[Federal Register Volume 62, Number 36 (Monday, February 24, 1997)]
[Proposed Rules]
[Pages 8190-8196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4475]


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FARM CREDIT ADMINISTRATION

12 CFR Part 650

RIN 3052-AB72


Federal Agricultural Mortgage Corporation; Receivers and 
Conservators

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

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SUMMARY: The Farm Credit Administration (FCA), by the FCA

[[Page 8191]]

Board (Board), proposes to amend the regulations that appertain to the 
Federal Agricultural Mortgage Corporation (Farmer Mac or Corporation) 
by adding a subpart to govern a receivership or conservatorship. This 
action is the result of changes made to the Farm Credit Act of 1971, as 
amended (Act), by the Farm Credit System Reform Act of 1996 (1996 
Reform Act), Pub. L. 104-105 (Feb. 10, 1996). The proposed rule 
implements the receivership/conservatorship authorities granted to the 
FCA in the 1996 Reform Act and by previous law.

DATES: Written comments should be received on or before March 26, 1997.

ADDRESSES: Comments may be mailed or delivered to Patricia W. DiMuzio, 
Director, Regulation Development Division, Office of Policy Development 
and Risk Control, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, Virginia 22102-5090 or sent by facsimile transmission to FAX 
number (703) 734-5784. Comments may also be submitted via electronic 
mail to ``[email protected]''. Copies of all communications received 
will be available for review by interested parties in the Office of 
Policy Development and Risk Control, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT: Larry W. Edwards, Director, Office of 
Secondary Market Oversight, Farm Credit Administration, McLean, VA 
22102-5090, (703) 883-4051, TDD (703) 883-4444.

SUPPLEMENTARY INFORMATION: The 1996 Reform Act added section 8.41 to 
the Act, which grants the FCA the authority to place the Corporation 
into receivership and expands FCA's existing authority to place the 
Corporation into conservatorship. The 1996 Reform Act provides that the 
receiver or conservator appointed for the Corporation shall have such 
powers as are authorized in regulations adopted by the FCA and that 
such powers shall be comparable to those of a receiver or conservator 
appointed pursuant to section 4.12(b) of the Act. The proposed 
regulations implement these statutory provisions.
    Based on the comparability requirement in section 8.41(e), the 
proposed regulations contain most of the provisions of existing part 
627 (Secs. 627.2700-627.2790) with certain modifications as necessary 
to implement section 8.41 and to reflect the unique characteristics of 
Farmer Mac. 1 The following is a section-by-section summary of the 
proposed regulations.
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    \1\ For more information on the regulations in 12 CFR part 627, 
see 57 FR 46482 (Oct. 9, 1992); 57 FR 23348 (Jun. 3, 1992); 54 FR 
1148 (Jan. 12, 1989); 51 FR 32444 (Sept. 12, 1986).
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Section 650.50--Grounds for Appointment of a Receiver or Conservator

    The 1996 Reform Act incorporated the grounds for receivership or 
conservatorship listed in existing section 4.12(b) of the Act and added 
an additional criterion for determining whether the Corporation is 
insolvent. Insolvency is defined in proposed Sec. 650.50(a) as when: 
(1) The assets of the Corporation are less than its obligations to 
creditors and others; or (2) the Corporation is unable to pay its debts 
as they fall due in the ordinary course of business. The remaining 
grounds listed in section 4.12(b) are incorporated in proposed 
Sec. 650.50(a) with one exception. Section 4.12(b)(6) is inapplicable 
to Farmer Mac because it pertains solely to the inability to pay the 
principal or interest on ``insured obligations.'' Section 5.51 of the 
Act defines ``insured obligations'' as those obligations issued by Farm 
Credit System banks and, therefore, does not include the obligations of 
Farmer Mac.
    Proposed Sec. 650.50(b) incorporates the three additional grounds 
that are in the 1996 Reform Act for appointment of a receiver for the 
Corporation. A receiver may be appointed if: (1) The authority of the 
Corporation to purchase qualified loans or issue or guarantee loan-
backed securities is suspended; or (2) the Corporation is classified 
under section 8.35 of the Act as within enforcement level III or IV and 
the alternative actions available under subtitle B are not 
satisfactory; and (3) prior to appointing a receiver under the first 
two conditions, the FCA determines that the appointment of a 
conservator would not be appropriate.
    Pursuant to the 1996 Reform Act, proposed Sec. 650.50(c) authorizes 
the FCA to appoint a conservator for Farmer Mac if its authority to 
purchase qualified loans or issue or guarantee loan-backed securities 
is suspended. Proposed Sec. 650.50(c) also incorporates the authority 
in section 8.37 of the Act for the FCA to appoint a conservator for 
Farmer Mac if the Corporation is classified under section 8.35 of the 
Act as within enforcement level III or IV.

