpose or effect of doing so 
would be to exclude regulated subsidiaries from a line of 
business that is financial in nature or prevent regulated 
subsidiaries from offering a product or service that is 
financial in nature. None of the above would prevent the Board 
from taking action in an individual case where the manner in 
which an activity is conducted renders action necessary to 
prevent or redress an unsafe or unsound practice or breach of 
fiduciary duty by a regulated subsidiary that poses a material 
risk to the financial safety, soundness or stability of an 
affiliated depository institution or to the domestic or 
international payment system.
    The Committee intends the term ``material risk'' to mean a 
risk of serious harm to the financial safety, soundness, or 
stability of the particular depository institution at issue or 
to the payment system. In considering whether it is not 
reasonably possible to effectively protect against risk through 
action directed at an affiliated depository institution or 
depository institutions generally, the Board must consider the 
full scope of any statutory authority it and the other federal 
banking agencies may have over any type of depository 
institution, including national banks and state nonmember 
banks, under any statute which the a Board and the other 
federal banking agencies are authorized to administer. In this 
regard, the Committee expects the Board, if necessary and 
possible, to request other federal banking agencies to exercise 
their authority in order to protect against any federal risk, 
and the Committee expects the other agencies to coordinate with 
and accommodate requests for action by the Board.

                 SECTION 117. INTERAGENCY CONSULTATION

    Section 117 states that the Board as the umbrella 
regulator, the appropriate federal banking regulator, and the 
state insurance regulator as the functional regulator of 
insurance activities, should consult with each other and share 
examination reports and other information. It provides that 
upon the request of a state insurance regulator, the Board may 
provide any information regarding the financial condition, risk 
management policies, and operations of any financial holding 
company that controls an insurance company regulated by that 
state insuranceregulator, and vice versa. It further provides 
that upon the request of a state insurance regulator, the appropriate 
federal banking agency may provide information about any transaction or 
relationship between a depository institution and affiliated insurance 
company regulated by that state insurance regulator, and vice versa. In 
addition, the appropriate federal banking regulator is required to 
consult with the appropriate state insurance regulator before making 
determinations between a depository institution, wholesale financial 
institution, or HFC with an insurance company.

           section 118. equivalent regulatory and supervision

    Section 118 provides that the provisions of both Section 
5(c) of the BHCA and Section 10A of the BHCA also limit any 
authority that a federal banking agency might otherwise have 
under any statute to require reports, make examinations, impose 
capital requirements, or take any other action with respect to 
BHCs and their nonbank subsidiaries. Section 5(c) of the BHCA 
limits the authority of the Board to require reports of, make 
examination of, and to impose capital requirements of BHCs and 
their nonbank subsidiaries. Section 10A of the BHCA limits any 
Board authority to take action with respect to bank holding 
companies and their nonbank subsidiaries. The FDIC, OCC, and 
Office of Thrift Supervision (``OTS'') are subject to the same 
standards and requirements as are applicable to the Board under 
these provisions, with the exception that the FDIC, OCC, and 
OTS are authorized to examine an affiliate of any insured 
depository institution as necessary to determine the condition 
of an insured depository institution supervised by the 
respective agency.

     section 119. prohibition on fdic assistance to affiliates and 
                              subsidiaries

    Section 119 amends Section 11(a)(4)(B) of the Federal 
Deposit Insurance Act generally to prohibit the use of the Bank 
Insurance Fund (``BIF'') and the Savings Association Insurance 
Fund (``SAIF'') to benefit any shareholder, subsidiary or 
nondepository or nondepository affiliate.
    The general prohibition of the use of the BIF and the SAIF 
to benefit any shareholder, funds, as well as the American 
taxpayer, will not bear the burden of providing a safety net 
for insurance companies, securities firms, and other nonbanking 
financial entities that may become part of FHCs as a result of 
this Act. These firms do not pay for deposit insurance and also 
do not have CRA-like responsibilities as banks, and will not 
have bailout assistance from the FDIC in the event of dire 
financial or liquidity problems, regardless of any banking 
services these firms provide. This section does not affect the 
ability of the Treasury or the Board to be involved in 
activities that would mitigate disorderly activity in the 
financial markets or reduce systemic risk to the economy.

  section 120. repeal of savings bank provisions in the bank holding 
                          company act of 1956

    Section 120 repeals section 3(f) of the BHCA to conform the 
regulation of savings bank life insurance with the regulations 
governing all other financial institutions in a BHC structure.

                   section 120a. technical amendment

               subtitle c--subsidiaries of national banks

 section 121. permissible activities for subsidiaries of national banks

    Section 121 provides that national bank subsidiaries may 
engage only in activities permissible for national banks to 
engage in directly, activities otherwise expressly authorized 
by statute, and activities that are financial in nature or 
incidental to financial activities. Subsidiaries engaged in 
financial activities under this Act are defined as ``financial 
subsidiaries.'' This section also requires a national bank 
which has total assets of $10 billion or more to be a 
subsidiary of a holding company if it desires to control a 
subsidiary engaged in financial activity pursuant to this 
section. There is a limited exclusion from the community needs 
requirements for newly acquired depository institutions.
    This section defines financial activities a those 
activities permitted for a financial holding company pursuant 
to section 6(c)(3) of the BHCA or activities that the Secretary 
determines to be financial in nature or incidental to financial 
activities in accordance with the procedures set forth in the 
bill. Excluded from the list of permissible financial 
activities for subsidiaries of national banks are insurance 
underwriting (including insurance company portfolio 
investments) and real estate investment and development. In 
addition to the activities that are permitted for bank holding 
companies pursuant to section 6(c)(3), national bank financial 
subsidiaries may also engage in developing financial 
activities. The Board has sole authority to prescribe 
regulations and issue interpretations regarding merchant 
banking activities.
    In defining what activities are financial in nature or 
incidental to such financial activities, both the Secretary and 
the Board are required to notify and consult with each other 
regarding any request, proposal, or application for a 
determination of whether an activity is financial in nature or 
incidental to a financial activity. The Secretary and the Board 
may veto a determination made by the other. The intent of this 
procedure, which is set forth in parallel provisions in this 
section for the Secretary and in section 103 for the Board, is 
to ensure consistency in interpretations and encourage 
regulatory coordination.
    In order for a financial subsidiary to engage in activities 
that are financial in nature or incidental to financial 
activities, its parent national bank and all its depository 
institution affiliates must be well capitalized, well managed, 
and have a satisfactory CRA rating. Procedures are set out in 
this section to address situations where there is a failure to 
comply with these conditions.

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

    Section 122 is intended to establish firewalls between an 
insured bank and a financial subsidiary in the areas of capital 
and transactions with affiliates. It amends the Federal Deposit 
Insurance Act to require that in determining whether an insured 
bank complies with applicable regulatory capital standards, the 
appropriate federal banking agency must deduct the aggregate 
amount of the outstanding equity investments of the bank in 
financial subsidiaries permitted under this bill, including the 
amount of any net earnings retained by such subsidiary and the 
assets and liabilities of such financial subsidiaries must not 
be consolidated with those of the parent bank. In addition, 
this section provides that an insured bank must not, without 
the prior approval of the appropriate federal banking agency, 
make any equity investment in a financial subsidiary if the 
investment would, when made, exceed that amount that the bank 
could pay as a dividend without obtaining prior regulatory 
approval. Each insured bank that has a financial subsidiary or 
affiliate is required to maintain and comply with policies and 
procedures to preserve the separate corporate identity and 
legal status of the bank. Finally, section 122 amends the 
Federal Reserve Act to apply the restrictions on transactions 
with affiliates contained in sections 23A and 23B of that Act 
to transactions between a bank and a financial subsidiary. It 
is intended that the restrictions contained in those sections 
will apply in the same manner as they apply to transactions 
between a bank and an affiliate with the exception that a 
parent bank may make an equity investment in a financial 
subsidiary which would exceed the section 23A limits on 
transactions with affiliates provided the bank's appropriate 
federal banking agency has approved the investment and the bank 
meets the capital deduction requirement.

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

    Section 123 makes it a crime for bank personnel to 
fraudulently represent that the bank will be liable for any 
obligation of an affiliate or subsidiary of a bank.

                   SECTION 124. FUNCTIONAL REGULATION

    Section 124 provides for the functional regulation of 
subsidiaries of insured depository institutions. Specifically, 
a broker or dealer that is a subsidiary of an insured 
depository institution shall be subject to regulation under the 
Securities and Exchange Act of 1934 and an insurance agency or 
brokerage subsidiary shall be subject to regulation by a state 
insurance authority.

     SECTION 125. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT

    Section 125 repeals the restrictions in section 11(m) of 
the Federal Reserve Act on loans by Federal Reserve member 
banks secured by stock or bond collateral. Limitations on loans 
to one borrower imposed pursuant to other statutory authority 
are not affected.

SUBTITLE d--WHOLESALE FINANCIAL HOLDING COMPANIES; WHOLESALE FINANCIAL 
                              INSTITUTIONS

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

     SECTION 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED

    Section 131 establishes Wholesale Financial Holding 
Companies (``WFHC''), defining a WFHC as an FHC that is 
predominantly financial, controls one or more Wholesale 
Financial Institutions (``WFIs''), and is not affiliated with 
an insured bank or savings association. WFHCs are subject to 
supervision by the Board, which may adopt capital adequacy 
rules for them. It is expected that the Board would reexamine 
its current holding company capital guidelines to include 
approaches that focus on excessive use of double leverage by 
holding companies to fund investments in stock of its 
subsidiaries. It is also expected that the Board will take full 
and appropriate account of the different classes of holding 
companies that may exist, such as those that do not control 
insured depository institutions or are predominately engaged in 
activities other than controlling insured depository 
institutions. The Board should further take into account that 
certain holding companies predominantly engaged in nonbanking 
financial activities have been organized in non-corporate 
structures, and should treat as common equity such interests as 
limited company memberships and partnerships interests where 
such interests are accepted in the marketplace as equity 
available to absorb losses. Commercial activities of WFHCs are 
grandfathered, but may not be expanded through merger or 
consolidation.

             SECTION 132. AUTHORIZATION TO RELEASE REPORTS

    Section 132 authorizes the release of certain reports under 
the Federal Reserve Act, and includes the Commodity Futures 
Trading Commission (``CFTC'') under the definitions of the 
Right to Financial Privacy Act.

                   section 133. conforming amendments

    Section 133 makes conforming amendments to the BHCA and the 
Federal Deposit Insurance Act.

              chapter 2--wholesale financial institutions

             section 136. wholesale financial institutions

    Section 136 authorizes the establishment of wholesale 
financial institutions (``WFIs''). A WFI can either be a 
national bank or a state member bank. A national bank is 
required to apply to the Comptroller for permission to operate 
as a WFI in accordance with regulations issued by the 
Comptroller. The approval of the Board is required for a state 
bank to operate as a WFI. Section 136(f) limits at ten the 
number of WFIs which can be members of the Federal Reserve 
System and have access to the Federal Reserve's payment system 
and discount window. There may be no more than 5 national WFIs 
and 5 state WFIs.
    Section 136(b) amends the Federal Reserve Act by adding a 
new section 9B which requires WFIs to become members of the 
Federal Reserve System. Section 9B states that unless otherwise 
provided, WFIs will be subject to the Federal Reserve Act to 
the same extent and in the same manner as a state member 
insured banks or national banks, except that a WFI may only 
terminate membership on the terms and conditions set by the 
Board and with prior written approval from the Board.
    Capital requirements for all WFIs must be established by 
the Board, which may also impose limitations on transactions 
with affiliates, set special clearing balance requirements, and 
take other actions to protect the payments system and the 
discount window. The Board may also exempt WFIs from provisions 
applying to member banks if it finds that the exemption is 
consistent with the promotion of safety and soundness, the 
protection of the deposit insurance funds, and the protection 
of creditors and other persons, including Federal Reserve 
banks.
    State WFIs have all of the powers and privileges of 
national banks, and thus of national WFIs. This includes 
branching rights and preemption of state laws.
    All WFIs must be well capitalized and well managed, and 
those failing these standards must take corrective action 
within prescribed time periods, or face divestiture. Section 9B 
also provides that WFIs will be subject to the prompt 
corrective action provisions contained in section 38 of the 
FDIA. The Board is responsible for setting the relevant capital 
levels and capital measures for each capital category under 
prompt corrective action for all WFIs. Except for the setting 
of capital levels, national WFIs are subject to prompt 
corrective action by the OCC andstate WFIs are subject to 
action by the Board. Subsection 136(a) subjects WFIs to the CRA.

               subtitle e--preservation of ftc authority

   section 141. amendment to the bank holding company act of 1956 to 
  modify notification and post-approval waiting period for section 3 
                             transactions.

    Section 141 sets forth a statutory requirement that the 
Board immediately notify the FTC about transactions by a BHC to 
merge with or acquire another BHC if the transaction involves 
the acquisition of nonbank assets.

                 section 142. interagency data sharing

    Section 142 provides that federal banking regulators share 
with the Attorney General and the FTC any information that the 
antitrust agencies deem necessary for antitrust review of 
appropriate transactions.

  section 143. clarification of status of subsidiaries and affiliates

    Section 143 provides that FHCs proposing to acquire a 
nonbank company engaged in financial activities must provide 
the antitrust agencies with prior notice of the transaction 
under the Hart-Scott-Rodino Act. It also clarifies that any 
person affiliated with a depository institution that is not 
itself a depository institution shall not be deemed a ``bank'' 
or ``savings association'' for purposes of the FTC Act or other 
law enforced by the FTC. The jurisdiction of the FTC over 
transactions involving the non-bank affiliates and subsidiaries 
of banks and savings associations under the FTC Act is affirmed 
by stating that such entities will not be treated as banks or 
savings associations.

                     section 144. annual gao report

    Section 144 requires the Comptroller General of the U.S. to 
annually report to Congress on market concentration in the 
financial services industry and its impact on consumers. The 
annual report is to focus on affiliations and acquisitions 
involving depository institutions, depository institution 
holding companies, securities firms, and insurance companies.

subtitle f--applying the principles of national treatment and equality 
   of competitive opportunity to foreign banks and foreign financial 
                              institutions

section 151. applying the principles of national treatment and equality 
of competitive opportunity to foreign banks that are financial holding 
                               companies

    Section 151 amends Section 8(c) of the International 
Banking Act of 1978 (``IBA'') by adding a new paragraph (3) to 
permit termination of the financial grandfathering authority 
granted by the IBA and other statutes to foreign banks to 
engage in certain financial activities. This grandfathering was 
necessary because of current law restrictions. With the repeal 
of these restrictions, foreign banks with financial 
grandfathered affiliates would be permitted to retain these 
grandfathered companies on the same terms that domestic banking 
organizations are permitted to establish.
    The legislation provides that foreign banks should no 
longer be entitled to financial grandfathered rights authorized 
under new section 6 of the BHCA after the bank has filed a 
declaration under section 6(b)(1)(D) of the BHCA or receives a 
Board determination under Section 10(d)(1) of the BHCA (other 
grandfathered rights would not be affected). In order to 
provide both competitive equality between domestic and foreign 
banks and fairness to the foreign banks that have relied for 
many years on their grandfathering rights, the foreign bank is 
granted two years which to have an application approved under 
section 6. Failing such approval within this time period, the 
Board may impose restrictions and requirements comparable to 
those on FHC, including those to conduct grandfathered 
activities in compliance with the safeguards of section 6 of 
the BHCA.

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

    Section 152 amends Section 8A of the Federal Deposit 
Insurance Act by adding a new subsection (i) which allows an 
insured branch of a foreign bank to terminate voluntarily its 
deposit insurance under the same conditions and extent as 
insured state and national banks.

                  section 153. representative offices

    Section 153 would require prior approval by the Board for 
the establishment of representative offices by a foreign bank.

        SUBTITLE G--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

                        SECTION 161. SHORT TITLE

    Section 161 designates this subtitle as the ``Federal Home 
Loan Bank System Modernization Act of 1999''.

                        SECTION 162. DEFINITIONS

    Section 162 provides technical changes to definitions 
within the Federal Home Loan Bank Act. It also creates a new 
class of ``community financial institutions'' with assets less 
than $500 million.

              SECTION 163. SAVINGS ASSOCIATION MEMBERSHIP

    This section eliminates mandatory membership for federal 
savings associations and federal savings banks, which under 
current law may not withdraw from the Federal Home Loan Bank 
(``FHLBanks'') System. This allows any mandatory member to 
withdraw from membership on the same terms and conditions as 
any voluntary member may do under current law. The right of 
federal savings associations and savings banks to leave the 
System is not limited by the inclusion elsewhere in the bill of 
a transition provision that preserves the current capital 
structure of the FHLBanks (which includes a bar on withdrawals 
by such institutions) until the new capital structure can be 
implemented. It is intended that the amendments made by Section 
163 are the sole provision governing the ability of mandatory 
members to withdraw from the System.

              SECTION 164. ADVANCES TO MEMBERS; COLLATERAL

    Current law allows the FHLBanks to make long-term advances 
to their members only for providing funds for residential 
housing finance. To give ``community financial institutions'' 
(CFIs) greater access to the FHLBanks System, Section 164 
authorizes CFIs (banks with less than $500 million in assets) 
to obtain long-term advances for providing funds for small 
business, agricultural, rural development, or low-income 
community development leading. Section 164 also allows a CFI to 
secure its advances with new categories of collateral, i.e., 
secured loans made for the purpose of small business, 
agriculture, rural development, or low-income community 
development, or securities representing interests in such 
loans. Separately, Section 164 repeals a cap (30 percent of a 
member's capital) on the amount of advances that may be secured 
by ``other real estate related collateral,'' but requires that 
the FHLBank accepting such collateral must be able to ascertain 
the value of the collateral and to perfect a security interest 
in the collateral. As they do with currently authorized types 
of collateral, the FHLBanks are expected to establish 
appropriate discounts for all of these new categories of 
collateral.
    Section 164 authorizes the Finance Board to review the 
collateral standards of any FHLBank relating to the new 
categories of collateral for CFIs and for the expanded category 
of ``other real estate related collateral.'' The Finance Board 
may order a FHLBank to make its standards for those types of 
collateral more stringent, if necessary for reasons of safety 
and soundness. The addition of this provision is intended to 
ensure that the new collateral provisions are implemented 
prudently, and does not limit the authority of the Finance 
Board to review or revise any other collateral standards or 
practices of the FHLBanks. The Finance Board, as the safety and 
soundness regulator for the FHLBanks, has the authority under 
current law to address such matters.

                   SECTION 165. ELIGIBILITY CRITERIA

    Section 165 waives the ten percent residential mortgage 
asset test for FDIC-insured institutions with less $500 million 
in assets. All institutions are currently required to have ten 
percent of their total assets in residential mortgage loans in 
order to become members of the system.

                    SECTION 166. MANAGEMENT OF BANKS

    Section 166 transfer from the Finance Board to the 
individual FHLBanks authority over a number of operational 
areas, including director and employee compensation, terms and 
conditions for advances, interest rates on advances, dividends, 
and forms for advance applications. The section also clarifies 
other powers and duties of the Finance Board with regard to 
enforcement.

              SECTION 167. RESOLUTION FUNDING CORPORATION

    Section 167 changes the current annual $300 million funding 
formula for the Resolution Funding Corporation obligations of 
the FHLBanks to a percentage of annual net earnings. The 
Committee does not intend a REFCorp fix that will result in a 
significant payment increase for the FHLBanks. The Committee 
will continue to review whether 20.75% is the most appropriate 
figure.

       SECTION 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS

    Section 168 replaces the existing redeemable stock 
structure of the FHLBank System with a capital structure that 
requires each FHLBank to meet a leverage limit and a risk-based 
permanent capital requirement. The bill authorizes the FHLBanks 
to issue three classes of stock;one class could be redeemed on 
6-months notice (Class A), one class could be redeemed on 5-years 
notice (Class B), and one class would be non-redeemable (Class C). 
After the Finance Board adopts new capital regulations, each FHLBank 
must submit a capital structure plan establishing the manner in which 
it is to be capitalized.
    The bill includes a leverage capital requirement, under 
which each FHLBank must maintain at a minimum total capital in 
an amount equal to 5 percent of the total on-balance sheet 
assets of the FHLBank. Total capital includes all of a 
FHLBank's permanent capital as well as all of its Class A 
stock, all Class B stock (other than the limited amounts that 
count as permanent capital), certain general loss reserves, and 
other items determined by the Finance Board as capable of 
absorbing losses. the permanent capital of a FHLBank includes 
only its Class C stock, retained earnings, and limited amounts 
of Class B stock (not to exceed 1 percent of the assets of the 
FHLBank).
    To encourage the FHLBanks to build their permanent capital, 
the bill includes a weighting provision, under which the 
capital items with the most permanence (Class C stock and 
retained earnings) count more toward the leverage requirement 
than do capital items with less permanence (Class B and Class 
A). Accordingly, the Class C stock and retained earnings are 
weighted at two times the paid-in face value, while the Class B 
stock is weighted at one and one-half times the paid-in face 
value. Class A stock is counted at paid-in face value for 
leverage purposes. The rationale for the weighting provision is 
that the permanent and longer-term stock is better able to 
absorb losses than is the short-term redeemable stock, and it 
is the intent to include incentives, both for the FHLBanks and 
their members, to build permanent capital at each FHLBank. As a 
further incentive, each FHLBank is authorized to establish 
preferences--such as greater dividends, additional voting 
rights, liquidation preferences, or reduced minimum 
investments--for holders of its permanent and longer-term stock 
that are not available to the Class A stock.
    To ensure that the amount of a FHLBank's capital is 
commensurate with the risks (both on- and off-balance sheet) 
that it undertakes, the bill requires the Finance Board to 
establish a risk-based capital requirement that can be met only 
with permanent capital, i.e., Class C stock, retained earnings, 
and limited amounts of Class B stock. Requiring permanent 
capital is intended to provide a degree of market discipline on 
the risks undertaken by the FHLBanks.
    The risk-based capital requirement must take into account 
both the credit risk and the market risk (which includes 
interest rate risk) to which the FHLBanks are exposed. The 
risk-based requirement will operate in conjunction with the 
leverage requirement, and a FHLBank must at all times be in 
compliance with both requirements. If a FHLBank takes greater 
risks in its operations, the risk-based capital requirement may 
well cause it to maintain a greater amount of capital than 
would be required under the leverage limit alone. The 
assessment of market risks is to be determined by use of a 
stress test to be developed by the Finance Board. The stress 
test must take into account how certain market variables, such 
as changes in interest rates, rate volatility, and changes in 
the shape of the yield curve, would affect the FHLBanks. The 
Finance Board must give due consideration to any risk-based 
capital test established by the Office ofFederal Housing 
Enterprise Oversight (``OFHEO'') for Fannie Mae and Freddie Mac, and 
may incorporate any provisions of the OFHEO risk-based capital 
regulations it deems appropriate for the operations of the FHLBanks.
    Because the new capital structure plans will not take 
effect until two years or more after enactment, the bill 
includes a transition provision that effectively preserves the 
current capital structure of the FHLBanks until the new capital 
structure is implemented. During the transition period a 
FHLBank may continue to admit new members and may permit 
existing members (including federal savings associations and 
federal savings banks) to withdraw. For institutions that 
previously had withdrawn from membership, the bill shortens the 
10-year ``lock-out'' period to 5 years, but also would allow 
any former member that had withdrawn prior to December 31, 1997 
to reapply for membership at any time.
    It is expected that the Finance Board, to the extent 
possible, will manage the transition to the new capital 
structure in a manner that will minimize or avoid any adverse 
effect on the Affordable Housing Program (``AHP''). The Federal 
Home Loan Banks' AHP is one of the nation's most effective 
targeted housing programs. Over the last decade, the 12 Federal 
Home Loan Banks have contributed more than $800 million of 
their net earnings to the AHP. Those funds have helped 
subsidize approximately 200,000 units of affordable housing for 
very-low-, low-, and moderate-income families throughout the 
country. The APH's continued success depends critically upon a 
profitable and well-capitalized Federal Home Loan Bank System.
    The bill authorizes the board of directors at each FHLBank, 
subject to Finance Board approval, to determine the details of 
the capital structure plan for the FHLBank, which may vary from 
one FHLBank to another. In all cases, each member must maintain 
a minimum investment in the stock of the FHLBank, and each 
FHLBank must at all times maintain sufficient capital to remain 
in compliance with both the leverage and risk-based capital 
requirements. The bill provides the FHLBanks up to three years 
to fully implement their capital structure plans. As an 
inducement for the members to purchase Class C stock, the bill 
provides that the holders of the outstanding Class C stock of 
the FHLBank shall own the retained earnings, surplus, undivided 
profits, and equity reserves of the FHLBank. If a FHLBank has 
no permanent stock outstanding, then the members owning the 
other classes of stock would own the retained earnings of the 
FHLBank.

                       SUBTITLE H--ATM FEE REFORM

                        SECTION 171. SHORT TITLE

    Section 171 designates this subtitle as the ``ATM Fee 
Reform Act of 1999''.

 SECTION 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST ATM

    Section 172 amends the Electronic Fund Transfer Act by 
requiring certain disclosures regarding automatic teller 
machine (``ATM'') surcharge fees. The disclosures only apply to 
surcharges imposed by ATM operators on noncustomers--not fees 
from the consumer's own bank. ATM operators assessing 
surcharges are required to: (1) post a sign on the ATM machine 
stating that a fee will be charged, and (2) post a notice on 
the screen that a fee will be charged and the amount of such 
fee after the transaction is initiated and before the consumer 
is irrevocably committed to completing the transaction. The 
second disclosure may be made by a paper notice issued from the 
machine. No surcharge fee may be charged unless the required 
disclosures are made and the consumer elects to proceed with 
the transaction after receiving the notice.

SECTION 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS 
                                 ISSUED

    Section 173 amends the Electronic Fund Transfer Act by 
requiring a notice to consumers when ATM cards are issued that 
would notify consumers that surcharges may be imposed by other 
parties when transactions are initiated from ATMs not operated 
by the card issuer.

                     SECTION 174. FEASIBILITY STUDY

    Section 174 mandates a GAO study of the feasibility, costs, 
benefits to consumers, and competitive impact of requiring ATM 
operators to disclose not only the surcharge imposed by the 
machine in use, but also any fees imposed by the consumer's own 
bank, any network used to effect the transaction, and any other 
party involved in the transfer. The report is due six months 
after the date of enactment of this Act.

        SECTION 175. NO LIABILITY IF POSTED NOTICES ARE DAMAGED

    Section 175 exempts ATM operators from liability under this 
section if properly posted signs are subsequently removed, 
damaged, or altered by any person other than the operator of 
the ATM.

          SUBTITLE I--CUSTOMER SERVICE, EDUCATION AND PRIVACY

       section 176. customer protection and education regulations

    Section 176 requires the federal banking agencies to issue 
joint regulations, within one year after the effective date of 
the Act, regarding bank retail sales of nondeposit products. 
The regulations to be issued under section 176 are to apply to 
retail sales, solicitations, advertising, and offers of 
nondeposit products by any insured depository institution or 
any person who is engaged in such activities at an office of 
the institution. The agencies also are directed to apply the 
regulations to subsidiaries of insured depository institutions 
as appropriate. The regulations are required to cover sales 
practices, including anti-coercion and suitability rules, 
disclosure and advertising requirements, consumer grievance 
procedures, and standards for the separation of banking and 
nonbanking activities. Many of the provisions of this section 
are based on the Interagency Statement on Retail Sales of 
Nondeposit Products and as such the agencies should use that 
Statement as a guideline, where appropriate, in implementing 
the regulations required by this section.
    Nondeposit products are defined to include investment and 
insurance products that are not deposit products as well as 
shares of registered investment companies. Specifically 
excluded from the category of nondeposit products are loans, 
other extensions of credit, letters of credit, discount and 
trust services, and other instruments, insurance, or investment 
products specifically excluded by joint agency rulemaking.
    Section 176(b) addresses the anticoercion and suitability 
rules. This subsection requires the federal banking agencies to 
promulgate regulations that address practices which could 
coerce or mislead consumers regarding the sale of a nondeposit 
product when they agree to purchase a credit product from an 
insured depository. The agencies are directed to adopt rules 
prohibiting an insured depository institution from engaging in 
any practices that would lead a consumer to believe that an 
extension of credit is conditional on the purchase of a 
nondeposit product from the institution (or its affiliates or 
subsidiaries), or an agreement by the consumer not to obtain a 
nondeposit product from an unaffiliated entity, in violation of 
the anti-tying rules contained in section 106(b) of the BHCA 
Amendments of 1970. The anticoercion sales practice rules 
required under section 176(b) are intended to be consistent 
with section 106(b) and the interpretations thereunder. This 
section is not intended to prohibit the offering of products 
and services permitted under section 106(b). Rather, it is 
intended that the agencies address sales practices that would 
lead a customer to believe that products are tied in violation 
of section 106(b). The subsection also required the federal 
banking agencies to adopt joint rules, modeled on appropriate 
sections of the Interagency Statement, providing suitability 
standards for retail sales of investment products by insured 
depository institutions and to promulgate comparable rules 
governing sales of insurance and other nondeposit products to 
assure that such products are appropriate to a customer's needs 
and financial capability based on financial information 
provided by the customer.
    The Committee believes that depository institutions should 
take reasonable steps to minimize the possibility of consumer 
confusion regarding the nondeposit products that they sell. As 
such, section 176(c) directs the agencies to adopt disclosure 
and advertising rules whichrequire that banks provide 
disclosure at the time the consumer opens an account for the purchase 
of any nondeposit product or in connection with the initial purchase of 
a nondeposit product. In addition, banks are required to obtain a 
written acknowledgment, signed and dated by the consumer, that the 
consumer has received the disclosures. Moreover, given the rapid growth 
of technology in consumer banking, section 176(c) directs the agencies 
to make necessary adjustments in the disclosure and acknowledgment 
requirements for sales made in person, by telephone, or by electronic 
media in order to provide for the most appropriate and complete form of 
disclosure and acknowledgment.
    Section 176(d) requires that the agencies adopt standards 
for the separation of banking and nonbanking activities. This 
subsection requires that the nondeposit product sales area be 
located in a physically segregated area, to the extent 
practicable, from the area where retail deposits are routinely 
taken. The Committee understands that it may be appropriate to 
use signs or other means to distinguish the nondeposit product 
area from the area where retail deposits are routinely 
accepted. The agencies are also required to adopt standards 
prohibiting any person from selling or offering to sell any 
nondeposit product in any part of any office the institution or 
on behalf of the institution, unless such person is 
appropriately qualified and licensed. In addition, the agencies 
must adopt regulations pertaining to the receipt by bank 
employees of a one-time nominal and fixed dollar fee for each 
customer referral. While this provision allows for referral 
fees, it does not affect, and is not intended to affect, any 
provision of the Real Estate Settlement Procedures Act.
    Section 176(e) requires the federal banking agencies to 
jointly establish a consumer complaint mechanism for 
expeditiously addressing meritorious consumer complaints by 
developing procedures for investigating such complaints and for 
informing consumers of their rights.
    Section 176 shall not be construed as granting, limiting, 
or otherwise affecting the authority of the SEC, any self-
regulatory organization, the Municipal Securities Rulemaking 
Board, or the Secretary under any federal securities law, or, 
except as otherwise provided, any authority of the state 
insurance commissioners under state insurance law.

          Section 177. Depository Institution Privacy Policies

    Section 177 adds a new subsection (h) to section 6 of the 
BHCA, requiring any depository institution that becomes 
affiliated with a financial or savings and loan holding company 
to make a clear and conspicuous disclosure of its privacy 
policy to its customers. The disclosures required by this 
provision must include (1) a statement of the depository 
institution's policy with respect to disclosing customer 
information to third parties, other than agents of the 
institution, for marketing purposes; and (2) the disclosures 
mandated by section 603(d)(2)(A)(iii) of the Fair Credit 
Reporting Act (12 U.S.C. 1681a(d)(2)(A)(iii)) with regard to 
the right of the customer, at any time, to direct that 
information referred to in such section not be shared 
withaffiliates of the depository institution.
    For persons who become customers of a depository 
institution subsequent to the depository institution 
affiliating with a financial or savings and loan holding 
company, the disclosures required by this section are to be 
made at the time at which the business relationship between the 
customer and the institution commences. For persons who are 
already customers of a depository institution at the time that 
the institution becomes affiliated with a financial or savings 
and loan holding company, the disclosures required by this 
section are to be made within a reasonable time after the 
affiliation is consummated.

     section 178. confidentiality of health and medical information

    Section 178 adds a new subsection (i) to section 6 of the 
BHCA, requiring an insurance company that becomes a financial 
or savings and loan holding company, or an affiliate of such a 
company, to maintain a practice of protecting the 
confidentiality of individually identifiable health and medical 
information of its customers. Disclosure of such information is 
authorized in the following circumstances: with the consent, or 
at the direction, of the customer; for insurance underwriting 
and reinsuring policies, account administration, reporting, 
investigating, or preventing fraud or material 
misrepresentation, processing premium payments, processing 
insurance claims or defending any action relating to such 
claims, administering insurance benefits (including utilization 
review activities), providing information to the customer's 
physician or other health care provider, participating in 
research projects, for purposes of enabling business decisions 
to be made about or in connection with the purchase, transfer, 
merger, or sale of an insurance-related business or businesses; 
or as otherwise required or specifically permitted by federal 
or state law; or in connection with the authorization, 
settlement, billing, processing, clearing, transferring, 
reconciling, or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card or 
account number, or by other payment means; the transfer of 
receivables, accounts, or interest therein; the audit of the 
debit, credit, or other payment information; compliance with 
federal, state, or local law, or with a properly authorized 
civil, criminal, or regulatory investigation by federal, state, 
or local authorities; or fraud protection, risk control, 
resolving customers disputes or inquiries, communicating with 
the person to whom the information relates, or reporting to 
consumer reporting agencies.
    Section 264(c)(1) of the Health Insurance Portability and 
Accountability Act of 1996 (P.L. 104-191) gives Congress until 
August 21, 1999, to pass comprehensive legislation ``governing 
the standards with respect to privacy of individually 
identifiable health information.'' If no such legislation is 
passed by that deadline, the statute gives the Department of 
Health and Human Services six additional months within which to 
promulgate final regulations containing such standards. In 
deference to the process mandated by P.L. 104-191, section 
178's provisions shall not become effective until February 1, 
2000. Should legislation that satisfies the requirements of 
section 264(c)(1) of the Health Insurance Portability and 
Accountability Act beenacted prior to February 1, 2000, section 
178 will never take effect. If such legislation is enacted subsequent 
to February 1, 2000, section 178 will cease to be effective.
    In the event that section 178 takes effect on February 1, 
2000, the Board is required to consult with the Secretary of 
Health and Human Services in administering its provisions.

               section 179. financial information privacy

    Section 179 amends the Consumer Credit Protection Act by 
adding a new title to be cited as ``Title X--the Financial 
Information Privacy Act.'' The new title is comprised of eight 
sections:

Section 1001. Short title; table of contents

    ``Financial Information Privacy Act of 1999.''

Section 1002. Definitions

    The term ``customer'' is defined as any person to whom a 
financial institution provides a product or service, including 
that of acting as a fiduciary. The term ``customer information 
of a financial institution'' is defined as any information 
maintained by a financial institution which is derived from the 
relationship between the financial institution and its customer 
and is identified with the customer. The term ``financial 
institution'' is defined as any institution engaged in the 
business of providing financial services to customers who 
maintain a credit, deposit, trust, or other financial account 
or relationship with the institution, including but not limited 
to depository institutions (as defined in section 19(b)(1)(A) 
of the Federal Reserve Act); loan or finance companies; credit 
card issuers; operators of credit card systems; and consumer 
reporting agencies. The Board is authorized to prescribe 
regulations further defining the types of institutions which 
shall be treated as ``financial institutions'' for purposes of 
this title.

Section 1003. Privacy protection for customer information of financial 
        institutions

    This section makes it unlawful for any person to obtain or 
attempt to obtain, or cause to be disclosed or attempt to cause 
to be disclosed to any person, customer information of a 
financial institution relating to another person by (1) 
knowingly making a false, fictitious, or fraudulent statement 
or representation to an officer, employee, or agent of a 
financial institution with the intent to deceive the officer, 
employee, or agent into relying on that statement or 
representation for purposes of releasing the customer 
information; (2) knowingly making a false, fictitious, or 
fraudulent statement or representation to a customer of a 
financial institution with the intent to deceive the customer 
into relying on the that statement or representation for 
purposes of releasing the customer information or authorizing 
the release of such information; or (3) providing any document 
to an officer, employee, or agent of a financial institution, 
knowing that the document is forged, counterfeit, lost, or 
stolen, was fraudulently obtained, or contains a false, 
fictitious, or fraudulent statement or representation, if the 
document is provided with the intent todeceive the officer, 
employee, or agent into relying on that document for purposes of 
releasing the customer information. This section also makes it unlawful 
to request a person to obtain customer information of a financial 
institution knowing or consciously avoiding knowing that it was 
obtained through any of the three methods described in this section.
    The prohibitions specified in this section do not apply to 
any action by a law enforcement agency to obtain customer 
information of a financial institution in the performance of 
its official duties. For purposes of this section, the term 
``law enforcement agency'' is intended to include federal, 
state and local agencies, and specifically encompasses those 
agencies responsible for enforcing child-support obligations.
    This section's prohibitions do not apply to instances in 
which a financial institution or its officers, employees, or 
agents, obtain customer information of such financial 
institution in the course of (1) testing the security 
procedures or systems of such institution for maintaining the 
confidentiality of customer information; (2) investigating 
allegations of misconduct or negligence on the part of any 
officer, employee, or agent of the financial institution; or 
(3) recovering customer information of the financial 
institution which was obtained or received by another person in 
any manner described in this section. Thus, for example, when a 
fraud prevention unit of a financial institution succeeds in 
retrieving information from an information broker that has been 
obtained through fraud or deceit, the financial institution is 
not in violation of this provision. This ``safe harbor'' 
extends to agents or contractors retained by a financial 
institution to implement anti-fraud or self-testing programs.
    This section does not apply to the obtaining of customer 
information of a financial institution that is otherwise 
available as a public record filed pursuant to the federal 
securities laws.
    This section does not prohibit any State-licensed private 
investigator, or any officer, employee, or agent of such 
private investigator, from obtaining customer information of a 
financial institution, to the extent reasonably necessary to 
collect child support from a person adjudged to have been 
delinquent in his or her obligations by a federal or state 
court, and to the extent that such action by a State-licensed 
private investigator is not unlawful under any other federal or 
state law or regulation.

Section 1004. Administrative enforcement

    This section assigns enforcement authority to the FTC and 
the federal banking agencies according to their respective 
jurisdictions. The enforcement authority exercised by the FTC 
under this title is coextensive with its authority under the 
Fair Debt Collection Practices Act. In instances where 
depository institutions are implicated in obtaining information 
through fraudulent means, or requesting that such information 
be obtained knowing or consciously avoiding knowing that 
fraudulent or deceptive methods will be used to collect it, the 
appropriate federal banking agencies have the authority to 
enforce this title.
    This section further provides that in addition to such 
other remedies as are available understate law, the states have 
the authority to enforce this Act, through actions to enjoin violations 
or recover damages of not more than $1,000 for each violation. The FTC 
and the other federal agencies with enforcement authority under this 
section have the right to intervene in any action by a state to enforce 
this Act. Where the FTC or any other federal agency with enforcement 
authority under this section has instituted a civil action to enforce 
this Act, no state may, during the pendency of that action, bring its 
own action under this section against any defendant named in the 
federal complaint for any act alleged in that complaint.

Section 1005. Civil liability

    This section provides that any person which is not a 
financial institution may be held civilly liable for violating 
this Act by a financial institution or a customer whose 
financial information was obtained unlawfully. The Act 
authorizes the recovery of (A) actual damages (1) in the amount 
sustained by the financial institution or customer as a result 
of the violation, or (2) in the amount of any compensation 
received by the defendant, including the value of any 
nonmonetary compensation, as a result of the violation, 
whichever is greater; (B) such additional damages as the court 
may allow; and (C) in the case of a successful action, the 
costs of the action, including reasonable attorneys' fees.
    The purpose of this section is to permit consumers and 
financial institutions who have been victimized by unscrupulous 
information brokers and others who traffic in fraudulently 
obtained financial information to hold those parties 
accountable. Affording injured private parties a right of 
action increases the likelihood that the Act's prohibitions 
will be vigorously enforced. For example, a financial 
institution will, in some instances, have a stronger incentive 
to proceed against an information broker or his client than a 
law enforcement agency or prosecutor operating with limited 
resources and forced to juggle competing priorities, 
particularly in those cases where the amount of monetary 
damages is minimal.
    This section does not give rise to a private right of 
action against a financial institution from which customer 
information has been obtained in a manner proscribed by section 
1003.

Section 1006. Criminal penalties

    Whoever violates this Act or attempts to violate this Act 
shall be fined in accordance with title 18, United States Code 
(up to $250,000 in the case of an individual or $500,000 in the 
case of a corporation), or imprisoned for not more than 5 
years, or both. Whoever violates this Act while violating or 
attempting to violate other laws, as part of a pattern of 
illegal activity involving more than $100,000 in a 12 month 
period, shall have their fines doubled or be imprisoned for not 
more than years, or both.

Section 1007. Relation to State laws

    This Act does not supersede any state statutes, 
regulations, orders, or interpretations, except to the extent 
that they are inconsistent with the provisions of this Act, and 
then only to the extent of the inconsistency. A state statute, 
regulation, order, or interpretation is not inconsistentwith 
the provisions of this Act of the protection such statute, regulation, 
order, or interpretation affords any person is greater than the 
protection provided under this Act.

Section 1008. Agency guidance

    This section requires the federal banking agencies (as 
defined in section 3(z) of the Federal Deposit Insurance Act) 
to issue advisories to depository institutions under their 
jurisdiction to assist those institutions in deterring and 
detecting activities proscribed in this section.
    Section 179 requires the GAO, in consultation with the FTC, 
federal banking agencies, and appropriate federal law 
enforcement agencies, to submit a report to Congress within 18 
months of the date of enactment on (1) the efficacy and 
adequacy of this legislation in addressing attempts to obtain 
financial information by fraudulent means and false pretenses; 
and (2) any recommendations regarding additional legislation or 
regulations necessary to address threats to the privacy of 
financial information.

          section 180. study of current financial privacy laws

    Section 180 directs the federal banking agencies to study 
whether existing laws regulating the sharing of customer 
information by insured depository institutions with affiliates 
of such institutions adequately protect the privacy rights of 
customers of such institutions, and to report their findings 
and conclusions to Congress within six months of enactment of 
this Act, together with such recommendations for legislative or 
administrative action as the agencies may determine to be 
appropriate.

                 subtitle j--direct activities of banks

    section 181. authority of national banks to underwrite certain 
                            municipal bonds

    Section 181 amends 12 U.S.C. 24(7) to expand the scope of 
securities activities permissible for a national bank to 
include municipal revenue bonds, limited obligation bonds, and 
other obligations that satisfy the requirements of Section 
142(b)(1) of the Internal Revenue Code issued by a state or 
political subdivision thereof.

                  subtitle k--deposit insurance funds

          section 186. study of safety and soundness of funds

    Section 186 directs the FDIC to study the following aspects 
of the SAIF and BIF: their safety and soundness and adequacy of 
reserves, in light of the size of newly merged institutions and 
affiliations with other financial institutions; their 
geographic concentration levels; and their required plans for 
possible merger of the funds. A report of such study to 
Congress is required prior to the end of the nine-month period 
beginning on the date of the Act's enactment.

       section 187. elimination of saif and dif special reserves

    Section 187 eliminates the need for the establishment of a 
SAIF ``special reserve'' which the FDIC was required to 
establish beginning in 1999.

                  subtitle l--miscellaneous provisions

    section 191. termination of ``know your customers'' regulations

    Section 191 prohibits the ``Know Your Customer'' 
regulations that were proposed by the OCC, OTS, the Board, and 
the FDIC from being published in final form. To the extent that 
any such regulation has become effective before the date of the 
enactment of this Act, such regulation shall cease to be 
effective.

            section 192. gao study of conflicts of interest

    Section 192 requires the Comptroller General to conduct a 
study analyzing the conflict of interest faced by the Federal 
Reserve between its role as a primary regulator of the banking 
industry and its role as a vendor of services to the banking 
and financial services industry. Specifically, the GAO should 
address the conflict of interest between the Federal Reserve's 
role as a regulator of the payment system and its role as a 
competitor with private sector providers of payments services, 
and how best to resolve that conflict. The report of the study 
along with any recommended legislative or administrative 
actions is due one year from enactment of this Act.

       section 193. clarification of source of strength doctrine

    Section 193 enhances the source of strength doctrine by 
protecting the federal banking agencies and the deposit 
insurance funds from claims brought by the bankruptcy trustee 
of a depository institution holding company or other person for 
the return of capital infusions. Specifically, the section 
amends Section 18 of the Federal Deposit Insurance Act by 
limiting claims against any federal banking agency or against 
any conservator or receiver appointed byany federal banking 
agency rising from or relating to the transfer of money, assets, or 
other property to a depository institution by a controlling stockholder 
or a depository institution holding company, or any affiliate or 
subsidiary of such holding company if at the time of the transfer the 
depository institution was subject to a direction by a federal banking 
agency to increase its capital or was undercapitalized. This section 
does not limit the right of a depository institution, a controlling 
stockholder, or a depository institution holding company to seek direct 
review of an order or directive of a federal banking agency under the 
Administrative Procedures Act in accordance with various banking 
statutes.

     SECTION 194. STUDY OF COST OF ALL FEDERAL BANKING REGULATIONS

    Section 194 mandates a study by the Board, in consultation 
with the other federal banking agencies, of the total annual 
costs and benefits of all federal financial regulations and 
regulatory requirements applicable to banks. The report, along 
with such recommendations for legislative and administrative 
action as the Board may determine to be appropriate, is due 
before the end of the 2-year period beginning on the date of 
the enactment of this Act.

    SECTION 195. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE 
              REQUIREMENTS TO ON-LINE BANKING AND LENDING

    Section 195 mandates the federal banking agencies to 
conduct a study of banking regulations regarding the delivery 
of financial services, including those regulations that may 
assume that there will be person-to-person contact during the 
course of a financial services transactions, and report their 
recommendations on adapting those existing requirements to 
online banking and lending. This report, together with such 
recommendations for legislative or regulatory action as the 
agencies may determine to be appropriate, is due to Congress 
within one year of the date of the enactment of this Act.

                  SUBTITLE M--EFFECTIVE DATE OF TITLE

                      SECTION 196. EFFECTIVE DATE

    Section 196 provides that Title I becomes effective 270 
days after enactment of the Act.

                    Title II--Functional Regulation


                    SUBTITLE A--BROKERS AND DEALERS

                   SECTION 201. DEFINITION OF BROKER

    Section 201 amends the Securities and Exchange Act of 1934 
(1934 Act) definition of ``Broker'' to narrow the blanket 
exemption for banks. A ``broker'' is defined as ``any person 
engaged in the business of effecting transactions in securities 
for the account of others.'' The bill exempts a bank from 
classification as a ``broker'' only to the extent that the bank 
engages in activities that are enumerated in this section.

                   SECTION 202. DEFINITION OF DEALER

    Section 202 amends the 1934 Act's blanket exemption for 
banks from the definition of ``dealer''. A ``dealer'' is 
defined as ``any person engaged in the business of buying or 
selling securities for such person's own account through a 
broker or otherwise''. The bill exempts a bank from 
classification as a ``dealer'' only to the extent that the bank 
engages in: transactions for investment purposes for accounts 
where the bank acts as a trustee or fiduciary; transactions in 
commercial paper, bank acceptances, commercial bills, qualified 
Canadian government obligations, and Brady bonds; the issuance 
or sale of asset backed securities to qualified investors; 
transactions in ``traditional banking products''; or buying or 
selling derivative instruments to qualified investors.

  SECTION 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES OFFERINGS

    Section 203 creates a new limited qualification category of 
National Association of Securities Dealers, Inc. (``NASD'') 
registration for bank employees engaged in private securities 
offerings.

