[Federal Register Volume 63, Number 15 (Friday, January 23, 1998)]
[Rules and Regulations]
[Pages 3453-3455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1639]


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FEDERAL HOUSING FINANCE BOARD

12 CFR Parts 900, 932 and 933

[No. 97-83]
RIN 3069-AA66


Membership Eligibility

AGENCY: Federal Housing Finance Board.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending 
the definition of the term ``State'' in its Membership Regulation to 
include the U.S. Territory of American Samoa (American Samoa) and the 
U.S. Commonwealth of the Northern Mariana Islands (the Northern Mariana 
Islands). Institutions organized under the laws of American Samoa and 
the Northern Mariana Islands, therefore, will be eligible to apply for 
Federal Home Loan Bank (Bank) membership. In accordance with these 
changes, the Finance Board also is clarifying in its regulations that 
the Seattle Bank District includes American Samoa and the Northern 
Mariana Islands. In addition, the Finance Board is designating Hawaii 
as the State in which members with a principal place of business in 
American Samoa, the Northern Mariana Islands, or Guam, shall be deemed 
to be located for purposes of election of Bank directors.

DATES: The final rule is effective on February 23, 1998.

FOR FURTHER INFORMATION CONTACT: Sharon B. Like, Senior Attorney-
Adviser, (202) 408-2930, Office of General Counsel, Federal Housing 
Finance Board, 1777 F Street, N.W., Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

A. Membership Eligibility Requirement--Definition of ``State''

    Under the Federal Home Loan Bank Act (Act), the Finance Board is 
responsible for the supervision and regulation of the 12 Banks, which 
provide advances and other financial services to their member 
institutions. See 12 U.S.C. 1422a(a). Institutions may become members 
of a Bank if they meet certain membership eligibility and minimum stock 
purchase criteria set forth in the Act and the Finance Board's 
implementing Membership Regulation. See id. sections 1424, 1426, 
1430(e)(3); 12 CFR part 933.
    Specifically, under the Act and the Membership Regulation, 
applicants for Bank membership must satisfy, among other requirements, 
the requirement that they are ``duly organized under the laws of any 
State or of the United States.'' See 12 U.S.C. 1424(a)(1)(A); 12 CFR 
933.6(a)(1), 933.7. Section 2(3) of the Act defines the term ``State'' 
as follows:
    The term ``State'' includes the District of Columbia, Guam, Puerto 
Rico, and the Virgin Islands of the United States.
    See 12 U.S.C. 1422(3). Guam and the U.S. Virgin Islands are U.S. 
Territories, while Puerto Rico is a U.S. Commonwealth.
    Section 933.1(cc) of the Finance Board's Membership Regulation 
implements the statutory definition by defining the term ``State'' as 
follows:
    State means a State, the District of Columbia, Guam, Puerto Rico, 
and the Virgin Islands of the United States.
    See 12 CFR 933.1(cc). The regulatory definition does not 
specifically include any other U.S. Territories, Commonwealths or 
Dependencies within the meaning of ``State.'' Therefore, financial 
institutions organized under the laws of such other jurisdictions 
currently are not eligible for Bank membership under the regulation, 
unless other specific laws or agreements executed by the United States 
and these jurisdictions make the Act applicable to such jurisdictions.
    On September 24, 1997, the Finance Board published a proposed rule 
to amend the definition of the term ``State'' in Sec. 933.1(c) of the 
Membership Regulation to include American Samoa and the Northern 
Mariana Islands. See 62 FR 49943 (Sept. 24, 1997). The Finance Board 
received six comment letters on the proposed rule. Commenters included: 
one Bank; a representative of a Guamanian housing counseling/advocacy 
organization who serves on the Bank's Advisory Council; the 
Congressional representative for American Samoa; the Governor of 
American Samoa; an American Samoan commercial bank that is a member of 
the Federal Reserve System with deposits insured by the Federal Deposit 
Insurance Corporation; and a Northern Mariana Islands public housing 
corporation.
    In the proposed rule, the Finance Board stated that it believes 
that the term ``State'' under the Membership Regulation should be 
defined comprehensively to include all other U.S. Territories, 
Commonwealths and Dependencies that share a political status similar to 
that of the specified entities in the statute, i.e., Guam, the U.S. 
Virgin Islands, and Puerto Rico. In addition, if any specific laws or 
agreements executed by the United States and particular jurisdictions 
make the Act applicable to such jurisdictions, then the regulatory 
definition of the term ``State'' should be amended to include those 
jurisdictions, consistent with the laws or agreements.
    Accordingly, as described in the proposed rule, the Finance Board 
undertook a broad analysis of existing and former U.S. Territories, 
Commonwealths and Dependencies to determine whether any of the 
jurisdictions satisfy the above requirements. The research revealed 
that only American Samoa and the Northern Mariana Islands meet the 
requirements, as further discussed below. In order to ensure that all 
eligible jurisdictions were included in the