Section 650.51--Action for Removal of Receiver or Conservator

    Proposed Sec. 650.51 contains the procedures provided by the 1996 
Reform Act for the Corporation to challenge the FCA's appointment of a 
receiver or conservator. Proposed Sec. 650.51 also authorizes the 
Corporation's board of directors to meet following the appointment of 
the receiver or conservator in order to authorize the filing of an 
action for removal of the receiver or conservator.

Section 650.52--Voluntary Liquidation

    Proposed Sec. 650.52 incorporates the authority in the 1996 Reform 
Act for Farmer Mac to voluntarily liquidate with the consent of the 
FCA, provided that the liquidation is conducted in accordance with a 
plan of liquidation approved by the FCA. Although the regulation does 
not require that a voluntary liquidation include a receiver, the FCA 
may, in its discretion, appoint a receiver as part of an approved 
liquidation plan. If a receiver is appointed to conduct a voluntary 
liquidation of the Corporation, the receivership will be conducted 
pursuant to these regulations, except to the extent that a plan for 
voluntary liquidation, approved by the stockholders and FCA, provides 
otherwise.
    In addition, proposed Sec. 650.52 requires that the resolution of 
the Corporation's board of directors and the liquidation plan be 
submitted to the FCA for preliminary approval. If preliminary approval 
is given, the resolution must be approved by the Corporation's 
stockholders. The stockholder voting procedures would be in accordance 
with the Corporation's bylaws. Following an affirmative vote of the 
stockholders, the FCA will consider final approval of the resolution 
and plan for voluntary liquidation.

Section 650.55--Appointment of a Receiver

    Consistent with part 627, proposed Sec. 650.55 provides for 
notification of the Corporation immediately upon appointment of the 
receiver and for public notification in the Federal Register. Further, 
upon appointment of the receiver, all rights, privileges, and powers of 
the board of directors, officers, and employees of the Corporation 
would be vested exclusively in the receiver, except that the board of 
directors is authorized by proposed Sec. 650.51 to maintain an action 
to challenge the receivership. Finally, pursuant to the 1996 Reform 
Act, proposed Sec. 650.55 authorizes the FCA to cancel the charter of 
the Corporation upon appointment of the receiver or at such later date 
as the FCA determines is appropriate, but not later than the conclusion 
of the receivership.

[[Page 8192]]

Section 650.56--Powers and Duties of the Receiver

    Pursuant to the requirement in the 1996 Reform Act that the powers 
of a receiver or conservator of Farmer Mac be comparable to the powers 
of a receiver or conservator of a Farm Credit institution, proposed 
Sec. 650.56 incorporates all of the powers of receivers found in 
Sec. 627.2725, except those few that deal only with the functions of 
banks and associations and would not be applicable to a receiver of 
Farmer Mac. Generally, a receiver or conservator of Farmer Mac would 
have all of the rights and powers that the Corporation had prior to the 
appointment of the conservator or receiver, including the power to 
issue guarantees of securities. The FCA requests comment on whether it 
would be appropriate to place limitations on any of these powers of 
Farmer Mac and if so asks for comment concerning specific reasons for 
any such limitation. In addition, the 1996 Reform Act authorizes a 
receiver or conservator of Farmer Mac to borrow funds to meet the 
ongoing administrative expenses and other liquidity needs of the 
receivership or conservatorship. Funds may be borrowed from such 
sources, in such amounts, and at such rates of interest as the receiver 
or conservator determines are necessary or appropriate to fund the 
working capital needs of the receivership or conservatorship.

Section 650.57--Report to Congress

    Proposed Sec. 650.57 incorporates the 1996 Reform Act requirement 
that the receiver submit a report to Congress on the financial 
condition of the receivership if the receiver determines that it is 
likely that there will be insufficient assets of the receivership to 
pay all valid claims.

Section 650.58--Preservation of Equity

    Proposed Sec. 650.58 provides for preservation of the equities of 
the Corporation in receivership until final distribution and also 
protects the equities of the Corporation in a voluntary liquidation 
until the stockholders and the FCA have approved the liquidation plan. 
If a voluntary liquidation is approved by the stockholders and the FCA 
and a receiver is appointed, disposition of equities of the Corporation 
would proceed in accordance with proposed Sec. 650.62(b). If a receiver 
is not appointed, disposition would proceed according to the plan of 
liquidation approved by the FCA pursuant to proposed Sec. 650.52.