                    SECTION 204. INFORMATION SHARING

    Section 204 requires federal banking agencies, in 
consultation with the SEC, to establish record-keeping 
requirements for banks relying on the bank exceptions to 
``broker'' or ``dealer'' classification. These records must be 
made available to he SEC upon request.

       SECTION 205. DEFINITION AND TREATMENT OF BANKING PRODUCTS

    Section 205 defines ``traditional banking product,'' for 
the purposes of the bank broker-dealer exemptions. The 
definition includes: deposit accounts; deposit instruments 
issued by a bank; banker's acceptances; letters of credit or 
loans issued by a bank; credit card debt accounts; loan 
participations sold to qualified investors; and certain non-
security derivative instruments.
    Section 205 clarifies that banks offering or entering into 
all types of swaps transactions (as defined in section 
11(e)(8)(D)(vi) of the Federal Deposit Insurance Act), and 
including credit and equity swaps, would not be required to 
register as brokers or dealers since such swaps fall within the 
definition of ``traditional banking products,'' subject to the 
determination of federal banking authorities. It is the 
Committee's intent, as reflected in a presumption incorporated 
in this section, that a bank may enter into equity swaps only 
with ``qualified investors'' unless a federal banking agency 
finds otherwise. This section contains a classification 
limitation which states that ``classification of a particular 
product or instrument as a traditional banking product . . . 
shall not be construed as finding or implying that such product 
or instrument is or is not a security for any purpose under the 
securities laws, or is or is not an account, agreement, 
contract, or transaction for any purpose under the Commodity 
Exchange Act.''
    The SEC, in consultation with the Board, is authorized to 
determine by rulemaking that a specific product which is 
developed in the future is a security and must be ``pushed-
out'' to a broker/dealer affiliate. In such cases, the Federal 
Reserve, or the aggrieved party, may initiate, within sixty 
days, an appeal to the United States Court of Appeals for the 
District of Columbia Circuit. The court's consideration must 
affirm and enforce, or set aside, the regulation based upon 
whether the subject product or instrument is best regulated 
under federal banking laws or federal securities laws. The SEC 
is prohibiting from bringing an enforcement action forcing 
registration as a broker-dealer while such judicial proceedings 
are pending.

                section 206. qualified investor defined

    Section 206 defines ``qualified investor'' to include: any 
registered investment company; bank; savings and loan 
association; broker; dealer; insurance company; business 
development company; licensed small business investment 
company; state sponsored employee benefit plan or employee 
benefit plan under the Employee Retirement Income Security Act 
of 1974 (``ERISA'') (other than an Individual Retirement 
Account); certain trusts; any market intermediary; any foreign 
bank or any foreign government; any corporation, company or 
individual who owns and invests at least $10 million; any 
government or political subdivision who owns and invests at 
least $50 million; and any multinational or supra-national 
entity; or any other person that the SEC determines to be a 
qualified investor.

               section 207. government securities defined

    Section 207 amends the Securities Exchange Act of 1934 
definition of ``government securities'' to include qualified 
Canadian government obligations for the purposes of Section 15C 
of that Act (which governs government securities brokers) as 
applied to a bank.

                      section 208. effective date

    Section 208 provides that the subtitle shall take effect 
270 days after enactment.

                   section 209. rule of construction

    Section 209 provides that nothing in the reported bill 
shall supersede, affect, or otherwise limit the scope and 
applicability of the Commodity Exchange Act. In adopting the 
provisions of the reported bill, the Committee did not intend 
in any way to alter or affect the applicability of the 
Commodity Exchange Act to transactions covered by these 
provisions, to the extent such Act might otherwise be 
applicable to such transactions.

             subtitle b--bank investment company activities

 section 211. custody of investment company assets by affiliated banks

    Section 211(a) reorganizes Section 17(f) of the Investment 
Company Act of 1940 and adds a new paragraph 17(f)(6). New 
paragraph 17(f)(6) authorizes the SEC to adopt rules 
prescribing the conditions under which a bank or an affiliate 
of a bank, when either of them is affiliated with an investment 
company, may serve as custodian of that investment company.
    Section 211(b) similarly amends Section 26 of the 
Investment Company Act to add a new subsection 26(b). New 
subsection 26(b) authorizes the SEC to adopt rules prescribing 
the conditions under which a bank or an affiliate of a bank, 
when either of them is affiliated with a unit investment trust, 
may serve as custodian of that unit investment trust.
    Section 211(c) amends Section 36(a) of the Investment 
Company Act to add a new paragraph 36(a)(3). Section 36(a) 
currently authorizes the SEC to bring actions for breach of 
fiduciary duty against the officers, directors, investment 
advisers, and principal underwriters of an investment company. 
New paragraph 36(a)(3) provides the SEC with the authority to 
bring an action for breach of fiduciary duty against a 
custodian of an investment company as well.

        section 212. lending to an affiliated investment company

    Section 212 amends Section 17(a) of the Investment Company 
Act to add a new paragraph 17(a)(4). Section 17(a) currently 
makes it unlawful for any affiliated person, promoter, or 
principal underwriter of an investment company to sell any 
security or other property to the investment company (subject 
to certain exceptions), to purchase any security or other 
propertyfrom the investment company (except securities of the 
investment company), or to borrow money or other property from the 
investment company (except as permitted by Section 21(b)). New 
paragraph 17(a)(4) makes it unlawful for any affiliated person, 
promoter, or principal underwriter of an investment company to lend 
money or other property to the investment company in contravention of 
such rules as the SEC may promulgate.

                   section 213. independent directors

    Section 213(a) amends Section 2(a)(19)(A) of the Investment 
Company Act. Section 2(a)(19)(A)(v) defines an ``interested 
person'' of an investment company to include any broker or 
dealer registered under the Securities Exchange Act and any 
affiliated person of such a broker or dealer. Section 213(a) 
replaces Section 2(a)(19)(A(v) with new Section 2(a)(19)(A)(v) 
and (vi). New Section 2(a)(19)(A)(v) defines an ``interested 
person'' of an investment company as any person or affiliate of 
a person who during the preceding six-month period has executed 
any portfolio transactions for the investment company or any 
related investment company. New Section 2(a)(19)(A)(vi) defines 
an ``interested person'' of an investment company as any person 
or affiliate of a person who during the preceding six-month 
period has loaned money or other property to the investment 
company or any related investment company. Section 213(b) makes 
a conforming change to Section 2(a)(19)(B) of the Investment 
Company Act, which defines an ``interested person'' of an 
investment adviser or principal underwriter of an investment 
company.
    Section 213(c) amends Section 10(c) of the Investment 
Company Act. Section 10(c) generally provides that no 
investment company may have a majority of its board of 
directors consisting of officers, directors, or employees of 
any one bank. Section 213(c) extends this prohibition to the 
officers, directors, or employees of any one bank or bank 
holding company, together with the bank or bank holding 
company's affiliates and subsidiaries.
    Section 213(d) provides that the amendments made by Section 
213 shall take effect one year after the date of enactment.

            section 214. additional sec disclosure authority

    Section 214 amends Section 35(a) of the Investment Company 
Act. Section 35(a) currently makes it unlawful for any person 
issuing or selling any security of an investment company to 
represent or imply in any manner that such security or company 
is guaranteed, sponsored, recommended, or approved by the 
United States or any agency, instrumentality or officer 
thereof. New Section 35(a) further makes it unlawful for any 
person issuing or selling any security of an investment company 
to represent or imply in any manner that such security or 
company is insured by the FDIC or is guaranteed by or is an 
obligation of any bank.
    New Section 35(a) further requires any person issuing or 
selling the securities of an investment company that is advised 
by, or sold through, a bank to disclose prominently that an 
investment in the company is not insured by the FDIC or any 
other government agency. The SECis given authority to issue 
rules prescribing the manner in which this disclosure will be provided.

 section 215. definition of broker under the investment company act of 
                                  1940

    Section 215 amends Section 2(a)(6) of the Investment 
Company Act. Section 2(a)(6) defines ``broker'' for purposes of 
the Investment Company Act and currently contains an exemption 
for banks. New Section 2(a)(6) defines ``broker'' as having the 
same meaning as in the Securities Exchange Act, except that for 
purposes of the Investment Company Act it does not include any 
person solely by reason of the fact that such person is an 
underwriter for one or more investment companies. The exemption 
for banks is deleted.

 section 216. definition of dealer under the investment company act of 
                                  1940

    Section 216 amends Section 2(a)(11) of the Investment 
Company Act. Section 2(a)(11) defines ``dealer'' for purposes 
of the Investment Company Act and currently contains an 
exemption for banks. New Section 2(a)(11) defines ``dealer'' as 
having the same meaning as in the Securities Exchange Act, 
except that for purposes of the Investment Company Act it does 
not include any insurance company or investment company. The 
exemption for banks is deleted.

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

    Section 217(a) amends Section 202(a)(11) of the Investment 
Advisers Act of 1940. Section 202(a)(11) defines ``investment 
adviser'' and currently exempts any bank or BHC that is not an 
investment company. New Section 202(a)(11) removes this 
exemption for any bank or BHC to the extent it serves or acts 
as an investment adviser to an investment company. If such 
services or actions performed through a separately identifiable 
department or division of a bank, the department or division 
and not the bank itself shall be deemed to be the investment 
adviser.
    Section 217(b) adds a new Section 202(a)(26) to the 
Investment Advisers Act. New Section 202(a)(26) defines 
``separately identifiable department or division'' of a bank as 
a unit under the direct supervision of an officer or officers 
designated by the bank's directors 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. All records relating to investment adviser 
activities must be separately maintained in or extractable from 
the unit's own facilities or the facilities of the bank so as 
to permit examination and enforcement by the SEC.

section 218. Definition of broker under the investment advisers act of 
                                  1940

    Section 218 amends Section 202(a)(3) of the Investment 
Advisers Act. Section 202(a)(3) defines ``broker'' for purposes 
of the Investment Advisers Act and currently contains a blanket 
exemption for banks. New Section 202(a)(3) defines ``broker'' 
as having the same meaning as in the Securities Exchange Act. 
The blanket exemption for banks is deleted.

section 219. definition of dealer under the investment advisers act of 
                                  1940

    Section 219 amends Section 202(a)(7) of the Investment 
Advisers Act. Section 202(a)(7) defines ``dealer'' for purposes 
of the Investment Advisers Act and currently contains a blanket 
exemption for banks. New Section 202(a)(7) defines ``dealer'' 
as having the same meaning as in the Securities Exchange Act, 
except that for purposes of the Investment Advisers Act it does 
not include any insurance company or investment company. The 
blanket exemption for banks is deleted.

                 section 220. interagency consultation

    Section 220 amends the Investment Advisers Act to add a new 
Section 210A. New Section 210A authorizes the SEC to receive 
from a federal banking agency the results of any examination, 
reports, records, or other information to which such agency may 
have access regarding the investment advisory activities of any 
BHC, bank, or separately identifiable department or division of 
a bank, that is registered as an investment adviser or that has 
a subsidiary or separately identifiable department or division 
registered as an investment adviser. New Section 210A similarly 
authorizes the federal banking agencies to receive from the SEC 
the results of any examination, reports, records, or other 
information regarding the investment advisory activities of any 
BHC, bank, or separately identifiable department or division of 
a bank, that is registered as an investment adviser. Section 
210A does not limit the authority of any federal banking agency 
with respect to such bank holding company, bank, or separately 
identifiable department or division under any provision of law.

           section 221. treatment of bank common trust funds

    Section 221(a) amends Section 3(a)(2) of the Securities Act 
of 1933. Section 3(a)(2) currently exempts from the application 
of the Securities Act 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 by the bank in its capacity as trustee, 
executor, administrator, or guardian. As amended, Section 
3(a)(2) exempts any interest or participation in any common 
trust fund or similar fund that is excluded from the definition 
of ``investment company'' under new Section 3(c)(3) of the 
Investment Company Act.
    Section 221(b) similarly amends Section 3(a)(12)(A)(iii) of 
the Securities Exchange Act of 1934. Section 3(a)(12)(A)(iii) 
currently exempts from the application of the Securities 
Exchange Act 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 by 
the bank in its capacity as trustee, executor, administrator, 
or guardian. As amended, Section 3(a)(12)(A)(iii) exempts any 
interest or participation in any common trust fund or similar 
fund that is excluded from the definition of ``investment 
company'' under new Section 3(c)(3) of the Investment Company 
Act.
    Section 221(c) amends Section 3(c)(3) of the Investment 
Company Act. Section 3(c)(3) currently exempts from the 
definitions of ``investment company'' 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 by the bank in its 
capacity as trustee, executor, administrator, or guardian. As 
amended, Section 3(c)(3) exempts such a bank common trust fund 
only if (i) the fund is employed by the bank solely as an aid 
to the administration of trusts, estates, or other fiduciary 
accounts; (ii) interests in the fund are not advertised or 
offered for sale to the general public, except in connection 
with the ordinary advertising of the bank's fiduciary services; 
and (iii) fees and expenses charged by the fund are in keeping 
with fiduciary principles established under applicable federal 
or state law.

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

    Section 222 amends Section 15 of the Investment Company Act 
to add a new subsection 15(g). Section 15 regulates advisory 
contracts between investment companies and their investment 
advisers. New subsection 15(g) requires that if an investment 
adviser, or an affiliated person of that adviser, holds a 
controlling interest in an investment company in a trustee or 
fiduciary capacity, he or she must transfer the power to vote 
the shares of the investment company. If the adviser or an 
affiliate holds the shares in a trustee or fiduciary capacity 
under an employee benefit plan subject to ERISA, he or she must 
transfer the power to vote the shares of the investment company 
to another plan fiduciary who is not affiliated with the 
adviser or an affiliate. If the adviser or an affiliate holds 
the shares in a trustee or fiduciary capacity under any other 
circumstance, he or she must either (i) transfer the power to 
vote the shares of the investment company to the beneficial 
owners, to another fiduciary who is not affiliated with the 
adviser or an affiliate, or to any person authorized to receive 
statements and information with respect to the trust who is not 
affiliated with the adviser or an affiliate; (ii) vote the 
shares of the investment company 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 by such rules as the SEC may prescribe. 
Acting in accordance with these provisions is deemed not to 
breach a fiduciary duty under state or federal law. These 
provisions do not apply if the investment company consists 
solely of assets held in a trustee or fiduciary capacity.

              SECTION 223. CONFORMING CHANGE IN DEFINITION

    Section 223 amends Section 2(a)(5) of the Investment 
Company Act. Section 2(a)(5) defines ``bank'' for purposes of 
the Investment Company Act to include any banking institution 
organized under the laws of the United States. As amended, 
Section 2(a)(5) defines ``bank'' to include any depository 
institution as defined in Section 3 of the Federal Deposit 
Insurance Act and any branch or agency of a foreign bank as 
defined in Section 1(b) of the International Banking Act of 
1978.

                   SECTION 224. CONFORMING AMENDMENT

    Section 224 amends Section 202 of the Investment Advisers 
Act to add a new subsection 202(c). New subsection 202(c) 
requires the SEC, whenever it is engaged in rulemaking or is 
required to consider or determine whether an action is 
necessary or appropriate in the public interest, under the 
Investment Advisers Act, to consider the promotion of 
efficiency, competition, and capital formation as well as the 
protection of investors. Similar changes were made to the 
Securities Act, the Securities Exchange Act, and the Investment 
Company Act by the National Securities Markets Improvement Act 
of 1996.

                      SECTION 225. EFFECTIVE DATE

    Section 225 provides that this subtitle shall take effect 
90 days after the date of enactment.

     SUBTITLE C--SECURITIES AND EXCHANGE COMMISSION SUPERVISION OF 
                   INVESTMENT BANK HOLDING COMPANIES

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

    Section 231 establishes a supervised investment bank 
holding company (``IBHC''), as an alternative to an FHC. An 
IBHC must register with, and is supervised by, the SEC. This 
alternative is made available to any company that controls two 
or more broker-dealers and is not affiliated with a WFI, an 
insured bank or savings association, or certain foreign banks 
and companies. An IBHC may affiliate with uninsured trust 
companies, credit card banks, Edge Act companies, CEBA 
institutions, and foreign branches of National banks. This 
section outlines registration, discontinuation, and record 
keeping requirements for IBHCs. This section provides the SEC 
with examination authority and the power to regulate the IBHC's 
capital if deemed necessary. The SEC is required to defer to 
the appropriate regulator regarding the interpretation of 
banking or insurance law with respect to the banking and 
insurance activities of the IBHC. Finally, the SEC is granted 
``backup'' supervisory authority over certain WFHCs to ensure 
that the WFHC and its affiliates comply with federal securities 
law.

                           SUBTITLE D--STUDY

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

    Section 241 mandates a GAO study of the efficacy, costs, 
and benefits of requiring insured depository institutions to 
inform consumers through the use of a logo or seal that a 
securities or insurance product is not FDIC-insured.

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

    Section 242 requires the GAO to undertake a study regarding 
the impact of regulations limiting any commissions, fees, 
markups, or other costs incurred by customers in the 
acquisition of financial products.

                          Title III--Insurance


               SUBTITLE A--STATE REGULATION OF INSURANCE

       SECTION 301. STATE REGULATION OF THE BUSINESS OF INSURANCE

    Section 301 states that the McCarran-Ferguson Act (15 
U.S.C. Sec. 1011 et seq.) remains the law of the United States.

        SECTION 302. MANDATORY INSURANCE LICENSING REQUIREMENTS

    Section 302 provides that, subject to Section 104, any 
person providing insurance in a state as principal or agent 
must be licensed as required by the appropriate insurance 
regulator of such state.

            SECTION 303. FUNCTIONAL REGULATION OF INSURANCE

    Section 303 provides that, subject to Section 104, the 
insurance sales activities of any person or entity shall be 
functionally regulated by the states. Section 104 establishes a 
safeharbor for state regulation of insurance sales, as well as 
a method for determining whether state regulation falling outside the 
safe harbor would be pre-empted.

         SECTION 304. INSURANCE UNDERWRITING IN NATIONAL BANKS

    Section 304(a) prohibits national banks and their 
subsidiaries from providing insurance in a state as principal. 
This prohibition does not apply to ``authorized products.'' 
Under Section 304(b), a product is ``authorized'' if, as of 
January 1, 1999, national banks were lawfully providing it as 
principal or the OCC had determined in writing that national 
banks may provide it as principal; no court of relevant 
jurisdiction had, by final judgment, overturned a determination 
by the OCC that national banks may provide it as principal; and 
the product is not title insurance or an annuity contract 
subject to tax treatment under Section 72 of the Internal 
Revenue Code.
    Section 304(c) defines ``insurance'' for purposes of 
Section 304. Under Section 304(c)(1), ``insurance'' means any 
product regulated as insurance as of January 1, 1999 in the 
state in which the product is provided. Under Section 
304(c)(2), insurance means any product first offered after 
January 1, 1999 which 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 loss of life, loss of health, or loss 
through damage to or destruction of property. Products which 
may not be a product or service of a bank that is a deposit 
product are (i) a loan, discount, letter of credit, or other 
extension of credit; (ii) a trust or other fiduciary service; 
(iii) a qualified financial contract as defined in Section 
11(e)(8)(D)(I) of the Federal Deposit Insurance Act; or (iv) a 
financial guaranty; except a bank product does not include a 
product that has an insurance component such that if offered by 
a bank as principal the product would be treated as a life 
insurance contract under Section 7702 of the Internal Revenue 
Code or losses incurred with respect to the product would 
qualify for treatment under Section 832(b)(5) of the Internal 
Revenue Code if the bank were subject to tax as an insurance 
company under Section 832 of the Internal Revenue Code. The 
term ``financial guaranty'' in Section 304(c)(2)(B)(v) is not 
intended to exclude surety bonds from the definition of 
insurance. Under Section 304(c)(3), insurance means any annuity 
contract on which the income is subject to tax under Section 72 
of the Internal Revenue Code.

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

    Section 305(a) prohibits national banks and their 
subsidiaries from engaging in any activity involving the 
underwriting of title insurance, other than title insurance 
underwriting activities in which they were lawfully engaged 
before the date of enactment. Section 305(b) provides that, in 
the case of a national bank that has an affiliate which 
provides insurance as principal, neither the bank or a 
subsidiary of the bank may engage in any activity involving the 
underwriting of title insurance. Section 305(c) provides that, 
in the case of a national bank that has a subsidiary that 
provides insurance as principal and no affiliate that provides 
insurance asprincipal, the bank may not engage in any activity 
involving the underwriting of title insurance. Section 305(d) prohibits 
national banks from selling title insurance unless they were selling 
title insurance prior to the date of enactment. Currently, under 
section 92 of the National Bank Act (12 U.S.C. 92), national banks may 
sell title insurance from places with populations of 5,000 or less. 
When the Committee debated this amendment, a colloquy occurred with the 
sponsor of the amendment indicating that section 305(d) should not be 
construed as limiting the authority of a national bank located and 
doing business in any place with a population of 5,000 or less to sell 
title insurance, even if the national bank was not selling title 
insurance from such a place before the date of enactment of the 
Financial Services Act. Section 305(f) states that any state law which 
was in effect prior to the date of the enactment of this Act 
prohibiting the sale of title insurance by any person or entity in a 
state is not preempted by this Act, including the preemption provisions 
contained in section 104, or by any current law, including section 92 
of the National Bank Act (12 U.S.C. 92). Other state laws with general 
applicability and not those that prohibit only banks from engaging in 
title insurance activities are protected by section 305(f).

 SECTION 306. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FINANCIAL 
                               REGULATORS

    Section 306(a) provides that in the event of a regulatory 
conflict between a state insurance regulator and a federal 
regulator as to whether a product is insurance as defined in 
Section 304(c), or as to whether a state statute, regulation, 
order, or interpretation regarding insurance sales or 
solicitation activity is preempted under federal law, either 
regulator may seek expedited judicial review. Either regulator 
may file a petition for review in the U.S. Court of Appeals for 
the District of Columbia Circuit or in the U.S. Court of 
Appeals for the circuit in which the state is located.
    Under Section 306(b), the relevant U.S. Court of Appeals 
must complete all action on the petition, including rendering a 
judgment, within 60 days from the filing of the petition unless 
all parties agree to an extension. Under Section 306(c), any 
request for certiorari to the U.S. Supreme Court must be filed 
as soon as practicable after the judgment of the U.S. Court of 
Appeals is issued. Section 306(d) provides that no action 
challenging an order, ruling, determination, or other action of 
a federal or state regulator may be brought under these 
procedures after the later of (i) 12-months after the first 
public notice of the order, ruling, or determination in its 
final form, or (ii) 6-months period after the order, ruling, or 
determination takes effect.
    Section 306(e) requires the court to base its decision on 
an action filed under this section upon its review on the 
merits of all questions presented under federal and state law. 
The court must review the nature of the product or activity and 
the history and purpose of its regulation under federal and 
state law without unequal deference.

  SECTION 307. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE 
                        COMPANIES AND AFFILIATES

    Section 307 provides that, except as provided in Section 
104(a)(2), no state may prevent or significantly interfere with 
the ability of an insurer, or any affiliate of an insurer, to 
become a financial holding company or to acquire control of a 
depository institution. Section 307 further provides that no 
state may limit the amount of an insurer's assets that may be 
invested in the voting securities of insured depository 
institution or a company that controls such an institution, 
except the state of the insurer's domicile may limit the 
investment to 5 percent of the insurer's assets. Section 307 
further provides that no state other than the state of the 
insurer's domicile may prevent, significantly interfere with, 
review, approve, or disapprove of an insurer's plan of 
reorganization from mutual form to stock form.

   SUBTITLE B--NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS

      SECTION 321. STATE FLEXIBILITY IN MULTISTATE LICENSE REFORMS

    Sectin 321 provides that Subtitle B will take effect unless 
three years after the date of enactment of the Act a majority 
of the states have enacted uniform laws and regulations 
governing licensing insurance agent and agencies, or have 
enacted reciprocity laws and regulations governing the 
licensing of nonresident agents and agencies.

   SECTION 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS

    Section 322 establishes the National Association of 
Registered Agents and Brokers (``NARAB''), a nonprofit 
corporation that is not an agency of the United States.

                          SECTION 323. PURPOSE

    Section 323 states that NARAB's purpose is to provide a 
mechanism through which uniform licensing, appointment, 
containing education, and other qualifications and conditions 
can be adopted and applied on a multistate basis. NARAB must 
preserve the rights of states to license, supervise, and 
discipline insurance producers and to prescribe and enforce 
laws and regulations relating to insurance-related consumer 
protection and unfair trade practices.

          SECTION 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT

    Section 324 states that NARAB will be subject to the 
supervision and oversight of theNational Association of 
Insurance Commissioners (``NAIC'') and is not an agency or 
instrumentality of the United States Government.

                        section 325. membership

    Section 325 provides that any State-licensed insurance 
producer is eligible to be a member of NARAB.

                    section 326. board of directors

    Section 326 states that NARAB will have a board of 
directors composed of 7 members serving three-year terms 
appointed by the NAIC. At least four of the board members must 
have significant experience with the regulation of commercial 
lines of insurance in at least one of the 20 states with the 
greatest total dollar amount of commercial-lines insurance in 
the United States.

                          section 327 officers

    Section 327 establishes the officers of NARAB: Board 
Chairperson (who must be a member of the NAIC), Board Vice 
Chairperson, President, Secretary, and Treasurer. It requires 
each officer of the Board and NARAB to be elected for a three-
year term.

          section 328. bylaws, rules and disciplinary actions

    Section 328 describes the procedure for adoption and 
amendment of the bylaws and rules and details determinations as 
to whether any membership should be denied, suspended, revoked, 
or not renewed.

                        section 329. assessments

    Section 329 authorizes NARAB to assess application and 
membership fees necessary to cover the costs of its operations 
provided that it does not discriminate against smaller 
insurance producers. Section 329 also authorizes the NAIC to 
assess the NARAB for any costs it incurs under Subtitle B.

                   section 330. functions of the naic

    Section 330 authorizes the NAIC to examine and inspect 
NARAB and require NARAB to file reports appropriate to the 
public interest. It requires NARAB to annually report to the 
NAIC about its business, financial condition, and related 
matters. NAIC will transmit the report to Congress and the 
President. It further provides that rulemaking determinations 
made by NAICpursuant to Section 328 must be made after offering 
a notice and comment period and an opportunity for a hearing.

section 331. liability of the association and the directors, officers, 
                    and employees of the association

    Section 331 states that NARAB is not to be deemed an 
insurer or insurance producer under state law. It provides that 
NARAB and its officers, directors, and employees are immune 
from liability for any action taken or omitted in good faith 
under or in connection with any matter in Subtitle B.

               section 332. elimination of naic oversight

    Section 332 contains provisions for establishing NARAB 
without NAIC oversight under certain circumstances.

                 section 333. relationship to state law

    Section 333 describes circumstances under which state laws 
and actions purporting to regulate insurance producers will be 
preempted.

            section 334. coordination with other regulators

    Section 334 authorizes NARAB to issue uniform insurance 
producer applications and renewal applications; establish a 
central clearinghouse through which NARAB members may apply for 
new or renewal of licenses; and establish a national database 
of regulatory information on insurance producers.

                      section 335. judicial review

    Section 335 sets standards of review, requires an aggrieved 
individual to exhaust all available administrative remedies 
before NARAB and the NAIC before seeking judicial review of a 
NARAB decision, and identifies the courts with appropriate 
jurisdiction over litigation involving NARAB.

                        section 336. definitions

    Section 336 defines ``insurance,'' ``insurance producer,'' 
``state law'' and ``home state.''

          Title IV--Unitary Savings and Loan Holding Companies


   section 401. prohibition on new unitary savings and loan holding 
                               companies

    Section 401(a) prohibits, after March 4, 1999, a company 
from acquiring control of a savings association as a unitary 
savings and loan holding company pursuant to section 10(c)(3) 
of the Home Owners' Loan Act (``HOLA'') (12 U.S.C. 1467a(c)(3)) 
unless such company is engaged in activities that multiple 
savings and loan holding companies can engage in under current 
law or in activities that FHCs can engage in under new section 
6(c) of the BHCA. This prohibition does not apply to unitary 
holding companies which had acquired or applied for a savings 
association on or before March 4, 1999, or acquired an existing 
unitary savings and loan holding company, except that such 
company must continue to control the savings association or its 
successor.
    Section 401(c) expands the permitted activities that mutual 
holding companies can engage in under section 10(o)(5) of the 
HOLA (12 U.S.C. 1467a(o)(5)) by allowing them to conduct an 
insurance agency or escrow business and in the case of unitary 
mutual savings and loan holding companies to engage in the 
activities permitted for financial holding companies under 
section 6(c) of the BHCA.

  section 402. retention of ``federal'' in name of converted federal 
                          savings association

    Section 402 would permit federal savings associations that 
convert to national or state bank charters to keep the word 
``Federal'' in their names. For example, if First Federal 
Savings Bank converts from a federal savings association to a 
state bank charter, it may retain its former name.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

BANKING ACT OF 1933

           *       *       *       *       *       *       *


    [Sec. 20. After one year from the date of the enactment of 
this Act, no member bank shall be affiliated in any manner 
described in section 2 (b) hereof with any corporation, 
association, business trust, or other similar organization 
engaged principally in the issue, flotation, underwriting, 
public sale, or distribution at wholesale or retail or through 
syndicate participation of stocks, bonds, debentures, notes, or 
other securities: Provided, That nothing in this paragraph 
shall apply to any such organization which shall have been 
placed in formal liquidation and which shall transact no 
business except such as may be incidental to the liquidation of 
its affairs.
    [For every violation of this section the member bank 
involved shall be subject to a penalty not exceeding $1,000 per 
day for each day during which such violation continues. Such 
penalty may be assessed by the Federal Reserve Board, in its 
discretion, and, when so assessed, may be collected by the 
Federal reserve bank by suit or otherwise.
    [If any such violation shall continue for six calendar 
months after the member bank shall have been warned by the 
Federal Reserve Board to discontinue the same, (a) in the case 
of a national bank, all the rights, privileges, and franchises 
granted to it under the National Bank Act may be forfeited in 
the manner prescribed in section 2 of the Federal Reserve Act, 
as amended (U.S.C., title 12, secs. 141, 222-225, 281-286, and 
502) or, (b) in the case of a State member bank, all of its 
rights and privileges of membership in the Federal Reserve 
System may be forfeited in the manner prescribed in section 9 
of the Federal Reserve Act, as amended (U.S.C., title 12, secs. 
321-332).]

           *       *       *       *       *       *       *

    [Sec. 32. No officer, director, or employee of any 
corporation or unincorporated association, no partner or 
employee of any partnership, and no individual, primarily 
engaged in the issue, flotation, underwriting, public sale, or 
distribution, at wholesale or retail, or through syndicate 
participation, of stocks, bonds, or other similar securities, 
shall serve the same time as an officer, director, or employee 
of any member bank except in limited classes of cases in which 
the Board of Governors of the Federal Reserve System may allow 
such service by general regulations when in the judgment of the 
said Board it would not unduly influence the investment 
policies of such member bank or the advice it gives its 
customers regarding investments.]

           *       *       *       *       *       *       *

                              ----------                              


                     BANK HOLDING COMPANY ACT OF 1956

           *       *       *       *       *       *       *



                              definitions

  Sec. 2. (a) * * *

           *       *       *       *       *       *       *

  (c) Bank Defined.--For purposes of this Act--
          (1) In general.--Except as provided in paragraph (2), 
        the term ``bank'' means any of the following:
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) A wholesale financial institution.
          (2) Exceptions.--The term ``bank'' does not include 
        any of the following:
                  (A) * * *

           *       *       *       *       *       *       *

                  (H) An industrial loan company, industrial 
                bank, or other similar institution which is--
                          (i) * * *

           *       *       *       *       *       *       *

                except that this subparagraph shall cease to 
                apply to any institution which permits any 
                overdraft (including any intraday overdraft), 
                or which incurs any such overdraft in such 
                institution's account at a Federal Reserve 
                bank, on behalf of an affiliate if such 
                overdraft is not the result of an inadvertent 
                computer or accounting error that is beyond the 
                control of both the institution and the 
                affiliate, or that is otherwise permissible for 
                a bank controlled by a company described in 
                section 4(f)(1).

           *       *       *       *       *       *       *

  (n) Incorporated Definitions.--For purposes of this Act, the 
terms ``insured depository institution'', ``appropriate Federal 
banking agency'', ``default'', ``in danger of default'', 
``insured bank'', and ``State bank supervisor'' have the same 
meanings as in section 3 of the Federal Deposit Insurance Act.
  (o) Other Definitions.--For purposes of this Act, the 
following definitions shall apply:
          (1) Capital terms.--
                  (A) Insured depository institutions.--With 
                respect to insured depository institutions, the 
                terms ``well capitalized'', ``adequately 
                capitalized'', and ``undercapitalized'' have 
                the same meanings as in section [38(b)] 38 of 
                the Federal Deposit Insurance Act.
          * * * * * * *
  (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 same meaning as in section 3 of the 
        Federal Deposit Insurance Act; and
          (2) includes a wholesale financial institution.

                  acquisition of bank shares or assets

  Sec. 3. (a) * * *

           *       *       *       *       *       *       *

  (c) Factors for Consideration by Board.--
          (1) * * *
          (2) Banking and community [factors.--In every case] 
        Factors.--
                  (A) In general.--In every case, the Board 
                shall take into consideration the financial and 
                managerial resources and future prospects of 
                the company or companies and the banks 
                concerned, and the convenience and needs of the 
                community to be served.
                  (B) Public meetings.--In each case involving 
                1 or more insured depository institutions each 
                of which has total assets of $1,000,000,000 or 
                more, the Board shall, as necessary and on a 
                timely basis, conduct public meetings in 1 or 
                more areas where the Board believes there will 
                be a substantial public impact.

           *       *       *       *       *       *       *

  (e) Every bank that is a holding company and every bank that 
is a subsidiary of such company shall become and remain an 
insured depository institution as such term is defined in 
section 3 of the Federal Deposit Insurance Act. This subsection 
shall not apply to a wholesale financial institution.
  [(f) Savings Bank Subsidiaries of Bank Holding Companies.--
          [(1) In general.--Notwithstanding any other provision 
        of this Act (other than paragraphs (2) and (3)), any 
        qualified savings bank which is a subsidiary of a bank 
        holding company may engage, directly or through a 
        subsidiary, in any activity in which such savings bank 
        may engage (as a State chartered savings bank) pursuant 
        to express, incidental, or implied powers under any 
        statute or regulation, or under any judicial 
        interpretation of any law, of the State in which such 
        savings bank is located.
          [(2) Insurance activities.--Except as provided in 
        paragraph (3), any insurance activities of any 
        qualified savings bank which is a subsidiary of a bank 
        holding company shall be limited to insurance 
        activities allowed under section 4(c)(8).
          [(3) Savings bank life insurance.--Any qualified 
        savings bank permitted, as of March 5, 1987, to engage 
        in the sale or underwriting of savings bank life 
        insurance may sell or underwrite such insurance after 
        such savings bank is a subsidiary of a bank holding 
        company if--
                  [(A) the savings bank is located in the State 
                of Connecticut, Massachusetts, or New York;
                  [(B) such activity is expressly authorized by 
                the law of the State in which such savings bank 
                is located;
                  [(C) the savings bank retains its character 
                as a savings bank;
                  [(D) such activity is carried out by the 
                savings bank directly and not by--
                          [(i) any subsidiary or affiliate of 
                        the savings bank; or
                          [(ii) the bank holding company which 
                        controls such savings bank;
                  [(E) such activity is carried out by the 
                savings bank in accordance with any residency 
                or employment limitations set forth in the 
                savings bank life insurance statute in effect 
                on March 5, 1987, in the State in which such 
                bank is located; and
                  [(F) such activity is otherwise carried out 
                in the same manner as savings bank life 
                insurance activity is carried out in the State 
                in which such bank is located by savings banks 
                which are not subsidiaries of any bank holding 
                company registered under this Act.
          [(4) Subsection shall cease to apply under certain 
        circumstances.--If any company which is not a savings 
        bank or a savings bank holding company acquires control 
        of a qualified savings bank, such savings bank shall 
        cease to engage in any activity authorized under 
        paragraph (1) or (3) before the end of the 2-year 
        period beginning on the date such company acquires 
        control, unless such activity is otherwise authorized 
        pursuant to this Act.
          [(5) Special asset aggregation rule for purposes of 
        paragraph (3).--For the sole purpose of determining 
        whether a qualified savings bank may continue to sell 
        and underwrite savings bank life insurance in 
        accordance with this subsection after control of such 
        savings bank is acquired by a bank holding company, the 
        assets of any other bank affiliated with, or under 
        contract to affiliate with, such savings bank as of 
        March 5, 1987, shall be treated as assets of the 
        savings bank in determining whether such bank holding 
        company is a savings bank holding company.]
  (f) [Repealed].
  (g) Mutual Bank Holding Company.--
          (1) * * *
          [(2) Regulation.--A corporation organized as a 
        holding company under this subsection shall be 
        regulated on the same terms and be subject to the same 
        limitations as any other holding company which controls 
        a savings bank.]
          (2) Regulations.--A bank holding company organized as 
        a mutual holding company shall be regulated on terms, 
        and shall be subject to limitations, comparable to 
        those applicable to any other bank holding company.

                 interests in nonbanking organizations

  Sec. 4. (a) * * *

           *       *       *       *       *       *       *

  (c) The prohibitions in this section shall not apply to (i) 
any company that was on January 4, 1977, both a bank holding 
company and a labor, agricultural, or horticultural 
organization exempt from taxation under section 501 of the 
Internal Revenue Code of 1954, or to any labor, agricultural, 
or horticultural organization to which all or substantially all 
of the assets of such company are hereafter transferred, or 
(ii) a company covered in 1970 more than 85 per centum of the 
voting stock of which was collectively owned on June 30, 1968, 
and continuously thereafter, directly or indirectly, by or for 
members of the same family, or their spouses, who are lineal 
descendants of common ancestors; and such prohibitions shall 
not, with respect to any other bank holding company, apply to--
          (1) * * *

           *       *       *       *       *       *       *

          [(8) shares of any company the activities of which 
        the Board after due notice (and opportunity for hearing 
        in the case of an acquisition of a savings association) 
        has determined (by order or regulation) to be so 
        closely related to banking or managing or controlling 
        banks as to be a proper incident thereto, but for 
        purposes of this subsection it is not closely related 
        to banking or managing or controlling banks for a bank 
        holding company to provide insurance as a principal, 
        agent, or broker except (A) where the insurance is 
        limited to assuring repayment of the outstanding 
        balance due on a specific extension of credit by a bank 
        holding company or its subsidiary in the event of the 
        death, disability, or involuntary unemployment of the 
        debtor; (B) in the case of a finance company which is a 
        subsidiary of a bank holding company, where the 
        insurance is also limited to assuring repayment of the 
        outstanding balance on an extension of credit in the 
        event of loss or damage to any property used as 
        collateral on such extention of credit and, during the 
        period beginning on the date of the enactment of this 
        subparagraph and ending on December 31, 1982, such 
        extension of credit is not more than $10,000 ($25,000 
        in the case of an extension of credit which is made to 
        finance the purchase of a residential manufactured home 
        and which is secured by such residential manufactured 
        home) and for any given year after 1982, such extension 
        of credit is not more than an amount equal to $10,000 
        ($25,000 in the case of an extension of credit which is 
        made to finance the purchase of a residential 
        manufactured home and which is secured by such 
        residential manufactured home) increased by the 
        percentage increase in the Consumer Price Index for 
        Urban Wage Earners and Clerical Workers published 
        monthly by the Bureau of Labor Statistics for the 
        period beginning on January 1, 1982, and ending on 
        December 31 of the year preceding the year in which 
        such extension of credit is made; (C) any insurance 
        agency activity in a place that (i) has a population 
        not exceeding five thousand(as shown by the last 
preceding decennial census), or (ii) the bank holding company, after 
notice and opportunity for a hearing, demonstrates has inadequate 
insurance agency facilities; (D) any insurance agency activity which 
was engaged in by the bank holding company or any of its subsidiaries 
on May 1, 1982, or which the Board approved for such company or any of 
its subsidiaries on or before May 1, 1982, including (i) sales of 
insurance at new locations of the same bank holding company or the same 
subsidiary or subsidiaries with respect to which insurance was sold on 
May 1, 1982, or approved to be sold on or before May 1, 1982, if such 
new locations are confined to the State in which the principal place of 
business of the bank holding company is located, any State or States 
immediately adjacent to such State, and any State or States in which 
insurance activities were conducted by the bank holding company or any 
of its subsidiaries on May 1, 1982, or were approved to be conducted by 
the bank holding company or any of its subsidiaries on or before May 1, 
1982, and (ii) sales of insurance coverages which may become available 
after May 1, 1982, so long as those coverages insure against the same 
types of risks as, or are otherwise functionally equivalent to, 
coverages sold on May 1, 1982, or approved to be sold on or before May 
1, 1982 (for purposes of this subparagraph, activities engaged in or 
approved by the Board on May 1, 1982, shall include activities carried 
on subsequent to that date as the result of an application to engage in 
such activities pending on May 1, 1982, and approved subsequent to that 
date or of the acquisition by such company pursuant to a binding 
written contract entered into on or before May 1, 1982, of another 
company engaged in such activities at the time of the acquisition); (E) 
any insurance activity where the activity is limited solely to 
supervising on behalf of insurance underwriters the activities of 
retail insurance agents who sell (i) fidelity insurance and property 
and casualty insurance on the real and personal property used in the 
operations of the bank holding company or any of its subsidiaries, and 
(ii) group insurance that protects the employees of the bank holding 
company or any of its subsidiaries; (F) any insurance agency activity 
engaged in by a bank holding company, or any of its subsidiaries, which 
bank holding company has total assets of $50,000,000 or less: Provided, 
however, That such a bank holding company and its subsidiaries may not 
engage in the sale of life insurance or annuities except as provided in 
subparagraph (A), (B), or (C); or (G) where the activity is performed, 
or shares of the company involved are owned, directly or indirectly, by 
a bank holding company which is registered with the Board of Governors 
of the Federal Reserve System and which, prior to January 1, 1971, was 
engaged, directly or indirectly, in insurance agency activities as a 
consequence of approval by the Board prior to January 1, 1971. In 
determining whether a particular activity is a proper incident to 
banking or managing or controlling banks the Board shall consider 
whether its performance by an affiliate of a holding company can 
reasonably be expected to produce benefits to the public, such as 
greater convenience, increased competition, or gains in efficiency, 
that outweigh possible adverse effects, such as undue concentration of 
resources, decreased or unfair competition, conflicts of interests, or 
unsound banking practices. In orders and regulation under this 
subsection, the Board may differentiate between activities commenced de 
novo and activities commenced by the acquisition, in whole or in part, 
of a going concern. Notwithstanding any other provision of this Act, if 
the Board finds that an emergency exists which requires the Board to 
act immediately on any application under this subsection involving a 
thrift institution, and the primary Federal regulator of such 
institution concurs in such finding, the Board may dispense with the 
notice and hearing requirement of this subsection and the Board may 
approve or deny any such application without notice or hearing. If an 
application is filed under this paragraph in connection with an 
application to make an acquisition pursuant to section 13(f) of the 
Federal Deposit Insurance Act, the Board may dispense with the notice 
and hearing requirement of this paragraph and the Board may approve or 
deny the application under this paragraph without notice or hearing. If 
an application described in the preceding sentence is approved, the 
Board shall publish in the Federal Register, not later than 7 days 
after such approval is granted, the order approving the application and 
a description of the nonbanking activities involved in the 
acquisition;]
          (8) shares of any company the activities of which had 
        been determined by the Board by regulation or order 
        under this paragraph as of the day before the date of 
        the enactment of the Financial Services Act of 1999, to 
        be so closely related to banking as to be a proper 
        incident thereto (subject to such terms and conditions 
        contained in such regulation or order, unless modified 
        by the Board);

           *       *       *       *       *       *       *

  (f) Certain Companies Not Treated as Bank Holding 
Companies.--
          (1) * * *
          (2) Loss of exemption.--Paragraph (1) shall cease to 
        apply to any company described in such paragraph if--
                  (A) such company directly or indirectly--
                          (i) * * *
                          (ii) acquires control of more than 5 
                        percent of the shares or assets of an 
                        additional bank or a savings 
                        association other than--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (IX) shares of a savings 
                                association held by any 
                                insurance company, as defined 
                                in section 2(a)(17) of the 
                                Investment Company Act of 1940, 
                                except as provided in paragraph 
                                (11); [and]
                                  (X) shares issued in a 
                                qualified stock insuance under 
                                section 10(q) of the Home 
                                Owners' Loan Act; and
                                  (XI) assets that are derived 
                                from, or are incidental to, 
                                consumer lending activities in 
                                which institutions described in 
                                subparagraph (F) or (H) of 
                                section 2(c)(2) are permitted 
                                to engage, except that the aggregate 
                                amount of shares held under this 
                                clause (other than under subclauses 
                                (I), (II), (III), (IV), (V), and 
                                (VIII)) may not exceed 15 percent of 
                                all outstanding shares or of the voting 
                                power of a savings association; or
                  [(B) any bank subsidiary of such company 
                fails to comply with the restrictions contained 
                in paragraph (3)(B).]
                  (B) any bank subsidiary of such company 
                engages in any activity in which the bank was 
                not lawfully engaged as of March 5, 1987, 
                unless the bank is well managed and well 
                capitalized;
                  (C) any bank subsidiary of such company 
                both--
                          (i) accepts demand deposits or 
                        deposits that the depositor may 
                        withdraw by check or similar means for 
                        payment to third parties; and
                          (ii) engages in the business of 
                        making commercial loans (and, for 
                        purposes of this clause, loans made in 
                        the ordinary course of a credit card 
                        operation shall not be treated as 
                        commercial loans); or
                  (D) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any 
                bank subsidiary of such company permits any 
                overdraft (including any intraday overdraft), 
                or incurs any such overdraft in such bank's 
                account at a Federal reserve bank, on behalf of 
                an affiliate, other than an overdraft described 
                in paragraph (3).
          [(3) Limitation on banks controlled by paragraph (1) 
        companies.--
                  [(A) Findings.--The Congress finds that banks 
                controlled by companies referred to in 
                paragraph (1) may, because of relationships 
                with affiliates, be involved in conflicts of 
                interest, concentration of resources, or other 
                effects adverse to bank safety and soundness, 
                and may also be able to compete unfairly 
                against banks controlled by bank holding 
                companies by combining banking services with 
                financial services not permissible for bank 
                holding companies. The purpose of this 
                paragraph is to minimize any such potential 
                adverse effects or inequities by temporarily 
                restricting the activities of banks controlled 
                by companies referred to in paragraph (1) until 
                such time as the Congress has enacted proposals 
                to allow, with appropriate safeguards, all 
                banks or bank holding companies to compete on a 
                more equal basis with banks controlled by 
                companies referred to in paragraph (1) or, 
                alternatively, proposals to permanently 
                restrict the activities of banks controlled by 
                companies referred to in paragraph (1).
                  [(B) Limitations.--Until such time as the 
                Congress has taken action pursuant to 
                subparagraph (A), a bank controlled by a 
                company described in paragraph (1) shall not--
                          [(i) engage in any activity in which 
                        such bank was not lawfully engaged as 
                        of March 5, 1987;
                          [(ii) offer or market products or 
                        services of an affiliate that are not 
                        permissible for bank holding companies 
                        to provide under subsection (c)(8), or 
                        permit its products or services to be 
                        offered or marketed in connection with 
                        products and services of an affiliate, 
                        unless--
                                  [(I) the Board, by 
                                regulation, has determined such 
                                products and services are 
                                permissible for bank holding 
                                companies to provide under 
                                subsection (c)(8);
                                  [(II) such products and 
                                services are described in 
                                section 20 of the Banking Act 
                                of 1933 and the Board, by 
                                regulation, has permitted bank 
                                holding companies to offer or 
                                market such products or 
                                services, but has prohibited 
                                bank holding companies and 
                                their affiliates from 
                                principally engaging in the 
                                offering or marketing of such 
                                products or services; or
                                  [(III) such products or 
                                services were being so offered 
                                or marketed as of March 5, 
                                1987, and then only in the same 
                                manner in which they were being 
                                offered or marketed as of that 
                                date; or
                          [(iii) after the date of the 
                        enactment of the Competitive Equality 
                        Amendments of 1987, permit any 
                        overdraft (including an intraday 
                        overdraft), or incur any such overdraft 
                        in such bank's account at a Federal 
                        Reserve bank, on behalf of an 
                        affiliate, other than an overdraft 
                        described in subparagraph (C).
                  [(C) Permissible overdrafts described.--For 
                purposes of subparagraph (B)(iii), an overdraft 
                is described in this subparagraph if--
                          [(i) such overdraft results from an 
                        inadvertent computer or accounting 
                        error that is beyond the control of 
                        both the bank and the affiliate; or
                          [(ii) such overdraft--
                                  [(I) is permitted or incurred 
                                on behalf of an affiliate which 
                                is monitored by, reports to, 
                                and is recognized as a primary 
                                dealer by the Federal Reserve 
                                Bank of New York; and
                                  [(II) is fully secured, as 
                                required by the Board, by 
                                bonds, notes, or other 
                                obligations which are direct 
                                obligations of the United 
                                States or on which the 
                                principal and interest are 
                                fully guaranteed by the United 
                                States or by securities and 
                                obligations eligible for 
                                settlement on the Federal 
                                Reserve book entry system.
          [(4) Divestiture in case of loss of exemption.--If 
        any company described in paragraph (1) loses the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such company shall divest control of 
        each bank it controls within 180 days after such 
        company becomes a bank holding company due to the loss 
        of such exemption.]
          (3) Permissible overdrafts described.--For purposes 
        of paragraph (2)(D), an overdraft is described in this 
        paragraph if--
                  (A) such overdraft results from an 
                inadvertent computer or accounting error that 
                is beyond the control of both the bank and the 
                affiliate;
                  (B) such overdraft--
                          (i) is permitted or incurred on 
                        behalf of an affiliate which is 
                        monitored by, reports to, and is 
                        recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                          (ii) is fully secured, as required by 
                        the Board, by bonds, notes, or other 
                        obligations which are direct 
                        obligations of the United States or on 
                        which the principal and interest are 
                        fully guaranteed by the United States 
                        or by securities and obligations 
                        eligible for settlement on the Federal 
                        Reserve book entry system; or
                  (C) such overdraft--
                          (i) is incurred on behalf of an 
                        affiliate solely in connection with an 
                        activity that is so closely related to 
                        banking, or managing or controlling 
                        banks, as to be a proper incident 
                        thereto, to the extent the bank 
                        incurring the overdraft and the 
                        affiliate on whose behalf the overdraft 
                        is incurred each document that the 
                        overdraft is incurred for such purpose; 
                        and
                          (ii) does not cause the bank to 
                        violate any provision of section 23A or 
                        23B of the Federal Reserve Act, either 
                        directly, in the case of a member bank, 
                        or by virtue of section 18(j) of the 
                        Federal Deposit Insurance Act, in the 
                        case of a nonmember bank.
          (4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for 
        the exemption provided under such paragraph by 
        operation of paragraph (2), such exemption shall cease 
        to apply to such company and such company shall divest 
        control of each bank it controls before the end of the 
        180-day period beginning on the date that the company 
        receives notice from the Board that the company has 
        failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the 
        company has--
                  (A) corrected the condition or ceased the 
                activity that caused the company to fail to 
                continue to qualify for the exemption; and
                  (B) implemented procedures that are 
                reasonably adapted to avoid the reoccurrence of 
                such condition or activity.
        The issuance of any notice under this paragraph that 
        relates to the activities of a bank shall not be 
        construed as affecting the authority of the bank to 
        continue to engage in such activities until the 
        expiration of such 180-day period.