[[Page 3454]]

revised definition of ``State'' for membership purposes, the Finance 
Board requested commenters to identify any other jurisdictions not 
included in proposed Sec. 933.1(cc) that have U.S. Territory, 
Commonwealth, or Dependency status, or that have laws or agreements 
with the United States that make the Act applicable to such 
jurisdictions. No other jurisdictions were identified by the commenters 
as meeting any of these criteria.

B. Designation of Member's State Location for Purposes of Election of 
Bank Directors

    The Act sets forth specific procedures for the election of 
directors by the members to the boards of the Banks. See 12 U.S.C. 
1427; 12 CFR 932. Each elective directorship is designated by the 
Finance Board as representing the members located in a particular 
State. See 12 U.S.C. 1427(b). If the principal place of business of a 
member is located in a ``State'' as defined in section 7(e) of the Act, 
the Finance Board must designate such State as the State in which the 
member is located for director election purposes. See id. section 
1427(c). Section 7(e) defines ``State,'' for purposes of section 7, as 
``the States of the Union, the District of Columbia, and the 
Commonwealth of Puerto Rico.'' See id. section 1427(e). For members 
whose principal place of business is not located in a ``State'' as 
defined in section 7(e), the Finance Board is required to designate a 
State in which such members shall be deemed to be located for director 
election purposes. See id. section 1427(c).
    American Samoa and the Northern Mariana Islands are not included in 
the section 7(e) definition of ``State.'' Accordingly, the Finance 
Board is required to designate a ``State'' where members with a 
principal place of business located in American Samoa or the Northern 
Mariana Islands shall be deemed to be located. The proposed rule 
amended Sec. 932.11(b) of the Finance Board's regulations to designate 
Hawaii as that State.

II. Analysis of the Final Rule

A. American Samoa--Section 933.1(cc)

    American Samoa is a Territory of the United States that is 
administered by the U.S. Department of Interior, and which has enacted 
its own banking laws. See 48 U.S.C. 1661; Executive Order No. 10264, 16 
FR 6419 (June 29, 1951); Title 28, American Samoa Code Ann. (Book 
1988). As a U.S. Territory, American Samoa has a political status 
similar to that of the U.S. Territories of Guam and the U.S. Virgin 
Islands, which are included as ``States'' under the Act and the current 
Membership Regulation. See 12 U.S.C. 1422(3); 12 CFR 
933.1(cc).1
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    \1\ There do not appear to be any laws or contractual provisions 
in the cession agreements executed by the United States and American 
Samoa making the Act applicable to American Samoa.
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    Five commenters specifically supported the proposed amendment of 
the term ``State'' in Sec. 933.1(c) to include American Samoa. One 
commenter noted that the condition of much of the private housing in 
American Samoa is deplorable, household incomes are extremely low, and 
very little new construction or rehabilitation of housing is occurring. 
The commenter stated that there is a need for home loans at affordable 
interest rates in this remote, rural area, and that the Bank System was 
intended to address such problems. Another commenter stated that by 
becoming a member of the Seattle Bank, the commenter would gain access 
to a wide array of competitively priced wholesale funding, as well as 
community lending programs designed to help meet the low- and moderate-
income housing and economic development needs of American Samoa.
    For the reasons discussed above, the final rule adopts the proposed 
amendment without change.