Section 650.59--Notice to Stockholders

    Proposed Sec. 650.59 incorporates the provisions in part 627 for 
notifying stockholders of the appointment of a receiver.

Section 650.60--Creditor Claims

    The requirements for publication of a notice to creditors, 
allowance of claims, and payment of claims contained in part 627 are 
incorporated in proposed Sec. 650.60.

Section 650.61--Priority of Claims

    Proposed Sec. 650.61 governs the priority of claims that apply to 
the distribution of assets of the Corporation in receivership. 
Distribution of assets begins with the first class of claims and will 
continue with each succeeding class until all claims are paid or the 
assets of the Corporation are exhausted. First in priority would be 
administrative expenses of the Corporation in receivership, including 
any amounts borrowed for working capital pursuant to proposed 
Sec. 650.56(b)(3). Also included in this class would be FCA's annual 
assessment of the Corporation pursuant to section 5.15 of the 
Act,2 including any unpaid amounts as of the date of appointment 
of the receiver. Section 5.15 requires that the FCA determine, assess 
and collect the costs of supervising and examining the Corporation 
separate from the costs of administering the Act with regard to other 
Farm Credit System institutions. The intent of separate apportionment 
is to ensure, in accordance with section 8.1(a)(3), that Farmer Mac 
does not pay for the costs of supervising and examining the other Farm 
Credit System institutions and that the other institutions do not pay 
FCA's similar costs related to Farmer Mac. The FCA believes that 
providing for FCA assessments as an administrative expense of the 
receivership and a first priority claim is necessary to ensure that the 
provisions of the Act regarding separate assessments are not violated.
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    \2\ Such assessments will continue until the Corporation's 
charter is canceled and the Office of Secondary Market Oversight is 
abolished.
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    Next in priority are administrative expenses of the Corporation, 
incurred within 60 days prior to the receiver's taking possession, 
claims for wages and salaries of employees of the Corporation, and 
claims for taxes, respectively. Following these claims, all claims of 
creditors that are secured by specific assets of the Corporation would 
be paid. Finally, payments would be made for the claims of general 
creditors of the Corporation.
    The FCA notes that pursuant to these priorities, obligations of 
Farmer Mac, whether general obligations issued under section 8.6(e)(2) 
or obligations issued to the Secretary of the Treasury under section 
8.13, will fall in either the category of secured obligations 
(Sec. 650.61(f)) or unsecured obligations (Sec. 650.61(g)) depending on 
the terms of each individual debt issuance. The FCA is considering 
whether the Secretary of the Treasury should be afforded a priority 
higher than other creditors and requests comments.
    In addition, the maximum amount for wage and salary claims of 
employees not engaged by the receiver in proposed Sec. 650.61(d) is 
stated in terms of the 1992 baseline of $3,000. The baseline will be 
adjusted to compute the maximum compensation limit at the time of any 
receivership. 3
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    \3\ If the FCA were to compute the maximum compensation limit 
based on 1996 and include the 1996 number as the baseline year, the 
maximum claim amounts under part 627 and part 650, as calculated in 
any year subsequent to 1996, would be slightly different due to the 
different base amounts. The FCA believes that the maximum claim 
amount for wages and salaries of employees not retained by a 
receiver should be the same when computed under any FCA receivership 
regulation.
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Section 650.62--Payment of Claims

    Proposed Sec. 650.62 provides for payment of claims according to 
the priorities set forth in proposed Sec. 650.61 and distribution of 
the remainder of the assets of the Corporation according to the 
Corporation's bylaws.

Section 650.63--Inventory, Audit, and Reports

    The requirements in part 627 for an inventory of assets, annual 
audit of the receivership, annual accounting to stockholders (available 
upon request), and a report to each stockholder at the conclusion of 
the receivership summarizing the disposition of the assets and claims 
are incorporated into proposed Sec. 650.63.

Section 650.64--Final Discharge and Release of the Receiver

    Proposed Sec. 650.64 provides that after the receiver has made a 
final distribution of the assets of the receivership, the receivership 
will be terminated and the receiver finally discharged and released. In 
addition, if the charter of the Corporation has not been canceled 
pursuant to proposed Sec. 650.55(c), the charter will be canceled at 
the time of discharge and release of the receiver.