           *       *       *       *       *       *       *

  (j) Notice Procedures for Nonbanking Activities.--
          (1) General notice procedure.--
                  (A) Notice requirement.--Except as provided 
                in paragraph (3), no bank holding company may 
                engage in any nonbanking activity or acquire or 
                retain ownership or control of the shares of a 
                company engaged in activities based on 
                subsection (c)(8) or (a)(2) or in any 
                complementary activity under section 
                6(c)(1)(A)(ii) without providing the Board with 
                written notice of the proposed transaction or 
                activity at least 60 days before the 
                transaction or activity is proposed to occur or 
                commence.

           *       *       *       *       *       *       *

          (3) No notice required for certain transactions.--No 
        notice under paragraph (1) of this subsection or under 
        subsection (c)(8) or (a)(2)(B) is required for a 
        proposal by a bank holding company to engage in any 
        activity, other than any complementary activity under 
        section 6(c)(1)(A)(ii), or acquire the shares or assets 
        of any company, other than an insured depository 
        institution or a company engaged in any complementary 
        activity under section 6(c)(1)(A)(ii), if the proposal 
        qualifies under paragraph (4).

           *       *       *       *       *       *       *


                             administration

  Sec. 5. (a) Within one hundred and eighty days after the date 
of enactment of this Act, or within one hundred and eighty days 
after becoming a bank holding company, whichever is later, each 
bank holding company shall register with the Board on forms 
prescribed by the Board, which shall include such information 
with respect to the financial condition and operations, 
management, and intercompany relationships of the bank holding 
company and its subsidiaries, and related matters, as the Board 
may deem necessary or appropriate to carry about the purposes 
of this Act. The Board may, in its discretion, extend the time 
within which a bank holding company shall register and file the 
requisite information. A declaration filed in accordance with 
section 6(b)(1)(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.

           *       *       *       *       *       *       *

  [(c) The Board from time to time may require reports under 
oath to keep it informed as to whether the provisions of this 
Act and such regulations and orders issued thereunder have been 
complied with; and the Board may make examinations of each bank 
holding company and each subsidiary thereof, the cost of which 
shall be assessed against, and paid by, such holding company. 
The Board shall, as far as possible, use the reports of 
examinations made by the Comptroller of the Currency, the 
Federal Deposit Insurance Corporation, or the appropriate State 
bank supervisory authority for the purposes of this section.]
  (c) Reports and Examinations.--
          (1) Reports.--
                  (A) In general.--The Board from time to time 
                may require any bank holding company and any 
                subsidiary of such company to submit reports 
                under oath to keep the Board informed as to--
                          (i) its financial condition, systems 
                        for monitoring and controlling 
                        financial and operating risks, and 
                        transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          (ii) compliance by the company or 
                        subsidiary with applicable provisions 
                        of this Act.
                  (B) Use of existing reports.--
                          (i) In general.--The Board shall, to 
                        the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraph that a bank holding company 
                        or any subsidiary of such company has 
                        provided or been required to provide to 
                        other Federal and State supervisors or 
                        to appropriate self-regulatory 
                        organizations.
                          (ii) Availability.--A bank holding 
                        company or a subsidiary of such company 
                        shall provide to the Board, at the 
                        request of the Board, a report referred 
                        to in clause (i).
                          (iii) Required use of publicly 
                        reported information.--The Board shall, 
                        to the fullest extent possible, accept 
                        in fulfillment of any reporting or 
                        recordkeeping requirements under this 
                        Act information that is otherwise 
                        required to be reported publicly and 
                        externally audited financial 
                        statements.
                          (iv) Reports filed with other 
                        agencies.--In the event the Board 
                        requires a report from a functionally 
                        regulated nondepository institution 
                        subsidiary of a bank holding company of 
                        a kind that is not required by another 
                        Federal or State regulator or 
                        appropriate self-regulatory 
                        organization, the Board shall request 
                        that the appropriate regulator or self-
                        regulatory organization obtain such 
                        report. If the report is not made 
                        available to the Board, and the report 
                        is necessary to assess a material risk 
                        to the bank holding company or any of 
                        its subsidiary depository institutions 
                        or compliance with this Act, the Board 
                        may require such subsidiary to provide 
                        such a report to the Board.
                  (C) Definition.--For purposes of this 
                subsection, the term ``functionally regulated 
                nondepository institution'' means--
                          (i) a broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934;
                          (ii) an investment adviser registered 
                        under the Investment Advisers Act of 
                        1940, or with any State, with respect 
                        to the investment advisory activities 
                        of such investment adviser and 
                        activities incidental to such 
                        investment advisory activities;
                          (iii) an insurance company subject to 
                        supervision by a State insurance 
                        commission, agency, or similar 
                        authority; and
                          (iv) an entity subject to regulation 
                        by the Commodity Futures Trading 
                        Commission, with respect to the 
                        commodities activities of such entity 
                        and activities incidental to such 
                        commodities activities.
          (2) Examinations.--
                  (A) Examination authority.--
                          (i) In general.--The Board may make 
                        examinations of each bank holding 
                        company and each subsidiary of a bank 
                        holding company.
                          (ii) Functionally regulated 
                        nondepository institution 
                        subsidiaries.--Notwithstanding clause 
                        (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank 
                        holding company only if--
                                  (I) the Board has reasonable 
                                cause to believe that such 
                                subsidiary is engaged in 
                                activities that pose a material 
                                risk to an affiliated 
                                depository institution, or
                                  (II) based on reports and 
                                other available information, 
                                the Board has reasonable cause 
                                to believe that a subsidiary is 
                                not in compliance with this Act 
                                or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the 
                                Board cannot make such 
                                determination through 
                                examination of the affiliated 
                                depository institution or bank 
                                holding company.
                  (B) Limitations on examination authority for 
                bank holding companies and subsidiaries.--
                Subject to subparagraph (A)(ii), the Board may 
                make examinations under subparagraph (A)(i) of 
                each bank holding company and each subsidiary 
                of such holding company in order to--
                          (i) inform the Board of the nature of 
                        the operations and financial condition 
                        of the holding company and such 
                        subsidiaries;
                          (ii) inform the Board of--
                                  (I) the financial and 
                                operational risks within the 
                                holding company system that may 
                                pose a threat to the safety and 
                                soundness of any subsidiary 
                                depository institution of such 
                                holding company; and
                                  (II) the systems for 
                                monitoring and controlling such 
                                risks; and
                          (iii) monitor compliance with the 
                        provisions of this Act and those 
                        governing transactions and 
                        relationships between any subsidiary 
                        depository institution and its 
                        affiliates.
                  (C) Restricted focus of examinations.--The 
                Board shall, to the fullest extent possible, 
                limit the focus and scope of any examination of 
                a bank holding company to--
                          (i) the bank holding company; and
                          (ii) any subsidiary of the holding 
                        company that, because of--
                                  (I) the size, condition, or 
                                activities of the subsidiary; 
                                or
                                  (II) the nature or size of 
                                transactions between such 
                                subsidiary and any depository 
                                institution which is also a 
                                subsidiary of such holding 
                                company,
                        could have a materially adverse effect 
                        on the safety and soundness of any 
                        depository institution affiliate of the 
                        holding company.
                  (D) Deference to bank examinations.--The 
                Board shall, to the fullest extent possible, 
                use, for the purposes of this paragraph, the 
                reports of examinations of depository 
                institutions made by the appropriate Federal 
                and State depository institution supervisory 
                authority.
                  (E) Deference to other examinations.--The 
                Board shall, to the fullest extent possible, 
                address the circumstances which might otherwise 
                permit or require an examination by the Board 
                by forgoing an examination and instead 
                reviewing the reports of examination made of--
                          (i) any registered broker or dealer 
                        by or on behalf of the Securities and 
                        Exchange Commission;
                          (ii) any registered investment 
                        adviser properly registered by or on 
                        behalf of either the Securities and 
                        Exchange Commission or any State;
                          (iii) any licensed insurance company 
                        by or on behalf of any state regulatory 
                        authority responsible for the 
                        supervision of insurance companies; and
                          (iv) any other subsidiary that the 
                        Board finds to be comprehensively 
                        supervised by a Federal or State 
                        authority.
          (3) Capital.--
                  (A) In general.--The Board 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 properly registered as an 
                        investment adviser under the Investment 
                        Advisers Act of 1940, or with any 
                        State.
                  (B) Rule of construction.--Subparagraph (A) 
                shall not be construed as preventing the Board 
                from imposing capital or capital adequacy 
                rules, guidelines, standards, or requirements 
                with respect to activities of a registered 
                investment adviser other than investment 
                advisory activities or activities incidental to 
                investment advisory activities.
                  (C) Limitations on indirect action.--In 
                developing, establishing, or assessing holding 
                company capital or capital adequacy rules, 
                guidelines, standards, or requirements for 
                purposes of this paragraph, the Board shall not 
                take into account the activities, operations, 
                or investments of an affiliated investment 
                company registered under the Investment Company 
                Act of 1940, if the investment company is not--
                          (i) a bank holding company; or
                          (ii) controlled by a bank holding 
                        company by reason of ownership by the 
                        bank holding company (including through 
                        all of its affiliates) of 25 percent or 
                        more of the shares of the investment 
                        company, where the shares owned by the 
                        bank holding company have a market 
                        value equal to more than $1,000,000.
          (4) Transfer of board authority to appropriate 
        federal banking agency.--
                  (A) In general.--In the case of any bank 
                holding company which is not significantly 
                engaged in nonbanking activities, the Board, in 
                consultation with the appropriate Federal 
                banking agency, may designate the appropriate 
                Federal banking agency of the lead insured 
                depository institution subsidiary of such 
                holding company as the appropriate Federal 
                banking agency for the bank holding company.
                  (B) Authority transferred.--An agency 
                designated by the Board under subparagraph (A) 
                shall have the same authority as the Board 
                under this Act to--
                          (i) examine and require reports from 
                        the bank holding company and any 
                        affiliate of such company (other than a 
                        depository institution) under section 
                        5;
                          (ii) approve or disapprove 
                        applications or transactions under 
                        section 3;
                          (iii) take actions and impose 
                        penalties under subsections (e) and (f) 
                        of section 5 and section 8; and
                          (iv) take actions regarding the 
                        holding company, any affiliate of the 
                        holding company (other than a 
                        depository institution), or any 
                        institution-affiliated party of such 
                        company or affiliate under the Federal 
                        Deposit Insurance Act and any other 
                        statute which the Board may designate.
                  (C) Agency orders.--Section 9 of this Act and 
                section 105 of the Bank Holding Company Act 
                Amendments of 1970 shall apply to orders issued 
                by an agency designated under subparagraph (A) 
                in the same manner such sections apply to 
                orders issued by the Board.
          (5) Functional regulation of securities and insurance 
        activities.--The Board shall defer to--
                  (A) the Securities and Exchange Commission 
                with regard to all interpretations of, and the 
                enforcement of, applicable Federal securities 
                laws (and rules, regulations, orders, and other 
                directives issued thereunder) relating to the 
                activities, conduct, and operations of 
                registered brokers, dealers, investment 
                advisers, and investment companies;
                  (B) the relevant State securities authorities 
                with regard to all interpretations of, and the 
                enforcement of, applicable State securities 
                laws (and rules, regulations, orders, and other 
                directives issued thereunder) relating to the 
                activities, conduct, and operations of 
                registered brokers, dealers, and investment 
                advisers; and
                  (C) the relevant State insurance authorities 
                with regard to all interpretations of, and the 
                enforcement of, applicable State insurance laws 
                (and rules, regulations, orders, and other 
                directives issued thereunder) relating to the 
                activities, conduct, and operations of insurance 
                companies and insurance agents.

           *       *       *       *       *       *       *

  (e)(1) Notwithstanding any other provision of this Act, the 
Board may, whenever it has reasonable cause to believe that the 
continuation by a bank holding company of any activity or of 
ownership or control of any of its nonbank subsidiaries, other 
than a nonbank subsidiary of a bank, constitutes a serious risk 
to the financial safety, soundness, or stability of a bank 
holding company subsidiary bank and is inconsistent with sound 
banking principles or with the purposes of this Act or with the 
[Financial Institutions Supervisory Act of 1966, order] 
Financial Institutions Supervisory Act of 1966, at the election 
of the bank holding company--
          (A) order the bank holding company or any such 
        nonbank subsidiaries, after due notice and opportunity 
        for hearing, and after considering the views of the 
        bank's primary supervisor, which shall be the 
        Comptroller of the Currency in the case of a national 
        bank or the Federal Deposit Insurance Corporation and 
        the appropriate State supervisory authority in the case 
        of an insured nonmember bank, to terminate such 
        activities or to terminate (within one hundred and 
        twenty days or such longer period as the Board may 
        direct in unusual circumstances) its ownership or 
        control of any such subsidiary either by sale or by 
        distribution of the shares of the subsidiary to the 
        [shareholders of the bank holding company. Such 
        distribution] shareholders of the bank holding company; 
        or
          (B) order the bank holding company, after due notice 
        and opportunity for hearing, and after consultation 
        with the primary supervisor for the bank, which shall 
        be the Comptroller of the Currency in the case of a 
        national bank, and the Federal Deposit Insurance 
        Corporation and the appropriate State supervisor in the 
        case of an insured nonmember bank, to terminate (within 
        120 days or such longer period as the Board may direct) 
        the ownership or control of any such bank by such 
        company.
The distribution referred to in subparagraph (A) shall be pro 
rata with respect to all of the shareholders of the 
distributing bank holding company, and the holding company 
shall not make any charge to its shareholders arising out of 
such a distribution.

           *       *       *       *       *       *       *

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

SEC. 6. FINANCIAL HOLDING COMPANIES.

  (a) Financial Holding Company Defined.--For purposes of this 
section, the term ``financial holding company'' means a bank 
holding company which meets the requirements of subsection (b).
  (b) Eligibility Requirements for Financial Holding 
Companies.--
          (1) In general.--No bank holding company may engage 
        in any activity or directly or indirectly acquire or 
        retain shares of any company under this section unless 
        the bank holding company meets the following 
        requirements:
                  (A) All of the subsidiary depository 
                institutions of the bank holding company are 
                well capitalized.
                  (B) All of the subsidiary depository 
                institutions of the bank holding company are 
                well managed.
                  (C) All of the subsidiary depository 
                institutions of the bank holding company have 
                achieved a rating of ``satisfactory record of 
                meeting community credit needs'', or better, at 
                the most recent examination of each such 
                institution;
                  (D) In the case of any bank holding company 
                which underwrites or sells, or any affiliate of 
                which underwrites or sells, annuities contracts 
                or contracts insuring, guaranteeing, or 
                indemnifying against loss, harm, damage, 
                illness, disability, or death--
                          (i) the company or affiliate has not 
                        been adjudicated in any Federal court, 
                        and has not entered into a consent 
                        decree filed in a Federal court or into 
                        a settlement agreement, premised upon a 
                        violation of the Fair Housing Act for 
                        the activities described in this 
                        subparagraph;
                          (ii) if such company or affiliate has 
                        entered into any such consent decree or 
                        settlement agreement, the company or 
                        the affiliate is not in violation of 
                        the decree or settlement agreement as 
                        determined by a court of competent 
                        jurisdiction or the agency with which 
                        the decree or agreement was entered 
                        into; or
                          (iii) the company has been exempted 
                        from the requirements of clauses (i) 
                        and (ii) by the Board under paragraph 
                        (4).
                  (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), (B), (C), and (D).
          (2) Foreign banks and companies.--For purposes of 
        paragraph (1), the Board shall establish and apply 
        comparable capital and other operating standards to a 
        foreign bank that operates a branch or agency or owns 
        or controls a bank or commercial lending company in the 
        United States, and any company that owns or controls 
        such foreign bank, giving due regard to the principle 
        of national treatment and equality of competitive 
        opportunity.
          (3) Limited exclusions from community needs 
        requirements for newly acquired depository 
        institutions.--Any depository institution acquired by a 
        bank holding company during the 12-month period 
        preceding the submission of a notice under paragraph 
        (1)(E) and any depository institution acquired after 
        the submission of such notice may be excluded for 
        purposes of paragraph (1)(C) during the 12-month period 
        beginning on the date of such acquisition if--
                  (A) the bank holding company has submitted an 
                affirmative plan to the appropriate Federal 
                banking agency to take such action as may be 
                necessary in order for such institution to 
                achieve a rating of ``satisfactory record of 
                meeting community credit needs'', or better, at 
                the next examination of the institution; and
                  (B) the plan has been accepted by such 
                agency.
          (4) Violations of the fair housing act.--The Board 
        may, on a case-by-case basis, exempt a bank holding 
        company from meeting the requirements of clauses (i) 
        and (ii) of paragraph (1)(D).
  (c) Engaging in Activities That Are Financial in Nature.--
          (1) Financial activities.--
                  (A) 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, 
                that the Board has determined (by regulation or 
                order and in accordance with subparagraph (B)) 
                to be--
                          (i) financial in nature or incidental 
                        to such financial activities; or
                          (ii) complementary to activities 
                        authorized under this subsection to the 
                        extent that the amount of such 
                        complementary activities remains small.
                  (B) Coordination between the board and the 
                secretary of the treasury.--
                          (i) Proposals raised before the 
                        board.--
                                  (I) Consultation.--The Board 
                                shall notify the Secretary of 
                                the Treasury of, and consult 
                                with the Secretary of the 
                                Treasury concerning, any 
                                request, proposal, or 
                                application under this 
                                subsection, including a 
                                regulation or order proposed 
                                under paragraph (4), for a 
                                determination of whether an 
                                activity is financial in nature 
                                or incidental to such a 
                                financial activity.
                                  (II) Treasury view.--The 
                                Board shall not determine that 
                                any activity is financial in 
                                nature or incidental to a 
                                financial activity under this 
                                subsection if the Secretary of 
                                the Treasury notifies the Board 
                                in writing, not later than 30 
                                days after the date of receipt 
                                of the notice described in 
                                subclause (I) (or such longer 
                                period as the Board determines 
                                to be appropriate in light of 
                                the circumstances) that the 
                                Secretary of the Treasury 
                                believes that the activity is 
                                not financial in nature or 
                                incidental to a financial 
                                activity.
                          (ii) Proposals raised by the 
                        treasury.--
                                  (I) Treasury 
                                recommendation.--The Secretary 
                                of the Treasury may, at any 
                                time, recommend in writing that 
                                the Board find an activity to 
                                be financial in nature or 
                                incidental to a financial 
                                activity.
                                  (II) Time period for board 
                                action.--Not later than 30 days 
                                after the date of receipt of a 
                                written recommendation from the 
                                Secretary of the Treasury under 
                                subclause (I) (or such longer 
                                period as the Secretary of the 
                                Treasury and the Board 
                                determine to be appropriate in 
                                light of the circumstances), 
                                the Board shall determine 
                                whether to initiate a public 
                                rulemaking proposing that the 
                                subject recommended activity be 
                                found to be financial in nature 
                                or incidental to a financial 
                                activity under this subsection, 
                                and shall notify the Secretary 
                                of the Treasury in writing of 
                                the determination of the Board 
                                and, in the event that the 
                                Board determines not to seek 
                                public comment on the proposal, 
                                the reasons for that 
                                determination.
          (2) Factors to be considered.--In determining whether 
        an activity is financial in nature or incidental to 
        financial activities, the Board shall take into 
        account--
                  (A) the purposes of this Act and the 
                Financial Services Act of 1999;
                  (B) changes or reasonably expected changes in 
                the marketplace in which bank holding companies 
                compete;
                  (C) changes or reasonably expected changes in 
                the technology for delivering financial 
                services; and
                  (D) whether such activity is necessary or 
                appropriate to allow a bank holding company and 
                the affiliates of a bank holding company to--
                          (i) compete effectively with any 
                        company seeking to provide financial 
                        services in the United States;
                          (ii) use any available or emerging 
                        technological means, including any 
                        application necessary to protect the 
                        security or efficacy of systems for the 
                        transmission of data or financial 
                        transactions, in providing financial 
                        services; and
                          (iii) offer customers any available 
                        or emerging technological means for 
                        using financial services.
          (3) Activities that are financial in nature.--The 
        following activities shall be considered to be 
        financial in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding money or 
                securities.
                  (B) Insuring, guaranteeing, or indemnifying 
                against loss, harm, damage, illness, 
                disability, or death, or providing and issuing 
                annuities, and acting as principal, agent, or 
                broker for purposes of the foregoing.
                  (C) Providing financial, investment, or 
                economic advisory services, including advising 
                an investment company (as defined in section 3 
                of the Investment Company Act of 1940).
                  (D) Issuing or selling instruments 
                representing interests in pools of assets 
                permissible for a bank to hold directly.
                  (E) Underwriting, dealing in, or making a 
                market in securities.
                  (F) Engaging in any activity that the Board 
                has determined, by order or regulation that is 
                in effect on the date of enactment of the 
                Financial Services Act of 1999, to be so 
                closely related to banking or managing or 
                controlling banks as to be a proper incident 
                thereto (subject to the same terms and 
                conditions contained in such order or 
                regulation, unless modified by the Board).
                  (G) Engaging, in the United States, in any 
                activity that--
                          (i) a bank holding company may engage 
                        in outside the United States; and
                          (ii) the Board has determined, under 
                        regulations issued pursuant to section 
                        4(c)(13) of this Act (as in effect on 
                        the day before the date of enactment of 
                        the Financial Services Act of 1999) to 
                        be usual in connection with the 
                        transaction of banking or other 
                        financial operations abroad.
                  (H) Directly or indirectly acquiring or 
                controlling, whether as principal, on behalf of 
                1 or more entities (including entities, other 
                than a depository institution, that the bank 
                holding company controls) or otherwise, shares, 
                assets, or ownership interests (including 
                without limitation debt or equity securities, 
                partnership interests, trust certificates or 
                other instruments representing ownership) of a 
                company or other entity, whether or not 
                constituting control of such company or entity, 
                engaged in any activity not authorized pursuant 
                to this section if--
                          (i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution;
                          (ii) such shares, assets, or 
                        ownership interests are acquired and 
                        held by an affiliate of the bank 
                        holding company that is a registered 
                        broker or dealer that is engaged in 
                        securities underwriting activities, or 
                        an affiliate of such broker or dealer, 
                        as part of a bona fide underwriting or 
                        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) or providing 
                        and issuing annuities;
                          (iii) such shares, assets, or 
                        ownership interests represent an 
                        investment made in the ordinary course 
                        of business of such insurance company 
                        in accordance with relevant State law 
                        governing such investments; and
                          (iv) during the period such shares, 
                        assets, or ownership interests are 
                        held, the bank holding company does not 
                        directly or indirectly participate in 
                        the day-to-day management or operation 
                        of the company or entity except insofar 
                        as necessary to achieve the objectives 
                        of clauses (ii) and (iii).
          (4) Authorization of new financial activities.--The 
        Board shall, by regulation or order and in accordance 
        with paragraph (1)(B), define, consistent with the 
        purposes of this Act, the following activities as, and 
        the extent to which such activities are, financial in 
        nature or incidental to activities which are financial 
        in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding financial 
                assets other than money or securities.
                  (B) Providing any device or other 
                instrumentality for transferring money or other 
                financial assets.
                  (C) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
          (5) Post-consummation notification.--
                  (A) In general.--A financial holding company 
                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 or in paragraph (6) of 
                this subsection, 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.
          (6) Notice required for large combinations.--
                  (A) In general.--No financial holding company 
                or wholesale financial holding company shall 
                directly or indirectly acquire, and no company 
                that becomes a financial holding company or a 
                wholesale financial holding company shall 
                directly or indirectly acquire control of, any 
                company in the United States, including through 
                merger, consolidation, or other type of 
                business combination, that--
                          (i) is engaged in activities 
                        permitted under this subsection or 
                        subsection (g); and
                          (ii) has consolidated total assets in 
                        excess of $40,000,000,000,
                unless such holding company has provided notice 
                to the Board, not later than 60 days prior to 
                such proposed acquisition or prior to becoming 
                a financial holding company or wholesale 
                financial holding company, and during that time 
                period, or such longer time period not 
                exceeding an additional 60 days, as established 
                by the Board, the Board has not issued a notice 
                disapproving the proposed acquisition or 
                retention.
                  (B) Factors for consideration.--In reviewing 
                any prior notice filed under this paragraph, 
                the Board shall take into consideration--
                          (i) whether the company is in 
                        compliance with all applicable criteria 
                        set forth in subsection (b) and the 
                        provisions of subsection (d);
                          (ii) whether the proposed combination 
                        represents an undue aggregation of 
                        resources;
                          (iii) whether the proposed 
                        combination poses a risk to the deposit 
                        insurance system;
                          (iv) whether the proposed combination 
                        poses a risk to State insurance 
                        guaranty funds;
                          (v) whether the proposed combination 
                        can reasonably be expected to be in the 
                        best interests of depositors or 
                        policyholders of the respective 
                        entities; and
                          (vi) whether the proposed transaction 
                        can reasonably be expected to further 
                        the purposes of this Act and produce 
                        benefits to the public.
                  (C) Required information.--The Board may 
                disapprove any prior notice filed under this 
                paragraph if the company submitting such notice 
                neglects, fails, or refuses to furnish to the 
                Board all relevant information required by the 
                Board.
                  (D) Solicitation of views of other 
                supervisory agencies.--
                          (i) In general.--Upon receiving a 
                        prior notice under this paragraph, in 
                        order to provide for the submission of 
                        their views and recommendations, the 
                        Board shall give notice of the proposal 
                        to--
                                  (I) the appropriate Federal 
                                banking agency of any bank 
                                involved;
                                  (II) the appropriate 
                                functional regulator of any 
                                functionally regulated 
                                nondepository institution (as 
                                defined in section 5(c)(1)(C)) 
                                involved; and
                                  (III) the Secretary of the 
                                Treasury, the Department of 
                                Justice, and the Federal Trade 
                                Commission.
                          (ii) Timing.--The views and 
                        recommendations of any agency provided 
                        notice under this paragraph shall be 
                        submitted to the Board not later than 
                        30 calendar days after the date on 
                        which notice to the agency was given, 
                        unless the Board determines that 
                        another shorter time period is 
                        appropriate.
  (d) Provisions Applicable to Financial Holding Companies That 
Fail To Meet Requirements.--
          (1) In general.--If a financial holding company is 
        not in compliance with the requirements of subparagraph 
        (A), (B), or (C) of subsection (b)(1), the appropriate 
        Federal banking agency of the subsidiary depository 
        institution shall notify the Board which shall give 
        notice of such finding to the company.
          (2) Agreement to correct conditions required.--Not 
        later than 45 days after receipt by a financial holding 
        company of a notice given under paragraph (1) (or such 
        additional period as the Board may permit), the company 
        and any relevant depository institution shall execute 
        an agreement acceptable to the Board and the 
        appropriate Federal banking agency to comply with the 
        requirements applicable to a financial holding company.
          (3) Authority to impose limitations.--Until the 
        conditions described in a notice to a financial holding 
        company under paragraph (1) are corrected--
                  (A) the Board may impose such limitations on 
                the conduct or activities of the company or any 
                affiliate of the company (other than a 
                depository institution or a subsidiary of a 
                depository institution) as the Board determines 
                to be appropriate under the circumstances; and
                  (B) the appropriate Federal banking agency 
                may impose such limitations on the conduct or 
                activities of an affiliated depository 
                institution or subsidiary of a depository 
                institution as the appropriate Federal banking 
                agency determines to be appropriate under the 
                circumstances.
          (4) Failure to correct.--If, after receiving a notice 
        under paragraph (1), a financial holding company or a 
        depository institution affiliate of such 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 on or before the date on 
                which the next examination of the depository 
                institution subsidiary is completed or by the 
                end of such other period as the 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) Authority To Retain Limited Nonfinancial Activities and 
Affiliations.--
          (1) In general.--Notwithstanding section 4(a), a 
        company that is not a bank holding company or a foreign 
        bank (as defined in section 1(b)(7) of the 
        International Banking Act of 1978) and becomes a 
        financial holding company after the date of the 
        enactment of the Financial Services Act of 1999 may 
        continue to engage in any activity and retain direct or 
        indirect ownership or control of shares of a company 
        engaged in any activity if--
                  (A) the holding company lawfully was engaged 
                in the activity or held the shares of such 
                company on September 30, 1997;
                  (B) the holding company is predominantly 
                engaged in financial activities as defined in 
                paragraph (2); and
                  (C) the company engaged in such activity 
                continues to engage only in the 3e activities 
                that such company conducted on September 30, 
                1997, and other activities permissible under 
                this Act.
          (2) Predominantly financial.--For purposes of this 
        subsection, a company is predominantly engaged in 
        financial activities if the annual gross revenues 
        derived by the holding company and all subsidiaries of 
        the holding company (excluding revenues derived from 
        subsidiary depository institutions), on a consolidated 
        basis, from engaging in activities that are financial 
        in nature or are incidental to activities that are 
        financial in nature under subsection (c) represent at 
        least 85 percent of the consolidated annual gross 
        revenues of the company.
          (3) No expansion of grandfathered commercial 
        activities through merger or consolidation.--A 
        financial holding company that engages in activities or 
        holds shares pursuant to this subsection, or a 
        subsidiary of such financial holding company, may not 
        acquire, in any merger, consolidation, or other type of 
        business combination, assets of any other company which 
        is engaged in any activity which the Board has not 
        determined to be financial in nature or incidental to 
        activities that are financial in nature under 
        subsection (c).
          (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 suchcompanies 
        does not exceed 15 percent of the consolidated annual 
        gross revenues of the financial holding company (excluding 
        revenues derived from subsidiary depository institutions).
          (5) Cross marketing restrictions applicable to 
        commercial activities.--A depository institution 
        controlled by a financial holding company shall not--
                  (A) offer or market, directly or through any 
                arrangement, any product or service of a 
                company whose activities are conducted or whose 
                shares are owned or controlled by the financial 
                holding company pursuant to this subsection or 
                subparagraph (H) or (I) of subsection (c)(3); 
                or
                  (B) permit any of its products or services to 
                be offered or marketed, directly or through any 
                arrangement, by or through any company 
                described in subparagraph (A).
          (6) Transactions with nonfinancial affiliates.--An 
        insured depository institution controlled by a 
        financial holding company or wholesale financial 
        holding company may not engage in a covered transaction 
        (as defined by section 23A(b)(7) of the Federal Reserve 
        Act) with any affiliate controlled by the company 
        pursuant to section 10(c), this subsection, or 
        subparagraph (H) or (I) of subsection (c)(3).
          (7) Sunset of grandfather.--A financial holding 
        company engaged in any activity, or retaining direct or 
        indirect ownership or control of shares of a company, 
        pursuant to this subsection, shall terminate such 
        activity and divest ownership or control of the shares 
        of such company before the end of the 10-year period 
        beginning on the date of the enactment of the Financial 
        Services Act of 1999. The Board may, upon application 
        by a financial holding company, extend such 10-year 
        period by a period not to exceed an additional 5 years 
        if such extension would not be detrimental to the 
        public interest.
  (g) Developing Activities.--A financial holding company 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) neither the Board nor the Secretary of the 
        Treasury has determined that the activity is not 
        financial in nature or incidental to financial 
        activities under subsection (c);
          (6) the holding company is not required to provide 
        prior written notice of the transaction to the Board 
        under subsection (c)(6); and
          (7) the holding company provides written notification 
        to the Board describing the activity commenced or 
        conducted by the company acquired no later than 10 
        business days after commencing the activity or 
        consummating the acquisition.
  (h) Depository Institution Privacy Policies.--
          (1) Disclosure required.--In the case of any insured 
        depository institution which becomes affiliated under 
        this section with a financial holding company, the 
        privacy policy of such depository institution shall be 
        clearly and conspicuously disclosed--
                  (A) with respect to any person who becomes a 
                customer of the depository institution any time 
                after the depository institution becomes 
                affiliated with such company, to such person at 
                the time at which the business relationship 
                between the customer and the institution is 
                initiated; and
                  (B) with respect to any person who already is 
                a customer of the depository institution at the 
                time the depository institution becomes 
                affiliated with such company, to such person 
                within a reasonable time after the affiliation 
                is consummated.
          (2) Information to be included.--The privacy policy 
        of an insured depository institution which is disclosed 
        pursuant to paragraph (1) shall include--
                  (A) the policy of the institution with 
                respect to disclosing customer information to 
                third parties, other than agents of the 
                depository institution, for marketing purposes; 
                and
                  (B) the disclosures required under section 
                603(d)(2)(D)(iii) of the Fair Credit Reporting 
                Act with regard to the right of the customer, 
                at any time, to direct that information 
                referred to in such section not be shared with 
                affiliates of the depository institution.
          (3) Applicability.--For purposes of section 10 of the 
        Home Owners' Loan Act, this subsection and subsection 
        (i) shall apply with regard to a savings and loan 
        holding company and any affiliate or insured depository 
        institution subsidiary of such holding company to the 
        same extent and in the same manner this subsection and 
        subsection (i) apply with respect to a financial 
        holding company, affiliate of a financial holding 
        company, or insured depository institution subsidiary 
        of a financial holding company.
  (i) Confidentiality of Health and Medical Information.--
          (1) In general.--If a company which underwrites or 
        sells annuities contracts or contracts insuring, 
        guaranteeing, or indemnifying against loss, harm, 
        damage, illness, disability, or death (other than 
        credit-related insurance) is or becomes a financial 
        holding company or an affiliate of a financial holding 
        company, such company shall maintain a practice of 
        protecting the confidentiality of individually 
        identifiable customer health and medical information 
        and may disclose such information only--
                  (A) with the consent, or at the direction, of 
                the customer;
                  (B) for insurance underwriting and reinsuring 
                policies, account administration, reporting, 
                investigating, or preventing fraud or material 
                misrepresentation, processing premium payments, 
                processing insurance claims or defending any 
                action relating to such claims, administering 
                insurance benefits (including utilization 
                review activities), providing information to 
                the customer's physician or other health care 
                provider, participating in research projects, 
                enabling the purchase, transfer, merger, or 
                sale of any insurance-related business, or as 
                otherwise required or specifically permitted by 
                Federal or State law; or
                  (C) in connection with--
                          (i) the authorization, settlement, 
                        billing, processing, clearing, 
                        transferring, reconciling, or 
                        collection of amounts charged, debited, 
                        or otherwise paid using a debit, 
                        credit, or other payment card or 
                        account number, or by other payment 
                        means;
                          (ii) the transfer of receivables, 
                        accounts, or interest therein;
                          (iii) the audit of the debit, credit, 
                        or other payment information;
                          (iv) compliance with Federal, State, 
                        or local law;
                          (v) compliance with a properly 
                        authorized civil, criminal, or 
                        regulatory investigation by Federal, 
                        State, or local authorities as governed 
                        by the requirements of this section; or
                          (vi) fraud protection, risk control, 
                        resolving customer disputes or 
                        inquiries, communicating with the 
                        person to whom the information relates, 
                        or reporting to consumer reporting 
                        agencies.
          (2) Effective date; sunset.--
                  (A) Effective date.--Except as provided in 
                subparagraph (B), paragraph (1) shall take 
                effect on February 1, 2000.
                  (B) Sunset.--Paragraph (1) shall not take 
                effect if, or shall cease to be effective on 
                and after the date on which, legislation is 
                enacted that satisfies the requirements in 
                section 264(c)(1) of the Health Insurance 
                Portability and Accountability Act of 1996 
                (Public Law 104-191; 110 Stat. 2033).
          (3) Consultation.--While paragraph (1) is in effect, 
        the Board shall consult with the Secretary of Health 
        and Human Services in connection with the 
        administration of such paragraph.

           *       *       *       *       *       *       *


              [amendments to internal revenue code of 1954

    --[Sec. 10. (a) subchapter O of chapter 1 of the internal 
revenue code of 1954 is amended by adding at the end thereof 
the following new part:

  [``PART VIII--DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY ACT OF 
                                  1956

[``Sec. 1101. Distributions pursuant to Bank Holding Company Act of 
          1956.
[``Sec. 1102. Special rules.
[``Sec. 1103. Definitions.

[``SEC. 1101. DISTRIBUTIONS PURSUANT TO BANK HOLDING COMPANY ACT OF 
                    1956.

      [``(a) Distributions of Certain Non-Banking Property.--
          [``(1) Distributions of prohibited property.--If--
                  [``(A) a qualified bank holding corporation 
                distributes prohibited property (other than 
                stock received in an exchange to which 
                subsection (c)(2) applies)--
                          [``(i) to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such share-
                        holder of stock in such corporation; or
                          [``(ii) to a shareholder, in exchange 
                        for its preferred stock; or
                          [``(iii) to a security holder, in 
                        exchange for its securities; and
                  [``(B) the Board has, before the 
                distribution, certified that the distribution 
                of such prohibited property is necessary or 
                appropriate to effectuate section 4 of the Bank 
                Holding Company Act of 1956,
        then no gain to the shareholder or security holder from 
        the receipt of such property shall be recognized.
          [``(2) Distributions of stock and securities received 
        in an exchange to which subsection (c)(2) applies.--
        If--
                  [``(A) a qualified bank holding corporation 
                distributes--
                          [``(i) common stock received in an 
                        exchange to which subsection (c)(2) 
                        applies to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such 
                        shareholder of stock in such 
                        corporation; or
                          [``(ii) common stock received in an 
                        exchange to which subsection (c)(2) 
                        applies to a shareholder, in exchange 
                        for its common stock; or
                          [``(iii) preferred stock or common 
                        stock received in an exchange to which 
                        subsection (c)(2) applies to a 
                        shareholder, in exchange for its 
                        preferred stock; or
                          [``(iv) securities or preferred or 
                        common stock received in an exchange to 
                        which subsection (c)(2) applies to a 
                        security holder, in exchange for its 
                        securities; and
                  [``(B) any preferred stock received has 
                substantially the same terms as the preferred 
                stock exchanged, and any securities received 
                have substantially the same terms as the 
                securities exchanged,
        then, except as provided in subsection (f), no gain to 
        the shareholder or security holder from the receipt of 
        such stock or such securities or such stock and 
        securities shall be recognized.
          [``(3) Non pro rata distributions.--Paragraphs (1) 
        and (2) shall apply to a distribution whether or not 
        the distribution is pro rata with respect to all of the 
        shareholders of the distributing qualified bank holding 
        corporation.
          [``(4) Exception.--This subsection shall not apply to 
        any distribution by a corporation which has made any 
        distribution pursuant to subsection (b).
          [``(5) Distributions involving gifts or 
        compensation.--

          [``In the case of a distribution to which paragraph (1) or (2) 
        applies, but which--
          [``(A) results in a gift, see section 2501, and following, or
          [``(B) has the effect of the payment of compensation, see 
        section 61(a)(1).

    [``(b) Corporation Ceasing To Be a Bank Holding Company.--
          [``(1) Distrubions of property which cause a 
        corporation to be a bank holding company.--If--
                  [``(A) a qualified bank holding corporation 
                distributes property (other than stock received 
                in an exchange to which subsection (c)(3) 
                applies)--
                          [``(i) to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such 
                        shareholder of stock in such 
                        corporation; or
                          [``(ii) to a shareholder, in exchange 
                        for its preferred stock; or
                          [``(iii) to a security holder, in 
                        change for its securities; and
                  [``(B) the Board has, before the 
                distribution, certified that--
                          [``(i) such property is all or part 
                        of the property by reason of which such 
                        corporation controls (within the 
                        meaning of section 2(a) of the Bank 
                        Holding Company Act of 1956) a bank or 
                        bank holding company, or such property 
                        is part of the property by reason of 
                        which such corporation did control a 
                        bank or a bank holding company before 
                        any property of the same kind was 
                        distributed under this subsection or 
                        exchanged under subsection (c)(3) ; and
                          [``(ii) the distribution is necessary 
                        or appropriate to effectuate the 
                        policies of such Act,
        then no gain to the shareholder or security holder from 
        the receipt of such property shall be recognized.
          [``(2) Distributions of stock and securities received 
        in an exchange to which subsection (c)(3) applies.--
        If--
                  [``(A) a qualified bank holding corporation 
                distributes--
                          [``(i) common stock received in an 
                        exchange to which subsection (c)(3) 
                        applies to a shareholder (with respect 
                        to its stock held by such shareholder), 
                        without the surrender by such 
                        shareholder of stock in such 
                        corporation; or
                          [``(ii) common stock received in an 
                        exchange to which subsection (c)(3) 
                        applies to a shareholder, in exchange 
                        for its common stock; or
                          [``(iii) preferred stock or common 
                        stock received in an exchange to which 
                        subsection (c)(3) applies to a 
                        shareholder, in exchange for its 
                        preferred stock; or
                          [``(iv) securities or preferred or 
                        common stock received in an exchange to 
                        which subsection (c)(3) applies to a 
                        security holder, in exchange for its 
                        securities; and
                  [``(B) any preferred stock received has 
                substantially the same terms as the preferred 
                stock exchanged, and any securities received 
                have substantially the same terms as the 
                securities exchanged,
        then, except as provided in subsection (f), no gain to 
        the shareholder or security holder from the receipt of 
        such stock or such securities or such stock and 
        securities shall be recognized.
          [``(3) Non pro rata distributions.--Paragraphs (1) 
        and (2) shall apply to a distribution whether or not 
        the distribution is pro rata with respect to all of the 
        shareholders of the distributing qualified bank holding 
        corporation.
          [``(4) Exception.--This subsection shall not apply to 
        any distribution by a corporation which has made any 
        distribution pursuant to subsection (a).
          [``(5) Distributions involving gift or 
        compensation.--

          [``In the case of a distribution to which paragraph (1) or (2) 
        applies, but which--
          [``(A) results in a gift, see section 2501, and following, or
          [``(B) has the effect of the payment of compensation, see 
        section 61(a)(1).