B. The Northern Mariana Islands--Section 933.1(cc)

    The Northern Mariana Islands is a former U.S.-administered Trust 
Territory that is now a Commonwealth of the United States. As a U.S. 
Commonwealth, the Northern Mariana Islands has a political status 
similar to that of the Commonwealth of Puerto Rico, which is included 
as a ``State'' under the Act and the current Membership Regulation. See 
id. Moreover, specific provisions of the Covenant Agreement executed by 
the United States and the Northern Mariana Islands make the Act 
applicable to the Northern Mariana Islands. See ``Covenant To Establish 
A Commonwealth Of The Northern Mariana Islands In Political Union With 
The United States Of America,'' sections 502(a)(1), 502(a)(2) (1986); 
``The Second Interim Report of the Northern Mariana Islands Commission 
on Federal Laws to the Congress of the United States,'' at 278-79 (Aug. 
1985); Presidential Proclamation No. 5207, 49 FR 24365 (June 7, 1984) 
(set forth at 48 U.S.C. 1681 note).
    Four commenters specifically supported the proposed amendment of 
the term ``State'' in Sec. 933.1(cc) to include the Northern Mariana 
Islands. One commenter noted that the Northern Mariana Islands 
Government and financial institutions operating in the Northern Mariana 
Islands have limited financial resources available for affordable 
housing and community development projects. The commenter stated that 
the proposed amendment would expand opportunities for access to funding 
assistance for such projects in the Northern Mariana Islands.
    For the reasons discussed above, the final rule adopts the proposed 
amendment without change.

C. Other Pacific Islands

    As discussed in the SUPPLEMENTARY INFORMATION section of the 
proposed rule, the Federated States of Micronesia, the Republic of the 
Marshall Islands, and the Republic of Palau were once U.S.-administered 
Trust Territories in the Pacific, but now have the status of 
independent, self-governing foreign nations. Nor do there appear to be 
any laws or contractual provisions in the Compacts of Free Association 
executed by the United States and these nations, respectively, that 
make the Act applicable to these nations. Other existing U.S. Pacific 
Island Territories generally are either uninhabited or contain tiny, 
nonpermanent military populations closed to the public. No other 
jurisdictions were identified by the commenters as having U.S. 
Territory, Commonwealth, or Dependency status, or having laws or 
agreements with the United States making the Act applicable to such 
jurisdictions. Accordingly, the Act would not be applicable to the 
nations and Territories discussed above, and these jurisdictions are 
not included in Sec. 933.1(cc) of the final rule.

D. Inclusion of American Samoa and the Northern Mariana Islands in the 
Seattle Bank District--Appendix to Subpart A of Part 900

    The Appendix to Subpart A of Part 900 of the Finance Board's 
regulations lists the States which comprise each of the 12 Bank 
Districts, with a reference to ``Pacific Islands'' included under 
Federal Home Loan Bank District 12 (the Seattle Bank District). See 
Appendix to Subpart A of Part 900--Federal Home Loan Banks. Consistent 
with the amendments discussed above, the final rule amends the Appendix 
by replacing the reference to the ``Pacific Islands'' under the Seattle 
Bank District with specific references to American Samoa and the 
Northern Mariana Islands.