[[Page 8193]]

Section 650.65--Appointment of a Conservator

    Consistent with part 627, proposed Sec. 650.65 provides for 
notification of the appointment of a conservator and authorizes the 
Board to terminate the conservatorship at any time and direct the 
conservator to turn over the Corporation's operation to such management 
as the Board may designate.

Section 650.66--Powers and Duties of the Conservator

    Pursuant to the requirement in the 1996 Reform Act that a 
conservator of the Corporation have powers comparable to those of a 
conservator of a Farm Credit institution appointed under section 
4.12(b) of the Act, proposed Sec. 650.66 incorporates the powers and 
duties of conservators that are contained in part 627. A conservator 
for Farmer Mac will have all of the powers of a receiver of Farmer Mac 
with the exception of those listed in proposed Sec. 650.56(b)(2) and 
(b)(16).

Section 650.67--Inventory, Examination, and Reports to Stockholders

    Proposed Sec. 650.67 requires the conservator to prepare an 
inventory of assets and liabilities of the Corporation and clarify that 
the FCA has authority to examine the Corporation in conservatorship. 
Further, the Corporation in conservatorship will be required to file 
financial reports with the FCA in accordance with Sec. 620.40 and part 
621 and will be required to comply with the applicable provisions of 
the Securities Act of 1933 and the Securities Exchange Act of 1934.

Section 650.68--Final Discharge and Release of the Conservator

    Proposed Sec. 650.68 requires the conservator to file a report on 
its activities with the FCA at such time as the conservator is relieved 
of its duties and will then be completely and finally released.

List of Subjects in 12 CFR Part 650

    Agriculture, Banks, banking, Conflicts of interests, Rural areas.

    For the reasons stated in the preamble, part 650 of chapter VI, 
title 12 of the Code of Federal Regulations is proposed to be amended 
to read as follows:

PART 650--FEDERAL AGRICULTURAL MORTGAGE CORPORATION

    1. The authority citation for part 650 is revised to read as 
follows:

    Authority: Secs. 4.12, 5.9, 5.17, 8.11, 8.37, 8.41 of the Farm 
Credit Act (12 U.S.C. 2183, 2243, 2252, 2279aa-11, 2279bb-6, 
2279cc); sec. 514 of Pub. L. 102-552, 106 Stat. 4102; sec. 118 of 
Pub. L. 104-105, 110 Stat. 168.

    2. Part 650 is amended by adding a new subpart C to read as 
follows:

Subpart C--Receiver and Conservator

Sec.
650.50  Grounds for appointment of a receiver or conservator.
650.51  Action for removal of receiver or conservator.
650.52  Voluntary liquidation.
650.55  Appointment of a receiver.
650.56  Powers and duties of the receiver.
650.57  Report to Congress.
650.58  Preservation of equity.
650.59  Notice to stockholders.
650.60  Creditor claims.
650.61  Priority of claims.
650.62  Payment of claims.
650.63  Inventory, audit, and reports.
650.64  Final discharge and release of the receiver.
650.65  Appointment of a conservator.
650.66  Powers and duties of the conservator.
650.67  Inventory, examination, and reports to stockholders.
650.68  Final discharge and release of the conservator.

Subpart C--Receiver and Conservator


Sec. 650.50  Grounds for appointment of a receiver or conservator.

    (a) The grounds for the appointment of a receiver or conservator 
for the Corporation are:
    (1) The Corporation is insolvent. For purposes of this paragraph, 
insolvent means:
    (i) The assets of the Corporation are less than its obligations to 
its creditors and others; or
    (ii) The Corporation is unable to pay its debts as they fall due in 
the ordinary course of business;
    (2) There has been a substantial dissipation of the assets or 
earnings of the Corporation due to the violation of any law, rule, or 
regulation, or the conduct of an unsafe or unsound practice;
    (3) The Corporation is in an unsafe or unsound condition to 
transact business;
    (4) The Corporation has committed a willful violation of a final 
cease-and-desist order issued by the Farm Credit Administration Board;
    (5) The Corporation is concealing its books, papers, records, or 
assets, or is refusing to submit its books, papers, records, assets, or 
other material relating to the affairs of the Corporation for 
inspection to any examiner or any lawful agent of the Farm Credit 
Administration Board.
    (b) In addition to the grounds set forth in paragraph (a) of this 
section, a receiver can be appointed for the Corporation if the Farm 
Credit Administration determines that the appointment of a conservator 
would not be appropriate when one of the following conditions exists:
    (1) The authority of the Corporation to purchase qualified loans or 
issue or guarantee loan-backed securities is suspended; or
    (2) The Corporation is classified under section 8.35 of the Act as 
within enforcement level III or IV and the alternative actions 
available under subtitle B of title VIII of the Act are not 
satisfactory.
    (c) In addition to the grounds set forth in paragraph (a) of this 
section, a conservator can be appointed for the Corporation if:
    (1) The Corporation is classified under section 8.35 of the Act as 
within enforcement level III or IV; or
    (2) The authority of the Corporation to purchase qualified loans or 
issue or guarantee loan-backed securities is suspended.