      [``(c) Property Acquired After May 15, 1955.--
          [``(1) In general.--Except as provided in paragraphs 
        (2) and (3), subsection (a) or (b) shall not apply to--
                  [``(A) any property acquired by the 
                distributing corporation after May 15, 1955, 
                unless (i) gain to such corporation with 
                respect to the receipt of such property was not 
                recognized by reason of subsection (a) or (b), 
                or (ii) such property was received by it in 
                exchange for all of its stock in an exchange to 
                which paragraph (2) or (3) applies, or (iii) 
                such property was acquired by the distributing 
                corporation in a transaction in which gain was 
                not recognized under section 305(a) or section 
                332, or under section 354 with respect to a 
                reorganization described in section 368(a)(1) 
                (E) or (F), or
                  [``(B) any property which was acquired by the 
                distributing corporation in a distribution with 
                respect to stock acquired by such corporation 
                after May 15, 1955, unless such stock was 
                acquired by such corporation (i) in a 
                distribution (with respect to stock held by it 
                on May 15, 1955, or with respect to stock in 
                respect of which all previous applications of 
                this clause are satisfied) with respect to 
                which gain to it was not recognized by reason 
                of subsection (a) or (b), or (ii) in exchange 
                for all of its stock in an exchange to which 
                paragraph (2) or (3) applies, or (iii) in a 
                transaction in which gain was not recognized 
                under section 305(a) or section 332, or under 
                section 354 with respect to a reorganization 
                described in section 368(a)(1) (E) or (F), or
                  [``(C) any property acquired by the 
                distributing corporation in a transaction in 
                which gain was not recognized under section 
                332, unless such property was acquired from a 
                corporation which, if it had been a qualified 
                bank holding corporation, could have 
                distributed such property under subsection 
                (a)(1) or (b)(1).
          [``(2) Exchanges involving prohibited property.--If--
                  [``(A) Any qualified bank holding corporation 
                exchanges (i) property, which, under subsection 
                (a)(1), such corporation could distribute 
                directly to its shareholders or security 
                holders without the recognition of gain to such 
                shareholders or security holders, and other 
                property (except property described in 
                subsection (b)(1)(B)(i)), for (ii) all of the 
                stock of a second corporation created and 
                availed of solely for the purpose of receiving 
                such property;
                  [``(B) immediately after the exchange, the 
                qualified bank holding corporation distributes 
                all of such stock in a manner prescribed in 
                subsection (a)(2)(A); and
                  [``(C) before such exchange, the Board has 
                certified (with respect to the property 
                exchanged which consists of property which, 
                under subsection (a)(1), such corporation could 
                distribute directly to its shareholders or 
                security holders without the recognition of 
                gain) that the exchange and distribution are 
                necessary or appropriate to effectuate section 
                4 of the Bank Holding Company Act of 1956,
        then paragraph (1) shall not apply with respect to such 
        distribution.
          [``(3) Exchanges involving interests in banks.--If--
                  [``(A) any qualified bank holding corporation 
                exchanges (i) property which, under subsection 
                (b)(1), such corporation could distribute 
                directly to its shareholders or securities 
                holders without the recognition of gain to such 
                shareholders or security holders, and other 
                property (except prohibited property), for (ii) 
                all of the stock of a second corporation 
                created and availed of solely for the purpose 
                of receiving such property;
                  [``(B) immediately after the exchange, the 
                qualified bank holding corporation distributes 
                all of such stock in a manner prescribed in 
                subsection (b)(2)(A); and
                  [``(C) before such exchange, the Board has 
                certified (with respect to the property 
                exchanged which consists of property which, 
                under subsection (b)(1), such corporation could 
                distribute directly to its shareholders or 
                security holders without the recognition of 
                gain) that--
                          [``(i) such property is all or part 
                        of the property by reason of which such 
                        corporation controls (within the 
                        meaning of section 2(a) of the Bank 
                        Holding Company Act of 1956) a bank or 
                        bank holding company, or such property 
                        is part of the property by reason of 
                        which such corporation did control a 
                        bank or a bank holding company before 
                        any property of the same kind was 
                        distributed under subsection (b)(1) or 
                        exchanged under this paragraph: and
                          [``(ii) the exchange and distribution 
                        are necessary or appropriate to 
                        effectuate the policies of such Act,
        then paragraph (1) shall not apply with respect to such 
        distribution.
      [``(d) Distributions To Avoid Federal Income Tax.--
          [``(1) Prohibited property.--Subsection (a) shall not 
        apply to a distribution if, connection with such 
        distribution, the distributing corporation retains, or 
        transfers after May 15, 1955, to any corporation, 
        property (other than prohibited property) as part of a 
        plan one of the principal purposes of which is the 
        distribution of the earnings and profits of any 
        corporation.
          [``(2) Banking property.--Subsection (b) shall not 
        apply to a distribution if, in connection with such 
        distribution, the distributing corporation retains, or 
        transfers after May 15, 1955, to any corporation, 
        property (other than property described in subsection 
        (b)(1)(B)(i)) as part of a plan one of the principal 
        purposes of which is the distribution of the earnings 
        and profits of any corporation.
          [``(3) Certain contributions to capital.--In the case 
        of a distribution a portion of which is attributable to 
        a transfer which is a contribution to the capital of a 
        corporation, made after May 15, 1955, and prior to the 
        date of the enactment of this part, if subsection (a) 
        or (b) would apply to such distribution but for the 
        fact that, under paragraph (1) or (2) (as the case may 
        be) of this subsection, such contribution to capital is 
        part of a plan one of the principal purposes of which 
        is to distribute the earnings and profits of any 
        corporation, then, notwithstanding paragraph (1) or 
        (2), subsection (a) or (b) (as the case may be) shall 
        apply to that portion of such distribution not 
        attributable to such contribution to capital, and shall 
        not apply to that portion of such distribution 
        attributable to such contribution to capital.
      [``(e) Final Certification.--
          [``(1) For subsection (a).--Subsection (a) shall not 
        apply with respect to any distribution by a corporation 
        unless the Board certifies that, before the expiration 
        of the period permitted under section 4(a) of the Bank 
        Holding Company Act of 1956 (including any extensions 
        thereof granted to such corporation under section 
        4(a)), the corporation has disposed of all the property 
        the disposition of which is necessary or appropriate to 
        effectuate section 4 of such Act (or would have been so 
        necessary or appropriate if the corporation had 
        continued to be a bank holding company).
          [``(2) For subsection (b).--
                  [``(A) Subsection (b) shall not apply with 
                respect to any distribution by any corporation 
                unless the Board certifies that, before the 
                expiration of the period specified in 
                subparagraph (B), the corporation has ceased to 
                be a bank holding company.
                  [``(B) The period referred to in subparagraph 
                (A) is the period which expires 2 years after 
                the date of theenactment of this part or 2 
years after the date on which the corporation becomes a bank holding 
company, whichever date is later. The Board is authorized, on 
application by any corporation, to extend such period from time to time 
with respect to such corporation for not more than one year at a time 
if, in its judgment, such an extension would not be detrimental to the 
public interest; except that such period may not in any case be 
extended beyond the date 5 years after the date of the enactment of 
this part or 5 years after the date on which the corporation becomes a 
bank holding company, whichever date is later.
    [``(f) Certain Exchanges of Securities.--In the case of an 
exchange described in subsection (a)(2)(A)(iv) or subsection 
(b)(2)(A)(iv), subsection (a) or subsection (b) (as the case 
may be) shall apply only to the extent that the principal 
amount of the securities received does not exceed the principal 
amount of the securities exchanged.

[``SEC. 1102. SPECIAL RULES.

    [``(a) Basis of Property Acquired in Distributions.--If, by 
reason of section 1101, gain is not recognized with respect to 
the receipt of any property, then, under regulations prescribed 
by the Secretary or his delegate--
          [``(1) if the property is received by a shareholder 
        with respect to stock, without the surrender by such 
        shareholder of stock, the basis of the property 
        received and of the stock with respect to which it is 
        distributed shall, in the distributee's hands, be 
        determined by allocating between such property and such 
        stock the adjusted basis of such stock; or
          [``(2) if the property is received by a shareholder 
        in exchange for stock or by a security holder in 
        exchange for securities, the basis of the property 
        received shall, in the distributee's hands, be the same 
        as the adjusted basis of the stock or securities 
        exchanged, increased by--
                  [``(A) the amount of the property received 
                which was treated as a dividend, and
                  [``(B) the amount of gain to the taxpayer 
                recognized on the property received (not 
                including any portion of such gain which was 
                treated as a dividend).
    [``(b) Periods of Limitation.--The periods of limitation 
provided in section 6501 (relating to limitations on assessment 
and collection) shall not expire, with respect to any 
deficiency (including interest and additions to the tax) 
resulting solely from the receipt of property by shareholders 
in a distribution which is certified by the Board under 
subsection (a), (b), or (c) of section 1101, until five years 
after the distributing corporation notifies the Secretary or 
his delegate (in such manner and with such accompanying 
information as the Secretary or his delegate may be regulations 
prescribe) that the period (including extensions thereof) 
prescribed in section 4(a) of the Bank Holding Company Act of 
1956, or section 1101(e)(2)(B), whichever is applicable, has 
expired; and such assessment may be made notwithstanding any 
provision of law or rule of law which would otherwise prevent 
such assessment.
      [``(c) Allocation of Earnings and Profits.--
          [``(1) Distribution of stock in a controlled 
        corporation.--In the case of a distribution by a 
        qualified bank holding corporation under section 
        1101(a)(1) or (b)(1) of stock in a controlled 
        corporation, proper allocation with respect to the 
        earnings and profits of the distributing corporation 
        and the controlled corporation shall be made under 
        regulations prescribed by the Secretary or his 
        delegate.
          [``(2) Exchanges described in section 1101(c) (2) or 
        (3).--In the case of any exchange described in section 
        1101(c) (2) or (3), proper allocation with respect to 
        the earnings and profits of the corporation 
        transferring the property and the corporation receiving 
        such property shall be made under regulations 
        prescribed by the Secretary or his delegate.
          [``(3) Definition of controlled corporation.--For 
        purposes of paragraph (1), the term `controlled 
        corporation' means a corporation with respect to which 
        at least 80 percent of the total combined voting power 
        of all classes of stock entitled to vote and at least 
        80 percent of the total number of shares of all other 
        classes of stock is owned by the distributing qualified 
        bank holding corporation.
    [``(d) Itemization of Property.--In any certification under 
this part, the Board shall make such specification and 
itemization of property as may be necessary to carry out the 
provisions of this part.

[``SEC. 1103. DEFINITIONS.

    [``(a) Bank Holding Company.--For purposes of this part, 
the term `bank holding company' has the meaning assigned to 
such term by section 2 of the Bank Holding Company Act of 1956.
      [``(b) Qualified Bank Holding Corporation.--
          [``(1) In general.--Except as provided in paragraph 
        (2), for purposes of this part the term `qualified bank 
        holding corporation' means any corporation (as defined 
        in section 7701(a)(3)) which is a bank holding company 
        and which holds prohibited property acquired by it--
                  [``(A) on or before May 15, 1955,
                  [``(B) in a distribution in which gain to 
                such corporation with respect to the receipt of 
                such property was not recognized by reason of 
                subsection (a) or (b) of section 1101, or
                  [``(C) in exchange for all of its stock in an 
                exchange described in section 1101 (c)(2) or 
                (c)(3).
          [``(2) Limitations.--
                  [``(A) A bank holding company shall not be a 
                qualified bank holding corporation, unless it 
                would have been a bank holding company on May 
                15, 1955, if the Bank Holding Company Act of 
                1956 had been in effect on such date, or unless 
                it is a bank holding company determined solely 
                by reference to--
                          [``(i) property acquired by it on or 
                        before May 15, 1955,
                          [``(ii) property acquired by it in a 
                        distribution in which gain to such 
                        corporation with respect to the receipt 
                        of such property was not recognized by 
                        reason of subsection (a) or (b) of 
                        section 1101, and
                          [``(iii) property acquired by it in 
                        exchange for all of its stock in an 
                        exchange described in section 1101(c) 
                        (2) or (3).
                  [``(B) A bank holding company shall not be a 
                qualified bank holding corporation by reason of 
                property described in subparagraph (B) of 
                paragraph (1) or clause (ii) of subparagraph 
                (A) of this paragraph, unless such property was 
                acquired in a distribution with respect to 
                stock, which stock was acquired by such bank 
                holding company--
                          [``(i) on or before May 15, 1955,
                          [``(ii) in a distribution (with 
                        respect to stock held by it on May 15, 
                        1955, or with respect to stock in 
                        respect of which all previous 
                        applications of this clause are 
                        satisfied) with respect to which gain 
                        to it was not recognized by reason of 
                        subsection (a) or (b) of section 1101, 
                        or
                          [``(iii) in exchange for all of its 
                        stock in an exchange described in 
                        section 1101(c) (2) or (3).
                  [``(C) A corporation shall be treated as a 
                qualified bank holding corporation only if the 
                Board certifies that it satisfies the foregoing 
                requirements of this subsection.
      [``(c) Prohibited Property.--For purposes of this part, 
the term `prohibited property' means, in the case of any bank 
holding company, property (other than nonexempt property) the 
disposition of which would be necessary or appropriate to 
effectuate section 4 of the Bank Holding Company Act of 1956 if 
such company continued to be a bank holding company beyond the 
period (including any extensions thereof) specified in 
subsection (a) of such section or in section 1101(e)(2)(B) of 
this part, as the case may be. The term `prohibited property' 
does not include shares of any company held by a bank holding 
company to the extent that the prohibitions of section 4 of the 
Bank Holding Company Act of 1956 do not apply to the ownership 
by such bank holding company of such property by reason of 
subsection (c)(5) of such section.
      [``(d) Nonexempt Property.--For purposes of this part, 
the term `nonexempt property' means--
          [``(1) obligations (including notes, drafts, bills of 
        exchange, and bankers' acceptances) having a maturity 
        at the time of issuance of not exceeding 24 months, 
        exclusive of days of grace;
          [``(2) securities issued by or guaranteed as to 
        principal or interest by a government or subdivision 
        thereof or by any instrumentality of a government or 
        subdivision; or
          [``(3) money, and the right to receive money not 
        evidenced by a security or obligation (other than a 
        security or obligation described in paragraph (1) or 
        (2)).
    [``(e) Board.--For purposes of this part, the term `Board' 
means the Board of Governors of the Federal Reserve System.''
    (b) The table of parts of subchapter O of chapter 1 of the 
Internal Revenue Code of 1954 is amended by adding at the end 
thereof the following:

        [``Part VIII. Distributions pursuant to Bank Holding Company Act 
        of 1956.''

    [(c) The amendments made by this section shall apply with 
respect to taxable years ending after the date of the enactment 
of this Act.]

SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

  (a) Companies That Control Wholesale Financial 
Institutions.--
          (1) Wholesale financial holding company defined.--The 
        term `wholesale financial holding company' means any 
        company that--
                  (A) is registered as a bank holding company;
                  (B) is predominantly engaged in financial 
                activities as defined in section 6(f)(2);
                  (C) controls 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)(D)(iii), the Board may 
        permit a company that controls a savings association 
        and that otherwise meets the requirements of paragraph 
        (1) to become supervised under paragraph (1), if the 
        company divests control of any such savings association 
        within such period, not to exceed 5 years after 
        becoming supervised under paragraph (1), as permitted 
        by the Board.
  (b) Supervision by the Board.--
          (1) In general.--The provisions of this section shall 
        govern the reporting, examination, and capital 
        requirements of wholesale financial holding companies.
          (2) Reports.--
                  (A) In general.--The Board from time to time 
                may require any wholesale financial holding 
                company and any subsidiary of such company to 
                submit reports under oath to keep the Board 
                informed as to--
                          (i) the company's or subsidiary's 
                        activities, financial condition, 
                        policies, systems for monitoring and 
                        controlling financial and operational 
                        risks, and transactions with depository 
                        institution subsidiaries of the holding 
                        company; and
                          (ii) the extent to which the company 
                        or subsidiary has complied with the 
                        provisions of this Act and regulations 
                        prescribed and orders issued under this 
                        Act.
                  (B) Use of existing reports.--
                          (i) In general.--The Board shall, to 
                        the fullest extent possible, accept 
                        reports in fulfillment of the Board's 
                        reporting requirements under this 
                        paragraph that the wholesale financial 
                        holding company or any subsidiary of 
                        such company has provided or been 
                        required to provide to other Federal 
                        and State supervisors or to appropriate 
                        self-regulatory organizations.
                          (ii) Availability.--A wholesale 
                        financial holding company or a 
                        subsidiary of such company shall 
                        provide to the Board, at the request of 
                        the Board, a report referred to in 
                        clause (i).
                  (C) Exemptions from reporting requirements.--
                          (i) In general.--The Board may, by 
                        regulation or order, exempt any company 
                        or class of companies, under such terms 
                        and conditions and for such periods as 
                        the Board shall provide in such 
                        regulation or order, from the 
                        provisions of this paragraph and any 
                        regulation prescribed under this 
                        paragraph.
                          (ii) Criteria for consideration.--In 
                        making any determination under clause 
                        (i) with regard to any exemption under 
                        such clause, the Board shall consider, 
                        among such other factors as the Board 
                        may determine to be appropriate, the 
                        following factors:
                                  (I) Whether information of 
                                the type required under this 
                                paragraph is available from a 
                                supervisory agency (as defined 
                                in section 1101(7) of the Right 
                                to Financial Privacy Act of 
                                1978) or a foreign regulatory 
                                authority of a similar type.
                                  (II) The primary business of 
                                the company.
                                  (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) Certain subsidiaries.--The Board 
                        shall not, by regulation, guideline, 
                        order or otherwise, prescribe or impose 
                        any capital or capital adequacy rules, 
                        standards, guidelines, or requirements 
                        upon any subsidiary that is not a 
                        depository institution and that is 
                        registered as an investment adviser 
                        under the Investment Advisers Act of 
                        1940, except that this clause shall not 
                        be construed as preventing the Board 
                        from imposing capital or capital 
                        adequacy rules, guidelines, standards, 
                        or requirements with respect to 
                        activities of a registered investment 
                        adviser other than investment advisory 
                        activities or activities incidental to 
                        investment advisory activities.
                          (v) Limitations on indirect action.--
                        In developing, establishing, or 
                        assessing holding company capital or 
                        capital adequacy rules, guidelines, 
                        standards, or requirements for purposes 
                        of this paragraph, the Board shall not 
                        take into account the activities, 
                        operations, or investments of an 
                        affiliated investment company 
                        registered under the Investment Company 
                        Act of 1940, if the investment company 
                        is not--
                                  (I) a bank holding company; 
                                or
                                  (II) controlled by a bank 
                                holding company by reason of 
                                ownership by the bank holding 
                                company (including through all 
                                of its affiliates) of 25 
                                percent or more of the shares 
                                of the investment company, 
                                where the shares owned by the 
                                bank holding company have a 
                                market value equal to more than 
                                $1,000,000.
                          (vi) Appropriate exclusions.--The 
                        Board shall take full account of--
                                  (I) the capital requirements 
                                made applicable to any 
                                subsidiary that is not a 
                                depository institution by 
                                another Federal regulatory 
                                authority or State insurance 
                                authority; and
                                  (II) industry norms for 
                                capitalization of a company's 
                                unregulated subsidiaries and 
                                activities.
                          (vii) Internal risk management 
                        models.--The Board may incorporate 
                        internal risk management models of 
                        wholesale financial holding companies 
                        into its capital adequacy guidelines or 
                        rules and may take account of the 
                        extent to which resources of a 
                        subsidiary depository institution may 
                        be used to service the debt or other 
                        liabilities of the wholesale financial 
                        holding company.
  (c) Nonfinancial Activities and Investments.--
          (1) Grandfathered activities.--
                  (A) In general.--Notwithstanding section 
                4(a), a company that becomes a wholesale 
                financial holding company may continue to 
                engage, directly or indirectly, in any activity 
                and may retain ownership and control of shares 
                of a company engaged in any activity if--
                          (i) on the date of the enactment of 
                        the Financial Services Act of 1999, 
                        such wholesale financial holding 
                        company was lawfully engaged in that 
                        nonfinancial activity, held the shares 
                        of such company, or had entered into a 
                        contract to acquire shares of any 
                        company engaged in such activity; and
                          (ii) the company engaged in such 
                        activity continues to engage only in 
                        the same activities that such company 
                        conducted on the date of the enactment 
                        of the Financial Services Act of 1999, 
                        and other activities permissible under 
                        this Act.
                  (B) No expansion of grandfathered commercial 
                activities through merger or consolidation.--A 
                wholesale financial holding company that 
                engages in activities or holds shares pursuant 
                to this paragraph, or a subsidiary of such 
                wholesale financial holding company, may not 
                acquire, in any merger, consolidation, or other 
                type of business combination, assets of any 
                other company which is engaged in any activity 
                which the Board has not determined to be 
                financial in nature or incidental to activities 
                that are financial in nature under section 6(c).
                  (C) Limitation to single exemption.--No 
                company that engages in any activity or 
                controls any shares under subsection (f) of 
                section 6 may engage in any activity or own any 
                shares pursuant to this paragraph.
          (2) Commodities.--
                  (A) In general.--Notwithstanding section 
                4(a), a wholesale financial holding company 
                which was predominately engaged as of January 
                1, 1997, in financial activities in the United 
                States (or any successor to any such company) 
                may engage in, or directly or indirectly own or 
                control shares of a company engaged in, 
                activities related to the trading, sale, or 
                investment in commodities and underlying 
                physical properties that were not permissible 
                for bank holding companies to conduct in the 
                United States as of January 1, 1997, if such 
                wholesale financial holding company, or any 
                subsidiary of such holding company, was engaged 
                directly, indirectly, or through any such 
                company in any of such activities as of January 
                1, 1997, in the United States.
                  (B) Limitation.--The attributed aggregate 
                consolidated assets of a wholesale financial 
                holding company held under the authority 
                granted under this paragraph and not otherwise 
                permitted to be held by all wholesale financial 
                holding companies under this section may not 
                exceed 5 percent of the total consolidated 
                assets of the wholesale financial holding 
                company, except that the Board may increase 
                such percentage of total consolidated assets by 
                such amounts and under such circumstances as 
                the Board considers appropriate, consistent 
                with the purposes of this Act.
          (3) Cross marketing restrictions.--A wholesale 
        financial holding company shall not permit--
                  (A) any company whose shares it owns or 
                controls pursuant to paragraph (1) or (2) to 
                offer or market any product or service of an 
                affiliated wholesale financial institution; or
                  (B) any affiliated wholesale financial 
                institution to offer or market any product or 
                service of any company whose shares are owned 
                or controlled by such wholesale financial 
                holding company pursuant to such paragraphs.
  (d) Qualification of Foreign Bank as Wholesale Financial 
Holding Company.--
          (1) In general.--Any foreign bank, or any company 
        that owns or controls a foreign bank, that operates a 
        branch, agency, or commercial lending company in the 
        United States, including a foreign bank or company that 
        owns or controls a wholesale financial institution, may 
        request a determination from the Board that such bank 
        or company be treated as a wholesale financial holding 
        company (other than for purposes of subsection (c)), 
        subject to such conditions as the Board deems 
        appropriate, giving due regard to the principle of 
        national treatment and equality of competitive 
        opportunity and the requirements imposed on domestic 
        banks and companies.
          (2) Conditions for treatment as a wholesale financial 
        holding company.--A foreign bank and a company that 
        owns or controls a foreign bank may not be treated as a 
        wholesale financial holding company unless the bank and 
        company meet and continue to meet the following 
        criteria:
                  (A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an 
                affiliate (other than an institution described 
                in subparagraph (D) or (F) of section 2(c)(2)) 
                are insured under the Federal Deposit Insurance 
                Act.
                  (B) Capital standards.--The foreign bank 
                meets risk-based capital standards comparable 
                to the capital standards required for a 
                wholesale financial institution, giving due 
                regard to the principle of national treatment 
                and equality of competitive opportunity.
                  (C) Transaction with affiliates.--
                Transactions between a branch, agency, or 
                commercial lending company subsidiary of the 
                foreign bank in the United States, and any 
                securities affiliate or company in which the 
                foreign bank (or any company that owns or 
                controls such foreign bank), has invested and 
                which engages in any activity authorized only 
                as a result of the application of subsection 
                (c) or (g) of section 6, comply with the 
                provisions of sections 23A and 23B of the 
                Federal Reserve Act in the same manner and to 
                the same extent as such transactions would be 
                required to comply with such sections if the 
                foreign 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 
        paragraphs (1)(C) and (3) of section 9B(c) of the 
        Federal Reserve Act, and any such foreign bank or 
        company shall be subject to paragraphs (3), (4), and 
        (5) of section 9B(d) of the Federal Reserve Act, except 
        that the Board may adopt such modifications, 
        conditions, or exemptions as the Board deems 
        appropriate, giving due regard to the principle of 
        national treatment and equality of competitive 
        opportunity.
          (4) Supervision of foreign bank which maintains no 
        banking presence other than control of a wholesale 
        financial institution.--A foreign bank that owns or 
        controls a wholesale financial institution but does not 
        operate a branch, agency, or commercial lending company 
        in the United States (and any company that owns or 
        controls such foreign bank) may request a determination 
        from the Board that such bank or company be treated as 
        a wholesale financial holding company, except that such 
        bank or company shall be subject to the restrictions of 
        paragraphs (2)(A) and (3) of this subsection.
          (5) No effect on other provisions.--This section 
        shall not be construed as limiting the authority of the 
        Board under the International Banking Act of 1978 with 
        respect to the regulation, supervision, or examination 
        of foreign banks and their offices and affiliates in 
        the United States.

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) a registered investment adviser, properly 
        registered by or on behalf of either the Securities and 
        Exchange Commission or any State, with respect to the 
        investment advisory activities of such investment 
        adviser and activities incidental to such investment 
        advisory activities;
          (3) an investment company registered under the 
        Investment Company Act of 1940;
          (4) an insurance company or an insurance agency 
        subject to supervision by a State insurance commission, 
        agency, or similar authority; or
          (5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the 
        commodities activities of such entity and activities 
        incidental to such commodities activities.

                            saving provision

  Sec. 11. (a) * * *
  (b) Antitrust Review.--
          (1) In general.--The Board shall immediately notify 
        the Attorney General of any approval by it pursuant to 
        section 3 of a proposed acquisition, merger, or 
        consolidation transaction 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. If the Board has found 
        that it must act immediately in order to prevent the 
        probable failure of a bank or bank holding company 
        involved in any such transaction, the transaction may 
        be consummated immediately upon approval by the Board. 
        If the Board has advised the Comptroller of the 
        Currency or the State supervisory authority, as the 
        case may be, of the existence of an emergency requiring 
        expeditious action and has required the submission of 
        views and recommendations within ten days, the 
        transaction may not be consummated before the fifth 
        calendar day after the date of approval by the Board. 
        In all other cases, the transaction may not be 
        consummated before the thirtieth calendar day after the 
        date of approval by the Board or, if the Board has not 
        received any adverse comment from the Attorney General 
        of the United States relating to competitive factors, 
        such shorter period of time as may be prescribed by the 
        Board with the concurrence of the Attorney General, but 
        in no event less than 15 calendar days after the date 
        of approval. Any action brought under the antitrust 
        laws arising out of an acquisition, merger, or 
        consolidation transaction approved under section 3 
        shall be commenced prior to the earliest time under 
        this subsection at which the transaction approval under 
        section 3 might be consummated. The commencement of 
        such an action shall stay the effectiveness of the 
        Board's approval unless the court shall otherwise 
        specifically order. In any such action, the court shall 
        review de novo the issues presented. In any judicial 
        proceeding attacking any acquisition, merger, or 
        consolidation transaction approved pursuant to section 
        3 on the ground that such transaction alone and of 
        itself constituted a violation of any antitrust laws 
        other than section 2 of the Act of July 2, 1890 
        (section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), 
        the standards applied by the court shall be identical 
        with those that the Board is directed to apply under 
        section 3 of this Act. Upon the consummation of an 
        acquisition, merger, or consolidation transaction 
        approved under section 3 in compliance with this Act 
        and after the termination of any antitrust litigation 
        commenced within the period prescribed in this section, 
        or upon the termination of such period if no such 
        litigation is commenced therein, the transaction may 
        not thereafter be attacked in any judicial proceeding 
        on the ground that it alone and of itself constituted a 
        violation of any antitrust laws other than section 2 of 
        the Act of July 2, 1890 (section 2 of the Sherman 
        Antitrust Act, 15 U.S.C. 2), but nothing in this Act 
        shall exempt any bank holding company involved in such a 
        transaction from complying with the antitrust laws after the 
        consummation of such transaction.

           *       *       *       *       *       *       *

                              ----------                              


               BANK HOLDING COMPANY ACT AMENDMENTS OF 1970

           *       *       *       *       *       *       *



                  TITLE I--BANK HOLDING COMPANIES

           *       *       *       *       *       *       *


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

           *       *       *       *       *       *       *

                              ----------                              


                SECTION 4 OF THE BANK SERVICE COMPANY ACT

           *       *       *       *       *       *       *



     permissible bank service company activities for other persons

  Sec. 4. (a) * * *

           *       *       *       *       *       *       *

  (f) Notwithstanding the other provisions of this section or 
any other provision of law, other than the provisions of 
Federal and State branching law regulating the geographic 
location of banks to the extent that those laws are applicable 
to an activity authorized by this subsection, a bank service 
company may perform at any geographic location any service, 
other than deposit taking, that the Board has determined, by 
regulation, to be permissible for a bank holding company under 
section 4(c)(8) of the Bank Holding Company Act[.] as of the 
day before the date of enactment of the Financial Services Act 
of 1999.
                              ----------                              


                      FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 3. As used in this Act--
  (a) * * *

           *       *       *       *       *       *       *

  (q) Appropriate Federal Banking Agency.--The term 
``appropriate Federal banking agency'' means--
          (1) the Comptroller of the Currency, in the case of 
        any national banking association, any District bank, 
        national wholesale financial institution authorized by 
        the Comptroller of the Currency pursuant to section 
        5136B of the Revised Statutes of the United States, or 
        any Federal branch or agency of a foreign bank;
          (2) the Board of Governors of the Federal Reserve 
        System, in the case of--
                  [(A) any State member insured bank (except a 
                District bank),]
                  (A) any State member insured bank (except a 
                District bank) and any wholesale financial 
                institution as authorized by the Board pursuant 
                to section 9B of the Federal Reserve Act,

           *       *       *       *       *       *       *

  Sec. 8. (a) Termination of Insurance.--
          [(1) Voluntary termination.--Any insured depository 
        institution which is not--
                  [(A) a national member bank;
                  [(B) a State member bank;
                  [(C) a Federal branch;
                  [(D) a Federal savings association; or
                  [(E) an insured branch which is required to 
                be insured under subsection (a) or (b) of 
                section 6 of the International Banking Act of 
                1978,
        may terminate such depository institution's status as 
        an insured depository institution if such insured 
        institution provides written notice to the Corporation 
        of the institution's intent to terminate such status 
        not less than 90 days before the effective date of such 
        termination.]
          [(2)] (1) Involuntary termination.--

           *       *       *       *       *       *       *

          [(3)] (2) Hearing; termination.--If, on the basis of 
        the evidence presented at a hearing before the Board of 
        Directors (or any person designated by the Board for 
        such purpose), inwhich all issues shall be determined 
on the record pursuant to section 554 of title 5, United States Code, 
and the written findings of the Board of Directors (or such person) 
with respect to such evidence (which shall be conclusive), the Board of 
Directors finds that any unsafe or unsound practice or condition or any 
violation specified in the notice to an insured depository institution 
under paragraph (2)(B) or subsection (w) has been established, the 
Board of Directors may issue an order terminating the insured status of 
such depository institution effective as of a date subsequent to such 
finding.
          [(4)] (3) Appearance; consent to termination.--Unless 
        the depository institution shall appear at the hearing 
        by a duly authorized representative, it shall be deemed 
        to have consented to the termination of its status as 
        an insured depository institution and termination of 
        such status thereupon may be ordered.
          [(5)] (4) Judicial review.--Any insured depository 
        institution whose insured status has been terminated by 
        order of the Board of Directors under this subsection 
        shall have the right of judicial review of such order 
        only to the same extent as provided for the review of 
        orders under subsection (h) of this section.
          [(6)] (5) Publication of notice of termination.--The 
        Corporation may publish notice of such termination and 
        the depository institution shall give notice of such 
        termination to each of its depositors at his last 
        address of record on the books of the depository 
        institution, in such manner and at such time as the 
        Board of Directors may find to be necessary and may 
        order for the protection of depositors.
          [(7)] (6) Temporary insurance of deposits insured as 
        of termination.--After the termination of the insured 
        status of any depository institution under the 
        provisions of this subsection, the insured deposits of 
        each depositor in the depository institution on the 
        date of such termination, less all subsequent 
        withdrawals from any deposits of such depositor, shall 
        continue for a period of at least 6 months or up to 2 
        years, within the discretion of the Board of Directors, 
        to be insured, and the depository institution shall 
        continue to pay to the Corporation assessments as in 
        the case of an insured depository institution during 
        such period. No additions to any such deposits and no 
        new deposits in such depository institution made after 
        the date of such termination shall be insured by the 
        Corporation, and the depository institution shall not 
        advertise or hold itself out as having insured deposits 
        unless in the same connection it shall also state with 
        equal prominence that such additions to deposits and 
        new deposits made after such date are not so insured. 
        Such depository institution shall, in all other 
        respects, be subject to the duties and obligations of 
        an insured depository institution for the period 
        referred to in the 1st sentence from the date of such 
        termination, and in the event that such depository 
        institution shall be closed on account of inability to 
        meet the demands of its depositors within such period, 
        the Corporation shall have the same powers and rights 
        with respect to such depository institution as in case 
        of an insured depository institution.
          [(8)] (7) Temporary suspension of insurance.--

           *       *       *       *       *       *       *

          [(9)] (8) Final decisions to terminate insurance.--
        Any decision by the Board of Directors to--
                  (A) * * *

           *       *       *       *       *       *       *

          [(10)] (9) Low- to moderate-income housing lender.--
        In making any determination regarding the termination 
        of insurance of a solvent savings association, the 
        Corporation may consider the extent of the 
        association's low- to moderate-income housing loans.

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *

  Sec. 11. (a) Deposit Insurance.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) General provisions relating to funds.--
                  (A) * * *
                  (B) Limitation on use.--Notwithstanding any 
                provision of law other than section 
                13(c)(4)(G), the Bank Insurance Fund and the 
                Savings Association Insurance Fund shall not be 
                used in any manner [to benefit any shareholder 
                of] to benefit any shareholder, affiliate 
                (other than an insured depository institution 
                that receives assistance in accordance with the 
                provisions of this Act), or subsidiary of--
                          (i) * * *

           *       *       *       *       *       *       *

          (6) Savings association insurance fund.--
                  (A) * * *

           *       *       *       *       *       *       *

          [(L) Establishment of saif special reserve.--
                  [(i) Establishment.--If, on January 1, 1999, 
                the reserve ratio of the Savings Association 
                Insurance Fund exceeds the designated reserve 
                ratio, there is established a Special Reserve 
                of the Savings Association Insurance Fund, 
                which shall be administered by the Corporation 
                and shall be invested in accordance with 
                section 13(a).
                  [(ii) Amounts in special reserve.--If, on 
                January 1, 1999, the reserve ratio of the 
                Savings Association Insurance Fund exceeds the 
                designated reserve ratio, the amount by which 
                the reserve ratio exceeds the designated 
                reserve ratio shall be placed in the Special 
                Reserve of the Savings Association Insurance 
                Fund established by clause (i).
                  [(iii) Limitation.--The Corporation shall not 
                provide any assessment credit, refund, or other 
                payment from any amount in the Special Reserve 
                of the Savings Association Insurance Fund.
                  [(iv) Emergency use of special reserve.--
                Notwithstanding clause (iii), the Corporation 
                may, in its sole discretion, transfer amounts 
                from the Special Reserve of the Savings 
                Association Insurance Fund to the Savings 
                Association Insurance Fund for the purposes set 
                forth in paragraph (4), only if--
                          [(I) the reserve ratio of the Savings 
                        Association Insurance Fund is less than 
                        50 percent of the designated reserve 
                        ratio; and
                          [(II) the Corporation expects the 
                        reserve ratio of the Savings 
                        Association Insurance Fund to remain at 
                        less than 50 percent of the designated 
                        reserve ratio for each of the next 4 
                        calendar quarters.
                  [(v) Exclusion of special reserve in 
                calculating reserve ratio.--Notwithstanding any 
                other provision of law, any amounts in the 
                Special Reserve of the Savings Association 
                Insurance Fund shall be excluded in calculating 
                the reserve ratio of the Savings Association 
                Insurance Fund.]

           *       *       *       *       *       *       *

  Sec. 18. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

          (12) Public meetings.--In each merger transaction 
        involving 1 or more insured depository institutions 
        each of which has total assets of $1,000,000,000 or 
        more, the responsible agency shall, as necessary and on 
        a timely basis, conduct public meetings in 1 or more 
        areas where the agency believes there will be a 
        substantial public impact.

           *       *       *       *       *       *       *

  (t) Limitation on Claims.--
          ``(1) In general.--Notwithstanding any other 
        provision of law, no person shall have any claim 
        against any Federal banking agency, in any capacity, or 
        against any conservator or receiver appointed by any 
        Federal banking agency (including the Corporation as 
        conservator or receiver), arising from or relating to 
        the transfer of money, assets, or other property to a 
        depository institution by a controlling stockholder or 
        a depository institution holding company, or any 
        affiliate or subsidiary of such depository institution 
        holding company, if, at the time of the transfer, the 
        depository institution--
                  (A) is subject to a direction by a Federal 
                banking agency to increase its capital; or
                  (B) is undercapitalized, significantly 
                undercapitalized, or critically 
                undercapitalized as defined in section 38.
          (2) Exception.--No provision of this subsection shall 
        be construed as limiting the right of a depository 
        institution, a controlling stockholder, or a depository 
        institution holding company to seek direct review of an 
        order or directive issued by a Federal banking agency 
        in accordance with the procedures provided by this Act, 
        the National Bank Receivership Act, the Bank 
        Conservation Act, or the Home Owner's Loan Act.
  (u) 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. 42. NOTICE OF BRANCH CLOSURE.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Branch Closures in Interstate Banking or Branching 
Operations.--
          (1) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


SEC. 45. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO SUBSIDIARIES OF 
                    BANKS.

  (a) Limiting the Equity Investment of a Bank in a 
Subsidiary.--
          (1) Capital deduction.--In determining whether an 
        insured bank complies with applicable regulatory 
        capital standards--
                  (A) the appropriate Federal banking agency 
                shall deduct from the assets and tangible 
                equity of the bank the aggregate amount of the 
                outstanding equity investments of the bank in 
                financial subsidiaries of the bank; and
                  (B) the assets and liabilities of such 
                financial subsidiaries shall not be 
                consolidated with those of the bank.
          (2) Investment limitation.--An insured bank shall 
        not, without the prior approval of the appropriate 
        Federal banking agency, make any equity investment in a 
        financial subsidiary of the bank if that investment 
        would, when made, exceed the amount that the bank could 
        pay as a dividend without obtaining prior regulatory 
        approval.
          (3) Treatment of retained earnings.--The amount of 
        any net earnings retained by a financial subsidiary of 
        an insured depository institution shall be treated as 
        an outstanding equity investment of the bank in the 
        subsidiary for purposes of paragraph (1).
  (b) Operational and Financial Safeguards for the Bank.--An 
insured bank that has a financial subsidiary shall maintain 
procedures for identifying and managing any financial and 
operational risks posed by the financial subsidiary.
  (c) Maintenance of Separate Corporate Identity and Separate 
Legal Status.--
          (1) In general.--Each insured bank shall ensure that 
        the bank maintains and complies with reasonable 
        policies and procedures to preserve the separate 
        corporate identity and legal status of the bank and any 
        financial subsidiary or affiliate of the bank.
          (2) Examinations.--The appropriate Federal banking 
        agency, as part of each examination, shall review 
        whether an insured bank is observing the separate 
        corporate identity and separate legal status of any 
        subsidiaries and affiliates of the bank.
  (d) Financial Subsidiary Defined.--For purposes of this 
section, the term ``financial subsidiary'' has the meaning 
given to such term in section 5136A(a)(7)(B) of the Revised 
Statutes of the United States.
  (e) Regulations.--The appropriate Federal banking agencies 
shall jointly prescribe regulations implementing this section.

SEC. 46. FUNCTIONAL REGULATION OF SECURITIES SUBSIDIARIES AND INSURANCE 
                    AGENCY SUBSIDIARIES OF INSURED DEPOSITORY 
                    INSTITUTIONS.

  (a) Broker or Dealer Subsidiary.--A broker or dealer that is 
a subsidiary of an insured depository institution shall be 
subject to regulation under the Securities Exchange Act of 1934 
in the same manner and to the same extent as a broker or dealer 
that--
          (1) is controlled by the same bank holding company as 
        controls the insured depository institution; and
          (2) is not an insured depository institution or a 
        subsidiary of an insured depository institution.
  (b) Insurance Agency Subsidiary.--An insurance agency or 
brokerage that is a subsidiary of an insured depository 
institution shall be subject to regulation by a State insurance 
authority in the same manner and to the same extent as an 
insurance agency or brokerage that--
          (1) is controlled by the same bank holding company as 
        controls the insured depository institution; and
          (2) is not an insured depository institution or a 
        subsidiary of an insured depository institution.
  (c) Definitions.--For purposes of this section, the terms 
``broker'' and ``dealer'' have the same meanings as in section 
3 of the Securities Exchange Act of 1934.

SEC. 47. CUSTOMER SERVICE AND EDUCATION 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 enactment of 
        the Financial Services Act of 1999, customer protection 
        regulations (which the agencies jointly determine to be 
        appropriate) that--
                  (A) apply to retail sales practices, 
                solicitations, advertising, or offers of any 
                nondeposit product by any insured depository 
                institution or any person who is engaged in 
                such activities at an office of the institution 
                or on behalf of the institution; and
                  (B) are consistent with the requirements of 
                this Act and provide such additional 
                protections for customers to whom such sales, 
                solicitations, advertising, or offers are 
                directed as the agency determines to be 
                appropriate.
          (2) Applicability to subsidiaries.--The regulations 
        prescribed pursuant to paragraph (1) shall extend such 
        protections to any subsidiary of an insured depository 
        institution, as deemed appropriate by the regulators 
        referred to in paragraph (3), where such extension is 
        determined to be necessary to ensure the customer 
        protections provided by this section.
          (3) Consultation and joint regulations.--The Federal 
        banking agencies shall consult with each other and 
        prescribe joint regulations pursuant to paragraph (1), 
        after consultation with the Securities and Exchange 
        Commission and the State insurance regulators, as 
        appropriate.
          (4) Nondeposit product defined.--For purposes of this 
        section, the term ``nondeposit product''--
                  (A) means any investment and insurance 
                product which is not a deposit;
                  (B) includes shares issued by a registered 
                investment company; and
                  (C) does not include--
                          (i) any loan or any other extension 
                        of credit by an insured depository 
                        institution;
                          (ii) any letter of credit;
                          (iii) any trust services;
                          (iv) any discount; or
                          (v) any other instrument or insurance 
                        or investment product specifically 
                        excluded from the definition of such 
                        term by regulations prescribed jointly 
                        by the Federal banking agencies, to the 
                        extent necessary to carry out the 
                        purposes of this Act.
          (5) 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.
  (b) Sales Practices.--
          (1) Anticoercion rules.--The regulations prescribed 
        pursuant to subsection (a) shall include anticoercion 
        rules applicable to the sale of nondeposit products 
        which prohibit an insured depository institution from 
        engaging in any practice that would lead a customer to 
        believe an extension of credit, in violation of section 
        106(b) of the Bank Holding Company Act Amendments of 
        1970, is conditional upon--
                  (A) the purchase of a nondeposit product from 
                the institution or any of its affiliates; or
                  (B) an agreement by the customer not to 
                obtain, or a prohibition on the customer from 
                obtaining, a nondeposit product from an 
                unaffiliated entity.
          (2) Suitability of product.--
                  (A) In general.--The regulations prescribed 
                pursuant to subsection (a) with respect to the 
                sale of nondeposit products shall include 
                standards to ensure that an investment product 
                sold to a customer is suitable and any other 
                nondeposit product is appropriate for the 
                customer based on financial information 
                disclosed by the customer.
                  (B) Rules of fair practice.--In prescribing 
                the standards under subparagraph (A) with 
                respect to the sale of investments, the Federal 
                banking agencies shall take into account the 
                Rules of Fair Practice of the National 
                Association of Securities Dealers.
  (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 a nondeposit 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) Insurance product.--In the case 
                        of an insurance policy which is sold by 
                        the depository institution, or any 
                        affiliate of the institution, as agent, 
                        the product is not an obligation of or 
                        guaranteed by the depository 
                        institution.
                          (iii) Investment risk.--In the case 
                        of an investment product, variable 
                        annuity, or other product which 
                        involves an investment risk, that there 
                        is an investment risk associated with 
                        the product, including possible loss of 
                        value.
                          (iv) Coercion.--The approval of an 
                        extension of credit may not be 
                        conditioned on--
                                  (I) the purchase of a 
                                nondeposit product from the 
                                institution in which the 
                                application for credit is 
                                pending or any of affiliate of 
                                the institution; or
                                  (II) an agreement by the 
                                customer not to obtain, or a 
                                prohibition on the customer 
                                from obtaining, a nondeposit 
                                product from an unaffiliated 
                                entity.
                  (B) Making disclosure readily 
                understandable.--Regulations prescribed under 
                subparagraph (A) shall encourage the use of 
                disclosure that is conspicuous, simple, direct, 
                and readily understandable, such as the 
                following:
                          (i) ``NOT FDIC-INSURED''.
                          (ii) ``NOT GUARANTEED BY THE BANK''.
                          (iii) ``MAY GO DOWN IN VALUE''.
                          (iv) ``NOT INSURED BY ANY GOVERNMENT 
                        AGENCY''.
                  (C) Adjustments for alternative methods of 
                purchase.--In prescribing the requirements 
                under subparagraphs (A) and (D), necessary 
                adjustments shall be made for purchase in 
                person, by telephone, or by electronic media to 
                provide for the most appropriate and complete 
                form of disclosure and acknowledgments.
                  (D) Customer acknowledgment.--A requirement 
                that an insured depository institution shall 
                require any person selling a nondeposit product 
                at any office of, or on behalf of, the 
                institution to obtain, at the time a customer 
                receives the disclosures required under this 
                paragraph or at the time of the initial 
                purchase by the customer of such product, an 
                acknowledgment by such customer of the receipt 
                of the disclosure required under this paragraph 
                with respect to such product.
          (2) Prohibition on misrepresentations.--A prohibition 
        on any practice, or any advertising, at any office of, 
        or on behalf of, the insured depository institution, or 
        any subsidiary as appropriate, 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 nondeposit 
                product sold, or offered for sale, by the 
                institution or any subsidiary of the 
                institution;
                  (B) in the case of a nondeposit product that 
                involves an investment risk, the investment 
                risk associated with any such product; or
                  (C) in the case of a nondeposit product, the 
                approval of an extension of credit is not 
                conditioned on the purchase of such nondeposit 
                product and the customer is not prohibited from 
                purchasing such nondeposit product from another 
                institution.
  (d) Separation of Banking and Nonbanking Activities.--
          (1) Regulations required.--The regulations prescribed 
        pursuant to subsection (a) shall include such 
        provisions as the Federal banking agencies consider 
        appropriate to ensure that the routine acceptance of 
        deposits is kept, to the extent practicable, physically 
        segregated from nondeposit 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 nondeposit 
                products should be conducted in a location 
                physically segregated from an area where retail 
                deposits are routinely accepted.
                  (B) Referrals.--Standards which permit any 
                person accepting deposits from the public in an 
                area where such transactions are routinely 
                conducted in an insured depository institution 
                to refer a customer who seeks to purchase any 
                nondeposit 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 
                nondeposit 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) Customer Grievance Process.--The Federal banking agencies 
shall jointly establish a customer complaint mechanism, for 
receiving and expeditiously addressing customer complaints 
alleging a violation of regulations issued under this section, 
which mechanism 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 customers 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.
  (f) Effect on Other Authority.--
          (1) In general.--No provision of this section shall 
        be construed as granting, limiting, or otherwise 
        affecting--
                  (A) any authority of the Securities and 
                Exchange Commission, any self-regulatory 
                organization, the Municipal Securities 
                Rulemaking Board, or the Secretary of the 
                Treasury under any Federal securities law; or
                  (B) except as provided in paragraph (2), any 
                authority of any State insurance commissioner 
                or other State authority under any State law.
          (2) Coordination with state law.--
                  (A) In general.--Except as provided in 
                subparagraph (B), regulations prescribed by a 
                Federal banking agency under this section shall 
                not apply to retail sales, solicitations, 
                advertising, or offers of any nondeposit 
                product by any insured depository institution 
                or to any person who is engaged in such 
                activities at an office of such institution or 
                on behalf of the institution, in a State where 
                the State has in effect statutes, regulations, 
                orders, or interpretations, that are 
                inconsistent with or contrary to the 
                regulations prescribed by the Federal banking 
                agencies.
                  (B) Preemption.--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, the Director of the Office of Thrift 
                Supervision, 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.
                              ----------                              


      SECTION 6 OF THE NATIONAL BANK CONSOLIDATION AND MERGER ACT

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

  In each case of a consolidation or merger under this Act 
involving 1 or more banks each of which has total assets of 
$1,000,000,000 or more, the Comptroller shall, as necessary and 
on a timely basis, conduct public meetings in 1 or more areas 
where the Comptroller believes there will be a substantial 
public impact.
                              ----------                              


                         HOME OWNERS' LOAN ACT

           *       *       *       *       *       *       *


SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.

  (a) * * *

           *       *       *       *       *       *       *

  [(f) Federal Home Loan Bank Membership.--Each Federal savings 
association, upon receiving its charter, shall become 
automatically a member of the Federal home loan bank of the 
district in which it is located, or if convenience requires and 
the Director approves, shall become a member of a Federal home 
loan bank of an adjoining district. Such associations shall 
qualify for such membership in the manner provided in the 
Federal Home Loan Bank Act with respect to other members.]
  (f) Federal Home Loan Bank Membership.--On and after January 
1, 1999, a Federal savings association may become a member of 
the Federal Home Loan Bank System, and shall qualify for such 
membership in the manner provided by the Federal Home Loan Bank 
Act.