[[Page 3455]]

E. Designation of State Location for Members With Principal Place of 
Business in American Samoa, the Northern Mariana Islands, or Guam--
Section 932.11(b)

    For the reasons discussed above, the proposed amendment of 
Sec. 932.11(b) provided that members with a principal place of business 
located in American Samoa or the Northern Mariana Islands shall be 
deemed to be located in Hawaii for purposes of election of Bank 
directors. One commenter specifically supported this designation. The 
final rule adopts the proposed amendment without change. The final rule 
also adopts, without change, the proposed amendment codifying the 
Finance Board's existing designation of Hawaii as the State where 
members with a principal place of business in Guam are deemed to be 
located for director election purposes.

III. Regulatory Flexibility Act

    The final rule implements statutory requirements binding on all 
Banks and on all applicants for Bank membership, regardless of their 
size. The Finance Board is not at liberty to make adjustments to those 
requirements to accommodate small entities. The final rule does not 
impose any additional regulatory requirements that will have a 
disproportionate impact on small entities. Therefore, in accordance 
with section 605(b) of the Regulatory Flexibility Act, see 5 U.S.C. 
605(b), the Finance Board hereby certifies that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

IV. Paperwork Reduction Act

    The final rule does not contain any collections of information 
pursuant to the Paperwork Reduction Act of 1995. See 44 U.S.C. 3501 et 
seq. Consequently, the Finance Board has not submitted any information 
to the Office of Management and Budget for review.

List of Subjects

12 CFR Part 900

    Organizations and functions (Government agencies).

12 CFR Part 932

    Conflicts of interest, Federal home loan banks.

12 CFR Part 933

    Credit, Federal home loan banks, Reporting and recordkeeping 
requirements.

    Accordingly, the Finance Board hereby amends title 12, chapter IX, 
parts 900, 932 and 933, Code of Federal Regulations, as follows:

PART 900--DESCRIPTION OF ORGANIZATION AND FUNCTIONS

    1. The authority citation for part 900 is revised to read as 
follows:

    Authority: 5 U.S.C. 552; 12 U.S.C. 1422b(a), 1423.

    2. The appendix to subpart A of part 900 is designated as appendix 
A to subpart A of part 900, the appendix heading is revised, and the 
parenthetical under Federal Home Loan Bank District 12 is revised to 
read as follows:

Appendix A to Subpart A of Part 900--Federal Home Loan Banks

* * * * *

FEDERAL HOME LOAN BANK DISTRICT 12

(Alaska, American Samoa, the Commonwealth of the Northern Mariana 
Islands, Guam, Hawaii, Idaho, Montana, Oregon, Utah, Washington, 
Wyoming)
* * * * *

PART 932--ORGANIZATION OF THE BANKS

    3. The authority citation for part 932 is revised to read as 
follows:

    Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1426, 1427, 1432; 
42 U.S.C. 8101 et seq.

    4. Section 932.11 is amended by revising paragraph (b) to read as 
follows:


Sec. 932.11  Location of member.

* * * * *
    (b) For purposes of this part, members with a principal place of 
business located in the Virgin Islands of the United States shall be 
deemed to be located in Puerto Rico, and members with a principal place 
of business located in American Samoa, the Commonwealth of the Northern 
Mariana Islands, or Guam, shall be deemed to be located in Hawaii.

PART 933--MEMBERS OF THE BANKS

    5. The authority citation for part 933 is revised to read as 
follows:

    Authority: 12 U.S.C. 1422, 1422a, 1422b, 1423, 1424, 1426, 1430, 
1442.

    6. Section 933.1 is amended by revising paragraph (cc) to read as 
follows:


Sec. 933.1  Definitions.

* * * * *
    (cc) State includes a State of the United States, American Samoa, 
the Commonwealth of the Northern Mariana Islands, the District of 
Columbia, Guam, Puerto Rico, or the Virgin Islands of the United 
States.
* * * * *
    By the Board of Directors of the Federal Housing Finance Board.

    Dated: December 17, 1997.
Bruce A. Morrison,
Chairman.
[FR Doc. 98-1639 Filed 1-22-98; 8:45 am]
BILLING CODE 6725-01-U