Sec. 650.51  Action for removal of receiver or conservator.

    Upon the appointment of a receiver or conservator for the 
Corporation by the Farm Credit Administration Board pursuant to 
Sec. 650.50 of this subpart, the Corporation may, within 30 days of 
such appointment, bring an action in the United States District Court 
for the District of Columbia, for an order requiring the Farm Credit 
Administration Board to remove the receiver or conservator and, if the 
charter has been canceled, to rescind the cancellation of the charter. 
Notwithstanding any other provision of this part, the Corporation's 
board of directors is empowered to meet subsequent to such appointment 
and authorize the filing of an action for removal. An action for 
removal may be authorized only by the Corporation's board of directors.


Sec. 650.52  Voluntary liquidation.

    (a) The Corporation may voluntarily liquidate by a resolution of 
its board of directors, but only with the consent of, and in accordance 
with a plan of liquidation approved by, the Farm Credit Administration 
Board. Upon adoption of such resolution, the Corporation shall submit 
the resolution and proposed voluntary liquidation plan to the Farm 
Credit Administration for preliminary approval. The Farm Credit 
Administration Board, in its discretion, may appoint a receiver as part 
of an approved liquidation plan. If a receiver is appointed for the 
Corporation as part of a voluntary

[[Page 8194]]

liquidation, the receivership shall be conducted pursuant to the 
regulations of this part, except to the extent that an approved plan of 
liquidation provides otherwise.
    (b) If the Farm Credit Administration Board gives preliminary 
approval to the liquidation plan, the board of directors of the 
Corporation shall submit the resolution to liquidate to the 
stockholders for a vote in accordance with the bylaws of the 
Corporation.
    (c) The Farm Credit Administration Board will consider final 
approval of the resolution to voluntarily liquidate and the liquidation 
plan after an affirmative stockholder vote on the resolution.


Sec. 650.55  Appointment of a receiver.

    (a) The Farm Credit Administration Board may in its discretion 
appoint, ex parte and without prior notice, a receiver for the 
Corporation provided that one or more of the grounds for appointment as 
set forth in Sec. 650.50 of this subpart exist.
    (b) Upon the appointment of the receiver, the Chairman of the Farm 
Credit Administration Board shall immediately notify the Corporation 
and shall publish a notice of the appointment in the Federal Register.
    (c) Upon the issuance of the order placing the Corporation into 
liquidation and appointing the receiver, all rights, privileges, and 
powers of the board of directors, officers, and employees of the 
Corporation shall be vested exclusively in the receiver. The Farm 
Credit Administration Board may cancel the charter of the Corporation 
on such date as the Farm Credit Administration determines is 
appropriate, but not later than the conclusion of the receivership and 
discharge of the receiver.


Sec. 650.56  Powers and duties of the receiver.