           *       *       *       *       *       *       *


SEC. 10. REGULATION OF HOLDING COMPANIES.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Holding Company Activities.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Certain limitations on activities not applicable 
        to certain holding companies.--[Notwithstanding] Except 
        as provided in paragraph (9) and notwithstanding 
        paragraphs (4) and (6) of this subsection, the 
        limitations contained in subparagraphs (B) and (C) of 
        paragraph (1) shall not apply to any savings and loan 
        holding company (or any subsidiary of such company) 
        which controls--
                  (A) * * *

           *       *       *       *       *       *       *

          (9) Termination of expanded powers for new unitary 
        holding company.--
                  (A) In general.--Subject to subparagraph (B) 
                and notwithstanding paragraph (3), no company 
                may directly or indirectly, including through 
                any merger, consolidation, or other type of 
                business combination, acquire control of a 
                savings association after March 4, 1999, unless 
                the company is engaged, directly or indirectly 
                (including through a subsidiary other than a 
                savings association), only in activities that 
                are permitted--
                          (i) under paragraph (1)(C) or (2); or
                          (ii) for financial holding companies 
                        under section 6(c) of the Bank Holding 
                        Company Act of 1956.
                  (B) Existing unitary holding companies and 
                the successors to such companies.--Subparagraph 
                (A) shall not apply, and paragraph (3) shall 
                continue to apply, to a company (or any 
                subsidiary of such company) that--
                          (i) either--
                                  (I) acquired 1 or more 
                                savings associations described 
                                in paragraph (3) pursuant to 
                                applications at least 1 of 
                                which was filed on or before 
                                March 4, 1999; or
                                  (II) became a savings and 
                                loan holding company by 
                                acquiring control of the 
                                company described in subclause 
                                (I); and
                          (ii) continues to control the savings 
                        association referred to in clause 
                        (i)(II) or the successor to any such 
                        savings association.

           *       *       *       *       *       *       *

  (e) Acquisitions.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Public meetings for large depository institution 
        acquisitions and mergers.--In each case involving 1 or 
        more insured depository institutions each of which has 
        total assets of $1,000,000,000 or more, the Director 
        shall, as necessary and on a timely basis, conduct 
        public meetings in 1 or more areas where the Director 
        believes there will be a substantial public impact.

           *       *       *       *       *       *       *

  (o) Mutual Holding Companies.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Permitted activities.--A mutual holding company 
        may engage only in the following activities:
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Engaging in the activities described in 
                subsection (c)(2)[, except subparagraph (B)].
                  (F) In the case of a mutual holding company 
                which is a savings and loan holding company 
                described in subsection (c)(3), engaging in the 
                activities permitted for financial holding 
                companies under section 6(c) of the Bank 
                Holding Company Act of 1956.

           *       *       *       *       *       *       *

                              ----------                              


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

SEC. 109. PROHIBITION AGAINST DEPOSIT PRODUCTION OFFICES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Application.--This section shall apply with respect to 
any interstate branch established or acquired in a host State 
pursuant to this title, the Financial Services Act of 1999, or 
any amendment made by this title or such Act to any other 
provision of law.
  (e) Definitions.--For the purposes of this section, the 
following definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          (4) Interstate branch.--The term ``interstate 
        branch'' means a branch established pursuant to this 
        title or any amendment made by this title to any other 
        provision of law and any branch of a bank controlled by 
        an out-of-State bank holding company (as defined in 
        section 2(o)(7) of the Bank Holding Company Act of 
        1956).

           *       *       *       *       *       *       *

                              ----------                              


                   TITLE LXII OF THE REVISED STATUTES


                  Title LXII.--NATIONAL BANKS.--Ch. 1.


                          T I T L E  L X I I.

                            NATIONAL BANKS.

                              ----------                              


                         C H A P T E R  O N E.

                        ORGANIZATION AND POWERS.

Sec.
5133.  Formation of national banking associations.
     * * * * * * *
5136A. Subsidiaries of national banks.
5136B. National wholesale financial institutions.
[5136A.] 5136C. Participation in lotteries prohibited.

           *       *       *       *       *       *       *

  Sec. 5136. Upon duly making and filing articles of 
association and an organization certificate, the association 
shall become, as from the date of the execution of its 
organization certificate, a body corporate, and as such, and in 
the name designated in the organization certificate, it shall 
have power--
  First. To adopt and use a corporate seal.

           *       *       *       *       *       *       *

  Seventh. To exercise by its board of directors or duly 
authorized officers or agents, subject to law, all such 
incidental powers as shall be necessary to carry on the 
business of banking; by discounting and negotiating promissory 
notes, drafts, bills of exchange, and other evidences of debt; 
by receiving deposits; by buying and selling exchange, coin, 
and bullion; by loaning money on personal security; and by 
obtaining, issuing, and circulating notes according to the 
provisions of this title. The business of dealing in securities 
and stock by the association shall be limited to purchasing and 
selling such securities and stock without recourse, solely upon 
the order, and for the account of, customers, and in no case 
for its own account, and the association shall not underwrite 
any issue of securities or stock: Provided, That the 
association may purchase for its own account investment 
securities under such limitations and restrictions as the 
Comptroller of the Currency may by regulation prescribe. In no 
event shall the total amount of the investment securities of 
any one obligor or maker, held by the association for its own 
account, exceed at any time 10 per centum of its capital stock 
actually paid in and unimpaired and 10 per centum of its 
unimpaired surplus fund, except that this limitation shall not 
require any association to dispose of any securities lawfully 
held by it on the date of enactment of the Banking Act of 1935. 
As used in this section the term ``investment securities'' 
shall mean marketable obligations evidencing indebtedness of 
any person, copartnership, association, or corporation in the 
form of bonds, notes and/or debentures commonly known as 
investment securities under such further definition of the term 
``investment securities'' as may by regulation be prescribed by 
the Comptroller of the Currency. Except as hereinafter provided 
or otherwise permitted by law, nothing herein contained shall 
authorize the purchase by the association for its own account 
of any shares of stock of any corporation. The limitations and 
restrictions herein contained as to dealing in, underwriting 
and purchasing for its own account, investment securities shall 
not apply to obligations of the United States, or general 
obligations of any State or of any political subdivision 
thereof, or obligations of the Washington Metropolitan Area 
Transit Authority which are guaranteed by the Secretary of 
Transportation under section 9 of the National Capital 
Transportation Act of 1969, or obligations issued under 
authority of the Federal Farm Loan Act, as amended, or issued 
by the thirteen banks for cooperatives or any of them or the 
Federal Home Loan Banks, or obligations which are insured by 
the Secretary of Housing and Urban Development under title XI 
of the National Housing Act, or obligations which are insured 
by the Secretary of Housing and Urban Development (hereafter in 
this sentence referred to as the ``Secretary'' pursuant to 
section 207 of the National Housing Act, if the debentures to 
be issued in payment of such insured obligations are guaranteed 
as to principal and interest by the United States, or 
obligations, participations, or other instruments of or issued 
by the Federal National Mortgage Association or the Government 
National Mortgage Association, or mortgages, obligations, or 
other securities which are or ever have been sold by the 
Federal Home Loan Mortgage Corporation pursuant to section 305 
or section 306 of the Federal Home Loan Mortgage Corporation 
Act or obligations of the Federal Financing Bank or obligations 
of the Environmental Financing Authority or obligations or 
other instruments or securities of the Student Loan Marketing 
Association, or such obligations of any local public agency (as 
defined in section 110(h) of the Housing Act of 1949) as are 
secured by an agreement between the local public agency and the 
Secretary in which the local public agency agrees to borrow 
from said Secretary and said Secretary agrees to lend to said 
local public agency, monies in an aggregate amount which 
(together with any other monies irrevocably committed to the 
payment of interest on such obligations) will suffice to pay, 
when due, the interest on and all installments (including the 
final installment) of the principal of such obligations, which 
monies under the terms of said agreement are required to be 
used for such payments, or such obligations of a public housing 
agency (as defined in the United States Housing Act of 1937, as 
amended) as are secured (1) by an agreement between the public 
housing agency and the Secretary in which the public housing 
agency agrees to borrow from the Secretary and the Secretary 
agrees to lend to the public housing agency, prior to the 
maturity of such obligations, monies in an amount which 
(together with anyother monies irrevocably committed to the 
payment of interest on such obligations) will suffice to pay the 
principal of such obligations with interest to maturity thereon, which 
monies under the terms of said agreement are required to be used for 
the purpose of paying the principal of and the interest on such 
obligations at their maturity, (2) by a pledge of annual contributions 
under an annual contributions contract between such public housing 
agency and the Secretary if such contract shall contain the covenant by 
the Secretary which is authorized by subsection (b) of section 22 of 
the United States Housing Act of 1937, as amended, and if the maximum 
sum and the maximum period specified in such contract pursuant to said 
subsection 22(b) shall not be less than the annual amount and the 
period for payment which are requisite to provide for the payment when 
due of all installments of principal and interest on such obligations, 
or (3) by a pledge or both annual contributions under an annual 
contributions contract containing the covenant by the Secretary which 
is authorized by section 6(g) of the United States Housing Act of 1937, 
and a loan under an agreement between the local public housing agency 
and the Secretary in which the public housing

agency agrees to borrow from the Secretary, and the Secretary 
agrees to lend to the public housing agency, prior to the 
maturity of the obligations involved, moneys in an amount which 
(together with any other moneys irrevocably committed under the 
annual contributions contract to the payment of principal and 
interest on such obligations) will suffice to provide for the 
payment when due of all installments of principal and interest 
on such obligations, which moneys under the terms of the 
agreement are required to be used for the purpose of paying the 
principal and interest on such obligations at their maturity: 
Provided, That in carrying on the business commonly known as 
the safe-deposit business the association shall not invest in 
the capital stock of a corporation organized under the law of 
any State to conduct a safe-deposit business in an amount in 
excess of 15 per centum of the capital stock of the association 
actually paid in and unimpaired and 15 per centum of its 
unimpaired surplus. The limitations and restrictions herein 
contained as to dealing in and underwriting investment 
securities shall not apply to obligations issued by the 
International Bank for Reconstruction and Development, the 
European Bank for Reconstruction and Development, the Inter-
American Development Bank, Bank for Economic Cooperation and 
Development in the Middle East and North Africa, the Asian 
Development Bank the African Development Bank, the Inter-
American Investment Corporation, or the International Finance 
Corporation, or obligations issued by any State or political 
subdivision or any agency of a State or political subdivision 
for housing, university, or dormitory purposes, which are at 
the time eligible for purchase by a national bank for its own 
account, nor to bonds, notes and other obligations issued by 
the Tennessee Valley Authority or by the United States Postal 
Service: Provided, That no association shall hold obligations 
issued by any of said organizations as a result of 
underwriting, dealing, or purchasing for its own account (and 
for this purpose obligations as to which it is under commitment 
shall be deemed to be held by it) in a total amount exceeding 
at any one time 10 per centum of its capital stock actually 
paid in and unimpaired and 10 per centum of its unimpaired 
surplus fund. Notwithstanding any other provision in this 
paragraph, the association may purchase for its own account 
shares of stock issued by a corporation authorized to be 
created pursuant to title IX of the Housing and Urban 
Development Act of 1968, and may make investments in a 
partnership, limited partnership, or joint venture formed 
pursuant to section 907(a) or 907(c) of that Act. 
Notwithstanding any other provision of this paragraph, the 
association may purchase for its own account shares of stock 
issued by any State housing corporation incorporated in the 
State in which the association is located and may make 
investments in loans and commitments for loans to any such 
corporation: Provided, That in no event shall the total amount 
of such stock held for its own account and such investments in 
loans and commitments made by the association exceed at any 
time 5 per centum of its capital stock actually paid in and 
unimpaired plus 5 per centum of its unimpaired surplus fund. 
Notwithstanding any other provision in this paragraph, the 
association may purchase for its own account shares of stock 
issued by a corporation organized solely for the purpose of 
making loans to farmers and ranchers for 
agricultural purposes, including the breeding, raising, 
fattening, or marketing of livestock. However, unless the 
association owns at least 80 per centum of the stock of such 
agricultural credit corporation the amount invested by the 
association at any one time in the stock of such corporation 
shall not exceed 20 per centum of the unimpaired capital and 
surplus of the association: Provided further, That 
notwithstanding any other provision of this paragraph, the 
association may purchase for its own account shares of stock of 
a bank insured by the Federal Deposit Insurance Corporation or 
a holding company which owns or controls such an insured bank 
if the stock of such bank or company is owned exclusively 
(except to the extent directors' qualifying shares are required 
by law) by depository institutions or depository institution 
holding companies (as defined in section 3 of the Federal 
Deposit Insurance Act) and such bank or company and all 
subsidiaries thereof are engaged exclusively in providing 
services to or for other depository institutions, their holding 
companies, and the officers, directors, and employees of such 
institutions and companies, and in providing correspondent 
banking services at the request of other depository 
institutions or their holding companies (also referred to as a 
``banker's bank''), but in no event shall the total amount of 
such stock held by the association in any bank or holding 
company exceed at any time 10 per centum of the associations 
capital stock and paid in and unimpaired surplus and in no 
event shall the purchase of such stock result in an 
association's acquiring more than 5 per centum of any class of 
voting securities of such bank or company. The limitations and 
restrictions contained in this paragraph as to an association 
purchasing for its own account investment securities shall not 
apply to securities that (A) are offered and sold pursuant to 
section 4(5) of the Securities Act of 1933 (15 U.S.C. 77d(5)); 
(B) are small business related securities (as defined in 
section 3(a)(53) of the Securities Exchange Act of 1934); or 
(C) are mortgage related securities (as that term is defined in 
section 3(a)(41) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(41)). The exception provided for the 
securitiesdescribed in subparagraphs (A), (B), and (C) shall be subject 
to such regulations as the Comptroller of the Currency may prescribe, 
including regulations prescribing minimum size of the issue (at the 
time of initial distribution) or minimum aggregate sales prices, or 
both. A national banking association may deal in, underwrite, and 
purchase for such association's own account qualified Canadian 
government obligations to the same extent that such association may 
deal in, underwrite, and purchase for such association's own account 
obligations of the United States or general obligations of any State or 
of any political subdivision thereof. For purposes of this paragraph--
          (1) the term ``qualified Canadian government 
        obligations'' means any debt obligation which is backed 
        by Canada, any Province of Canada, or any political 
        subdivision of any such Province to a degree which is 
        comparable to the liability of the United States, any 
        State, or any political subdivision thereof for any 
        obligation which is backed by the full faith and credit 
        of the United States, such State, or such political 
        subdivision, and such term includes any debt obligation 
        of any agent of Canada or any such Province or any 
        political subdivision of such Province if--
                  (A) the obligation of the agent is assumed in 
                such agent's capacity as agent for Canada or 
                such Province or such political subdivision; 
                and
                  (B) Canada, such Province, or such political 
                subdivision on whose behalf such agent is 
                acting with respect to such obligation is 
                ultimately and unconditionally liable for such 
                obligation; and
          (2) the term ``Province of Canada'' means a Province 
        of Canada and includes the Yukon Territory and the 
        Northwest Territories and their successors.
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).

SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.

  (a) Subsidiaries of National Banks Authorized To Engage in 
Financial Activities.--
          (1) Exclusive authority.--No provision of section 
        5136 or any other provision of this title LXII of the 
        Revised Statutes of the United States shall be 
        construed as authorizing a subsidiary of a national 
        bank to engage in, or own any share of or any other 
        interest in any company engaged in, any activity that--
                  (A) is not permissible for a national bank to 
                engage in directly; or
                  (B) is conducted under terms or conditions 
                other than those that would govern the conduct 
                of such activity by a national bank,
        unless a national bank is specifically authorized by 
        the express terms of a Federal statute and not by 
        implication or interpretation to acquire shares of or 
        an interest in, or to control, such subsidiary, such as 
        by paragraph (2) of this subsection and section 25A of 
        the Federal Reserve Act.
          (2) Specific authorization to conduct activities 
        which are financial in nature.--Subject to paragraphs 
        (3) and (4), a national bank may control a financial 
        subsidiary, or hold an interest in a financial 
        subsidiary, that is controlled by insured depository 
        institutions or subsidiaries thereof.
          (3) Eligibility requirements.--A national bank may 
        control or hold an interest in a company pursuant to 
        paragraph (2) only if--
                  (A) the national bank and all depository 
                institution affiliates of the national bank are 
                well capitalized;
                  (B) the national bank and all depository 
                institution affiliates of the national bank are 
                well managed;
                  (C) the national bank and all depository 
                institution affiliates of such national bank 
                have achieved a rating of `satisfactory record 
                of meeting community credit needs', or better, 
                at the most recent examination of each such 
                bank or institution; and
                  (D) the bank has received the approval of the 
                Comptroller of the Currency.
          (4) Activity limitations.--In addition to any other 
        limitation imposed on the activity of subsidiaries of 
        national banks, a subsidiary of a national bank may 
        not, pursuant to paragraph (2)--
                  (A) engage as principal in insuring, 
                guaranteeing, or indemnifying against loss, 
                harm, damage, illness, disability, or death 
                (other than in connection with credit-related 
                insurance) or in providing or issuing 
                annuities;
                  (B) engage in real estate investment or 
                development activities; or
                  (C) engage in any activity permissible for a 
                financial holding company under paragraph 
                (3)(I) of section 6(c) of the Bank Holding 
                Company Act of 1956 (relating to insurance 
                company investments).
          (5) Size factor with regard to free-standing national 
        banks.--Notwithstanding paragraph (2), a national bank 
        which has total assets of $10,000,000,000 or more may 
        not control a subsidiary engaged in financial 
        activities pursuant to such paragraph unless such 
        national bank is a subsidiary of a bank holding 
        company.
          (6) Limited exclusions from community needs 
        requirements for newly affiliated depository 
        institutions.--Any depository institution which becomes 
        an affiliate of a national bank during the 12-month 
        period preceding the date of an approval by the 
        Comptroller of the Currency under paragraph (3)(D) for 
        such bank, and any depository institution which becomes 
        an affiliate of the national bank after such date, may 
        be excluded for purposes of paragraph (3)(C) during the 
        12-month period beginning on the date of such affiliation if--
                  (A) the national bank or such depository 
                institution has submitted an affirmative plan 
                to the appropriate Federal banking agency to 
                take such action as may be necessary in order 
                for such institution to achieve a rating of 
                ``satisfactory record of meeting community 
                credit needs'', or better, at the next 
                examination of the institution; and
                  (B) the plan has been accepted by such 
                agency.
          (7) Definitions.--For purposes of this section, the 
        following definitions shall apply:
                  (A) Company; control; affiliate; 
                subsidiary.--The terms ``company'', 
                ``control'', ``affiliate'', and ``subsidiary'' 
                have the same meanings as in section 2 of the 
                Bank Holding Company Act of 1956.
                  (B) Financial subsidiary.--The term 
                ``financial subsidiary'' means a company which 
                is a subsidiary of an insured bank and is 
                engaged in financial activities that have been 
                determined to be financial in nature or 
                incidental to such financial activities in 
                accordance with subsection (b) or permitted in 
                accordance with subsection (b)(4), other than 
                activities that are permissible for a national 
                bank to engage in directly or that are 
                authorized under the Bank Service Company Act, 
                section 25 or 25A of the Federal Reserve Act, 
                or any other Federal statute (other than this 
                section) that specifically authorizes the 
                conduct of such activities by its express terms 
                and not by implication or interpretation.
                  (C) Well capitalized.--The term ``well 
                capitalized'' has the same meaning as in 
                section 38 of the Federal Deposit Insurance Act 
                and, for purposes of this section, the 
                Comptroller shall have exclusive jurisdiction 
                to determine whether a national bank is well 
                capitalized.
                  (D) Well managed.--The term ``well managed'' 
                means--
                          (i) in the case of a depository 
                        institution that has been examined, 
                        unless otherwise determined in writing 
                        by the appropriate Federal banking 
                        agency--
                                  (I) the achievement of a 
                                composite rating of 1 or 2 
                                under the Uniform Financial 
                                Institutions Rating System (or 
                                an equivalent rating under an 
                                equivalent rating system) in 
                                connection with the most recent 
                                examination or subsequent 
                                review of the depository 
                                institution; and
                                  (II) at least a rating of 2 
                                for management, if that rating 
                                is given; or
                          (ii) in the case of any depository 
                        institution that has not been examined, 
                        the existence and use of managerial 
                        resources that the appropriate Federal 
                        banking agency determines are 
                        satisfactory.
                  (E) Incorporated definitions.--The terms 
                ``appropriate Federal banking agency'' and 
                ``depository institution'' have the same 
                meanings as in section 3 of the Federal Deposit 
                Insurance Act.
  (b) Activities That Are Financial in Nature.--
          (1) Financial activities.--
                  (A) In general.--For purposes of subsection 
                (a)(7)(B), an activity shall be considered to 
                have been determined to be financial in nature 
                or incidental to such financial activities only 
                if--
                          (i) such activity is permitted for a 
                        financial holding company pursuant to 
                        section 6(c)(3) of the Bank Holding 
                        Company Act of 1956 (to the extent such 
                        activity is not otherwise prohibited 
                        under this section or any other 
                        provision of law for a subsidiary of a 
                        national bank engaged in activities 
                        pursuant to subsection (a)(2)); or
                          (ii) the Secretary of the Treasury 
                        determines the activity to be financial 
                        in nature or incidental to such 
                        financial activities in accordance with 
                        subparagraph (B) or paragraph (3).
                  (B) Coordination between the board and the 
                secretary of the treasury.--
                          (i) Proposals raised before the 
                        secretary of the treasury.--
                                  (I) Consultation.--The 
                                Secretary of the Treasury shall 
                                notify the Board of, and 
                                consult with the Board 
                                concerning, any request, 
                                proposal, or application under 
                                this subsection, including any 
                                regulation or order proposed 
                                under paragraph (3), for a 
                                determination of whether an 
                                activity is financial in nature 
                                or incidental to such a 
                                financial activity.
                                  (II) Board view.--The 
                                Secretary of the Treasury shall 
                                not determine that any activity 
                                is financial in nature or 
                                incidental to a financial 
                                activity under this subsection 
                                if the Board notifies the 
                                Secretary in writing, not later 
                                than 30 days after the date of 
                                receipt of the notice described 
                                in subclause (I) (or such 
                                longer period as the Secretary 
                                determines to be appropriate in 
                                light of the circumstances) 
                                that the Board believes that 
                                the activity is not financial 
                                in nature or incidental to a 
                                financial activity.
                          (ii) Proposals raised by the board.--
                                  (I) Board recommendation.--
                                The Board may, at any time, 
                                recommend in writing that the 
                                Secretary of the Treasury find 
                                an activity to be financial in 
                                nature or incidental to a 
                                financial activity (other than 
                                an activity which the Board has 
                                sole authority to regulate 
                                under subparagraph (C)).
                                  (II) Time period for 
                                secretarial action.--Not later 
                                than 30 days after the date of 
                                receipt of a written 
                                recommendation from the Board 
                                under subclause (I) (or such 
                                longer period as the Secretary 
                                of the Treasury and the Board 
                                determine to be appropriate in 
                                light of the circumstances), 
                                the Secretary shall determine 
                                whether to initiate a public 
                                rulemaking proposing that the 
                                subject recommended activity be 
                                found to be financial in nature or 
                                incidental to a financial activity 
                                under this subsection, and shall 
                                notify the Board in writing of the 
                                determination of the Secretary and, 
                                in the event that the Secretary 
                                determines not to seek public comment 
                                on the proposal, the reasons for that 
                                determination.
                  (C) Authority over merchant banking.--The 
                Board shall have sole authority to prescribe 
                regulations and issue interpretations to 
                implement this paragraph with respect to 
                activities described in section 6(c)(3)(H) of 
                the Bank Holding Company Act of 1956.
          (2) Factors to be considered.--In determining whether 
        an activity is financial in nature or incidental to 
        financial activities, the Secretary shall take into 
        account--
                  (A) the purposes of this Act and the 
                Financial Services Act of 1999;
                  (B) changes or reasonably expected changes in 
                the marketplace in which banks compete;
                  (C) changes or reasonably expected changes in 
                the technology for delivering financial 
                services; and
                  (D) whether such activity is necessary or 
                appropriate to allow a bank and the 
                subsidiaries of a bank to--
                          (i) compete effectively with any 
                        company seeking to provide financial 
                        services in the United States;
                          (ii) use any available or emerging 
                        technological means, including any 
                        application necessary to protect the 
                        security or efficacy of systems for the 
                        transmission of data or financial 
                        transactions, in providing financial 
                        services; and
                          (iii) offer customers any available 
                        or emerging technological means for 
                        using financial services.
          (3) Authorization of new financial activities.--The 
        Secretary of the Treasury shall, by regulation or order 
        and in accordance with paragraph (1)(B), define, 
        consistent with the purposes of this Act, the following 
        activities as, and the extent to which such activities 
        are, financial in nature or incidental to activities 
        which are financial in nature:
                  (A) Lending, exchanging, transferring, 
                investing for others, or safeguarding financial 
                assets other than money or securities.
                  (B) Providing any device or other 
                instrumentality for transferring money or other 
                financial assets.
                  (C) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
          (4) Developing activities.--Subject to subsection 
        (a)(2), a financial subsidiary of a national bank may 
        engage directly or indirectly, or acquire shares of any 
        company engaged, in any activity that the Secretary has 
        not determined to be financial in nature or incidental 
        to financial activities under this subsection if--
                  (A) the subsidiary reasonably concludes that 
                the activity is financial in nature or 
                incidental to financial activities;
                  (B) the gross revenues from all activities 
                conducted under this paragraph represent less 
                than 5 percent of the consolidated gross 
                revenues of the national bank;
                  (C) the aggregate total assets of all 
                companies the shares of which are held under 
                this paragraph do not exceed 5 percent of the 
                national bank's consolidated total assets;
                  (D) the total capital invested in activities 
                conducted under this paragraph represents less 
                than 5 percent of the consolidated total 
                capital of the national bank;
                  (E) neither the Secretary of the Treasury nor 
                the Board has determined that the activity is 
                not financial in nature or incidental to 
                financial activities under this subsection; and
                  (F) the national bank provides written notice 
                to the Secretary of the Treasury describing the 
                activity commenced by the subsidiary or 
                conducted by the company acquired no later than 
                10 business days after commencing the activity 
                or consummating the acquisition.
  (c) Provisions Applicable to National Banks That Fail To Meet 
Requirements.--
          (1) In general.--If a national bank or depository 
        institution affiliate is not in compliance with the 
        requirements of subparagraph (A), (B), or (C) of 
        subsection (a)(3), the appropriate Federal banking 
        agency shall notify the Comptroller of the Currency, 
        who shall give notice of such finding to the national 
        bank.
          (2) Agreement to correct conditions required.--Not 
        later than 45 days after receipt by a national bank of 
        a notice given under paragraph (1) (or such additional 
        period as the Comptroller of the Currency may permit), 
        the national bank and any relevant affiliated 
        depository institution shall execute an agreement 
        acceptable to the Comptroller of the Currency and the 
        other appropriate Federal banking agencies, if any, to 
        comply with the requirements applicable under 
        subsection (a)(3).
          (3) Comptroller of the currency may impose 
        limitations.--Until the conditions described in a 
        notice to a national bank under paragraph (1) are 
        corrected--
                  (A) the Comptroller of the Currency may 
                impose such limitations on the conduct or 
                activities of the national bank or any 
                subsidiary of the bank as the Comptroller of 
                the Currency determines to be appropriate under 
                the circumstances; and
                  (B) the appropriate Federal banking agency 
                may impose such limitations on the conduct or 
                activities of an affiliated depository 
                institution or any subsidiary of the depository 
                institution as such agency determines to be 
                appropriate under the circumstances.
          (4) Failure to correct.--If, after receiving a notice 
        under paragraph (1), a national 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 (a)(3)(A), restore the 
                national bank or any depository institution 
                affiliate of the bank to well capitalized 
                status before the end of the 180-day period 
                beginning on the date such notice is received 
                by the national bank (or such other period 
                permitted by the Comptroller of the Currency); 
                or
                  (D) in the case of a notice of failure to 
                comply with subparagraph (B) or (C) of 
                subsection (a)(3), restore compliance with any 
                such subparagraph on or before the date on 
                which the next examination of the depository 
                institution subsidiary is completed or by the 
                end of such other period as the Comptroller of 
                the Currency determines to be appropriate,
        the Comptroller of the Currency may require such 
        national bank, under such terms and conditions as may 
        be imposed by the Comptroller of the Currency and 
        subject to such extension of time as may be granted in 
        the Comptroller of the Currency's discretion, to divest 
        control of any subsidiary engaged in activities 
        pursuant to subsection (a)(2) or, at the election of 
        the national bank, instead to cease to engage in any 
        activity conducted by a subsidiary of the national bank 
        pursuant to subsection (a)(2).
          (5) Consultation.--In taking any action under this 
        subsection, the Comptroller of the Currency shall 
        consult with all relevant Federal and State regulatory 
        agencies.

SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.

  (a) Authorization of the Comptroller Required.--
          (1) In general.--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 wholesale financial 
        institution.
          (2) National wholesale financial institution.--Any 
        national bank that is approved by the Comptroller of 
        the Currency to operate as a wholesale financial 
        institution under paragraph (1) shall be known 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) Limit on Number.--Not more than 5 national wholesale 
financial institutions may be chartered by the Comptroller of 
the Currency.
  Sec. [5136A.] 5136C. (a) A national bank may not--
          (1) * * *

           *       *       *       *       *       *       *


           *       *       *       *       *       *       *


                        C H A P T E R  F O U R.

DISSOLUTION AND RECEIVERSHIP.

           *       *       *       *       *       *       *


  Sec. 5239. (a) * * *

           *       *       *       *       *       *       *

  [(d)] (e) Authority.--The Comptroller of the Currency may act 
in the Comptroller's own name and through the Comptroller's own 
attorneys in enforcing any provision of this title, regulations 
thereunder, or any other law or regulation, or in any action, 
suit, or proceeding to which the Comptroller of the Currency is 
a party.
  (f) Enforcement Authority Over Uninsured National 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 national bank in the same manner and to 
the same extent such provisions apply to an insured national 
bank and any reference in any such provision to ``insured 
depository institution'' shall be deemed to be a reference to 
``uninsured national bank'' for purposes of this subsection.

           *       *       *       *       *       *       *

                              ----------                              


                         FEDERAL RESERVE ACT

           *       *       *       *       *       *       *


  Sec. 9. Any bank incorporated by special law of any State, or 
organized under the general laws of any State or of the United 
States, including Morris Plan banks and other incorporated 
banking institutions engaged in similar business, desiring to 
become a member of the Federal Reserve System, may make 
application to the Board of Governors of the Federal Reserve 
System, under such rules and regulations as it may prescribe, 
for the right to subscribe to the stock of the Federal reserve 
bank organized within the district in which the applying bank 
is located. Such application shall be for the same amount of 
stock that the applying bank would be required to subscribe to 
as a national bank. For the purposes of membership of any such 
bank the terms ``capital'' and ``capital stock'' shall include 
the amount of outstanding capital notes and debentures legally 
issued by the applying bank and purchased by the Reconstruction 
Finance Corporation. The Board of Governors of the Federal 
Reserve System, subject to the provisions of this Act and to 
such conditions as it may prescribe pursuant thereto maypermit 
the applying bank to become a stockholder of such Federal reserve bank.

           *       *       *       *       *       *       *

  If at any time it shall appear to the Board of Governors of 
the Federal Reserve System that a member bank has failed to 
comply with the provisions of this section or the regulations 
of the Board of Governors of the Federal Reserve System made 
pursuant thereto, or has ceased to exercise banking functions 
without a receiver or liquidating agent having been appointed 
therefor, it shall be within the power of the board after 
hearing to require such bank to surrender its stock in the 
Federal reserve bank and to forfeit all rights and privileges 
of membership. The Board of Governors of the Federal Reserve 
System may restore membership upon due proof of compliance with 
the conditions imposed by this section. The Board of Governors 
of the Federal Reserve System, at its discretion, may furnish 
reports of examination or other confidential supervisory 
information concerning State member banks or any other entities 
examined under any other authority of the Board to any Federal 
or State authorities with supervisory or regulatory authority 
over the examined entity, to officers, directors, or receivers 
of the examined entity, and to any other person that the Board 
determines to be proper.

           *       *       *       *       *       *       *

          (24) Enforcement authority over uninsured state 
        member banks.--Section 3(u) of the Federal Deposit 
        Insurance Act, subsections (j) and (k) of section 7 of 
        such Act, and subsections (b) through (n), (s), (u), 
        and (v) of section 8 of such Act shall apply to an 
        uninsured member bank in the same manner and to the 
        same extent such provisions apply to an insured member 
        bank and any reference in any such provision to 
        ``insured depository institution'' shall be deemed to 
        be a reference to ``uninsured member bank'' for 
        purposes of this paragraph.

           *       *       *       *       *       *       *


SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

  (a) Application for Membership as Wholesale Financial 
Institution.--
          (1) Application required.--
                  (A) In general.--Any bank may apply to the 
                Board of Governors of the Federal Reserve 
                System to become a State wholesale financial 
                institution, or to the Comptroller of the 
                Currency under section 5136B of the Revised 
                Statutes of the United States to be a national 
                wholesale financial institution, and, as a 
                wholesale financial institution, to subscribe 
                to the stock of the Federal reserve bank 
                organized within the district where the 
                applying bank is located.
                  (B) Treatment as member bank.--Any 
                application under subparagraph (A) shall be 
                treated as an application under, and shall be 
                subject to the provisions of, section 9.
                  (C) Limit on Number.--Not more than 5 
                wholesale financial institutions may be 
                approved by the Board under this subsection.
          (2) Insurance termination.--No bank the deposits of 
        which are insured under the Federal Deposit Insurance 
        Act may become a wholesale financial institution unless 
        it has met all requirements under that Act for 
        voluntary termination of deposit insurance.
  (b) General Requirements Applicable to Wholesale Financial 
Institutions.--
          (1) Federal reserve act.--Except as otherwise 
        provided in this section, wholesale financial 
        institutions shall be member banks and shall be subject 
        to the provisions of this Act that apply to member 
        banks to the same extent and in the same manner as 
        State member insured banks or national banks, except 
        that a wholesale financial institution may terminate 
        membership under this Act only with the prior written 
        approval of the Board and on terms and conditions that 
        the Board determines are appropriate to carry out the 
        purposes of this Act.
          (2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal 
        Deposit Insurance Act except that--
                  (A) the relevant capital levels and capital 
                measures for each capital category shall be the 
                levels specified by the Board for wholesale 
                financial institutions;
                  (B) subject to subparagraph (A), all 
                references to the appropriate Federal banking 
                agency or to the Corporation in that section 
                shall be deemed to be references to the 
                Comptroller of the Currency, in the case of a 
                national wholesale financial institution 
                authorized under section 5136B(a)(1) of the 
                Revised Statutes of the United States, and to 
                the Board, in the case of other wholesale 
                financial institutions; and
                  (C) in the case of wholesale financial 
                institutions, the purpose of prompt corrective 
                action shall be to protect taxpayers and the 
                financial system from risks associated with the 
                operation and activities of wholesale financial 
                institutions.
          (3) Enforcement authority.--Section 3(u), subsections 
        (j) and (k) of section 7, subsections (b) through (n), 
        (s), (u), and (v) of section 8, and section 19 of the 
        Federal Deposit Insurance Act shall apply to a 
        wholesale financial institution in the same manner and 
        to the same extent as such provisions apply to State 
        member insured banks or national banks, as the case may 
        be, and any reference in such sections to an insured 
        depository institution shall be deemed to include a 
        reference to a wholesale financial institution.
          (4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate 
        Federal banking agency for such bank and all such 
        bank's affiliates, for purposes of the International 
        Lending Supervision Act.
          (5) Bank merger act.--A wholesale financial 
        institution shall be subject to sections 18(c) and 44 
        of the Federal Deposit Insurance Act in the same manner 
        and to the same extent the wholesale financial 
        institution would be subject to such sectionsif the 
        institution were a State member insured bank or a national bank.
          (6) Branching.--Notwithstanding any other provision 
        of law, a wholesale financial institution may establish 
        and operate a branch at any location--
                  (A) on such terms and conditions as 
                established, in the case of a State-chartered 
                wholesale financial institution, by the Board 
                or, in the case of a national wholesale 
                financial institution, by the Comptroller of 
                the Currency; and
                  (B) 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 to be a 
                State bank and an insured State bank for 
                purposes of paragraphs (1), (2), and (3) of 
                section 24(j) of the Federal Deposit Insurance 
                Act, and a national wholesale financial 
                institution shall be deemed to be a national 
                bank for purposes of section 5155(f) of the 
                Revised Statutes of the United States.
                  (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.--Except as 
                otherwise provided in section 8A(f) of the 
                Federal Deposit Insurance Act, no deposits held 
                by a wholesale financial institution shall be 
                insured deposits under the Federal Deposit 
                Insurance Act.
                  (C) Advertising and disclosure.--The Board 
                and the Comptroller of the Currency shall 
                prescribe jointly regulations pertaining to 
                advertising and disclosure by wholesale 
                financial institutions to ensure that each 
                depositor is notified that deposits at the 
                wholesale financial institution are not 
                federally insured or otherwise guaranteed by 
                the United States Government.
          (2) Minimum capital levels applicable to wholesale 
        financial institutions.--The Board shall, by 
        regulation, adopt capital requirements for wholesale 
        financial institutions--
                  (A) to account for the status of wholesale 
                financial institutions as institutions that 
                accept deposits that are not insured under the 
                Federal Deposit Insurance Act; and
                  (B) to provide for the safe and sound 
                operation of the wholesale financial 
                institution without undue risk to creditors or 
                other persons, including Federal reserve banks, 
                engaged in transactions with the bank.
          (3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member insured banks or 
        applicable, under this section, to wholesale financial 
        institutions, the Board may impose, by regulation or 
        order, upon wholesale financial institutions--
                  (A) limitations on transactions, direct or 
                indirect, with affiliates to prevent--
                          (i) the transfer of risk to the 
                        deposit insurance funds; or]
                          (ii) an affiliate from gaining access 
                        to, or the benefits of, credit from a 
                        Federal reserve bank, including 
                        overdrafts at a Federal reserve bank;
                  (B) special clearing balance requirements; 
                and
                  (C) any additional requirements that the 
                Board determines to be appropriate or necessary 
                to--
                          (i) promote the safety and soundness 
                        of the wholesale financial institution 
                        or any insured depository institution 
                        affiliate of the wholesale financial 
                        institution;
                          (ii) prevent the transfer of risk to 
                        the deposit insurance funds; or
                          (iii) protect creditors and other 
                        persons, including Federal reserve 
                        banks, engaged in transactions with the 
                        wholesale financial institution.
          (4) Exemptions for wholesale financial 
        institutions.--The Board may, by regulation or order, 
        exempt any wholesale financial institution from any 
        provision applicable to a member bank that is not a 
        wholesale financial institution, if the Board finds 
        that such exemption is consistent with--
                  (A) the promotion of the safety and soundness 
                of the wholesale financial institution or any 
                insured depository institution affiliate of the 
                wholesale financial institution;
                  (B) the protection of the deposit insurance 
                funds; and
                  (C) the protection of creditors and other 
                persons, including Federal reserve banks, 
                engaged in transactions with the wholesale 
                financial institution.
          (5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For 
        purposes of section 23A(d)(1) of the Federal Reserve 
        Act, a wholesale financial institution that is 
        affiliated with an insured bank shall not be a bank.
          (6) No effect on other provisions.--This section 
        shall not be construed as limiting the Board's 
        authority over member banks or the authority of the 
        Comptroller of the Currency over national banks under 
        any other 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, in the case of a 
        State-chartered wholesale financial institution, or the 
        Comptroller of the Currency, in the case of a national 
        wholesale financial institution, shall promptly provide 
        notice to a company that controls a wholesale financial 
        institution whenever such wholesale financial 
        institution is not well capitalized or well managed.
          (3) Agreement to restore institution.--Not later than 
        45 days after the date of receipt of a notice under 
        paragraph (2) (or such additional period not to exceed 
        90 days as the Board or the Comptroller of the 
        Currency, as the case may be, may permit), the company 
        shall execute an agreement acceptable to the Board or 
        the Comptroller of the Currency, as the case may be, 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 or the Comptroller of the Currency, as 
        the case may be, may impose such limitations on the 
        conduct or activities of the company or any affiliate 
        of the company as the Board or the Comptroller of the 
        Currency determines to be appropriate under the 
        circumstances.
          (5) Failure to restore.--If the company does not 
        execute and implement an agreement in accordance with 
        paragraph (3), comply with any limitation imposed under 
        paragraph (4), restore the wholesale financial 
        institution to well capitalized status not later than 
        180 days after the date of receipt by the company of 
        the notice described in paragraph (2), or restore the 
        wholesale financial institution to well managed status 
        within such period as the Board may permit, the company 
        shall, under such terms and conditions as may be 
        imposed by the Board or the Comptroller of the 
        Currency, as the case may be and subject to such 
        extension of time as may be granted in the discretion 
        of the Board or the Comptroller of the Currency, divest 
        control of its subsidiary depository institutions.
          (6) Well managed defined.--For purposes of this 
        subsection, the term ``well managed'' has the same 
        meaning as in section 2 of the Bank Holding Company Act 
        of 1956.
  (e) Resolution of Wholesale Financial Institutions.--
          (1) Conservatorship or receivership.--
                  (A) Appointment.--The Board may appoint a 
                conservator or receiver for a State-chartered 
                wholesale financial institution to the same 
                extent and in the same manner as the 
                Comptroller of the Currency may appoint a 
                conservator or receiver for a national bank.
                  (B) Powers.--The conservator or receiver for 
                a wholesale financial institution shall 
                exercise the same powers, functions, and 
                duties, subject to the same limitations, as a 
                conservator or receiver for a national bank.
          (2) Board authority.--The Board shall have the same 
        authority with respect to any conservator or receiver 
        appointed for a State-chartered wholesale financial 
        institution under paragraph (1), and the wholesale 
        financial institution for which it has been appointed, 
        as the Comptroller of the Currency has with respect to 
        a conservator or receiver for a national bank and the 
        national bank for which the conservator or receiver has 
        been appointed.
          (3) Bankruptcy proceedings.--The Comptroller of the 
        Currency (in the case of a national wholesale financial 
        institution approved by the Comptroller of the Currency 
        under section 5136B(a)(1) of the Revised Statutes of 
        the United States) or the Board (in the case of other 
        wholesale financial institutions) may direct the 
        conservator or receiver of a wholesale financial 
        institution to file a petition pursuant to title 11, 
        United States Code, in which case, title 11, United 
        States Code, shall apply to the wholesale financial 
institution in lieu of otherwise applicable Federal or State insolvency 
law.
  (f) Exclusive Jurisdiction.--Subsections (c) and (e) of 
section 43 of the Federal Deposit Insurance Act shall not apply 
to any wholesale financial institution.

           *       *       *       *       *       *       *

  Sec. 11. The Board of Governors of the Federal Reserve System 
shall be authorized and empowered:
  (a) * * *

           *       *       *       *       *       *       *

  [(m) Upon the affirmative vote of not less than six of its 
members the Board of Governors of the Federal Reserve System 
shall have power to fix from time to time for each Federal 
reserve district the percentage of individual bank capital and 
surplus which may be represented by loans secured by stock or 
bond collateral made by member banks within such district, but 
no such loan shall be made by any such bank to any person in an 
amount in excess of 15 percent of the unimpaired capital and 
surplus of such bank: Provided, That with respect to loans 
represented by obligations secured by not less than a like 
amount of bonds or notes of the United States issued since 
April 24, 1917, certificates of indebtedness of the United 
States, Treasury bills of the United States, or obligations 
fully guaranteed both as to principal and interest by the 
United States, such limitation of 15 percent on loans to any 
person shall not apply, but State member banks shall be subject 
to the same limitations and conditions as are applicable in the 
case of national banks under section 5200(c)(4) of the Revised 
Statutes. Any percentage so fixed by the Board of Governors of 
the Federal Reserve System shall be subject to change from time 
to time upon ten days' notice, and it shall be the duty of the 
Board to establish such percentages with a view to preventing 
the undue use of bank loans for the speculative carrying of 
securities. The Board of Governors of the Federal Reserve 
System shall have power to direct any member bank to refrain 
from further increase of its loans secured by stock or bond 
collateral for any period up to one year under penalty of 
suspension of all rediscount privileges at Federal reserve 
banks.]
  (m) [Repealed]

           *       *       *       *       *       *       *

  Sec. 19. (a) * * *
  (b) Reserve Requirements.--
          (1) Definitions.--The following definitions and rules 
        apply to this subsection, subsection (c), section 11A, 
        the first paragraph of section 13, and the second, 
        thirteenth, and fourteenth paragraphs of section 16:
                  (A) The term ``depository institution'' 
                means--
                          (i) any insured bank as defined in 
                        section 3 of the Federal Deposit 
                        Insurance Act or any bank which is 
                        eligible to make application to become 
                        an insured bank under section 5 of such 
                        Act, or any wholesale financial 
                        institution subject to section 9B of 
                        this Act;

           *       *       *       *       *       *       *

                  (G) Limitation on wholesale financial 
                institutions.--Not more than 10 wholesale 
                financial institutions subject to section 9B of 
                the Federal Reserve Act may be treated by the 
                Board as depository institutions, as defined in 
                subparagraph (A), for purposes of this 
                paragraph.

           *       *       *       *       *       *       *


                         INTERBANK LIABILITIES

  Sec. 23. (a) * * *

           *       *       *       *       *       *       *

  (e) Rules Relating to Banks With Financial Subsidiaries.--
          (1) Financial subsidiary defined.--For purposes of 
        this section and section 23B, the term `financial 
        subsidiary' means a company which is a subsidiary of a 
        bank and is engaged in activities that are financial in 
        nature or incidental to such financial activities 
        pursuant to subsection (a)(2) or (b)(4) of section 
        5136A of the Revised Statutes of the United States.
          (2) Application to transactions between a financial 
        subsidiary of a bank and the bank.--For purposes of 
        applying this section and section 23B to a transaction 
        between a financial subsidiary of a bank and the bank 
        (or between such financial subsidiary and any other 
        subsidiary of the bank which is not a financial 
        subsidiary) and notwithstanding subsection (b)(2) and 
        section 23B(d)(1), the financial subsidiary of the 
        bank--
                  (A) shall be an affiliate of the bank and any 
                other subsidiary of the bank which is not a 
                financial subsidiary; and
                  (B) shall not be treated as a subsidiary of 
                the bank.
          (3) Application to transactions between financial 
        subsidiary and nonbank affiliates.--
                  (A) In general.--A transaction between a 
                financial subsidiary and an affiliate of the 
                financial subsidiary shall not be deemed to be 
                a transaction between a subsidiary of a 
                national bank and an affiliate of the bank for 
                purposes of section 23A or section 23B of the 
                Federal Reserve Act.
                  (B) Certain affiliates excluded.--For 
                purposes of subparagraph (A) and 
                notwithstanding paragraph (4), the term 
                ``affiliate'' shall not include a bank, or a 
                subsidiary of a bank, which is engaged 
                exclusively in activities permissible for a 
                national bank to engage in directly or which 
                are authorized by any Federal law other than 
                section 5136A of the Revised Statutes of the 
                United States.
          (4) Equity investments excluded subject to the 
        approval of the banking agency.--Subsection (a)(1) 
        shall not apply so as to limit the equity investment of 
        a bank in a financial subsidiary of such bank, except 
        that any investment that exceeds the amount of a 
        dividend that the bank could pay at the time of the 
        investment without obtaining prior approval of the 
        appropriate Federal banking agency and is in excess of 
        the limitation which would apply under subsection 
        (a)(1), but for this paragraph, may be made only with 
        the approval of theappropriate Federal banking agency 
(as defined in section 3(q) of the Federal Deposit Insurance Act) with 
respect to such bank.
  [(e)] (f) Rulemaking Authority; Enforcement.--The Board may 
issue such regulations and orders, including definitions 
consistent with this section, as may be necessary to administer 
and carry out the purpose of this section. The appropriate 
Federal banking agency shall enforce compliance with those 
regulations under section 8 of the Federal Deposit Insurance 
Act. (12 U.S.C. 371b-2)

           *       *       *       *       *       *       *


     banking corporations authorized to do foreign banking business

  Sec. 25A. Corporations to be organized for the purpose of 
engaging in international or foreign banking or other 
international or foreign financial operations, or in banking or 
other financial operations in a dependency or insular 
possession of the United States, either directly or through the 
agency, ownership, or control of local institutions in foreign 
countries, or in such dependencies or insular possessions as 
provided by this section, and to act when required by the 
Secretary of the Treasury as fiscal agents of the United 
States, may be formed by any number of natural persons, not 
less in any case than five: Provided, That nothing in this 
section shall be construed to deny the right of the Secretary 
of the Treasury to use any corporation organized under this 
section as depositaries in Panama and the Panama Canal Zone, or 
in the Philippine Islands and other insular possessions and 
dependencies of the United States. (12 U.S.C. 611)

           *       *       *       *       *       *       *

  [Whenever the Board of Governors of the Federal Reserve 
System shall become satisfied of the insolvency of any such 
corporation, it may appoint a receiver who shall take 
possession of all of the property and assets of the corporation 
and exercise the same rights, privileges, powers, and authority 
with respect thereto as are now exercised by receivers of 
national banks appointed by the Comptroller of the Currency of 
the United States: Provided, however, That the assets of the 
corporation subject to the laws of other countries or 
jurisdictions shall be dealt with in accordance with the terms 
of such laws.]
          (16) Appointment of receiver or conservator.--
                  (A) In general.--The Board may appoint a 
                conservator or receiver for a corporation 
                organized under the provisions of this section 
                to the same extent and in the same manner as 
                the Comptroller of the Currency may appoint a 
                conservator or receiver for a national bank, 
                and the conservator or receiver for such 
                corporation shall exercise the same powers, 
                functions, and duties, subject to the same 
                limitations, as a conservator or receiver for a 
                national bank.
                  (B) Equivalent authority.--The Board shall 
                have the same authority with respect to any 
                conservator or receiver appointed for a 
                corporation organized under the provisions of 
                this section under this paragraph and any such 
                corporation as the Comptroller of the Currency 
                has with respect to a conservator or receiver 
                of a national bank and the national bank for 
                which a conservator or receiver has been 
                appointed.
                  (C) Title 11 petitions.--The Board may direct 
                the conservator or receiver of a corporation 
                organized under the provisions of this section 
                to file a petition pursuant to title 11, United 
                States Code, in which case, title 11, United 
                States Code, shall apply to the corporation in 
                lieu of otherwise applicable Federal or State 
                insolvency law.