    (a) General. Upon appointment as receiver, the receiver shall take 
possession of the Corporation in order to wind up the business 
operations of the Corporation, collect the debts owed to the 
Corporation, liquidate its property and assets, pay its creditors, and 
distribute the remaining proceeds to stockholders. The receiver is 
authorized to exercise all powers necessary to the efficient 
termination of the Corporation's operation as provided for in this 
part.
    (2) Upon its appointment as receiver, the receiver automatically 
succeeds to:
    (i) All rights, titles, powers, and privileges of the Corporation 
and of any stockholder, officer, or director of the Corporation with 
respect to the Corporation and the assets of the Corporation; and
    (ii) Title to the books, records, and assets of any other legal 
custodian of the Corporation.
    (3) The receiver of the Corporation serves as the trustee of the 
receivership estate and conducts its operations for the benefit of the 
creditors and stockholders of the Corporation.
    (b) Specific powers. The receiver may:
    (1) Exercise all powers as are conferred upon the officers and 
directors of the Corporation under law and the articles and bylaws of 
the Corporation.
    (2) Take any action the receiver considers appropriate or expedient 
to carry on the business of the Corporation during the process of 
liquidating its assets and winding up its affairs.
    (3) Borrow funds in accordance with section 8.41(f) of the Act to 
meet the ongoing administrative expenses or other liquidity needs of 
the receivership.
    (4) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect the Corporation's assets or property or 
rehabilitate or improve such property and assets.
    (5) Pay any sum the receiver deems necessary or advisable to 
preserve, conserve, or protect any asset or property on which the 
Corporation has a lien or in which the Corporation has a financial or 
property interest, and pay off and discharge any liens, claims, or 
charges of any nature against such property.
    (6) Investigate any matter related to the conduct of the business 
of the Corporation, including, but not limited to, any claim of the 
Corporation against any individual or entity, and institute appropriate 
legal or other proceedings to prosecute such claims.
    (7) Institute, prosecute, maintain, defend, intervene, and 
otherwise participate in any legal proceeding by or against the 
Corporation or in which the Corporation or its creditors or 
stockholders have any interest, and represent in every way the 
Corporation, its stockholders and creditors.
    (8) Employ attorneys, accountants, appraisers, and other 
professionals to give advice and assistance to the receivership 
generally or on particular matters, and pay their retainers, 
compensation, and expenses, including litigation costs.
    (9) Hire any agents or employees necessary for proper 
administration of the receivership.
    (10) Execute, acknowledge, and deliver, in person or through a 
general or specific delegation, any instrument necessary for any 
authorized purpose, and any instrument executed under this paragraph 
shall be valid and effective as if it had been executed by the 
Corporation's officers by authority of its board of directors.
    (11) Sell for cash or otherwise any mortgage, deed of trust, chose 
in action, note, contract, judgment or decree, stock, or debt owed to 
the Corporation, or any property (real or personal, tangible or 
intangible).
    (12) Purchase or lease office space, automobiles, furniture, 
equipment, and supplies, and purchase insurance, professional, and 
technical services necessary for the conduct of the receivership.
    (13) Release any assets or property of any nature, regardless of 
whether the subject of pending litigation, and repudiate, with cause, 
any lease or executory contract the receiver considers burdensome.
    (14) Settle, release, or obtain release of, for cash or other 
consideration, claims and demands against or in favor of the 
Corporation or receiver.
    (15) Pay, out of the assets of the Corporation, all expenses of the 
receivership (including compensation to personnel employed to represent 
or assist the receiver) and all costs of carrying out or exercising the 
rights, powers, privileges, and duties as receiver.
    (16) Pay, out of the assets of the Corporation, all approved claims 
of indebtedness in accordance with the priorities established in this 
part.
    (17) Take all actions and have such rights, powers, and privileges 
as are necessary and incident to the exercise of any specific power.
    (18) Take such actions, and have such additional rights, powers, 
privileges, immunities, and duties as the Farm Credit Administration 
Board authorizes by order or by amendment of any order or by 
regulation.


Sec. 650.57  Report to Congress.

    On a determination by the receiver that there are insufficient 
assets of the receivership to pay all valid claims against the 
receivership, the receiver shall submit to the Secretary of the 
Treasury and Congress a report on the financial condition of the 
receivership.


Sec. 650.58  Preservation of equity.

    (a) Except as provided for upon final distribution of the assets of 
the Corporation pursuant to Sec. 650.62 of this subpart, no capital 
stock, equity reserves, or other allocated equities of the Corporation 
in receivership shall be issued, allocated, retired, sold, distributed, 
transferred, or assigned.
    (b) Immediately upon the adoption of a resolution by its board of 
directors to voluntarily liquidate the Corporation,

[[Page 8195]]

the capital stock, equity reserves, and allocated equities of the 
Corporation shall not be issued, allocated, retired, sold, distributed, 
transferred, assigned, or applied against any indebtedness of the 
owners of such equities. Such activities could resume if the 
stockholders of the Corporation or the Farm Credit Administration Board 
disapprove the resolution. In the event the resolution is approved by 
the stockholders of the Corporation and the Farm Credit Administration 
Board, the liquidation plan shall govern disposition of the equities of 
the Corporation, except that if the Corporation is placed in 
receivership, the provisions of paragraph (a) of this section shall 
govern further disposition of the equities of the Corporation.


Sec. 650.59  Notice to stockholders.

    As soon as practicable after a receiver takes possession of the 
Corporation, the receiver shall notify, by first class mail, each 
holder of stock of the following matters:
    (a) The number of shares such holder owns;
    (b) That the stock and other equities of the Corporation may not be 
retired or transferred until the liquidation is completed, whereupon 
the receiver will distribute a liquidating dividend, if any, to the 
stockholders; and
    (c) Such other matters as the receiver or the Farm Credit 
Administration deems necessary.


Sec. 650.60  Creditor claims.

    (a) Upon appointment, the receiver shall promptly publish a notice 
to creditors to present their claims against the Corporation, with 
proof thereof, to the receiver by a date specified in the notice, which 
shall be not less than 90 calendar days after the first publication. 
The notice shall be republished approximately 30 days and 60 days after 
the first publication. The receiver shall promptly send, by first class 
mail, a similar notice to any creditor shown on the Corporation's books 
at the creditor's last address appearing thereon. Claims filed after 
the specified date shall be disallowed except as the receiver may 
approve them for full or partial payment from the Corporation's assets 
remaining undistributed at the time of approval.
    (b) The receiver shall allow any claim that is timely received and 
proved to the receiver's satisfaction. The receiver may disallow in 
whole or in part any creditor's claim or claim of security, preference, 
or priority that is not proved to the receiver's satisfaction or is not 
timely received and shall notify the claimant of the disallowance and 
reason therefor. Sending the notice of disallowance by first class mail 
to the claimant's address appearing on the proof of claim shall be 
sufficient notice. The disallowance shall be final unless, within 30 
days after the notice of disallowance is mailed, the claimant files a 
written request for payment regardless of the disallowance. The 
receiver shall reconsider any claim upon the timely request of the 
claimant and may approve or disapprove such claim in whole or in part.
    (c) Creditors' claims that are allowed shall be paid by the 
receiver from time to time, to the extent funds are available therefor 
and in accordance with the priorities established in this part and in 
such manner and amounts as the receiver deems appropriate. In the event 
the Corporation has a claim against a creditor of the Corporation, the 
receiver shall offset the amount of such claim against the claim 
asserted by such creditor.


Sec. 650.61  Priority of claims.

    The following priority of claims shall apply to the distribution of 
the assets of the Corporation in liquidation:
    (a) All costs, expenses, and debts incurred by the receiver in 
connection with the administration of the receivership, all FCA 
assessments for the costs of supervising and examining the Corporation, 
and any amounts borrowed pursuant to Sec. 650.56(b)(3).
    (b) Administrative expenses of the Corporation, provided that such 
expenses were incurred within 60 days prior to the receiver's taking 
possession, and that such expenses shall be limited to reasonable 
expenses incurred for services actually provided by accountants, 
attorneys, appraisers, examiners, or management companies, or 
reasonable expenses incurred by employees that were authorized and 
reimbursable under a preexisting expense reimbursement policy and that, 
in the opinion of the receiver, are of benefit to the receivership, and 
shall not include wages or salaries of employees of the Corporation.
    (c) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the receiver 
by an employee of the Corporation whom the receiver determines it is in 
the best interest of the receivership to engage or retain for a 
reasonable period of time.
    (d) If authorized by the receiver, claims for wages and salaries, 
including vacation pay, earned prior to the appointment of the 
receiver, up to a maximum of three thousand dollars ($3,000) per person 
as adjusted for inflation, by an employee of the Corporation not 
engaged or retained by the receiver. The adjustment for inflation shall 
be the percentage by which the Consumer Price Index (as prepared by the 
Department of Labor) for the calendar year preceding the appointment of 
the receiver exceeds the Consumer Price Index for the calendar year 
1992.
    (e) All claims for taxes.
    (f) All claims of creditors which are secured by specific assets of 
the Corporation, with priority of conflicting claims of creditors 
within this same class to be determined in accordance with priorities 
of applicable Federal or State law.
    (g) All claims of general creditors.


Sec. 650.62  Payment of claims.

    (a) All claims of each class described in Sec. 650.61 of this 
subpart shall be paid in full or provisions shall be made for such 
payment prior to the payment of any claim of a lesser priority. If 
there are insufficient funds to pay all claims in a class in full, 
distribution to that class will be on a pro rata basis.
    (b) Following the payment of all claims, the receiver shall 
distribute the remainder of the assets of the Corporation, if any, to 
the owners of stock and other equities in accordance with the 
priorities for impairment set forth in section 8.4(e)(3) of the Act and 
the bylaws of the Corporation.