           *       *       *       *       *       *       *

                              ----------                              


               CHAPTER 47 OF TITLE 18, UNITED STATES CODE

                 CHAPTER 47--FRAUD AND FALSE STATEMENTS

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

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *

                              ----------                              


                 RIGHT TO FINANCIAL PRIVACY ACT OF 1978

           *       *       *       *       *       *       *


                              definitions

      Sec. 1101. For the purpose of this title, the term--
          (1) * * *

           *       *       *       *       *       *       *

          (7) ``supervisory agency'' means with respect to any 
        particular financial institution, holding company, or 
        any subsidiary of a financial institution or holding 
        company, any of the following which has statutory 
        authority to examine the financial condition, business 
        operations, or records or transactions of that 
        institution, holding company, or subsidiary--
                  (A) * * *

           *       *       *       *       *       *       *

                  (G) the Commodity Futures Trading Commission; 
                or
                  [(G)] (H) the Secretary of the Treasury, with 
                respect to the Bank Secrecy Act and the 
                Currency and Foreign Transactions Reporting Act 
                (Public Law 91-508, title I and II); or
                  [(H)] (I) any State banking or securities 
                department or agency: and

           *       *       *       *       *       *       *


                           use of information

      Sec. 1112. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *

                              ----------                              


                     TITLE 11, UNITED STATES CODE

           *       *       *       *       *       *       *



                    CHAPTER 1--GENERAL PROVISIONS

           *       *       *       *       *       *       *



Sec. 101. Definitions

  In this title--
          (1) * * *

           *       *       *       *       *       *       *

          [(22) ``financial institution'' means a person that 
        is a commercial or savings bank, industrial savings 
        bank, savings and loan association, or trust company 
        and, when any such person is acting as agent or 
        custodian for a customer in connection with a 
        securities contract, as defined in section 741 of this 
        title, such customer;]
          (22) ``financial institution'' means a person that is 
        a commercial or savings bank, industrial savings bank, 
        savings and loan association, trust company, wholesale 
        financial institution established under section 5136B 
        of the Revised Statutes of the United States or section 
        9B of the Federal Reserve Act, or corporation organized 
        under section 25A of the Federal Reserve Act and, when 
        any such person is acting as agent or custodian for a 
        customer in connection with a securities contract, as 
        defined in section 741 of this title, such customer,

           *       *       *       *       *       *       *


Sec. 103. Applicability of chapters

  (a) * * *

           *       *       *       *       *       *       *

  (e) Subchapter V of chapter 7 of this title applies only in a 
case under such chapter concerning the liquidation of a 
wholesale financial institution established under section 5136B 
of the Revised Statutes of the United States or section 9B of 
the Federal Reserve Act, or a corporation organized under 
section 25A of the Federal Reserve Act.
  [(e)] (f) Except as provided in section 901 of this title, 
only chapters 1 and 9 of this title apply in a case under such 
chapter 9.
  [(f)] (g) Except as provided in section 901 of this title, 
subchapters I, II, and III of chapter 11 of this title apply 
only in a case under such chapter.
  [(g)] (h) Subchapter IV of chapter 11 of this title applies 
only in a case under such chapter concerning a railroad.
  [(h)] (i) Chapter 13 of this title applies only in a case 
under such chapter.
  [(i)] (j) Chapter 12 of this title applies only in a case 
under such chapter.

           *       *       *       *       *       *       *


Sec. 109. Who may be a debtor

  (a) Notwithstanding any other provision of this section, only 
a person that resides or has a domicile, a place of business, 
or property in the United States, or a municipality, may be a 
debtor under this title.
  (b) A person may be a debtor under chapter 7 of this title 
only if such person is not--
          (1) a railroad;
          (2) a domestic insurance company, bank, savings bank, 
        cooperative bank, savings and loan association, 
        building and loan association, homestead association, a 
        small business investment company licensed by the Small 
        Business Administration under subsection (c) or (d) of 
        section 301 of the Small Business Investment Act of 
        1958, credit union, or industrial bank or similar 
        institution which is an insured bank as defined in 
        section 3(h) of the Federal Deposit Insurance Act[; 
        or], except that--
                  (A) a wholesale financial institution 
                established under section 5136B of the Revised 
                Statutes of the United States or section 9B of 
                the Federal Reserve Act may be a debtor if a 
                petition is filed at the direction of the 
                Comptroller of the Currency (in the case of a 
                wholesale financial institution established 
                under section 5136B of the Revised Statutes of 
                the United States) or the Board of Governors of 
                the Federal Reserve System (in the case of any 
                wholesale financial institution); and
                  (B) a corporation organized under section 25A 
                of the Federal Reserve Act may be a debtor if a 
                petition is filed at the direction of the Board 
                of Governors of the Federal Reserve System; or

           *       *       *       *       *       *       *

  [(d) Only a person that may be a debtor under chapter 7 of 
this title, except a stockbroker or a commodity broker, and a 
railroad may be a debtor under chapter 11 of this title.]
  (d) Only a railroad and a person that may be a debtor under 
chapter 7 of this title, except that a stockbroker, a wholesale 
financial institution established under section 5136B of the 
Revised Statutes of the United States or section 9B of the 
Federal Reserve Act, a corporation organized under section 25A 
of the Federal Reserve Act, or a commodity broker, may be a 
debtor under chapter 11 of this title.

           *       *       *       *       *       *       *


                         CHAPTER 7--LIQUIDATION


                SUBCHAPTER I--OFFICERS AND ADMINISTRATION

Sec.
701. Interim trustee.
     * * * * * * *

                SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

781. Definitions for subchapter.
782. Selection of trustee.
783. Additional powers of trustee.
784. Right to be heard.
785. Expedited transfers.

           *       *       *       *       *       *       *


                SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

Sec. 781. Definitions for subchapter

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

Sec. 782. Selection of trustee

  Notwithstanding any other provision of this title, the 
conservator or receiver who files the petition shall be the 
trustee under this chapter, unless the Comptroller of the 
Currency (in the case of a national wholesale financial 
institution for which it appointed the conservator or receiver) 
or the Board (in the case of any wholesale bank for which it 
appointed the conservator or receiver) designates an 
alternative trustee. The Comptroller of the Currency or the 
Board (as applicable) may designate a successor trustee, if 
required.

Sec. 783. Additional powers of trustee

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

Sec. 784. Right to be heard

  ``The Comptroller of the Currency (in the case of a national 
wholesale financial institution), the Board (in the case of any 
wholesale bank), or a Federal Reserve bank (in the case of a 
wholesale bank that is a member of that bank) may raise and may 
appear and be heard on any issue in a case under this 
subchapter.

Sec. 785. Expedited transfers

  The trustee may make a transfer pursuant to section 783 
without prior judicial approval, if the Comptroller of the 
Currency (in the case of a national wholesale financial 
institution for which it appointed the conservator or receiver) 
or the Board (in the case of any wholesale bank for which it 
appointed the conservator or receiver) determines that the 
transfer would be necessary to avert serious adverse effects on 
economic conditions or financial stability.
                              ----------                              


                     SECTION 7A OF THE CLAYTON ACT

  Sec. 7A. (a) * * *

           *       *       *       *       *       *       *

  (c) The following classes of transactions are exempt from the 
requirements of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (7) transactions which require agency approval under 
        section 10(e) of the Home Owners' Loan Act, section 
        18(c) of the Federal Deposit Insurance Act (12 U.S.C. 
        1828(c)), or section 3 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1842), 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;
                              ----------                              


                   INTERNATIONAL BANKING ACT OF 1978

           short title; definitions and rules of construction

  Section 1. (a) * * *
  (b) For the purposes of this Act--
          (1) * * *

           *       *       *       *       *       *       *


           *       *       *       *       *       *       *

          (15) the term ``representative office'' means any 
        office of a foreign bank which is located in any State 
        and is not a Federal branch, Federal agency, State 
        branch, [State agency, or subsidiary of a foreign bank] 
        or State agency;

           *       *       *       *       *       *       *


                         nonbanking activities

  Sec. 8. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

          (3) Termination of grandfathered rights.--
                  (A) In general.--If any foreign bank or 
                foreign company files a declaration under 
                section 6(b)(1)(E) of the Bank Holding Company 
                Act of 1956, or receives a determination under 
                section 10(d)(1) of the Bank Holding Company 
                Act of 1956, any authority conferred by this 
                subsection on any foreign bank or company to 
                engage in any activity which the Board has 
                determined to be permissible for financial 
                holding companies under section 6 of such Act 
                shall terminate immediately.
                  (B) Restrictions and requirements 
                authorized.--If a foreign bank or company that 
                engages, directly or through an affiliate 
                pursuant to paragraph (1), in an activity which 
                the Board has determined to be permissible for 
                financial holding companies under section 6 of 
                the Bank Holding Company Act of 1956 has not 
                filed a declaration with the Board of its 
                status as a financial holding company under 
                such section or received a determination under 
                section 10(d)(1) by the end of the 2-year 
                period beginning on the date of enactment of 
                the Financial Services Act of 1999, the Board, 
                giving due regard to the principle of national 
                treatment and equality of competitive 
                opportunity, may impose such restrictions and 
                requirements on the conduct of such activities 
                by such foreign bank or company as are 
                comparable to those imposed on a financial 
                holding company organized under the laws of the 
                United States, including a requirement to 
                conduct such activities in compliance with any 
                prudential safeguards established under section 
                114 of the Financial Services Act of 1999.

           *       *       *       *       *       *       *


SEC. 10. REPRESENTATIVE OFFICES.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Examinations.--The Board may make examinations of each 
representative office of a foreign bank, the cost of which 
shall be assessed against and paid by such foreign bank. The 
Board may also make examinations of any affiliate of a foreign 
bank conducting business in any State if the Board deems it 
necessary to determine and enforce compliance with this Act, 
the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), 
or other applicable Federal banking law.

           *       *       *       *       *       *       *

                              ----------                              


                       FEDERAL HOME LOAN BANK ACT

           *       *       *       *       *       *       *


                              definitions

  Sec. 2. As used in this Act--
          (1) Board.--The [term ``Board'' means] terms 
        ``Finance Board'' and ``Board'' mean the Federal 
        Housing Finance Board established under section 2A.
  [(3) The term ``State'' includes the District of Columbia, 
Guam, Puerto Rico, and the Virgin Islands of the United 
States.]
          (3) State.--The term ``State'', in addition to the 
        States of the United States, includes the District of 
        Columbia, Guam, Puerto Rico, the United States Virgin 
        Islands, American Samoa, and the Commonwealth of the 
        Northern Mariana Islands.

           *       *       *       *       *       *       *

          (13) Community financial institution.--
                  (A) In general.--The term ``community 
                financial institution'' means a member--
                          (i) the deposits of which are insured 
                        under the Federal Deposit Insurance 
                        Act; and
                          (ii) that has, as of the date of the 
                        transaction at issue, less than 
                        $500,000,000 in average total assets, 
                        based on an average of total assets 
                        over the 3 years preceding that date.
                  (B) Adjustments.--The $500,000,000 limit 
                referred to in subparagraph (A)(ii) shall be 
                adjusted annually by the Finance Board, based 
                on the annual percentage increase, if any, in 
                the Consumer Price Index for all urban 
                consumers, as published by the Department of 
                Labor.

           *       *       *       *       *       *       *


SEC. 2B. POWERS AND DUTIES.

  (a) General Powers.--The Board shall have the following 
powers:
          (1)  * * *

           *       *       *       *       *       *       *

          (5) To issue and serve a notice of charges upon a 
        Federal home loan bank or upon any executive officer or 
        director of a Federal home loan bank if, in the 
        determination of the Finance Board, the bank, executive 
        officer, or director is engaging or has engaged in, or 
        the Finance Board has reasonable cause to believe that 
        the bank, executive officer, or director is about to 
        engage in, any conduct that violates any provision of 
        this Act or any law, order, rule, or regulation or any 
        condition imposed in writing by the Finance Board in 
        connection with the granting of any application or 
        other request by the bank, or any written agreement 
        entered into by the bank with the agency, in accordance 
        with the procedures provided in section 1371(c) of the 
        Federal Housing Enterprises Financial Safety and 
        Soundness Act of 1992. Such authority includes the same 
        authority to take affirmative action to correct 
        conditions resulting from violations or practices or to 
        limit activities of a bank or any executive officer or 
        director of a bank as appropriate Federal banking 
        agencies have to take with respect to insured 
        depository institutions under paragraphs (6) and (7) of 
section 8(b) of the Federal Deposit Insurance Act, and to have all 
other powers, rights, and duties to enforce this Act with respect to 
the Federal home loan banks and their executive officers and directors 
as the Office of Federal Housing Enterprise Oversight has to enforce 
the Federal Housing Enterprises Financial Safety and Soundness Act of 
1992, the Federal National Mortgage Association Charter Act, or the 
Federal Home Loan Mortgage Corporation Act with respect to the Federal 
housing enterprises under the Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992.
          (6) To address any insufficiencies in capital levels 
        resulting from the application of section 5(f) of the 
        Home Owners' Loan Act.
          (7) To sue and be sued, by and through its own 
        attorneys.

           *       *       *       *       *       *       *

  Sec. 4. (a) Criteria for Eligibility.--
          (1)  * * *
          (2) Qualified thrift lender.--An insured depository 
        institution that is not a member on January 1, 1989, 
        may become a member of a Federal Home Loan Bank only 
        if--
                  (A) the insured depository institution (other 
                than a community financial institution) has at 
                least 10 percent of its total assets in 
                residential mortgage loans;

           *       *       *       *       *       *       *

          (3) Limited exemption for community financial 
        institutions.--A community financial institution that 
        otherwise meets the requirements of paragraph (2) may 
        become a member without regard to the percentage of its 
        total assets that is represented by residential 
        mortgage loans, as described in subparagraph (A) of 
        paragraph (2).

           *       *       *       *       *       *       *


     [capital of federal home loan banks and subscriptions thereto

  [Sec. 6. (a) The capital stock of each Federal Home Loan Bank 
shall be divided into shares of a par value of $100 each. The 
minimum capital stock shall be issued at par. Stock issued 
thereafter shall be issued at such price not less than par as 
may be fixed by the Board.
  [(b)(1) The original stock subscription of each institution 
eligible to become a member under section 4 shall be an amount 
equal to 1 per centum of the subscriber's aggregate unpaid loan 
principal, but not less than $500. The bank shall annually, as 
of the close of the calendar year, adjust, at such time and in 
such manner and upon such terms and conditions as the Board may 
by regulations or otherwise prescribe, the amount of stock held 
by each member so that such member shall have invested in the 
stock of the Federal Home Loan Bank at least an amount 
calculated in the manner provided in the next preceding 
sentence (but not less than $500). If the bank finds that the 
investment of any member in stock is greater than that required 
under this subsection it may, unless prohibited by said Board 
or by the provisions of paragraph (2) of this subsection, in 
its discretion and upon application of such member retire the 
stock of such member in excess of the amount so required. Said 
Board, in its discretion, may, by regulations or otherwise, 
provide for adjustments in amounts of stock to be issued or 
retired in order that stock may be issued or retired only in 
entire shares.
  [(2) Notwithstanding any other provision of this subsection, 
no action shall be taken by any bank with respect to any member 
pursuant to any of the foregoing provisions of this subsection 
if the effect of such action would be to cause the aggregate 
outstanding advances, within the meaning of the last sentence 
of subsection (c) of section 10 of this Act or within the 
meaning of regulations of the Board defining such term for the 
purposes of this sentence, made by such bank to such member to 
exceed twenty times the amounts paid in by such member for 
outstanding capital stock held by such member.
  [(3) Except as provided in subsection (i), upon retirement of 
stock of any member the bank shall pay such member for the 
stock retired an amount equal to the par value of such stock, 
or, at the election of the bank, the whole or any part of the 
payment which would otherwise be so made shall be credited upon 
the indebtedness of the member to the bank. In either such 
event, stock equal in par value to the amount of the payment or 
credit, or both, as the case may be, shall be canceled.
  [(4) For the purposes of this subsection, the term 
``aggregate unpaid loan principal'' means the aggregate unpaid 
principal of a subscriber's or member's home mortgage loans, 
home-purchase contracts, and similar obligations.
  [(5) The Board, by regulations or otherwise, may require each 
member to submit such reports and information as said Board, in 
its discretion, may determine to be necessary or appropriate 
for the purposes of this subsection.
  [(c) Stock subscriptions other than by the United States 
shall be paid for in cash, and shall be paid for at the time of 
application therefor, or, at the election of the subscriber, in 
installments, but not less than one-fourth of the total amount 
payable shall be paid at the time of filing application, and a 
further sum of not less than one-fourth of such total shall 
have been paid at the end of each succeeding period of four 
months.
  [(d) Stock subscribed for otherwise than by the United 
States, and the right to the proceeds thereof, shall not be 
transferred or hypothecated except as hereinafter provided and 
the certificates therefor shall so state.
  [(e) Any member other than a Federal savings and loan 
association may withdraw from membership in a Federal Home Loan 
Bank six months after filing with the Board written notice of 
intention so to do, and the Board may, after hearing, remove 
any member from membership, if, in the opinion of the Board, 
such member (i) has failed to comply with any provision of this 
Act or regulation of the Board made pursuant thereto; (ii) is 
insolvent: Provided, That any member of a bank which is a 
building and loan association, savings and loan association, 
cooperative bank, or homestead association shall be deemed 
insolvent if the assets of such memberare less than its 
obligations to its creditors and others, including the holders of its 
withdrawable accounts; or (iii) has a management or home-financing 
policy of a character inconsistent with sound and economical home 
financing or with the purposes of this Act. If any member's membership 
in a Federal Home Loan Bank is terminated, the indebtedness of such 
member to the Federal Home Loan Bank shall be liquidated in an orderly 
manner (as determined by the Federal Home Loan Bank), and upon 
completion of such liquidation, the capital stock in the Federal Home 
Loan Bank owned by such member shall be surrendered and canceled. Any 
such liquidation shall be deemed a prepayment of any such indebtedness, 
and shall be subject to any penalties or other fees applicable to such 
prepayment. Upon the liquidation of such indebtedness such member shall 
be entitled to the return of its collateral, and, upon surrender and 
cancellation of such capital stock, the member shall receive a sum 
equal to its cash paid subscriptions for the capital stock surrendered, 
except that if at any time the Board finds that the paid-in capital of 
a Federal Home Loan Bank is or is likely to be impaired as a result of 
losses in or depreciation of the assets held, the Federal Home Loan 
Bank shall on the order of the Board withhold from the amount to be 
paid in retirement of the stock a pro rata share of the amount of such 
impairment as determined by the Board.
  [(f) A Federal Home Loan Bank may, with the approval of the 
Board, permit the disposal of stock to another member, or to an 
institution eligible to become a member, but only to enable 
such an institution to become a member.
  [(g) All stock of any Federal Home Loan Bank shall share in 
dividend distributions without preference.
  [(h) Notwithstanding any other provision of this Act, an 
institution which withdraws from membership may acquire 
membership in any Federal Home Loan Bank only after the 
expiration of a period of 10 years thereafter, except where 
such withdrawal is a consequence of a transfer of membership on 
a non-interrupted basis between banks or in connection with 
obtaining a charter as a Federal savings association (as 
defined in section 3 of the Federal Deposit Insurance Act).]

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

  (a) Regulations.--
          (1) Capital standards.--Not later than 1 year after 
        the date of enactment of the Financial Services Act of 
        1999, the Finance Board shall issue regulations 
        prescribing uniform capital standards applicable to 
        each Federal home loan bank, which shall require each 
        such bank to meet--
                  (A) the leverage requirement specified in 
                paragraph (2); and
                  (B) the risk-based capital requirements, in 
                accordance with paragraph (3).
          (2) Leverage requirement.--The leverage requirement 
        shall require each Federal home loan bank to maintain a 
        minimum amount of total capital based on the aggregate 
        on-balance sheet assets of the bank and shall be 5 
        percent.
          (3) Risk-based capital standards.--
                  (A) In general.--Each Federal home loan bank 
                shall maintain permanent capital in an amount 
                that is sufficient, as determined in accordance 
                with the regulations of the Finance Board, to 
                meet--
                          (i) the credit risk to which the 
                        Federal home loan bank is subject; and
                          (ii) the market risk, including 
                        interest rate risk, to which the 
                        Federal home loan bank is subject, 
                        based on a stress test established by 
                        the Finance Board that rigorously tests 
                        for changes in market variables, 
                        including changes in interest rates, 
                        rate volatility, and changes in the 
                        shape of the yield curve.
                  (B) Consideration of other risk-based 
                standards.--In establishing the risk-based 
                standard under subparagraph (A)(ii), the 
                Finance Board shall take due consideration of 
                any risk-based capital test established 
                pursuant to section 1361 of the Federal Housing 
                Enterprises Financial Safety and Soundness Act 
                of 1992 (12 U.S.C. 4611) for the enterprises 
                (as defined in that Act), with such 
                modifications as the Finance Board determines 
                to be appropriate to reflect differences in 
                operations between the Federal home loan banks 
                and those enterprises.
          (4) Other regulatory requirements.--The regulations 
        issued by the Finance Board under paragraph (1) shall--
                  (A) permit each Federal home loan bank to 
                issue, with such rights, terms, and 
                preferences, not inconsistent with this Act and 
                the regulations issued hereunder, as the board 
                of directors of that bank may approve, any 1 or 
                more of--
                          (i) Class A stock, which shall be 
                        redeemable in cash and at par 6 months 
                        following submission by a member of a 
                        written notice of its intent to redeem 
                        such shares;
                          (ii) Class B stock, which shall be 
                        redeemable in cash and at par 5 years 
                        following submission by a member of a 
                        written notice of its intent to redeem 
                        such shares; and
                          (iii) Class C stock, which shall be 
                        nonredeemable;
                  (B) provide that the stock of a Federal home 
                loan bank may be issued to and held by only 
                members of the bank, and that a bank may not 
                issue any stock other than as provided in this 
                section;
                  (C) prescribe the manner in which stock of a 
                Federal home loan bank may be sold, 
                transferred, redeemed, or repurchased; and
                  (D) provide the manner of disposition of 
                outstanding stock held by, and the liquidation 
                of any claims of the Federal home loan bank 
                against, an institution that ceases to be a 
                member of the bank, through merger or 
                otherwise, or that provides notice of intention 
                to withdraw from membership in the bank.
          (5) Definitions of capital.--For purposes of 
        determining compliance with the capital standards 
        established under this subsection--
                  (A) permanent capital of a Federal home loan 
                bank shall include (as determined in accordance 
                with generally accepted accounting 
                principles)--
                          (i) the amounts paid for the Class C 
                        stock and any other nonredeemable stock 
                        approved by the Finance Board;
                          (ii) the amounts paid for the Class B 
                        stock, in an amount not to exceed 1 
                        percent of the total assets of the 
                        bank; and
                          (iii) the retained earnings of the 
                        bank; and
                  (B) total capital of a Federal home loan bank 
                shall include--
                          (i) permanent capital;
                          (ii) the amounts paid for the Class A 
                        stock, Class B stock (excluding any 
                        amount treated as permanent capital 
                        under subparagraph (5)(A)(ii)), or any 
                        other class of redeemable stock 
                        approved by the Finance Board;
                          (iii) consistent with generally 
                        accepted accounting principles, and 
                        subject to the regulation of the 
                        Finance Board, a general allowance for 
                        losses, which may not include any 
                        reserves or allowances made or held 
                        against specific assets; and
                          (iv) any other amounts from sources 
                        available to absorb losses incurred by 
                        the bank that the Finance Board 
                        determines by regulation to be 
                        appropriate to include in determining 
                        total capital.
          (6) Transition period.--Notwithstanding any other 
        provisions of this Act, the requirements relating to 
        purchase and retention of capital stock of a Federal 
        home loan bank by any member thereof in effect on the 
        day before the date of enactment of the Federal Home 
        Loan Bank System Modernization Act of 1999, shall 
        continue in effect with respect to each Federal home 
        loan bank until the regulations required by this 
        subsection have taken effect and the capital structure 
        plan required by subsection (b) has been approved by 
        the Finance Board and implemented by such bank.
  (b) Capital Structure Plan.--
          (1) Approval of plans.--Not later than 270 days after 
        the date of publication by the Finance Board of final 
        regulations in accordance with subsection (a), the 
        board of directors of each Federal home loan bank shall 
        submit for Finance Board approval a plan establishing 
        and implementing a capital structure for such bank 
        that--
                  (A) the board of directors determines is best 
                suited for the condition and operation of the 
                bank and the interests of the members of the 
                bank;
                  (B) meets the requirements of subsection (c); 
                and
                  (C) meets the minimum capital standards and 
                requirements established under subsection (a) 
                and other regulations prescribed by the Finance 
                Board.
          (2) Approval of modifications.--The board of 
        directors of a Federal home loan bank shall submit to 
        the Finance Board for approval any modifications that 
        the bank proposes to make to an approved capital 
        structure plan.
  (c) Contents of Plan.--The capital structure plan of each 
Federal home loan bank shall contain provisions addressing each 
of the following:
          (1) Minimum investment.--
                  (A) In general.--Each capital structure plan 
                of a Federal home loan bank shall require each 
                member of the bank to maintain a minimum 
                investment in the stock of the bank, the amount 
                of which shall be determined in a manner to be 
                prescribed by the board of directors of each 
                bank and to be included as part of the plan.
                  (B) Investment alternatives.--
                          (i) In general.--In establishing the 
                        minimum investment required for each 
                        member under subparagraph (A), a 
                        Federal home loan bank may, in its 
                        discretion, include any 1 or more of 
                        the requirements referred to in clause 
                        (ii), or any other provisions approved 
                        by the Finance Board.
                          (ii) Authorized requirements.--A 
                        requirement is referred to in this 
                        clause if it is a requirement for--
                                  (I) a stock purchase based on 
                                a percentage of the total 
                                assets of a member; or
                                  (II) a stock purchase based 
                                on a percentage of the 
                                outstanding advances from the 
                                bank to the member.
                  (C) Minimum amount.--Each capital structure 
                plan of a Federal home loan bank shall require 
                that the minimum stock investment established 
                for members shall be set at a level that is 
                sufficient for the bank to meet the minimum 
                capital requirements established by the Finance 
                Board under subsection (a).
                  (D) Adjustments to minimum required 
                investment.--The capital structure plan of each 
                Federal home loan bank shall impose a 
                continuing obligation on the board of directors 
                of the bank to review and adjust the minimum 
                investment required of each member of that 
                bank, as necessary to ensure that the bank 
                remains in compliance with applicable minimum 
                capital levels established by the Finance 
                Board, and shall require each member to comply 
                promptly with any adjustments to the required 
                minimum investment.
          (2) Transition rule.--
                  (A) In general.--The capital structure plan 
                of each Federal home loan bank shall specify 
                the date on which it shall take effect, and may 
                provide for a transition period of not longer 
                than 3 years to allow the bank to come into 
                compliance with the capital requirements 
                prescribed under subsection (a), and to allow 
                any institution that was a member of the bank 
                on the date of enactment of the Financial 
                Services Act of 1999, to come into compliance 
                with the minimum investment required pursuant 
                to the plan.
                  (B) Interim purchase requirements.--The 
                capital structure plan of a Federal home loan 
                bank may allow anymember referred to in 
                subparagraph (A) that would be required by the 
                terms of the capital structure plan to increase 
                its investment in the stock of the bank to do so 
                in periodic installments during the transition period.
          (3) Disposition of shares.--The capital structure 
        plan of a Federal home loan bank shall provide for the 
        manner of disposition of any stock held by a member of 
        that bank that terminates its membership or that 
        provides notice of its intention to withdraw from 
        membership in that bank.
          (4) Classes of stock.--
                  (A) In general.--The capital structure plan 
                of a Federal home loan bank shall afford each 
                member of that bank the option of maintaining 
                its required investment in the bank through the 
                purchase of any combination of classes of stock 
                authorized by the board of directors of the 
                bank and approved by the Finance Board in 
                accordance with its regulations.
                  (B) Rights requirement.--A Federal home loan 
                bank shall include in its capital structure 
                plan provisions establishing terms, rights, and 
                preferences, including minimum investment, 
                dividends, voting, and liquidation preferences 
                of each class of stock issued by the bank, 
                consistent with Finance Board regulations and 
                market requirements.
                  (C) Reduced minimum investment.--The capital 
                structure plan of a Federal home loan bank may 
                provide for a reduced minimum stock investment 
                for any member of that bank that elects to 
                purchase Class B, Class C, or any other class 
                of nonredeemable stock, in a manner that is 
                consistent with meeting the minimum capital 
                requirements of the bank, as established by the 
                Finance Board.
                  (D) Liquidation of claims.--The capital 
                structure plan of a Federal home loan bank 
                shall provide for the liquidation in an orderly 
                manner, as determined by the bank, of any claim 
                of that bank against a member, including claims 
                for any applicable prepayment fees or penalties 
                resulting from prepayment of advances prior to 
                stated maturity.
          (5) Limited transferability of stock.--The capital 
        structure plan of a Federal home loan bank shall--
                  (A) provide that--
                          (i) any stock issued by that bank 
                        shall be available only to, held only 
                        by, and tradable only among members of 
                        that bank and between that bank and its 
                        members; and
                          (ii) a bank has no obligation to 
                        repurchase its outstanding Class C 
                        stock but may do so, provided it is 
                        consistent with Finance Board 
                        regulations and is at a price that is 
                        mutually agreeable to the bank and the 
                        member; and
                  (B) establish standards, criteria, and 
                requirements for the issuance, purchase, 
                transfer, retirement, and redemption of stock 
                issued by that bank.
          (6) Bank review of plan.--Before filing a capital 
        structure plan with the Finance Board, each Federal 
        home loan bank shall conduct a review of the plan by--
                  (A) an independent certified public 
                accountant, to ensure, to the extent possible, 
                that implementation of the plan would not 
                result in any write-down of the redeemable bank 
                stock investment of its members; and
                  (B) at least 1 major credit rating agency, to 
                determine, to the extent possible, whether 
                implementation of the plan would have any 
                material effect on the credit ratings of the 
                bank.
  (d) Termination of Membership.--
          (1) Voluntary withdrawal.--Any member may withdraw 
        from a Federal home loan bank by providing written 
        notice to the bank of its intent to do so. The 
        applicable stock redemption notice periods shall 
        commence upon receipt of the notice by the bank. Upon 
        the expiration of the applicable notice period for each 
        class of redeemable stock, the member may surrender 
        such stock to the bank, and shall be entitled to 
        receive in cash the par value of the stock. During the 
        applicable notice periods, the member shall be entitled 
        to dividends and other membership rights commensurate 
        with continuing stock ownership.
          (2) Involuntary withdrawal.--
                  (A) In general.--The board of directors of a 
                Federal home loan bank may terminate the 
                membership of any institution if, subject to 
                Finance Board regulations, it determines that--
                          (i) the member has failed to comply 
                        with a provision of this Act or any 
                        regulation prescribed under this Act; 
                        or
                          (ii) the member has been determined 
                        to be insolvent, or otherwise subject 
                        to the appointment of a conservator, 
                        receiver, or other legal custodian, by 
                        a State or Federal authority with 
                        regulatory and supervisory 
                        responsibility for the member.
                  (B) Stock disposition.--An institution, the 
                membership of which is terminated in accordance 
                with subparagraph (A)--
                          (i) shall surrender redeemable stock 
                        to the Federal home loan bank, and 
                        shall receive in cash the par value of 
                        the stock, upon the expiration of the 
                        applicable notice period under 
                        subsection (a)(4)(A);
                          (ii) shall receive any dividends 
                        declared on its redeemable stock, 
                        during the applicable notice period 
                        under subsection (a)(4)(A); and
                          (iii) shall not be entitled to any 
                        other rights or privileges accorded to 
                        members after the date of the 
                        termination.
                  (C) Commencement of notice period.--With 
                respect to an institution, the membership of 
                which is terminated in accordance with 
                subparagraph (A), the applicable notice period 
                under subsection (a)(4) for each class of 
                redeemable stock shall commence on the earlier 
                of--
                          (i) the date of such termination; or
                          (ii) the date on which the member has 
                        provided notice of its intent to redeem 
                        such stock.
          (3) Liquidation of indebtedness.--Upon the 
        termination of the membership of an institution for any 
        reason, the outstanding indebtedness of the member to 
        the bank shall be liquidated in an orderly manner, as 
        determined by the bank and, upon the extinguishment of 
        all such indebtedness, the bank shall return to the 
        member all collateral pledged to secure the 
        indebtedness.
  (e) Redemption of Excess Stock.--
          (1) In general.--A Federal home loan bank, in its 
        sole discretion, may redeem or repurchase, as 
        appropriate, any shares of Class A or Class B stock 
        issued by the bank and held by a member that are in 
        excess of the minimum stock investment required of that 
        member.
          (2) Excess stock.--Shares of stock held by a member 
        shall not be deemed to be ``excess stock'' for purposes 
        of this subsection by virtue of a member's submission 
        of a notice of intent to withdraw from membership or 
        termination of its membership in any other manner.
          (3) Priority.--A Federal home loan bank may not 
        redeem any excess Class B stock prior to the end of the 
        5-year notice period, unless the member has no Class A 
        stock outstanding that could be redeemed as excess.
  (f) Impairment of Capital.--If the Finance Board or the board 
of directors of a Federal home loan bank determines that the 
bank has incurred or is likely to incur losses that result in 
or are expected to result in charges against the capital of the 
bank, the bank shall not redeem or repurchase any stock of the 
bank without the prior approval of the Finance Board while such 
charges are continuing or are expected to continue. In no case 
may a bank redeem or repurchase any applicable capital stock 
if, following the redemption, the bank would fail to satisfy 
any minimum capital requirement.
  (g) Rejoining After Divestiture of All Shares.--
          (1) In general.--Except as provided in paragraph (2), 
        and notwithstanding any other provision of this Act, an 
        institution that divests all shares of stock in a 
        Federal home loan bank may not, after such divestiture, 
        acquire shares of any Federal home loan bank before the 
        end of the 5-year period beginning on the date of the 
        completion of such divestiture, unless the divestiture 
        is a consequence of a transfer of membership on an 
        uninterrupted basis between banks.
          (2) Exception for withdrawals from membership before 
        1998.--Any institution that withdrew from membership in 
        any Federal home loan bank before December 31, 1997, 
        may acquire shares of a Federal home loan bank at any 
        time after that date, subject to the approval of the 
        Finance Board and the requirements of this Act.
  (h) Treatment of Retained Earnings.--
          (1) In general.--The holders of the Class C stock of 
        a Federal home loan bank, and any other classes of 
        nonredeemable stock approved by the Finance Board (to 
        the extent provided in the terms thereof), shall own 
        the retained earnings, surplus, undivided profits, and 
        equity reserves, if any, of the bank.
          (2) No nonredeemable classes of stock.--If a Federal 
        home loan bank has no outstanding Class C or other such 
        nonredeemable stock, then the holders of any other 
        classes of stock of the bank then outstanding shall 
        have ownership in, and a private property right in, the 
        retained earnings, surplus, undivided profits, and 
        equity reserves, if any, of the bank.
          (3) Exception.--Except as specifically provided in 
        this section or through the declaration of a dividend 
        or a capital distribution by a Federal home loan bank, 
        or in the event of liquidation of the bank, a member 
        shall have no right to withdraw or otherwise receive 
        distribution of any portion of the retained earnings of 
        the bank.
          (4) Limitation.--A Federal home loan bank may not 
        make any distribution of its retained earnings unless, 
        following such distribution, the bank would continue to 
        meet all applicable capital requirements.

                          management of banks

  Sec. 7. (a)  * * *

           *       *       *       *       *       *       *

  [(d) The term] (d) Terms of Office.--The term of each 
elective directorship [shall be two years] and the term of each 
appointive directorship shall be four years. If any person, 
before or after, or partly before and partly after, the date of 
the enactment of this sentence, has been elected to each of 
three consecutive full terms as an elective director of a 
Federal home loan bank in any elective directorship or elective 
directorships and has served for all or part of each of said 
terms, such person shall not be eligible for election to an 
elective directorship of such bank for a term which begins 
earlier than two years after the expiration of the last 
expiring of said three terms. The Board is hereby authorized to 
prescribe such rules and regulations as it may deem necessary 
or appropriate for the nomination and election of directors of 
Federal home loan banks, including, without limitation on the 
generality of the foregoing, rules and regulations with respect 
to the breaking of ties and with respect to the inclusion of 
more than one directorship on a single ballot and the methods 
of voting and of determining the results of voting in such 
cases.

           *       *       *       *       *       *       *

  (i) Each bank may pay its directors reasonable compensation 
for the time required of them, and their necessary expenses, in 
the performance of their duties, in accordance with the 
resolutions adopted by the such directors[, subject to the 
approval of the board].

           *       *       *       *       *       *       *

  Sec. 9. Any member of a Federal Home Loan Bank shall be 
entitled to apply in writing for advances. Such application 
shall be in such form as shall be required by the Federal Home 
Loan Bank [with the approval of the Board]. Such Federal Home 
Loan Bank may at its discretion deny any such application, or[, 
subject to theapproval of the Board,] may grant it on such 
conditions as the Federal Home Loan Bank may prescribe.

           *       *       *       *       *       *       *


                          [advances to members

  [Sec. 10. (a) Each]

SEC. 10. ADVANCES TO MEMBERS.

  (a) In General.--
          (1) All advances.--Each Federal Home Loan Bank is 
        authorized to make secured advances to its members upon 
        collateral sufficient, in the judgment of the Bank, to 
        fully secure advances obtained from the Bank under this 
        section or section 11(g) of this Act. [All long-term 
        advances shall only be made for the purpose of 
        providing funds for residential housing finance. A 
        Bank]
          (2) Purposes of advances.--A long-term advance may 
        only be made for the purposes of--
                  (A) providing funds to any member for 
                residential housing finance; and
                  (B) providing funds to any community 
                financial institution for small businesses, 
                agricultural, rural development, or low-income 
                community development lending.
          (3) Collateral.--A Bank, at the time of origination 
        or renewal of a loan or advance, shall obtain and 
        maintain a security interest in collateral eligible 
        pursuant to one or more of the following categories:
                  [(1)] (A) Fully disbursed, whole first 
                mortgages on improved residential property (not 
                more than 90 days delinquent), or securities 
                representing a whole interest in such 
                mortgages.
                  [(2)] (B) Securities issued, insured, or 
                guaranteed by the United States Government or 
                any agency thereof (including without 
                limitation, mortgage-backed securities issued 
                or guaranteed by the Federal Home Loan Mortgage 
                Corporation, the Federal National Mortgage 
                Corporation, and the Government National 
                Mortgage Association).
                  [(3)] (C) [Deposits] Cash or deposits of a 
                Federal Home Loan Bank.
                  [(4)] (D) Other real estate related 
                collateral acceptable to the Bank if such 
                collateral has a readily ascertainable value 
                and the Bank can perfect its interest in the 
                collateral. [The aggregate amount of 
                outstanding advances secured by such other real 
                estate related collateral shall not exceed 30 
                percent of such member's capital.]
                  (E) Secured loans for small business, 
                agriculture, rural development, or low-income 
                community development, or securities 
                representing a whole interest in such secured 
                loans, in the case of any community financial 
                institution.
          [(5) Paragraphs (1) through (4)] (4) Additional bank 
        authority.--Subparagraphs (A) through (E) of paragraph 
        (3) shall not affect the ability of any Federal Home 
        Loan Bank to take such steps as it deems necessary to 
        protect its security position with respect to 
        outstanding advances, including requiring deposits of 
        additional collateral security, whether or not such 
        additional security would be eligible to originate an 
        advance. If an advance existing on the date of 
        enactment of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989 matures and the 
        member does not have sufficient eligible collateral to 
        fully secure a renewal of such advance, a Bank may 
        renew such advance secured by such collateral as the 
        Bank [and the Board] determines is appropriate. A 
        member that has an advance secured by such insufficient 
        eligible collateral must reduce its level of 
        outstanding advances promptly and prudently in 
        accordance with a schedule determined by the [Board] 
        Federal home loan bank.
          (5) Review of certain collateral standards.--The 
        Board may review the collateral standards applicable to 
        each Federal home loan bank for the classes of 
        collateral described in subparagraphs (D) and (E) of 
        paragraph (3), and may, if necessary for safety and 
        soundness purposes, require an increase in the 
        collateral standards for any or all of those classes of 
        collateral.
          (6) Definitions.--For purposes of this subsection, 
        the terms ``small business'', ``agriculture'', ``rural 
        development'', and ``low-income community development'' 
        shall have the meanings given those terms by rule or 
        regulation of the Finance Board.

           *       *       *       *       *       *       *

  (c) Such advances shall be made upon the note or obligation 
of the member secured as provided in this section, bearing such 
rate of interest as the [Board] Federal home loan bank may 
approve or determine, and the Federal Home Loan Bank shall have 
a lien upon and shall hold the stock of such member as further 
collateral security for all indebtedness of the member to the 
Federal Home Loan Bank. [At no time shall the aggregate 
outstanding advances made by any Federal Home Loan Bank to any 
member exceed twenty times the amounts paid in by such member 
for outstanding capital stock held by it exceed twenty times 
the value of the security required to be deposited under 
section 6(e)].
  (d) The institution applying for an advance shall enter into 
a primary and unconditional obligation to pay off all advances, 
together with interest and any unpaid costs and expenses in 
connection therewith according to the terms under which they 
were made, in such form as shall meet the requirements of the 
bank [and the approval of the Board]. The bank shall reserve 
the right to require at any time, when deemed necessary for its 
protection, deposits of additional collateral security or 
substitutions of security by the borrowing institution, and 
each borrowing institution shall assign additional or 
substituted security when and as so required. [Subject to the 
approval of the Board, any] Any Federal Home Loan Bank shall 
have power to sell to any other Federal Home Loan Bank, with or 
without recourse, any advance made under the provisions of this 
Act, or to allow to such bank a participation therein, and any 
other Federal Home Loan Bank shall have power to purchase such 
advance or to accept a participation therein, together with an 
appropriate assignment of security therefor.
  (e) Qualified Thrift Lender Status.--
          (1) In general.--A member that is not a qualified 
        thrift lender may only receive an advance if it holds 
        stock in its Federal Home Loan Bank at the time it 
        receives that advance in an amount equal to at least--
                  (A) 5 percent of that member's total 
                advances, divided by
                  (B) such member's actual thrift investment 
                percentage.
        Such members that are not qualified thrift lenders may 
        only apply for advances under this section for the 
        purpose of obtaining funds for housing finance or, in 
        the case of any community financial institution, for 
        the purposes described in subsection (a)(2).

           *       *       *       *       *       *       *

          (5) Definitions.--As used in this subsection--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Actual thrift investment percentage.--The 
                term ``actual thrift investment percentage'' 
                has the same meaning as in section 10(m) of the 
                Home Owners' Loan Act except that, in 
                determining the actual thrift investment 
                percentage of any community financial 
                institution for purposes of this subsection, 
                the total investment of such member in loans 
                for small business, agriculture, or rural 
                development, or securities representing a whole 
                interest in such loans, shall be treated as a 
                qualified thrift investment (as defined in such 
                section 10(m)).

           *       *       *       *       *       *       *

  (j) Affordable Housing Program.--
          (1) In general.--[Pursuant]
                  (A) Establishment.--Pursuant to regulations 
                promulgated by the Board, each Bank shall 
                establish an Affordable Housing Program [to 
                subsidize the interest rate on advances] to 
                provide subsidies, including subsidized 
                interest rates on advances to members engaged 
                in lending for long term, low- and moderate-
                income, owner-occupied and affordable rental 
                housing at subsidized interest rates.
                  (B) Nondelegation of approval authority.--
                Subject to such regulations as the Finance 
                Board may prescribe, the board of directors of 
                each Federal home loan bank may approve or 
                disapprove requests from members for Affordable 
                Housing Program subsidies, and may not delegate 
                such authority.

           *       *       *       *       *       *       *


              incorporation of banks, and corporate powers

  Sec. 12. (a) The directors of each Federal Home Loan Bank 
shall, in accordance with such rules and regulations as the 
Board may prescribe, make and file with the Board at the 
earliest practicable date after the establishment of such bank, 
an organization certificate which shall contain such 
information as the Board may require. Upon the making and 
filing of such organization certificate with the Board, such 
bank shall become, as of the date of the execution of its 
organization certificate, a body corporate, and as such and in 
its name as designated by the Board it shall have power to 
adopt, alter, and use a corporate seal; to make contracts; to 
purchase or lease and hold or dispose of such real estate as 
may be necessary or convenient for the transaction of its 
business[, but, except with the prior approval of the Board, no 
bank building shall be bought or erected to house any such 
bank, or leased by such bank under any lease for such purpose 
which has a term of more than ten years]; to sue and be sued, 
to complain, and to defend, in any court of competent 
jurisdiction, State or Federal; to select, employ, and fix the 
compensation of such officers, employees, attorneys, and agents 
as shall be necessary for the transaction of its business 
[subject to the approval of the Board]; to define their duties, 
require bonds of them and fix the penalties thereof, and to 
dismiss at pleasure such officers, employees, attorneys, and 
agents; [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, by the board of directors of the bank, to 
prescribe, amend, and repeal by-laws governing the manner in 
which its affairs may be administered, consistent with 
applicable laws and regulations, as administered by the Finance 
Board. No officer, employee, attorney, or agent of a Federal 
home loan bank who receives compensation, may be a member of 
the [Board] board of directors. Each such bank shall have all 
such incidental powers, not inconsistent with the provisions of 
this Act, as are customary and usual in corporations generally.
  (b) Subject to such regulations as may be prescribed by the 
Board, one or more Federal home [loans banks] loan banks may 
acquire, hold, or dispose of, in whole or in part, or 
facilitate such acquisition, holding, or disposition by members 
of any such bank of, housing project loans, or interests 
therein, having the benefit of any guaranty under section 221 
of the Foreign Assistance Act of 1961, as now or hereafter in 
effect, or loans, or interests therein, having the benefit of 
any guaranty under section 224 of such Act, or any commitment 
or agreement with respect to such loans, or interests therein, 
made pursuant to either of such sections. This authority 
extends to the acquisition, holding, and disposition of loans, 
or interests therein, having the benefit of any guaranty under 
section 221 or 222 of the Foreign Assistance Act of 1961, as 
amended by section 105 of the Foreign Assistance Act of 1969 or 
as hereafter amended or extended, or of any commitment or 
agreement for any such guaranty.