Sec. 650.63  Inventory, audit, and reports.

    (a) As soon as practicable after taking possession of the 
Corporation, the receiver shall take an inventory of the assets and 
liabilities as of the date possession was taken.
    (b) The receivership shall be audited on an annual basis by a 
certified public accountant selected by the receiver.
    (c) The receiver shall make an annual accounting or report, as 
appropriate, available upon request to any stockholder of the 
Corporation or any member of the public, with a copy provided to the 
Farm Credit Administration.
    (d) As soon as practicable after final distribution, the receiver 
shall send to each stockholder of record a report summarizing the 
disposition of the assets of the receivership and claims against the 
receivership.


Sec. 650.64  Final discharge and release of the receiver.

    After the receiver has made a final distribution of the assets of 
the receivership, the receivership shall be terminated, the charter 
shall be canceled by the Farm Credit Administration Board if such 
cancellation has not previously occurred, and the receiver shall be 
finally discharged and released.

[[Page 8196]]

Sec. 650.65  Appointment of a conservator.

    (a) The Farm Credit Administration Board may in its discretion 
appoint, ex parte and without prior notice, a conservator for the 
Corporation provided that one or more of the grounds for appointment as 
set forth in Sec. 650.50 of this subpart exist;
    (b) Upon the appointment of a conservator, the Chairman of the Farm 
Credit Administration shall immediately notify the Corporation and 
shall publish a notice of the appointment in the Federal Register.
    (c) As soon as practicable after the conservator takes possession 
of the Corporation, the conservator shall notify, by first class mail, 
each holder of stock in the Corporation of the establishment of the 
conservatorship and shall describe the effect of the conservatorship on 
the Corporation's operations and equity holdings.
    (d) Upon the issuance of the order placing the Corporation in 
conservatorship, all rights, privileges, and powers of the members, 
board of directors, officers, and employees of the Corporation are 
vested exclusively in the conservator.
    (e) The Farm Credit Administration Board may, at any time, 
terminate the conservatorship and direct the conservator to turn over 
the Corporation's operations to such management as the Farm Credit 
Administration Board may designate, in which event the provisions of 
this subpart shall no longer apply.


Sec. 650.66  Powers and duties of the conservator.

    (a) The conservator shall direct the Corporation's further 
operation until the Farm Credit Administration Board decides that the 
Corporation can operate without the conservatorship or places the 
Corporation into receivership. Upon correction or resolution of the 
problem or condition that provided the basis for the appointment, the 
Farm Credit Administration Board may turn the Corporation over to such 
management as the Farm Credit Administration Board may direct.
    (b) The conservator shall exercise all powers necessary to continue 
the ongoing operations of the Corporation, to conserve and preserve the 
Corporation's assets and property, and otherwise protect the interests 
of the Corporation, its stockholders, and creditors as provided in this 
subpart.
    (c) The conservator serves as the trustee of the Corporation and 
conducts its operations for the benefit of the creditors and 
stockholders of the Corporation.
    (d) The conservator may exercise the powers that a receiver of the 
Corporation may exercise under any of the provisions of Sec. 650.56(b) 
of this subpart, except paragraphs (b)(2) and (b)(16). In interpreting 
the applicable paragraphs for purposes of this section, the terms 
``conservator'' and ``conservatorship'' shall be read for ``receiver'' 
and ``receivership''.
    (e) The conservator may also take any other action the conservator 
considers appropriate or expedient to the continuing operation of the 
Corporation.


Sec. 650.67  Inventory, examination, and reports to stockholders.

    (a) As soon as practicable after taking possession of the 
Corporation, the conservator shall take an inventory of the assets and 
liabilities of the Corporation as of the date possession was taken. One 
copy of the inventory shall be filed with the Farm Credit 
Administration.
    (b) The conservatorship shall be examined by the Farm Credit 
Administration in accordance with section 8.11 of the Act.
    (c) The conservatorship shall prepare and file financial reports 
and other documents in accordance with the requirements of Sec. 620.40 
and part 621 of this chapter. The conservator of the Corporation shall 
provide the certification required in Sec. 621.14 of this chapter.


Sec. 650.68  Final discharge and release of the conservator.

    At such time as the conservator shall be relieved of its 
conservatorship duties, the conservator shall file a report on the 
conservator's activities with the Farm Credit Administration. The 
conservator shall thereupon be completely and finally released.

    Dated: February 19, 1997.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 97-4475 Filed 2-21-97; 8:45 am]
BILLING CODE 6705-01-P