           *       *       *       *       *       *       *


                         reserves and dividends

  Sec. 16. (a) Each Federal Home Loan Bank may carry to a 
reserve account from time-to-time such portion of its net 
earnings as may be determined by its board of directors. Each 
Federal HomeLoan Bank shall establish such additional reserves 
and/or make such charge-offs on account of depreciation or impairment 
of its assets as the Board shall require from time to time. No 
dividends shall be paid except out of [net earnings] previously 
retained earnings or current net earnings remaining after reductions 
for all reserves, chargeoffs, purchases of capital certificates of the 
Financing Corporation, and payments relating to the Funding Corporation 
required under this Act have been provided for, other than chargeoffs 
or expenses incurred by a Bank in connection with the purchase of 
capital stock of the Financing Corporation under section 21 or payments 
relating to the Funding Corporation Principal Fund under section 
21B(e)[, and then only with the approval of the Federal Housing Finance 
Board]. [Beginning on January 1, 1992, the preceding sentence shall be 
applied by substituting ``previously retained earnings or current net 
earnings'' for ``net earnings''.] The reserves of each Federal Home 
Loan Bank shall be invested, subject to such regulations, restrictions, 
and limitations as may be prescribed by the Board, in direct 
obligations of the United States, in obligations, participations, or 
other instruments of or issued by the Federal National Mortgage 
Association or the Government National Mortgage Association, in 
mortgages, obligations, or other securities which are or ever have been 
sold by the Federal Home Loan Mortgage Corporation pursuant to section 
305 or section 306 of the Federal Home Loan Mortgage Corporation Act, 
and in such securities as fiduciary and trust funds may be invested in 
under the laws of the State in which the Federal Home Loan Bank is 
located.

           *       *       *       *       *       *       *


                        administrative expenses

  Sec. 18. (a) * * *
  (b) Assessments for Administrative Expenses.--
          (1)  * * *

           *       *       *       *       *       *       *

          [(4) Transition provision.--On or after the effective 
        date of the Financial Institutions Reform, Recovery, 
        and Enforcement Act of 1989, the Board may levy a one-
        time special assessment on the Banks pursuant to this 
        subsection for the Board's estimated expenses for the 
        transitional period following enactment of such Act, if 
        such assessment is made before the Board's first 
        semiannual assessment under paragraph (1).]

           *       *       *       *       *       *       *


SEC. 21B. [12 U.S.C. 1441B] RESOLUTION FUNDING CORPORATION ESTABLISHED.

  (a)  * * *

           *       *       *       *       *       *       *

  (f) Obligations of Funding Corporation.--
          (1)  * * *
          (2) Interest payments.--The Funding Corporation shall 
        pay the interest due on such obligations from funds 
        obtained for such interest payments from the following 
        sources:
                  (A)  * * *

           *       *       *       *       *       *       *

                  [(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, the 
                Federal Home Loan Banks shall pay to the 
                Funding Corporation each calendar year the 
                aggregate amount of $300,000,000 minus the 
                amounts required in such year for Financing 
                Corporation principal payments (pursuant to 
                section 21) and the amounts required in such 
                year by the Funding Corporation pursuant to 
                subsection (e). Each Bank's individual share of 
                any amounts required to be paid by the Banks 
                under this subparagraph shall be determined as 
                follows:
                          [(i) Amounts up to 20 percent of net 
                        earnings.--Each Federal Home Loan Bank 
                        shall pay an equal percentage of its 
                        net earnings for the year for which 
                        such amount is required to be paid, up 
                        to a maximum of 20 percent of net 
                        earnings.
                          [(ii) Amounts in excess of 20 percent 
                        of net earnings.--If the aggregate 
                        amount required to be paid by the 
                        Federal Home Loan Banks under this 
                        subparagraph for any year exceeds 20 
                        percent of the aggregate net earnings 
                        of the Banks for such year, each Bank 
                        shall pay 20 percent of its net 
                        earnings for such year as provided in 
                        clause (i), and each Bank's individual 
                        share of the excess of the required 
                        amount over 20 percent of the aggregate 
                        net earnings of the Banks for such year 
                        shall be determined by dividing--
                                  [(I) the average month-end 
                                level in the prior year of 
                                advances outstanding by such 
                                Bank to Savings Associations 
                                Insurance Fund members; by
                                  [(II) the average month-end 
                                level in the prior year of 
                                advances outstanding by all 
                                such Banks to Savings 
                                Associations Insurance Fund 
                                members.]
                  (C) Payments by federal home loan banks.--
                          (i) In general.--To the extent that 
                        the amounts available pursuant to 
                        subparagraphs (A) and (B) are 
                        insufficient to cover the amount of 
                        interest payments, each Federal home 
                        loan bank shall pay to the Funding 
                        Corporation in each calendar year, 
                        20.75 percent of the net earnings of 
                        that bank (after deducting expenses 
                        relating to section 10(j) and operating 
                        expenses).
                          (ii) Annual determination.--The Board 
                        annually shall determine the extent to 
                        which the value of the aggregate 
                        amounts paid by the Federal home loan 
                        banks exceeds or falls short of the 
                        value of an annuity of $300,000,000 per 
                        year that commences on the issuance 
                        date and ends on the final scheduled 
                        maturity date of the obligations, and 
                        shall select appropriate present value 
                        factors for making such determinations.
                          (iii) Payment term alterations.--The 
                        Board shall extend or shorten the term 
                        of the payment obligations of a Federal 
                        home loan bank under this subparagraph 
                        as necessary to ensure that the value 
                        of all payments made by the banks is 
                        equivalent to the value of an annuity 
                        referred to in clause (ii).
                          (iv) Term beyond maturity.--If the 
                        Board extends the term of payments 
                        beyond the final scheduled maturity 
                        date for the obligations, each Federal 
                        home loan bank shall continue to pay 
                        20.75 percent of its net earnings 
                        (after deducting expenses relating to 
                        section 10(j) and operating expenses) 
                        to the Treasury of the United States 
                        until the value of all such payments by 
                        the Federal home loan banks is 
                        equivalent to the value of an annuity 
                        referred to in clause (ii). In the 
                        final year in which the Federal home 
                        loan banks are required to make any 
                        payment to the Treasury under this 
                        subparagraph, if the dollar amount 
                        represented by 20.75 percent of the net 
                        earnings of the Federal home loan banks 
                        exceeds the remaining obligation of the 
                        banks to the Treasury, the Finance 
                        Board shall reduce the percentage pro 
                        rata to a level sufficient to pay the 
                        remaining obligation.

           *       *       *       *       *       *       *


[SEC. 22A. INFORMAL REVIEW OF CERTAIN SUPERVISORY DECISIONS.

  [(a) Review of Certain Supervisory Decisions.--The Board 
shall establish an informal review procedure under which any 
association, insured institution, or member may obtain a 
review, by the principal supervisory agent for the Federal home 
loan bank district in which such association, institution, or 
member is located, of any decision by any examiner or 
supervisory agent of the Federal home loan bank for such 
district with respect to--
          [(1) the appraisal value of--
                  [(A) any loan held by the association, 
                insured institution, or member; or
                  [(B) any property serving as collateral to 
                secure the repayment of any loan (held by the 
                association, institution, or member);
          [(2) the classification of any loan held by the 
        association, institution, or member; or
          [(3) any requirement imposed on the association, 
        institution, or member to establish or to add to a 
        reserve or allowance for a possible loss on any loan 
        held by such institution.
  [(b) Standards for Review.--The review procedure established 
pursuant to subsection (a) shall provide that the principal 
supervisory agent for the appropriate Federal home loan bank 
district, after taking into account the report described in 
subsection (c)(2) by the arbiter (or panel of arbiters), shall 
approve, modify, or set aside any decision for which a review 
has been requested on the basis of the supervisory agent's 
review of all the facts and the regulations applicable to such 
decision and shall take such action as such agent may determine 
to be necessary or appropriate in light of such review.
  [(c) Appointment of Independent Arbiter.--The review 
procedure established pursuant to subsection (a) shall provide 
for the appointment (by the principal supervisory agent for the 
appropriate Federal home loan bank district, upon the filing of 
a request for a review under this section by an association, 
insured institution, or member) of an independent arbiter (or, 
upon the request of such association, institution, or member, a 
panel of independent arbiters) who shall--
          [(1) review the decision which is the subject of the 
        review in light of all the facts of the case and the 
        regulations applicable to such determination; and
          [(2) report the conclusions and recommendations of 
        the independent arbiter (or the panel) with respect to 
        the decision under review to the principal supervisory 
        agent for the appropriate Federal home loan bank 
        district and the association, insured institution, or 
        member.
  [(d) Consolidation of Reviews of Related Decisions.--The 
principal supervisory agent may consolidate requests for review 
under this section of related decisions and conduct a single 
review of all such related decisions.
  [(e) 25-Day Arbiter Review Period; 20-Day PSA Review 
Period.--
          [(1) Arbiter review.--The review procedure 
        established pursuant to subsection (a) shall provide 
        that any review described in subsection (c) by an 
        arbiter (or panel of arbiters) shall be completed 
        before the end of the 25-day period beginning on the 
        date the request for the review was filed with the 
        principal supervisory agent.
          [(2) Review by psa.--The review procedure established 
        pursuant to subsection (a) shall provide that any 
        review by the principal supervisory agent of an 
        arbiter's report described in subsection (c)(2) (or the 
        report of a panel of arbiters) shall be completed 
        before the end of the 20-day period beginning on the 
        date the agent receives such report.
          [(3) Only business days included.--Saturdays, 
        Sundays, and holidays shall not be taken into account 
        in determining the periods described in paragraphs (1) 
        and (2).
  [(f) Clarification of Relationship Between Informal Review 
and Other Available Review.--
          [(1) Informal review not exclusive.--The informal 
        review procedure established pursuant to subsection (a) 
        for reviewing any decision referred to in such 
        subsection shall be in addition to, and not in lieu of, 
        any other procedure established by law, or any 
        regulation of the Board, which provides for formal 
        administrative or judicial review of such decision.
          [(2) Only the original decision is within scope of 
        administrative and judicial review.--If any 
        association, insured institution, or member seeks 
        administrative or judicial review of any examiner or 
        supervisory agent decision for which such association, 
        insured institution, or member obtained an informal 
        review under the procedure established pursuant to 
        subsection (a), such administrative or judicial review 
        shall be carried out--
                  [(A) without regard to the fact that such 
                informal review was made; and
                  [(B) without admitting into evidence, or 
                otherwise taking into account, the findings, 
                recommendations, or conclusions of the 
                principal supervisory agent and the independent 
                arbiter (or the panel of independent arbiters) 
                which conducted the informal review.
          [(3) Informal review not subject to formal review.--
        The findings, recommendations, or conclusions of any 
        principal supervisory agent who conducted a review 
        under the procedure established pursuant to subsection 
        (a) are not decisions which may be subject to review by 
        the Board or any court under any regulation of the 
        Board or any law.
  [(g) Expenses of Review Borne by Association, Institution, or 
Member.--All reasonable expenses incurred as a direct or 
indirect result of any review under the procedure established 
pursuant to subsection (a) shall be paid by the association, 
insured institution, or member which requested the review.]

           *       *       *       *       *       *       *


[SEC. 27. [12 U.S.C. 1447] HOUSING OPPORTUNITY HOTLINE PROGRAM.

  [(a) Establishment.--The Federal Home Loan Banks shall, 
individually or (at the discretion of the Federal Housing 
Finance Board) on a consolidated basis, establish and provide a 
service substantially similar (in the determination of the 
Board) to the ``Housing Opportunity Hotline'' program 
established in October 1992, by the Federal Home Loan Bank of 
Dallas.
  [(b) Purpose.--The service or services established under this 
section shall provide information regarding the availability 
for purchase of single family properties that are owned or held 
by Federal agencies and are located in the Federal Home Loan 
Bank district for such Bank. Such agencies shall provide to the 
Federal Home Loan Banks the information necessary to provide 
such service or services.
  [(c) Required Information.--The service or services 
established under this section shall use the information 
obtained from Federal agencies to provide information regarding 
the size, location, price, and other characteristics of such 
single family properties, the eligibility requirements for 
purchasers of such properties, the terms for such sales, and 
the terms of any available seller financing, and shall identify 
properties that are affordable to low- and moderate-income 
families.
  [(d) Toll-Free Telephone Number.--The service or services 
established under this section shall establish and maintain a 
toll-free telephone line for providing the information made 
available under the service or services.
  [(e) Definitions.--For purposes of this section, the 
following definitions shall apply:
          [(1) Federal agencies.--The term ``Federal agencies'' 
        means--
                  [(A) the Farmers Home Administration, the 
                Federal National Mortgage Association, the 
                Federal Home Loan Mortgage Corporation, the 
                General Services Administration, the Department 
                of Housing and Urban Development, and the 
                Department of Veterans Affairs;
                  [(B) the Resolution Trust Corporation, 
                subject to the discretion of such Corporation; 
                and
                  [(C) the Federal Deposit Insurance 
                Corporation, subject to the discretion of such 
                Corporation.
          [(2) Single family property.--The term ``single 
        family property'' means a 1- to 4-family residence, 
        including a manufactured home.]

           *       *       *       *       *       *       *

                              ----------                              


                        ACT OF OCTOBER 28, 1974


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

TITLE I--AMENDMENTS TO AND EXTENSIONS OF PROVISIONS OF LAW RELATING TO 
               FEDERAL REGULATION OF DEPOSITORY INSTITUTIONS

           *       *       *       *       *       *       *



             independence of financial regulatory agencies

  Sec. 111. No officer or agency of the United States shall 
have any authority to require the Securities and Exchange 
Commission, the Board of Governors of the Federal Reserve 
System, the Federal Deposit Insurance Corporation, the 
Comptroller of the Currency, the [Federal Home Loan Bank 
Board,] Director of the Office of Thrift Supervision, the 
Federal Housing Finance Board, or the National Credit Union 
Administration to submit legislative recommendations, or 
testimony, or comments on legislation, to any officer or agency 
of the United States for approval, comments, or review, prior 
to the submission of such recommendations, testimony, or 
comments to the Congress if such recommendations, testimony, or 
comments to the Congress include a statement indicating that 
the views expressed therein are those of the agency submitting 
them and do not necessarily represent the views of the 
President.

           *       *       *       *       *       *       *

                              ----------                              


                       ELECTRONIC FUND TRANSFER ACT

           *       *       *       *       *       *       *



Sec. 904. Regulations

  (a)  * * *

           *       *       *       *       *       *       *

  (d) Applicability to Service Providers Other Than Certain 
Financial Institutions.--
          (1)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


Sec. 905. Terms and conditions of transfers

  (a) The terms and conditions of electronic fund transfers 
involving a consumer's account shall be disclosed at the time 
the consumer contracts for an electronic fund transfer service, 
in accordance with regulations of the Board. Such disclosures 
shall be in readily understandable language and shall include, 
to the extent applicable--
          (1)  * * *

           *       *       *       *       *       *       *

          (8) the financial institution's liability to the 
        consumer under section 910; [and]
          (9) under what circumstances the financial 
        institution will in the ordinary course of business 
        disclose information concerning the consumer's account 
        to third persons[.]; and
          (10) a notice to the consumer that a fee may be 
        imposed by--
                  (A) an automated teller machine operator (as 
                defined in section 904(d)(3)(D)(ii)) if the 
                consumer initiates a transfer from an automated 
                teller machine which is not operated by the 
                person issuing the card or other means of 
                access; and
                  (B) any national, regional, or local network 
                utilized to effect the transaction.

           *       *       *       *       *       *       *


Sec. 910. Liability of financial institutions

  (a)  * * *

           *       *       *       *       *       *       *

  (d) Exception for Damaged Notices.--If the notice required to 
be posted pursuant to section 904(d)(3)(B)(i) by an automated 
teller machine operator has been posted by such operator in 
compliance with such section and the notice is subsequently 
removed, damaged, or altered by any person other than the 
operator of the automated teller machine, the operator shall 
have no liability under this section for failure to comply with 
section 904(d)(3)(B)(i).

           *       *       *       *       *       *       *

                              ----------                              


             TITLE X OF THE CONSUMER CREDIT PROTECTION ACT


           TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

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

            TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION

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

SEC. 1002. DEFINITIONS.

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

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

  (a) Prohibition on Obtaining Customer Information by False 
Pretenses.--It shall be a violation of this title for any 
person to obtain or attempt to obtain, or cause to be disclosed 
or attempt to cause to be disclosed to any person, customer 
information of a financial institution relating to another 
person--
          (1) by knowingly making a false, fictitious, or 
        fraudulent statement or representation to an officer, 
        employee, or agent of a financial institution with the 
        intent to deceive the officer, employee, or agent into 
        relying on that statement or representation for 
        purposes of releasing the customer information;
          (2) by knowingly making a false, fictitious, or 
        fraudulent statement or representation to a customer of 
        a financial institution with the intent to deceive the 
        customer into relying on that statement or 
        representation for purposes of releasing the customer 
        information or authorizing the release of such 
        information; or
          (3) by knowingly providing any document to an 
        officer, employee, or agent of a financial institution, 
        knowing that the document is forged, counterfeit, lost, 
        or stolen, was fraudulently obtained, or contains a 
        false, fictitious, or fraudulent statement or 
        representation, if the document is provided with the 
        intent to deceive the officer, employee, or agent into 
        relying on that document for purposes of releasing the 
        customer information.
  (b) Prohibition on Solicitation of a Person To Obtain 
Customer Information From a Financial Institution Under False 
Pretenses.--It shall be a violation of this title to request a 
person to obtain customer information of a financial 
institution, knowing or consciously avoiding knowing that the 
person will obtain, or attempt to obtain, the information from 
the institution in any manner described in subsection (a).
  (c) Non Applicability to Law Enforcement Agencies.--No 
provision of this section shall be construed so as to prevent 
any action by a law enforcement agency, or any officer, 
employee, or agent of such agency, to obtain customer 
information of a financial institution in connection with the 
performance of the official duties of the agency.
  (d) Non Applicability to Financial Institutions in Certain 
Cases.--No provision of this section shall be construed to 
prevent any financial institution, or any officer, employee, or 
agent of a financial institution, from obtaining customer 
information of such financial institution in the course of--
          (1) testing the security procedures or systems of 
        such institution for maintaining the confidentiality of 
        customer information;
          (2) investigating allegations of misconduct or 
        negligence on the part of any officer, employee, or 
        agent of the financial institution; or
          (3) recovering customer information of the financial 
        institution which was obtained or received by another 
        person in any manner described in subsection (a) or 
        (b).
  (e) Non Applicability to Certain Types of Customer 
Information of Financial Institutions.--No provision of this 
section shall be construed to prevent any person from obtaining 
customer information of a financial institution that otherwise 
is available as a public record filed pursuant to the 
securities laws (as defined in section 3(a)(47) of the 
Securities Exchange Act of 1934).
  (f) Non Applicability to Collection of Child Support 
Judgments.--No provision of this section shall be construed to 
prevent any State-licensed private investigator, or any 
officer, employee, or agent of such private investigator, from 
obtaining customer information of a financial institution, to 
the extent reasonably necessary to collect child support from a 
person adjudged to have been delinquent in his or her 
obligations by a Federal or State court, and to the extent that 
such action by a State-licensed private investigator is not 
unlawful under any other Federal or State law or regulation.

SEC. 1004. ADMINISTRATIVE ENFORCEMENT.

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

SEC. 1005. CIVIL LIABILITY.

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

SEC. 1006. CRIMINAL PENALTY.

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

SEC. 1007. RELATION TO STATE LAWS.

  (a) In General.--This title shall not be construed as 
superseding, altering, or affecting the statutes, regulations, 
orders, or interpretations in effect in any State, except to 
the extent that such statutes, regulations, orders, or 
interpretations are inconsistent with the provisions of this 
title, and then only to the extent of the inconsistency.
  (b) Greater Protection Under State Law.--For purposes of this 
section, a State statute, regulation, order, or interpretation 
is not inconsistent with the provisions of this title if the 
protection such statute, regulation, order, or interpretation 
affords any person is greater than the protection provided 
under this title.

SEC. 1008. AGENCY GUIDANCE.

  In furtherance of the objectives of this title, each Federal 
banking agency (as defined in section 3(z) of the Federal 
Deposit Insurance Act) shall issue advisories to depository 
institutions under the jurisdiction of the agency, in order to 
assist such depository institutions in deterring and detecting 
activities proscribed under section 1003.
                              ----------                              


                   DEPOSIT INSURANCE FUNDS ACT OF 1996

           *       *       *       *       *       *       *


SEC. 2704. MERGER OF BIF AND SAIF.

  (a)  * * *

           *       *       *       *       *       *       *

  [(b) Special Reserve of the Deposit Insurance Fund.--
          [(1) In general.--Immediately before the merger of 
        the Bank Insurance Fund and the Savings Association 
        Insurance Fund, if the reserve ratio of the Savings 
        Association Insurance Fund exceeds the designated 
        reserve ratio, the amount by which that reserve ratio 
        exceeds the designated reserve ratio shall be placed in 
        the Special Reserve of the Deposit Insurance Fund, 
        established under section 11(a)(5) of the Federal 
        Deposit Insurance Act, as amended by this section.
          [(2) Definition.--For purposes of this subsection, 
        the term ``reserve ratio'' means the ratio of the net 
        worth of the Savings Association Insurance Fund to the 
        aggregate estimated amount of deposits insured by the 
        Savings Association Insurance Fund.]

           *       *       *       *       *       *       *

  (d) Technical and Conforming Amendments.--
          (1)  * * *

           *       *       *       *       *       *       *

          [(4) Special reserve of deposits.--Section 11(a)(5) 
        of the Federal Deposit Insurance Act (12 U.S.C. 
        1821(a)(5)) is amended to read as follows:
          [``(5) Special reserve of deposit insurance fund.--
                  [``(A) Establishment.--
                          [``(i) In general.--There is 
                        established a Special Reserve of the 
                        Deposit Insurance Fund, which shall be 
                        administered by the Corporation and 
                        shall be invested in accordance with 
                        section 13(a).
                          [``(ii) Limitation.--The Corporation 
                        shall not provide any assessment 
                        credit, refund, or other payment from 
                        any amount in the Special Reserve.
                  [``(B) Emergency use of special reserve.--
                Notwithstanding subparagraph (A)(ii), the 
                Corporation may, in its sole discretion, 
                transfer amounts from the Special Reserve to 
                the Deposit Insurance Fund, for the purposes 
                set forth in paragraph (4), only if--
                          [``(i) the reserve ratio of the 
                        Deposit Insurance Fund is less than 50 
                        percent of the designated reserve 
                        ratio; and
                          [``(ii) the Corporation expects the 
                        reserve ratio of the Deposit Insurance 
                        Fund to remain at less than 50 percent 
                        of the designated reserve ratio for 
                        each of the next 4 calendar quarters.
                  [``(C) Exclusion of special reserve in 
                calculating reserve ratio.--Notwithstanding any 
                other provision of law, any amounts in the 
                Special Reserve shall be excluded in 
                calculating the reserve ratio of the Deposit 
                Insurance Fund under section 7.''.]

           *       *       *       *       *       *       *

          (6) Repeals.--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) Section 11.--Section 11(a) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1821(a)) is 
                amended--
                          (i) by striking paragraphs [(6) and 
                        (7)] (5), (6), and (7); and
                          [(ii) by redesignating paragraph (8) 
                        as paragraph (6).]
                          (ii) by redesignating paragraph (8) 
                        as paragraph (5).

           *       *       *       *       *       *       *

                              ----------                              


                     SECURITIES EXCHANGE ACT OF 1934

           *       *       *       *       *       *       *


                  definitions and application of title

  Sec. 3. (a) When used in this title, unless the context 
otherwise requires--
          (1)  * * *

           *       *       *       *       *       *       *

          [(4) The term ``broker'' means any person engaged in 
        the business of effecting transactions in securities 
        for the account of others, but does not include a 
        bank.]
          (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 
                        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 
                                for such transactions on the 
                                basis of an administration or 
                                annual fee (payable on a 
                                monthly, quarterly, or other 
                                basis), a percentage of assets 
                                under management, or a flat or 
                                capped per order processing fee 
                                equal to not more than the cost 
                                incurred by the bank in 
                                connection with executing 
                                securities transactions for 
                                trustee and fiduciary 
                                customers, or any combination 
                                of such fees, consistent with 
                                fiduciary principles and 
                                standards; 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.
                          (iii) Permissible securities 
                        transactions.--The bank effects 
                        transactions in--
                                  (I) commercial paper, bankers 
                                acceptances, or commercial 
                                bills;
                                  (II) exempted securities;
                                  (III) qualified Canadian 
                                government obligations as 
                                defined in section 5136 of the 
                                Revised Statutes, in conformity 
                                with section 15C of this title 
                                and the rules and regulations 
                                thereunder, or obligations of 
                                the North American Development 
                                Bank; or
                                  (IV) any standardized, credit 
                                enhanced debt security issued 
                                by a foreign government 
                                pursuant to the March 1989 plan 
                                of then Secretary of the 
                                Treasury Brady, used by such 
                                foreign government to retire 
                                outstanding commercial bank 
                                loans.
                          (iv) Certain stock purchase plans.--
                                  (I) Employee benefit plans.--
                                The bank effects transactions, 
                                as 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 primarily of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both.
                                  (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 primarily of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both.
                                  (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 primarily of 
                                        administration fees, or 
                                        flat or capped per 
                                        order processing fees, 
                                        or both.
                                  (IV) Permissible delivery of 
                                materials.--The exception to 
                                being considered a broker for a 
                                bank engaged in activities 
                                described in subclauses (I), 
                                (II), and (III) will not be 
                                affected by a bank's delivery 
                                of written or electronic plan 
                                materials to employees of the 
                                issuer, shareholders of the 
                                issuer, or members of affinity 
                                groups of the issuer, so long 
                                as such materials are--
                                          (aa) comparable in 
                                        scope or nature to that 
                                        permitted by the 
                                        Commission as of the 
                                        date of the enactment 
                                        of the Financial 
                                        Services Act of 1999; 
                                        or
                                          (bb) otherwise 
                                        permitted by the 
                                        Commission.
                          (v) Sweep accounts.--The bank effects 
                        transactions as part of a program for 
                        the investment or reinvestment of 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 the 
                                date that is 1 year after the 
                                date of enactment of the 
                                Financial Services Act of 1999, 
                                is not affiliated with a broker 
                                or dealer that has been 
                                registered for more than 1 year 
                                in accordance with this Act, 
                                and engages in dealing, market 
                                making, or underwriting 
                                activities, other than with 
                                respect to exempted securities; 
                                and
                                  (III) effects transactions 
                                exclusively with qualified 
                                investors.
                          (viii) Safekeeping and custody 
                        activities.--
                                  (I) In general.--The bank, as 
                                part of customary banking 
                                activities--
                                          (aa) provides 
                                        safekeeping or custody 
                                        services with respect 
                                        to securities, 
                                        including the exercise 
                                        of warrants and other 
                                        rights on behalf of 
                                        customers;
                                          (bb) facilitates the 
                                        transfer of funds or 
                                        securities, as a 
                                        custodian or a clearing 
                                        agency, in connection 
                                        with the clearance and 
                                        settlement of its 
                                        customers' transactions 
                                        in securities;
                                          (cc) effects 
                                        securities lending or 
                                        borrowing transactions 
                                        with or on behalf of 
                                        customers as part of 
                                        services provided to 
                                        customers pursuant to 
                                        division (aa) or (bb) 
                                        or invests cash 
                                        collateral pledged in 
                                        connection with such 
                                        transactions; or
                                          (dd) holds securities 
                                        pledged by a customer 
                                        to another person or 
                                        securities subject to 
                                        purchase or resale 
                                        agreements involving a 
                                        customer, or 
                                        facilitates the 
                                        pledging or transfer of 
                                        such securities by book 
                                        entry or as otherwise 
                                        provided under 
                                        applicable law.
                                  (II) Exception for carrying 
                                broker activities.--The 
                                exception to being considered a 
                                broker for a bank engaged in 
                                activities described in 
                                subclause (I) shall not apply 
                                if the bank, in connection with 
                                such activities, acts in the 
                                United States as a carrying 
                                broker (as such term, and 
                                different formulations thereof, 
                                are used in section 15(c)(3) 
                                and the rules and regulations 
                                thereunder) for any broker or 
                                dealer, unless such carrying 
                                broker activities are engaged 
                                in with respect to government 
                                securities (as defined in 
                                paragraph (42) of this 
                                subsection).
                          (ix) Banking products.--The bank 
                        effects transactions in traditional 
                        banking products, as defined in section 
                        205(a) of the Financial Services Act of 
                        1999.
                          (x) De minimis exception.--The bank 
                        effects, other than in transactions 
                        referred to in clauses (i) through 
                        (ix), not more than 500 transactions in 
                        securities in any calendar year, and 
                        such transactions are not effected by 
                        an employee of the bank who is also an 
                        employee of a broker or dealer.
                  (C) Broker dealer execution.--The exception 
                to being considered a broker for a bank engaged 
                in activities described in clauses (ii), (iv), 
                and (viii) of subparagraph (B) shall not apply 
                if the activities described in such provisions 
                result in the trade in the United States of any 
                security that is a publicly traded security in 
                the United States, unless--
                          (i) the bank directs such trade to a 
                        registered broker or dealer for 
                        execution;
                          (ii) the trade is a cross trade or 
                        other substantially similar trade of a 
                        security that--
                                  (I) is made by the bank or 
                                between the bank and an 
                                affiliated fiduciary; and
                                  (II) is not in contravention 
                                of fiduciary principles 
                                established under applicable 
                                Federal or State law; or
                          (iii) the trade is conducted in some 
                        other manner permitted under rules, 
                        regulations, or orders as the 
                        Commission may prescribe or issue.
                  (D) No effect of bank exemptions on other 
                commission authority.--The exception to being 
                considered a broker for a bank engaged in 
                activities described in subparagraphs (B) and 
                (C) shall not affect the authority of the 
                Commission under any other provision of this 
                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 1999, subject to section 15(e); and
                          (ii) is subject to such restrictions 
                        and requirements as the Commission 
                        considers appropriate.
          [(5) The term ``dealer'' means any person engaged in 
        the business of buying and selling securities for his 
        own account, through a broker or otherwise, but does 
        not include a bank, or any person insofar as he buys or 
        sells securities for his own account, either 
        individually or in some fiduciary capacity, but not as 
        a part of a regular business.]
          (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 205(a) of the 
                        Financial Services Act of 1999.
          (12)(A) The term ``exempted security'' or ``exempted 
        securities'' includes--
                  (i)  * * *

           *       *       *       *       *       *       *

                  [(iii) any interest or participation in any 
                common trust fund or similar fund maintained by 
                a bank exclusively for the collective 
                investment and reinvestment of assets 
                contributed thereto by such bank in its 
                capacity as trustee, executor, administrator, 
                or guardian;]
                  (iii) any interest or participation in any 
                common trust fund or similar fund that is 
                excluded from the definition of the term 
                ``investment company'' under section 3(c)(3) of 
                the Investment Company Act of 1940;

           *       *       *       *       *       *       *

          (34) The term ``appropriate regulatory agency'' 
        means--
                  (A)  * * *
          * * * * * * *
                  (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.

           *       *       *       *       *       *       *

          (42) The term ``government securities'' means--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) securities issued or guaranteed as to 
                principal or interest by any corporation the 
                securities of which are designated, by statute 
                specifically naming such corporation, to 
                constitute exempt securities within the meaning 
                of the laws administered by the Commission; 
                [or]
                  (D) for purposes of sections 15C and 17A, any 
                put, call, straddle, option, or privilege on a 
                security described in subparagraph (A), (B), or 
                (C) other than a put, call, straddle, option, 
                or privilege--
                          (i) that is traded on one or more 
                        national securities exchanges; or
                          (ii) for which quotations are 
                        disseminated through an automated 
                        quotation system operated by a 
                        registered securities association[.]; 
                        or
                  (E) for purposes of section 15C as applied to 
                a bank, a qualified Canadian government 
                obligation as defined in section 5136 of the 
                Revised Statutes.

           *       *       *       *       *       *       *

          (54) Qualified investor.--
                  (A) Definition.--For purposes of this title, 
                the term ``qualified investor'' means--
                          (i) any investment company registered 
                        with the Commission under section 8 of 
                        the Investment Company Act of 1940;
                          (ii) any issuer eligible for an 
                        exclusion from the definition of 
                        investment company pursuant to section 
                        3(c)(7) of the Investment Company Act 
                        of 1940;
                          (iii) any bank (as defined in 
                        paragraph (6) of this subsection), 
                        savings association (as defined in 
                        section 3(b) of the Federal Deposit 
                        Insurance Act), broker, dealer, 
                        insurance company (as defined in 
                        section 2(a)(13) of the Securities Act 
                        of 1933), or business development 
                        company (as defined in section 2(a)(48) 
                        of the Investment Company Act of 1940);
                          (iv) any small business investment 
                        company licensed by the United States 
                        Small Business Administration under 
                        section 301 (c) or (d) of the Small 
                        Business Investment Act of 1958;
                          (v) any State sponsored employee 
                        benefit plan, or any other employee 
                        benefit plan, within the meaning of the 
                        Employee Retirement Income Security Act 
                        of 1974, other than an individual 
                        retirement account, if the investment 
                        decisions are made by a plan fiduciary, 
                        as defined in section 3(21) of that 
                        Act, which is either a bank, savings 
                        and loan association, insurance 
                        company, or registered investment 
                        adviser;
                          (vi) any trust whose purchases of 
                        securities are directed by a person 
                        described in clauses (i) through (v) of 
                        this subparagraph;
                          (vii) any market intermediary exempt 
                        under section 3(c)(2) of the Investment 
                        Company Act of 1940;
                          (viii) any associated person of a 
                        broker or dealer other than a natural 
                        person;
                          (ix) any foreign bank (as defined in 
                        section 1(b)(7) of the International 
                        Banking Act of 1978);
                          (x) the government of any foreign 
                        country;
                          (xi) any corporation, company, or 
                        partnership that owns and invests on a 
                        discretionary basis, not less than 
                        $10,000,000 in investments;
                          (xii) any natural person who owns and 
                        invests on a discretionary basis, not 
                        less than $10,000,000 in investments;
                          (xiii) any government or political 
                        subdivision, agency, or instrumentality 
                        of a government who owns and invests on 
                        a discretionary basis not less than 
                        $50,000,000 in investments; or
                          (xiv) any multinational or 
                        supranational entity or any agency or 
                        instrumentality thereof.
                  (B) Additional authority.--The Commission 
                may, by rule or order, define a ``qualified 
                investor'' as any other person, taking into 
                consideration such factors as the financial 
                sophistication of the person, net worth, and 
                knowledge and experience in financial matters.

           *       *       *       *       *       *       *


           registration and regulation of brokers and dealers

  Sec. 15. (a)  * * *

           *       *       *       *       *       *       *

  (i) Transactions Involving Hybrid Products.--
          (1) Commission authority.--
                  (A) In general.--The Commission may, after 
                consultation with the Board, determine, by 
                regulation published in the Federal Register, 
                that a bank that effects transactions in, or 
                buys or sells, a new product should be subject 
                to the registration requirements of this 
                section.
                  (B) Limitation.--The Commission may not 
                impose the registration requirements of this 
                section on any bank that effects transactions 
                in, or buys or sells, a product under this 
                subsection unless the Commission determines in 
                the regulations described in subparagraph (A) 
                that--
                          (i) the subject product is a new 
                        product;
                          (ii) the subject product is a 
                        security; and
                          (iii) imposing the registration 
                        requirements of this section is 
                        necessary or appropriate in the public 
                        interest and for the protection of 
                        investors.
          (2) Objection to commission regulation.--
                  (A) Filing of petition for review.--The 
                Board, or any aggrieved party, may obtain 
                review of any final regulation described in 
                paragraph (1) in the United States Court of 
                Appeals for the District of Columbia Circuit by 
                filing in such court, not later than 60 days 
                after the date of publication of the final 
                regulation, a written petition requesting that 
                the regulation be set aside.
                  (B) Transmittal of petition and record.--A 
                copy of a petition described in subparagraph 
                (A) shall be transmitted as soon as possible by 
                the Clerk of the Court to an officer or 
                employee of the Commission designated for that 
                purpose. Upon receipt of the petition, the 
                Commission shall file with the court the 
                regulation under review and any documents 
                referred to therein, and any other relevant 
                materials prescribed by the court.
                  (C) Exclusive jurisdiction.--On the date of 
                the filing of the petition under subparagraph 
                (A), the court has jurisdiction, which becomes 
                exclusive on the filing of the materials set 
                forth in subparagraph (B), to affirm and 
                enforce or to set aside the regulation at 
                issue.
                  (D) Standard of review.--
                          (i) In general.--The court shall 
                        determine to affirm and enforce or set 
                        aside a regulation of the Commission 
                        under this subsection, based on the 
                        determination of the court as to 
                        whether the subject product--
                                  (I) is a new product, as 
                                defined in this subsection;
                                  (II) is a security; and
                                  (III) would be more 
                                appropriately regulated under 
                                the Federal securities laws or 
                                the Federal banking laws, 
                                giving equal deference to the 
                                views of the Commission and the 
                                Board.
                          (ii) Considerations.--In making a 
                        determination under clause (i)(III), 
                        the court shall consider--
                                  (I) the nature of the subject 
                                new product;
                                  (II) the history, purpose, 
                                extent, and appropriateness of 
                                the regulation of the new 
                                product under the Federal 
                                securities laws; and
                                  (III) the history, purpose, 
                                extent, and appropriateness of 
                                the regulation of the new 
                                product under the Federal 
                                banking laws.
                  (E) Judicial stay.--The filing of a petition 
                by the Board or an aggrieved party pursuant to 
                subparagraph (A) shall operate as a judicial 
                stay, until the date on which the court makes a 
                final determination under this paragraph, of--
                          (i) any Commission requirement that a 
                        bank register as a broker or dealer 
                        under this section, because the bank 
                        engages in any transaction in, or buys 
                        or sells, the new product that is the 
                        subject of the petition; and
                          (ii) any Commission action against a 
                        bank for a failure to comply with a 
                        requirement described in clause (i).
          (3) Definitions.--For purposes of this subsection--
                  (A) the term ``Board'' means the Board of 
                Governors of the Federal Reserve System; and
                  (B) the term ``new product'' means a product 
                or instrument offered or provided by a bank 
                that--
                          (i) was not subject to regulation by 
                        the Commission as a security under this 
                        Act before the date of enactment of 
                        this subsection; and
                          (ii) is not a traditional banking 
                        product, as defined in paragraphs (1) 
                        through (6) of section 205(a) of the 
                        Financial Services Act of 1999.

           *       *       *       *       *       *       *


                   registered securities associations

  Sec. 15A. (a)  * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


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

  Sec. 17. (a)  * * *

           *       *       *       *       *       *       *

  (i) Investment Bank Holding Companies.--
          (1) 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 an insured bank 
                        (other than an institution described in 
                        subparagraph (D), (F), or (G) of 
                        section 2(c)(2), or held under section 
                        4(f), of the Bank Holding Company Act 
                        of 1956) or a savings association;
                          (ii) a foreign bank, foreign company, 
                        or company that is described in section 
                        8(a) of the International Banking Act 
                        of 1978; or
                          (iii) a foreign bank that controls, 
                        directly or indirectly, a corporation 
                        chartered under section 25A of the 
                        Federal Reserve Act,
                may elect to become supervised by filing with 
                the Commission a notice of intention to become 
                supervised, pursuant to subparagraph (B) of 
                this paragraph. Any investment bank holding 
                company filing such a notice shall be 
                supervised in accordance with this section and 
                comply with the rules promulgated by the 
                Commission applicable to supervised investment 
                bank holding companies.
                  (B) Notification of status as a supervised 
                investment bank holding company.--An investment 
                bank holding company that elects under 
                subparagraph (A) to become supervised by the 
                Commission shall file with the Commission a 
                written notice of intention to become 
                supervised by the Commission in such form and 
                containing such information and documents 
                concerning such investment bank holding company 
                as the Commission, by rule, may prescribe as 
                necessary or appropriate in furtherance of the 
                purposes of this section. Unless the Commission 
                finds that such supervision is not necessary or 
                appropriate in furtherance of the purposes of 
                this section, such supervision shall become 
                effective 45 days after the date of receipt of 
                such written notice by the Commission, or 
                within such shorter time period as the 
                Commission, by rule or order, may determine.
          (2) Election not to be supervised by the commission 
        as an investment bank holding company.--
                  (A) Voluntary withdrawal.--A supervised 
                investment bank holding company that is 
                supervised pursuant to paragraph (1) may, upon 
                such terms and conditions as the Commission 
                deems necessary or appropriate, elect not to be 
                supervised by the Commission by filing a 
                written notice of withdrawal from Commission 
                supervision. Such notice shall not become 
                effective until 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 provided promptly at any time upon 
                        request by the Commission. Such records 
                        and reports may include--
                                  (I) a balance sheet and 
                                income statement;
                                  (II) an assessment of the 
                                consolidated capital of the 
                                supervised investment bank 
                                holding company;
                                  (III) an independent 
                                auditor's report attesting to 
                                the supervised investment bank 
                                holding company's compliance 
                                with its internal risk 
                                management and internal control 
                                objectives; and
                                  (IV) reports concerning the 
                                extent to which the company or 
                                affiliate has complied with the 
                                provisions of this title and 
                                any regulations prescribed and 
                                orders issued under this title.
                  (B) Use of existing reports.--
                          (i) In general.--The Commission 
                        shall, to the fullest extent possible, 
                        accept reports in fulfillment of the 
                        requirements under this paragraph that 
                        the supervised investment bank holding 
                        company or its affiliates have been 
                        required to provide to another 
                        appropriate regulatory agency or self-
                        regulatory organization.
                          (ii) Availability.--A supervised 
                        investment bank holding company or an 
                        affiliate of such company shall provide 
                        to the Commission, at the request of 
                        the Commission, any report referred to 
                        in clause (i).
                  (C) Examination authority.--
                          (i) Focus of examination authority.--
                        The Commission may make examinations of 
                        any supervised investment bank holding 
                        company and any affiliate of such 
                        company in order to--
                                  (I) inform the Commission 
                                regarding--
                                          (aa) the nature of 
                                        the operations and 
                                        financial condition of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates;
                                          (bb) the financial 
                                        and operational risks 
                                        within the supervised 
                                        investment bank holding 
                                        company that may affect 
                                        any broker or dealer 
                                        controlled by such 
                                        supervised investment 
                                        bank holding company; 
                                        and
                                          (cc) the systems of 
                                        the supervised 
                                        investment bank holding 
                                        company and its 
                                        affiliates for 
                                        monitoring and 
                                        controlling those 
                                        risks; and
                                  (II) monitor compliance with 
                                the provisions of this 
                                subsection, provisions 
                                governing transactions and 
                                relationships between any 
                                broker or dealer affiliated 
                                with the supervised investment 
                                bank holding company and any of 
                                the company's other affiliates, 
                                and applicable provisions of 
                                subchapter II of chapter 53, 
                                title 31, United States Code 
                                (commonly referred to as the 
                                ``Bank Secrecy Act'') and 
                                regulations thereunder.
                          (ii) Restricted focus of 
                        examinations.--The Commission shall 
                        limit the focus and scope of any 
                        examination of a supervised investment 
                        bank holding company to--
                                  (I) the company; and
                                  (II) any affiliate of the 
                                company that, because of its 
                                size, condition, or activities, 
                                the nature or size of the 
                                transactions between such 
                                affiliate and any affiliated 
                                broker or dealer, or the 
                                centralization of functions 
                                within the holding company 
                                system, could, in the 
                                discretion of the Commission, 
                                have a materially adverse 
                                effect on the operational or 
                                financial condition of the 
                                broker or dealer.
                          (iii) Deference to other 
                        examinations.--For purposes of this 
                        subparagraph, the Commission shall, to 
                        the fullest extent possible, use the 
                        reports of examination of an 
                        institution described in 
                        subparagraph(D), (F), or (G) of section
                        2(c)(2), or held under section 4(f), of 
                        the Bank Holding Company Act of 1956 made 
                        by the appropriate regulatory agency, or 
                        of a licensed insurance company made by the 
                        appropriate State insurance regulator.
          (4) Holding company capital.--
                  (A) Authority.--If the Commission finds that 
                it is necessary to adequately supervise 
                investment bank holding companies and their 
                broker or dealer affiliates consistent with the 
                purposes of this subsection, the Commission may 
                adopt capital adequacy rules for supervised 
                investment bank holding companies.
                  (B) Method of calculation.--In developing 
                rules under this paragraph:
                          (i) Double leverage.--The Commission 
                        shall consider the use by the 
                        supervised investment bank holding 
                        company of debt and other liabilities 
                        to fund capital investments in 
                        affiliates.
                          (ii) No unweighted capital ratio.--
                        The Commission shall not impose under 
                        this section a capital ratio that is 
                        not based on appropriate risk-weighting 
                        considerations.
                          (iii) No capital requirement on 
                        regulated entities.--The Commission 
                        shall not, by rule, regulation, 
                        guideline, order or otherwise, impose 
                        any capital adequacy provision on a 
                        nonbanking affiliate (other than a 
                        broker or dealer) that is in compliance 
                        with applicable capital requirements of 
                        another Federal regulatory authority or 
                        State insurance authority.
                          (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 and 
        subsection (j)--
                  (A) the term ``investment bank holding 
                company'' means--
                          (i) any person other than a natural 
                        person that owns or controls one or 
                        more brokers or dealers; and
                          (ii) the associated persons of the 
                        investment bank holding company;
                  (B) the term ``supervised investment bank 
                holding company'' means any investment bank 
                holding company that is supervised by the 
                Commission pursuant to this subsection;
                  (C) the terms ``affiliate'', ``bank'', ``bank 
                holding company'', ``company'', ``control'', 
                and ``savings association'' have the same 
                meanings as in section 2 of the Bank Holding 
                Company Act of 1956;
                  (D) the term ``insured bank'' has the same 
                meaning as in section 3 of the Federal Deposit 
                Insurance Act;
                  (E) the term ``foreign bank'' has the same 
                meaning as in section 1(b)(7) of the 
                International Banking Act of 1978; and
                  (F) the terms ``person associated with an 
                investment bank holding company'' and 
                ``associated person of an investment bank 
                holding company'' mean any person directly or 
                indirectly controlling, controlled by, or under 
                common control with, an investment bank holding 
                company.
  (j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission 
shall not be compelled to disclose any information required to 
be reported under subsection (h) or (i) or any information 
supplied to the Commission by any domestic or foreign 
regulatory agency that relates to the financial or operational 
condition of any associated person of a broker or dealer, 
investment bank holding company, or any affiliate of an 
investment bank holding company. Nothing in this subsection 
shall authorize the Commission to withhold information from 
Congress, or prevent the Commission from complying with a 
request for information from any other Federal department or 
agency or any self-regulatory organization requesting the 
information for purposes within the scope of its jurisdiction, 
or complying with an order of a court of the United States in 
an action brought by the United States or the Commission. For 
purposes of section 552 of title 5, United States Code, this 
subsection shall be considered a statute described in 
subsection (b)(3)(B) of such section 552. In prescribing 
regulations to carry out the requirements of this subsection, 
the Commission shall designate information described in or 
obtained pursuant to subparagraphs (A), (B), and (C) of 
subsection (i)(5) as confidential information for purposes of 
section 24(b)(2) of this title.
  [(i)] (k) Coordination of Examining Authorities.--
          (1) * * *

           *       *       *       *       *       *       *

                              ----------                              


                     INVESTMENT COMPANY ACT OF 1940


TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *



                          general definitions

  Sec. 2. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          (5) ``Bank'' means [(A) a banking institution 
        organized under the laws of the United States] (A) a 
        depository institution (as defined in section 3 of the 
        Federal Deposit Insurance Act) or a branch or agency of 
        a foreign bank (as such terms are defined in section 
        1(b) of the International Banking Act of 1978), (B) a 
        member bank of the Federal Reserve System, (C) any 
        other banking institution or trust company, whether 
        incorporated or not, doing business under the laws of 
        any State or of the United States, a substantial 
        portion of the business of which consists of receiving 
        deposits or exercising fiduciary powers similar to 
        those permitted to national banks under the authority 
        of the Comptroller of the Currency, and which is 
        supervised and examined by State or Federal authority 
        having supervision over banks, and which is not 
        operated for the purpose of evading the provisions of 
        this title, and (D) a receiver, conservator, or other 
        liquidating agent of any institution or firm included 
        in clause (A), (B), or (C) of this paragraph.
          [(6) ``Broker'' means any person engaged in the 
        business of effecting transactions in securities for 
        the account of others, but does not include a bank or 
        any person solely by reason of the fact that such 
        person is an underwriter for one or more investment 
        companies.]
          (6) The term ``broker'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934, 
        except that such term does not include any person 
        solely by reason of the fact that such person is an 
        underwriter for one or more investment companies.

           *       *       *       *       *       *       *

          [(11) ``Dealer'' means any person regularly engaged 
        in the business of buying and selling securities for 
        his own account, through a broker or otherwise, but 
        does not include a bank, insurance company, or 
        investment company, or any person insofar as he is 
        engaged in investing, reinvesting, or trading in 
        securities, or in owning or holding securities, for his 
        own account, either individually or in some fiduciary 
        capacity, but not as a part of a regular business.]
          (11) The term ``dealer'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934, but 
        does not include an insurance company or investment 
        company.

           *       *       *       *       *       *       *

          (19) ``Interested person'' of another person means--
                  (A) when used with respect to an investment 
                company--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(v) any broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934 or any affiliated person of such a 
                        broker or dealer, and]
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) the investment company;
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services; or
                                  (III) any account over which 
                                the investment company's 
                                investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) the investment company;
                                  (II) any other investment 
                                company having the same 
                                investment adviser as such 
                                investment company or holding 
                                itself out to investors as a 
                                related company for purposes of 
                                investment or investor 
                                services; or
                                  (III) any account for which 
                                the investment company's 
                                investment adviser has 
                                borrowing authority,
                          [(vi)] (vii) any natural person whom 
                        the Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had, at any time 
                        since the beginning of the last two 
                        completed fiscal years of such company, 
                        a material business or professional 
                        relationship with such company or with 
                        the principal executive officer of such 
                        company or with any other investment 
                        company having the same investment 
                        adviser or principal underwriter or 
                        with the principal executive officer of 
                        such other investment company:
                Provided, That no person shall be deemed to be 
                an interested person of an investment company 
                solely by reason of (aa) his being a member of 
                its board of directors or advisory board or an 
                owner of its securities, or (bb) hismembership 
in the immediate family of any person specified in clause (aa) of this 
proviso; and
                  (B) when used with respect to an investment 
                adviser of or principal underwriter for any 
                investment company--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(v) any broker or dealer registered 
                        under the Securities Exchange Act of 
                        1934 or any affiliated person of such a 
                        broker or dealer, and]
                          (v) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        executed any portfolio transactions 
                        for, engaged in any principal 
                        transactions with, or distributed 
                        shares for--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account over which 
                                the investment adviser has 
                                brokerage placement discretion,
                          (vi) any person or any affiliated 
                        person of a person (other than a 
                        registered investment company) that, at 
                        any time during the 6-month period 
                        preceding the date of the determination 
                        of whether that person or affiliated 
                        person is an interested person, has 
                        loaned money or other property to--
                                  (I) any investment company 
                                for which the investment 
                                adviser or principal 
                                underwriter serves as such;
                                  (II) any investment company 
                                holding itself out to 
                                investors, for purposes of 
                                investment or investor 
                                services, as a company related 
                                to any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as 
                                such; or
                                  (III) any account for which 
                                the investment adviser has 
                                borrowing authority,
                          [(vi)] (vii) any natural person whom 
                        the Commission by order shall have 
                        determined to be an interested person 
                        by reason of having had at any time 
                        since the beginning of the last two 
                        completed fiscal years of such 
                        investment company a material business 
                        or professional relationship with such 
                        investment adviser or principal 
                        underwriter or with the principal 
                        executive officer or any controlling 
                        person of such investment adviser or 
                        principal underwriter.

           *       *       *       *       *       *       *


                    definition of investment company

  Sec. 3. (a) * * *

           *       *       *       *       *       *       *

  (c) Notwithstanding subsection (a), none of the following 
persons is an investment company within the meaning of this 
title:
          (1) * * *

           *       *       *       *       *       *       *

           (3) Any bank or insurance company; any savings and 
        loan association, building and loan association, 
        cooperative bank, homestead association, or similar 
        institution, or any receiver, conservator, liquidator, 
        liquidating agent, or similar official or person 
        thereof or therefor; or any common trust fund or 
        similar fund maintained by a bank exclusively for the 
        collective investment and reinvestment of moneys 
        contributed thereto by the bank in its capacity as a 
        trustee, executor, administrator, or guardian, if--
                  (A) such fund is employed by the bank solely 
                as an aid to the administration of trusts, 
                estates, or other accounts created and 
                maintained for a fiduciary purpose;
                  (B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, 
                interests in such fund are not--
                          (i) advertised; or
                          (ii) offered for sale to the general 
                        public; and
                  (C) fees and expenses charged by such fund 
                are not in contravention of fiduciary 
                principles established under applicable Federal 
                or State law.

           *       *       *       *       *       *       *


                       affiliations of directors

  Sec. 10. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


             investment advisory and underwriting contracts

  Sec. 15. (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


      transactions of certain affiliated persons and underwriters

  Sec. 17. (a) It shall be unlawful for any affiliated person 
or promoter of or principal underwriter for a registered 
investment company (other than a company of the character 
described in section 12(d)(3) (A) and (B)), or any affiliated 
person of such a person, promoter, or principal underwriter, 
acting as principal--
          (1) * * *
          (2) knowingly to purchase from such registered 
        company, or from any company controlled by such 
        registered company, any security or other property 
        (except securities of which the seller is the issuer); 
        [or]
          (3) to borrow money or other property from such 
        registered company or from any company controlled by 
        such registered company (unless the borrower is 
        controlled by the lender) except as permitted in 
        section 21(b)[.]; or
          (4) to loan money or other property to such 
        registered company, or to any company controlled by 
        such registered company, in contravention of such 
        rules, regulations, or orders as the Commission may 
        prescribe or issue consistent with the protection of 
        investors.

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


                         unit investment trusts

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

           *       *       *       *       *       *       *


                   unlawful representations and names

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

           *       *       *       *       *       *       *


                        breach of fiduciary duty

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

           *       *       *       *       *       *       *

                              ----------                              


                    INVESTMENT ADVISERS ACT OF 1940


                     TITLE II--INVESTMENT ADVISERS

           *       *       *       *       *       *       *



                              definitions

  Sec. 202. (a) When used in this title, unless the context 
otherwise requires, the following definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          [(3) ``Broker'' means any person engaged in the 
        business of effecting transactions in securities for 
        the account of others, but does not include a bank.]
          (3) The term ``broker'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934.

           *       *       *       *       *       *       *

          [(7) ``Dealer'' means any person regularly engaged in 
        the business of buying and selling securities for his 
        own account, through a broker or otherwise, but does 
        not include a bank, insurance company, or investment 
        company, or any person insofar as he is engaged in 
        investing, reinvesting or trading in securities, or in 
        owning or holding securities, for his own account, 
        either individually or in some fiduciary capacity, but 
        not as a part of a regular business.]
          (7) The term ``dealer'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934, but 
        does not include an insurance company or investment 
        company.

           *       *       *       *       *       *       *

          (11) ``Investment adviser'' means any person who, for 
        compensation, engages in the business of advising 
        others, either directly or through publications or 
        writings, as to the value of securities or as to the 
        advisability of investing in, purchasing, or selling 
        securities, or who, for compensation and as part of a 
        regular business, issues or promulgates analyses or 
        reports concerning securities; but does not include (A) 
        a bank, or any bank holding company as defined in the 
        Bank Holding Company Act of 1956, which is not an 
        [investment company] investment company, except that 
        the term ``investment adviser'' includes any bank or 
        bank holding company to the extent that such bank or 
        bank holding company serves or acts as an investment 
        adviser to a registered investment company, but if, in 
        the case of a bank, such services or actions are 
        performed through a separately identifiable department 
        or division, the department or division, and not the 
        bank itself, shall be deemed to be the investment 
        adviser; (B) any lawyer, accountant, engineer, or 
        teacher whose performance of such services is solely 
        incidental to the practice of his profession; (C) any 
        broker or dealer whose performance of such services is 
        solely incidental to the conduct of his business as a 
        broker or dealer and who receives no special 
        compensation therefor; (D) the publisher of any bona 
        fide newspaper, news magazine or business or financial 
        publication of general and regular circulation; (E) any 
        person whose advice, analyses, or reports relate to no 
        securities other than securities which are direct 
        obligations of or obligations guaranteed as to 
        principal or interest by the United States, or 
        securities issued or guaranteed by corporations in 
        which the United States has a direct or indirect 
        interest which shall have been designated by the 
        Secretary of the Treasury, pursuant to section 3(a)(12) 
        of the Securities Exchange Act of 1934, as exempted 
        securities for the purposes of that Act; or (F) such 
        other persons not within the intent of this paragraph, 
        as the Commission may designate by rules and 
        regulations or order.

           *       *       *       *       *       *       *

          (26) The term ``separately identifiable department or 
        division'' of a bank means a unit--
                  (A) that is under the direct supervision of 
                an officer or officers designated by the board 
                of directors of the bank as responsible for the 
                day-to-day conduct of the bank's investment 
                adviser activities for one or more investment 
                companies, including the supervision of all 
                bank employees engaged in the performance of 
                such activities; and
                  (B) for which all of the records relating to 
                its investment adviser activities are 
                separately maintained in or extractable from 
                such unit's own facilities or the facilities of 
                the bank, and such records are so maintained or 
                otherwise accessible as to permit independent 
                examination and enforcement by the Commission 
                of this Act or the Investment Company Act of 
                1940 and rules and regulations promulgated under
                this Act or the Investment Company Act of 1940.

           *       *       *       *       *       *       *

  (c) Consideration of Promotion of Efficiency, Competition, 
and Capital Formation.--Whenever pursuant to this title the 
Commission is engaged in rulemaking and is required to consider 
or determine whether an action is necessary or appropriate in 
the public interest, the Commission shall also consider, in 
addition to the protection of investors, whether the action 
will promote efficiency, competition, and capital formation.

           *       *       *       *       *       *       *


SEC. 210A. CONSULTATION.

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

           *       *       *       *       *       *       *

                              ----------                              


                SECTION 3 OF THE SECURITIES ACT OF 1933

                          exempted securities

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


                           ACT OF MAY 1, 1886

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

           *       *       *       *       *       *       *


    Sec. 2. (a) * * *

           *       *       *       *       *       *       *

    (d) Retention of ``Federal'' in Name of Converted Federal 
Savings Association._
          (1) In General._Notwithstanding subsection (a) or any 
        other provision of law, any depository institution the 
        charter of which is converted from that of a Federal 
        savings association to a national bank or a State bank 
        after the date of the enactment of the Financial 
        Services Act of 1999 may retain the term ``Federal'' in 
        the name of such institution if such depository 
        institution remains an insured depository institution.
          (2) Definitions._For purposes of this subsection, the 
        terms ``depository institution'', ``insured depository 
        institution'', ``national bank'', and ``State bank'' 
        have the same meanings as in section 3 of the Federal 
        Deposit Insurance Act.
                           SUPPLEMENTAL VIEWS

    The Financial Services Act of 1999 attempts to modernize 
our financial services sector in a progressive manner, enhance 
the safety and soundness of individual institutions, and the 
financial system as a whole, and afford appropriate protections 
to the consumer to ensure that they are the ultimate 
beneficiary of the changes we are seeking. We strongly support 
these goals and voted with the majority to report this 
legislation to the full House.
    While the focus of the long public debate over this 
legislation has been the opening of the financial services 
marketplace to new competition, the reduction of barriers 
between financial services providers, and the impact on the 
various sectors of the financial services industry, of equal 
importance to us is the impact of this legislation on our 
constituents and the communities in which they live. Consumers 
and communities are an important part of the financial 
landscape. Arguably, the benefits of one-stop shopping and 
comprehensive competitive services are there--according to the 
Treasury Department, financial services modernization could 
mean as much as $15 billion in savings to consumers. Access to 
these cost-savings and services is key to our continued support 
of the bill. Additionally, the bill recognizes the importance 
of smaller financial institutions to the U.S. financial 
services marketplace. Such institutions play a critical role in 
many medium-sized and small communities and thus need to play a 
role in this legislation.
    The Chairman's mark brought to the Committee for 
consideration was produced on a bipartisan basis and was an 
important stepping stone to the strong 51-8 bipartisan vote of 
the Committee. The mark built upon the solid work of our 
Committee and others in the previous Congress.
    The purposes of the bill reflect the importance of 
modernizing our financial services laws and the significance of 
enhancing the availability of financial services to citizens of 
all economic circumstances and in all geographic areas. The 
purposes of the bill also require depository institutions to 
comply with the Community Reinvestment Act of 1977 and to meet 
the capital and credit needs of all citizens and communities, 
including under served communities and populations. The bill as 
reported by the Committee takes crucial steps to make these 
goals a reality.
    The requirement that all of the holding company's 
subsidiary depository institutions have at least a 
``satisfactory'' Community Reinvestment Act (CRA) rating in 
order to affiliate as a Financial Holding Company and in order 
to maintain that affiliation appropriately recognizes that the 
benefits of this legislation require a solid commitment to 
meeting local credit needs. Maintaining the relevance of the 
CRA and enhancing it as we enhance the powers of financial 
institutions is critical.
    Further, the extension of the CRA to the new Wholesale 
Financial Institutions (WFIs) is appropriate. While deposits to 
a WFI will not be insured, these new institutions will be 
members of the Federal Reserve System with the same rights and 
privileges as a State member insured bank. This extension of 
rights and privileges must be accompanied by the same 
responsibilities including meeting community credit needs.
    Provisions in the bill would require that financial 
institutions meet existing credit needs by assuring that banks 
acquired under this legislation would not drain deposits out of 
a State. The bill requires that an out-of-state controlled bank 
continue to make loans in the host state with strong sanctions 
available to the regulator for enforcement. In cases of branch 
closings in low and moderate-income neighborhoods, the 
provisions require federal regulators to work with local 
communities to obtain adequate alternative services for the 
affected community.
    Additionally, because of concerns regarding concentration, 
the bill requires the appropriate banking regulators to 
maintain market-related data and to produce an annual report on 
concentration of financial resources that will provide Congress 
with the needed information to ensure that community credit 
needs are being met. The bill maintains relevant state 
antitrust laws as well.
    As Congress moves forward with this broad financial 
services modernization legislation, safeguards must be in place 
to insure that consumers are not confused about new products, 
the risk they carry, whether or not they are insured, and their 
status regarding deposit insurance coverage or the lack 
thereof. Products marketed to consumers must also be suitable 
to their needs and economic circumstances, and consumers must 
be protected against coercion, misrepresentations or conflicts 
ofinterests. The bill requires the regulators to issue 
regulations governing bank sales of non-deposit products. The 
regulations would include disclosure of risk and disclosure that non-
deposit products are not insured by the Federal Deposit Insurance 
Corporation (FDIC), along with anti-tying and anti-coercion 
requirements, and the creation of a consumer grievance process within 
the regulatory agencies.
    These provisions, included in the bipartisan mark, are 
important safeguards. However, the Committee properly added 
additional consumer and community protections through the 
amendment process. These new provisions are a key component of 
any financial modernization legislation, including the key 
disclosures, consumer protections and credit availability 
provisions. Specifically,
    We support the amendments to add the words ``not insured by 
any government agency'' to disclosure requirements on sales of 
non-insured products by banks, to clarify that the extension of 
credit to consumers is not contingent on the purchase of other 
non-insured products, and to require a suitability test to be 
applied to the sales of derivatives in financial institutions.
    We support the amendment to allow financial regulators to 
deny a financial holding company the ability to engage in new 
powers if federal anti-redlining laws through the Fair Housing 
Act are violated by an affiliated insurance company. This 
amendment reinforces federal laws designed to combat insurance 
redlining. An overall benefit of this bill is increased 
competition and the expanded availability of products and 
services. This amendment will help ensure that neighborhoods 
are not denied the availability of insurance products. It 
requires a bank holding company or financial holding company 
affiliate that engages in insurance sales and underwriting to 
be in compliance with the terms of a Fair Housing Act court 
order or settlement.
    We support the amendment that requires public meetings in 
the case of mega-mergers between banks each of which have more 
than $1 billion in assets. This amendment appropriately 
requires hearings in one or more places where there may be 
substantial public impact because of the larger merger, giving 
appropriate discretion to the regulator (be they the Federal 
Reserve Board, the Office of the Comptroller of the Currency, 
or the Office of Thrift Supervision) regarding the meetings and 
their location.
    With regard to financial privacy, we support the amendment 
to eliminate the overly-broad proposed Know Your Customer 
regulations. In addition, we support the amendment to require 
that depository institutions of financial holding companies 
clearly and conspicuously disclose to their customers their 
privacy policy, specifying what their policies are with regard 
to a customer's information. In this way, customers would learn 
what a financial institution's policies are on disclosing 
customers information to third parties for marketing purposes 
and could also be clearly informed of their rights under the 
Fair Credit Reporting Act to choose not to have their 
information shared among affiliates. As a result, consumers 
will be able to choose whether they want to do business with 
institutions that have privacy policies with which they 
disagree. This provision builds on self-regulatory mechanisms 
now being pushed for the Internet which require Web sites to 
have privacy policies for which the site sponsors will be held 
accountable.
    The amendment also provides protection for medical 
information which is important to this bill because of the 
ability for banks and insurance companies to affiliate. This 
provision will require insurance companies which affiliate with 
a bank to keep confidential customers' health and medical 
information, except under very limited circumstances. The 
provision closely follows the Medical Privacy Act passed by the 
105th Congress.
    Finally, the privacy amendment incorporates provisions from 
the Financial Information Privacy Act of 1999, which prohibits 
the obtaining of financial information from financial 
institutions by false means and incorporates an amendment that 
requires a study of how well current privacy laws protect the 
privacy rights of customers of insured depository institutions.
    We support the amendment that built upon the strengths of 
the mark to further improve the Federal Home Loan Bank System 
by updating the antiquated capital structure to provide a 
permanent source of capital for the system and incentives for 
acquiring permanent capital. The amendment,for the first time, 
establishes a risk-based capital requirement for each of the banks. 
This addition will increase the safety and soundness of the system 
because it will require each bank to maintain a level of tangible 
capital that could not be withdrawn by the members in times of stress.
    These changes, along with the four key provisions to 
modernize and improve the system which were in the mark--(1) 
expanding support for agricultural, small business, and 
community development lending by financial institutions of less 
than $500 million, (2) providing voluntary membership under 
equal terms and conditions for both banks and thrifts, (3) 
changing the REFCorp obligation formula to a flat percentage of 
each Bank's annual earnings, and (4) eliminating the micro-
management by devolving governance functions from the Federal 
Housing Finance Board as suggested by GAP--are important 
reforms.
    Together we believe that these five reforms will allow the 
system to better compete in the future, lower the cost of home 
mortgages to millions of Americans, improve economic 
development opportunities in urban and rural communities alike, 
and increase the availability of affordable housing.
    We support the amendment that provides better disclosure 
requirements in law for Automatic Teller Machines (ATMs). With 
this amendment, ATM operators would be required to post a sign 
on the cash machine showing that an ATM surcharge will be 
imposed. The dollar amount of the surcharge imposed by the 
machine in use would have to be specified as part of the 
machine's on-screen display. Additionally, when issuing ATM 
cards, banks would have to issue a warning that surcharges may 
be imposed by other parties. The amendment also requires the 
General Accounting office (GAO) to study the feasibility and 
cost of requiring ATM operators to disclose not only the 
surcharge imposed by the machine in use but by the consumer's 
own bank as well.
    H.R. 10 was approved on a strong bi-partisan basis with 21 
Democratic votes cast in support of the bill. Successful 
enactment of this bill into law will require that the bi-
partisan spirit of cooperation remain. We are committed to 
achieving comprehensive financial modernization. H.R. 10 
strikes a critical, unprecedented balance by providing a new 
financial services infrastructure aimed at keeping the United 
States competitive in the global marketplace, while ensuring 
consumers the quality services and protections they deserve. As 
this legislation moves our financial industries forward into 
the 21st Century, Congress cannot push the interests of 
consumers and local communities back into the 19th Century. It 
is our strong view that consumer and community lending 
protections must remain an integral component of any modernization 
legislation considered by the full House.

                                   John J. LaFalce.
                                   Bruce F. Vento.
                                   Paul E. Kanjorski.
                                   Luis V. Gutierrez.
                                   Carolyn B. Maloney.
                                   Gary L. Ackerman.
                                   Melvin L. Watt.
                                   Ken Bentsen.
                                   Charles A. Gonzalez.
                                   Dennis Moore.
                                   Max Sandlin.
                                   Frank Mascara.
                                   Bob Weygand.
                                   Jim Maloney.
                                   Nydia Velaquez.
                                   Darlene Hooley.
                                   Brad Sherman.
                                   Stephanie Tubbs Jones.

      SUPPLEMENTAL VIEWS ON THE FEDERAL HOME LOAN BANK PROVISIONS

    A critical component of the Financial Services Act of 1999 
concerns the modernization of the Federal Home Loan Banks 
(FHLBanks). As the Chairman and the Ranking Member of the 
Subcommittee on Capital Markets, Securities, and Government 
Sponsored Enterprises--which has primary jurisdiction over the 
FHLBanks--we believe it important to express our thoughts and 
views about these reforms. Moreover, we have been the original 
bipartisan sponsors for many years of legislation to broaden 
and modernize the FHLBanks and have each developed a 
substantive understanding of the Federal Home Loan Bank System 
(System). Subtitle G of this bill only makes a number of 
significant and much needed changes to that System, but is also 
includes many of the reforms called for in our legislation.
    The System began in 1932 primarily for the purpose of 
providing a source of intermediate- and long-term credit for 
state savings institutions to finance long-term residential 
mortgages, and to provide a source of liquidity for such 
institutions. Neither was sufficiently available at the time. 
In 1989, Congress expanded on these basic elements to allow the 
System's membership to include commercial banks and credit 
unions. Over the years, many depository institutions have 
incorporated their residential mortgage lending into a product 
mix of community banking that typically provides a range of 
mortgage, consumer, and commercial loans. Furthermore, smaller 
community banks still tend to have a more difficult time 
accessing intermediate- and long-term funding. They, like 
savings associations in the 1930's typically draw most of their 
funding from local deposits.
    During the past several years, there has been a succession 
of legislative proposals to update the System. There have also 
been a number of studies by the Department of Housing and Urban 
Development, the General Accounting Office (GAO), and the 
Department of the Treasury on various operational and policy 
aspects of the System. Furthermore, we have learned much about 
the credit needs of rural, inner-city, and underserved markets 
throughout our country as a result of hearings in our 
Subcommittee. In many locations, a community bank is the chief 
repository of the community's wealth and the chief source of 
its credit. We have additionally learned that community banks 
frequently can no longer fund their operations from local 
deposits, and experience difficulties in accessing capital 
markets to fund intermediate- and long-term assets. This 
liquidity problem can be particularly acute for community banks 
located in rural areas where non-farm businesses tend to rely 
heavily on such financial institutions as their primary lender.
    It is our view that if smaller community banks are granted 
enhanced access to longer-term funding with a broader base of 
collateral for advances, they will then be able to increase the 
level of financial competition in underserved markets. 
Additionally, if the System is used prudently it can be a 
valuable resource to assist properly regulated, well-
capitalized banks (especially smaller community banks located 
in rural areas, inner cities, and underserved neighborhoods), 
to provide a more stable funding source for customers who 
require intermediate- and longer-term funding. Moreover, if the 
FHLBanks and their member institutions can better manage their 
interest rate risks, they will then be able to avoid the types 
of problems that led to the crisis in the thrift industry in 
the 1980s.
    Earlier this year, we introduced the Federal Home Loan Bank 
Modernization Act of 1999 (H.R. 822). Four key parts of our 
bipartisan legislation were included in Subtitle G of the mark-
up text for the Financial Services Act of 1999. These reforms 
will be very helpful to community banking and the System. 
Importantly, these four elements are widely supported and 
substantially the same as provisions adopted without opposition 
by the House and Senate Banking Committees and by the full 
House in the last Congress.
    Specifically, Subtitle G creates a System where all members 
will belong on a voluntary basis, and all will be treated 
equally. The capital required to support membership will be 
equalized for large and small members. Subtitle G also 
transfers certain powers from the Federal Housing Finance Board 
to the Boards of the FHLBanks themselves. The FHLBanks will be 
empowered, for example, to make a number of management 
decisions that were formerly within the discretion of the 
Federal Housing Finance Board. Subtitle G will additionally 
expand support for agricultural, small business and community 
development lending by small community financial institutions 
with less than $500 million in assets.
    Subtitle G further changes the Resolution Funding 
Corporation (REFCorp) Obligation Formula to a flat percentage 
of each FHLBank's annual earnings. Our intent was to equalize 
the proportion of each FHLBank's net income that is assessed to 
meet the REFCorp obligation. Since 1987, the FHLBanks have paid 
more than $5 billion to help reduce the cost of the thrift 
crisis to taxpayers. Over the next 21 years, they will pay an 
additional $6.3 billion to reduce the cost of the bailout to 
taxpayers. We also sought to ensure that this fixed, 
predictable percentage would continue to comply with the 
requirements of the Congressional Budget Act of 1974, as 
amended.
    Although the Committee Print used to mark up the Financial 
Services Act of 1999 contained four important reforms for the 
System, it lacked in one key provision. That is, it did nothing 
to address the need of the FHLBanks to retain permanent 
capital. Presently, the System operates under an antiquated 
capital structure established at a time when all thrifts were 
required to be members of the System. Thrifts were thus 
prohibited from pulling their capital out of the system. By 
eliminating mandatory membership for federal savings 
associations, however, the bill would have transformed the $8.6 
billion in non-redeemable stock currently held by mandatory 
members into redeemable stock, effectively removing all 
permanent capital from the System.
    In order to preserve the safety and soundness of the System 
and to create incentives for selling and purchasing permanent 
capital, we offered two amendments affecting the FHLBanks' 
capital structure during the Committee's consideration of the 
bill. Our first amendment, adopted by the Committee on a 
bipartisan voice vote after Chairman Leach asked for some 
modifications, establishes, for the first time, a risk-based 
permanent capital structure for the System. As a result, the 
FHLBanks must maintain minimum amounts of permanent capital 
based on the risks inherent in their assets and off-balance 
sheet obligations. Under our amendment, each FHLBank will 
maintain permanent capital--which would consist of non-
redeemable stock, retained earnings, and limited amounts of 
five-year redeemable stock--in an amount sufficient to offset 
the risks to which it is exposed. If the risks to which each 
FHLBank is exposed increase, so too would the amount of 
permanent capital that the FHLBank would be required to hold. 
These risks include credit risk, market risk, interest rate 
risk, and off-balance sheet exposure risks.
    As a result of this amendment, the FHLBanks will now be 
able to maintain a stable base of total capital structure that 
is at least as strong as--and most likely stronger than--the 
capital requirements for Fannie Mae and Freddie Mac, two other 
housing government-sponsored enterprises. On a risk-adjusted 
basis, the FHLBanks will continue to have a higher capital 
standard than any other government-sponsored enterprise or 
insured depository institution. Furthermore, the capital plan 
adopted in this first amendment moves the FHLBanks to the kind 
of long-term capital the GAO contends the System needs. The GAO 
has repeatedly said that the FHLBanks should have a risk-based 
capital system with some more permanent capital.
    Our second amendment, also adopted by the Committee on a 
strong bipartisan voice vote, creates incentives for FHLBanks 
to build their permanent capital. We accomplish this goal via a 
weighting provision, under which the capital items with the 
most permanence count more toward the leverage requirement than 
do capital items with less permanence. Accordingly, Class C 
stock, which is never redeemable, and retained earnings are 
weighted at twice the paid-in face value. Class B stock, 
redeemable in 5 years, is weighted at one and one-half times 
the paid-in face value, and Class A stock, redeemable in 6 
months, is counted at its paid-in face value. This weighting 
system will encourage FHLBank to build permanent capital. These 
incentives to acquire permanent capital complement the 
provisions authorizing each FHLBank to establish preferences 
for holders of permanent and near-permanent stock. Members 
acquiring Class B and C stocks may, for instance, receive 
dividend premiums over those paid for Class A stock. They may 
also have preferential voting rights.
    In sum, we are pleased with the FHLBank provisions 
contained in the Financial Services Act of 1999. Together we 
believe that these five reforms will increase competition, 
lower the cost of home mortgages to millions of Americans, 
improve economic development opportunities in underserved 
communities, and better the availability of affordable housing. 
We further believe that the reformed System will serve as an 
integral tool to assist well-capitalized community banks, 
especially community banks in rural areas, inner cities, and 
underserved neighborhoods, to obtain a more stable funding 
source for intermediate- and long-term assets. As new 
affiliations develop among financial service firms and between 
commercial affiliates as a consequence of this legislation, the 
support provided by the System will greatly benefit small banks 
and their communities. Moreover, by including language to 
update the System in the Financial Services Act of 1999, we 
believe that we have helped to ensure that the rewards of 
financial modernization will flow to small and large financial 
institutions alike.

                                   Richard A. Baker.
                                   Paul E. Kanjorski.

                 SUPPLEMENTAL VIEWS OF HON. BRUCE VENTO

    The House Banking Committee has taken important first steps 
in addressing the issue of consumer privacy through the 
inclusion of the Leach Vento amendment in H.R. 10. Ultimately, 
privacy and the concerns about the sharing of confidential 
customer information will be of greater importance to our 
constituents than all other components of this legislation.
    As we enter the modern world of the financial services 
marketplace, multiple services and instant access are important 
advantages brought by technological change. However, the age of 
computers and instant communication is a two-edged sword. 
Consumers want and expect the efficiency and services available 
as a result of technology. Consumers want to be able to access 
their accounts through any ATM at any time. They want to get 
frequent flyer miles or other perks every time that they use 
their credit card and they want the convenience of doing their 
banking from their home computer. However, at the same time, 
consumers also expect their personal data, which may be widely 
disseminated, to remain private. The two-day debate over 
privacy in the Committee highlighted the dilemma. Draft an 
amendment too broadly to prohibit information sharing and 
consumers might not get that credit for those frequent flyer 
miles, they might not be able to bank at home and they might 
not even be able to get their checks printed.
    Recognizing that this financial services modernization 
legislation will not be the last work on privacy, the Committee 
did reach a compromise agreement. This Committee has always 
operated under the policy of providing consumers with adequate 
information to make informed decisions. Under the adopted 
amendment, consumers will be provided with a clear statement 
and full disclosure of the bank's privacy policies. That policy 
will include at a minimum, the customer's existing rights under 
FCRA--including an opt out at any point--and the institution's 
policies on providing consumer information to third parties for 
the purposes of marketing. Frankly, I would prefer a consumer 
voice in sharing information with third parties, but am willing 
to defer on that matter until a full exploration of the 
ramifications and workability of such a proviso is clear. 
Today, the level and sophistication of privacy policies vary 
from institution to institution. I am convinced that this 
amendment guarantees that competition between banks alone will 
in fact accelerate the development of comprehensive balanced 
privacy rights for consumers.
    There is one issue upon which most Members can agree. 
Credit making decisions should not be based upon health history 
or insurance information. Under this legislation, insurance 
companies and banks will be able to affiliate. The bipartisan 
compromise will block the sharing for health-related 
information except for the clearly delineated purposes 
articulated in the amendment. This provision draws upon the 
Federal Reserve format and decision regarding the Citicorp/
Travelers merger.
    The Health Insurance Portability and Accountability Act 
requires Congress to approve comprehensive medical privacy 
legislation by August 21 of this year. That is a daunting task 
and one that is fraught with pitfalls. Because this legislation 
will facilitate the affiliation of the insurance and banking 
industries, the medical privacy provisions are an important 
component of the Committee privacy package. While these 
provisions may require further refinement as the legislation 
moves forward, one cannot lose sight of the basic premise--
credit making decisions should not improperly be based upon 
health history or insurance information.
    This amendment is an important first step on behalf of 
customer privacy. These privacy protections must remain as a 
minimum standard. However, I believe that more can be done. The 
problems of privacy extend beyond financial services holding 
companies and similar privacy protections should be extended to 
other segments of our marketplace. I have introduced 
legislation to provide privacy for users of the Internet. In 
addition, I will be introducing legislation that expands upon 
the protections contained in H.R. 10 and will increase the 
universe of those who have to comply with these consumer 
privacy provisions. Hopefully, these changes will be considered 
in the context of H.R. 10.

                                                    Bruce F. Vento.

    SUPPLEMENTAL VIEW ON H.R. 10 AND THE COMMUNITY REINVESTMENT ACT

    With respect to communities' credit, investment and 
consumer needs, the Financial Services Act of 1999, as reported 
by the Committee, is flawed. Rather than maintaining and 
enhancing the relevance of the Community Reinvestment Act 
(CRA), H.R. 10 weakens this important 1977 law that imposes an 
affirmative obligation of banks and thrifts institutions to 
help meet the credit needs of all parts of the local 
communities they serve.
    While H.R. 10 requires all of the holding company's 
subsidiary depository institutions to achieve and maintain a 
``satisfactory'' CRA rating in order to affiliate as a 
Financial Holding Company, the bill does not require that all 
of a Financial Holding Company's banking and lending products 
and services be covered by the CRA. H.R. 10 creates, therefore, 
a two-tiered banking and lending industry, with one part being 
covered by CRA and the other part not. Further, this two-tiered 
structure creates a large loophole through which financial 
institutions can avoid community obligations created by the 
CRA. Specifically, H.R. 10 does not require securities 
companies, insurance companies, real estate companies and 
commercial and industrial affiliates engaging in lending or 
offering banking products to meet the credit, investment and 
consumer needs of the local communities they serve.
    The exclusion of nonbank affiliates' banking and lending 
products and services from the CRA is significant because 
increasingly, businesses such as car makers and credit card 
companies, securities firms and insurers are behaving like 
banks by offering products such as: FDIC-insured depository 
services, consumer loans, debit and credit cards, mortgages, 
home equity loans and commercial loans. Additionally, private 
investment capital is decreasingly covered by CRA requirements, 
rendering it more difficult for underserved rural and urban 
communities to access badly-needed capital for housing, 
economic development and infrastructure.
    Currently, more than two-thirds of long-term savings and 
investments now reside in nonbank intermediaries, compared to 
less than one-third in the mid-1970s. The functional effect of 
this market shift is that merely one-third of capital 
investment in the United States is conducted according to 
principles embodied by the CRA. Unless financial modernization 
applies the CRA to nonbank affiliates' banking and lending 
activities, this trend will increase, thereby fundamentally 
weakening the CRA.
    Weakening the CRA should be avoided because this relatively 
modest regulation has made a major contribution to the well-
being of residents of many underserved urban and rural 
communities. For example, since passage of the CRA in 1977, 
banks and community organizations have entered into agreements 
worth more than $1.04 trillion in reinvestment dollars for 
traditionally underserved populations. Lenders committed 87 
percent of this total in the last two years. Largely because of 
the CRA, homeownership in disinvested areas has increased. Data 
on home loans indicates that from 1993 to 1997 the number of 
home mortgage loans to African Americans and Hispanics 
increased 72 and 45 percent respectively. During the same time 
period the number of conventional mortgage loans to low- and 
moderate-income households increased from 407,059 to 571,125, 
representing a 40 percent increase.
    This progress should be maintained and enhanced. To reach 
this goal requires fully-protecting the CRA by applying its 
provisions to the banking and lending activities of nonbank 
financial institutions.
    In summary, H.R. 10 will modernize our nation's banking 
laws. It will likely enhance the safety and soundness of 
individual institutions. It will protect consumers in many 
ways. H.R. 10 does not adequately protect the CRA and encourage 
reinvestment in neglected urban and rural neighborhoods, 
however. Depository services and lending products in banks and 
nonbank affiliates should be covered by the CRA. Otherwise, 
different parts of financial holding companies will be 
regulated differently with respect to community capital, 
investment and consumer needs. In turn, this uneven regulation 
will make it increasingly harder for communities suffering from 
disinvestment to acquire capital for housing, economic 
development and infrastructure.

                                                 Luis V. Gutierrez.

                            ADDITIONAL VIEWS

    Today, we have the strongest financial market system in the 
world with the strongest consumer market and these consumers 
ought to be protected. Therefore, I voted for H.R. 10 because I 
believe it will promote more competition, create more products 
at lower prices, and better protect American consumers. It 
allows federal law to catch-up to the fast paced structural 
changes occurring in the financial marketplace. While H.R. 10 
does not necessarily produce the ``ideal'' financial holding 
company model or charter, it does repeal portions of existing 
regulatory constraints dating back to the Great Depression 
commensurate with a market that has matured greatly through 
disintermediation brought on by increased consumer wealth, 
sophistication, and access to information. This proposal should 
not be viewed as a repudiation of past regulatory regimes, but 
rather a maturing of such regimes.
    While this bill is not perfect, it strikes a balance in 
this new marketplace. First, H.R. 10 includes multiple 
structures for banking entities through either a holding 
company-affiliate model or operating subsidiary, which I have 
long supported and believe is adequately safe and sound. 
Second, the bill addresses in a prudent way the issue of 
commerce and banking through a new ``complimentary to banking'' 
approach that I hope will meet my previous concerns that an 
outright ban on commerce would limit future abilities to meet 
market demands and product development. Third, it provides for 
substantial consumer protections including suitability 
requirements for ``in-bank'' securities sales, which I have 
advocated. Finally, it continues the efforts of the Community 
Reinvestment Act so that all sectors of our society can benefit 
equally from capital formation and economic development. It is 
important that these areas of H.R. 10 are not changed or 
watered down.
    I want to highlight two amendments that I offered, both of 
which were adopted by this Committee. The first amendment to 
Section 202 clarifies the rule that equity swaps can be sold 
within banks to qualified investors, as defined by the 
Securities and Exchange Commission (SEC). Qualified investors 
are those investors with sufficient capital and expertise that 
they understand the risks associated with investing in these 
products. This amendment ensures that these hybrid products can 
be sold in banks as permitted by federal bank regulators. The 
Bentsen Amendment, however, ensures that equity swaps are not 
sold to the retail public. I am concerned that equity swaps are 
a hybrid product between a derivative and a securities product, 
and that we should proceed prudently and judiciously about 
sales of these products. Moreover, I want to clarify that this 
amendment does not permit the SEC to review or enforce actions 
against banks that sell these products. My amendment simply 
adopts the qualified investor definition provided for under the 
Securities and Exchange Act so that these products are sold to 
investors who understand the risks associated with these 
products.
    The second amendment I offered that the Committee approved 
is related to unitary thrift holding companies and ensures that 
they be treated fairly. The Committee mark would have limited 
transferability of existing unitary thrift holding companies, 
which is not equitable and would adversely impact the values of 
these charters. I believe that my amendment corrects this 
inequity and ensures that all unitary thrift holding companies 
that existed as of March 4, 1999, and those thrifts that have 
applied to become unitary thrift holding companies as of March 
4, 1999, will be permitted to sell their thrift to an open 
market as has been accorded since the unitary thrift charter 
was first established by Congress more than thirty years ago. 
While the Committee has endorsed a ban on outright mixing of 
banking and commerce, with my support, this amendment strikes a 
balance where such mixing is only permitted in the limited form 
authorized under the thrift charter, with limited commercial 
lending capacity as previously allowed by Congress. Further, it 
prohibits the creation of new commercially owned thrift 
charters without taking from existing Congressionally approved 
charters. By adopting this amendment, I believe we have dealt 
as fairly as possible with an extremely difficult issue.
    In conclusion, this bill is imperfect. But, it advances 
banking regulations to meet the challenges of a 21st Century 
marketplace without shortchanging consumers. Therefore, and for 
the reasons outlined above, I strongly support its adoption.

                                                    Ken E. Bentsen.

                            DISSENTING VIEWS

    I oppose H.R. 10, the Financial Services Act of 1999, as 
reported by the Committee. H.R. 10, at potential risk to 
taxpayers, consumers, small businesses and their communities, 
would let banks, insurance companies and securities firms merge 
with each other. Proponents argue that these industries will 
use the financial rewards from these mergers to provide 
consumers more services at lower cost. I argued that we should 
mandate consumer benefits in the legislation, just as we 
mandated the benefits to the affected industries. 
Unfortunately, in too many instances we failed to protect 
consumers. Consequently, I voted against the bill.
    Specifically, I, along with other members of the Committee, 
wrote to the Chairman asking that several important consumer 
and community protections be placed in the bill. That request 
included provision of affordable basic bank accounts, a ban on 
ATM surcharge fees and expansion of the Community Reinvestment 
Act to include insurance companies and securities firms.
    Affordable basic bank accounts are important because bank 
accounts give regular consumers basic access to the American 
financial mainstream. For instance, consumers can't get loans 
without a bank account. However, bank accounts must be 
affordable priced if every consumer will have genuine access to 
them. H.R. 10 would give banks the financial wherewithal to 
provide basic bank accounts at cheaper cost. Consequently, we 
should have mandated that banks provide affordable basic 
banking.
    This bill should have banned ATM surcharge fees. Again, 
financial modernization would provide banks the financial 
wherewithal to provide this service more affordably. Moreover, 
it's something consumer's demand. A 1998 survey of voters from 
my state, Illinois, showed that 77% of voters supported a ban 
on ATM fees. ATMs are supposed to provide depositors convenient 
access to their money and obstacles, like hidden surcharge 
fees, should not be placed in their way.
    Finally, we should have ``modernized'' the Community 
Reinvestment Act along with the other banking laws. The 
Community Reinvestment Act has produced over $1 trillion of 
investments to underserved neighborhoods in the form of 
mortgage and small business loans that are profitable to banks. 
That $1 trillion resulted without any tax dollars and, because 
it enables our neighborhoods to build their own wealth without 
accessing the government safety net, it saved even more tax 
dollars. Unfortunately, H.R. 10 threatens CRA.
    H.R. 10 lets banks merge with insurance companies and 
securities firms. Banks that do more business as insurance 
companies and securities firms will do less business as banks 
and, because CRA only covers banks, make fewer loans to people. 
Expanding CRA to cover insurance companies and securities firms 
would ensure that banks maintain the necessary focus on serving 
the needs of consumers and communities.
    Absent these consumer and community protections, H.R. 10 
poses more threat than promise and thus I opposed the bill.

                                                    Jan Schakowski.

                            DISSENTING VIEWS

    Financial modernization is an important issue, and reform 
is long overdue. Arbitrary and artificial government 
interventions in the market distort the national economy. This 
distortion limits consumer choice and raises costs on 
businesses. ``Modernization'' legislation should first ``do no 
harm'' and then seek to undo the previous governmental 
interventions. This bill fails that test: not only is it not a 
deregulation bill, it is in fact a reregulation bill.
    In order to allow for the market to function properly--and 
to internalize properly the risk that businesses choose to 
take--governmental regulations should be relaxed not increased. 
Federal banking regulations and other restrictions stifle the 
dynamic growth of new financial products and services that are 
fundamental to enhance the success of the U.S. financial 
services sector.
    Genuine financial modernization would allow and encourage 
the introduction and development of new financial service 
products and structures, not restrict financial providers' 
current activities and eliminate present structures. As new 
hybrid financial service products are developed in response to 
market demand, government should not thwart the consumer's 
ability to enjoy these new products.
    Instead of relying more on private market regulation and 
deferring to state regulation of insurance, this bill would 
enhance the power of Federal regulators over the market. By 
mixing banking and commerce and increasing the scope of Federal 
banking regulators, including the Federal Reserve, commercial 
enterprises will come under greater governmental supervision. 
The result will serve to stifle the innovation that is the 
intended purpose of this bill.
    By substituting the original Paul-Campbell amendment number 
eight (which would have removed any requirement that banks 
monitor the legality of transactions of their customers) for 
the Baker-Barr amendment, the bill does not take a strong, free 
market stand in favor of respect for financial privacy. As the 
current uproar over the proposed formal ``Know Your Customer'' 
rule has demonstrated, the American people expect the 
government to respect their--not use unwilling intermediaries 
to spy on them. Over a quarter of a million Americans told the 
regulators in no uncertain terms that the government should 
have access to this information only through a search warrant. 
They do not want an informal requirement such as the existing 
Bank Secrecy Act's compliance manual from the Federal Reserve.
    The Law Enforcement Alliance of America supported the 
original Paul-Campbell amendment:

          [Removing existing requirements] would in no way 
        impinge efforts of law enforcement to investigate 
        criminal activity * * * The pursuit of private 
        information outside the traditional, time-tested, and 
        court-approved law enforcement practices such as those 
        proposed [KYC] will in fact have a deleterious effect 
        on law enforcement's ability to effectively prosecute 
        its mission. Such intrusive measures will also infringe 
        the privacy rights of law-abiding citizens while 
        detracting from meaningful debate and discussion of 
        measures that would improve law enforcement's crime-
        fighting ability.

    Frances B. Smith, executive director, Consumer Alert, 
(Journal of Commerce, March 12, 1999), argues that we need to 
go back and revisit current laws, ``Many large banks already 
have [Know Your Customer] programs that follow the nixed 
proposals. Consumers' financial transactions will still be 
under surveillance until the laws on the books are 
challenged.'' And others concur. ``The American Bankers 
Association on Monday urged regulators not only to withdraw 
their proposed know-your-customer rule proposal but to 
dismantle existing requirements'' (American Banker, March 9, 
1999).
    The California Bankers Association web site explains 
clearly, ``There is no precedent whatsoever to match what is 
being proposed--for a private nongovernment entity to be 
required to continually monitor ordinary citizens to actively 
ensure the legality of their unregulated activities [banking 
transactions] * * * It is not unlike requiring telephone 
companies to identify customers and monitor their customers' 
calling patterns to ensure no commission of crimes through the 
wires.''
    The American Bankers Association June 1998 report Financial 
Privacy in America: A Review of Consumer Financial Services 
Issues reads, ``In sum, the citizens of the United States are 
not only well-protected, but increasingly well-informed and 
aggressive in addressing perceived risks to their personal 
privacy, in making choices about data privacy, and in insisting 
that these choices are respected,'' the ABA report reads. 
``Technology enables businesses to make sense of vast stores of 
information by providing consumers with new and better products 
and services, particularly, the ones that consumers are likely 
to find attractive. Businesses collect consumer information in 
an effort to deliver new services and products that consumers 
want. This is the law of supply and demand. For businesses to 
succeed, they must satisfy consumer needs and demands as 
efficiently and accurately as possible. This is a `market' 
check on privacy.''
    Many other groups agree. Norman Willox Jr., president and 
chief executive, National Fraud Center, (``Know your cyber-
customer,'' Journal of Commerce, February 4, 1999), writes ``We 
also encourage the administration to continue to recognize the 
importance of self-regulation in this complex area, and we 
commend it for its efforts to allow industry the opportunity to 
develop and implement such self-regulatory programs needed if 
we are to see a thriving e-commerce.''
    The Privacy Act of 1974 made clear that there should be no 
problems adopting this amendment, ``It shall be unlawful for 
any Federal, State or local government agency to deny any 
individual any right, benefit or privilege provided by law 
because of such individual's refusal to disclose his Social 
Security number'' Yet government requires bank tellers to 
circumvent rational expectations of consumer privacy.
    While the bill does allow for greater flexibility of some 
structures and activities, it does so in an arbitrary fashion. 
The reforms that this bill makes do not sufficiently address 
the safety and soundness of deposit insurance and the payments 
system and, ultimately, taxpayer liability.

                                                          Ron Paul.
  

                                
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