Farm Credit Act of 1971 (12 U.S.C. 2001-2279cc)

1 1 This table of contents is not part of the Act but is included for user convenience. The numbers in brackets refer to section numbers in title 7, United States Code. FARM CREDIT ACT OF 1971 [As Amended Through P.L. 110–246, Effective May 22, 2008] [Public Law 92–181] TABLE OF CONTENTS 1 Sec. 1.1. Policy and objectives. Sec. 1.2. The Farm Credit System. TITLE I—FARM CREDIT BANKS Sec. 1.3. Establishment, charters, titles, branches. Sec. 1.4. Board of directors. Sec. 1.5. General corporate powers. Sec. 1.6. Farm Credit Bank capitalization. Sec. 1.7. Lending authority. Sec. 1.8. Interest rates and other charges. Sec. 1.9. Eligibility. Sec. 1.10. Security; terms. Sec. 1.11. Purposes for extensions of credit. Sec. 1.12. Related services. Sec. 1.13. Loans through associations or agents. Sec. 1.14. Liens on stock. Sec. 1.15. Taxation. TITLE II—FARM CREDIT ASSOCIATIONS Subtitle A—Production Credit Associations Sec. 2.0. Organization and charters. Sec. 2.1. Board of directors. Sec. 2.2. General corporate powers. Sec. 2.3. Production credit association capitalization. Sec. 2.4. Short- and intermediate-term loans; participation; other financial assist ance; terms; conditions; interest; security. Sec. 2.5. Other services. Sec. 2.6. Liens on stock. Sec. 2.7. Taxation. Subtitle B—Federal Land Bank Associations Sec. 2.10. Organizations; articles; charters; powers of the Farm Credit Administra tion. Sec. 2.11. Board of directors. Sec. 2.12. General corporate powers. Sec. 2.13. Federal land bank association capitalization. Sec. 2.14. Agreements for sharing gains or losses. Sec. 2.15. Liens on stock. Sec. 2.16. Taxation. TITLE III—BANKS FOR COOPERATIVES PART A—BANKS FOR COOPERATIVES Sec. 3.0. Establishment; titles; branches. Sec. 3.1. Corporate existence; general corporate powers. Sec. 3.2. Board of directors. Sec. 3.3. Bank for cooperatives stock; value; classes of stock; voting; exchange. Sec. 3.4. Dividends. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00001 Fmt 9001 Sfmt 6611 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 2 FARM CREDIT ACT OF 1971 Sec. 3.4. Dividends. Sec. 3.5. Retirement of stock. Sec. 3.6. Guaranty fund subscriptions in lieu of stock. Sec. 3.7. Lending power. Sec. 3.8. Eligibility. Sec. 3.9. Ownership of stock by borrowers. Sec. 3.10. Interest rates; security; lien; cancellation; and application on indebted ness. Sec. 3.11. Earnings and reserves; application of savings. Sec. 3.12. Distribution of assets and liquidation or dissolution. Sec. 3.13. Taxation. PART B—UNITED AND NATIONAL BANKS FOR COOPERATIVES Sec. 3.20. Charter, powers, and operation. Sec. 3.21. Board of directors provisions. Sec. 3.22. Credit delivery office. Sec. 3.23. Consolidation of functions. Sec. 3.24. Exchange of ownership interests. Sec. 3.25. Capitalization. Sec. 3.26. Patronage pools. Sec. 3.27. Transactions to accomplish the merger. Sec. 3.28. Lending limits. Sec. 3.29. Reports by merged banks for cooperatives. TITLE IV—PROVISIONS APPLICABLE TO TWO OR MORE CLASSES OF INSTITUTIONS OF THE SYSTEM PART A—FUNDING Sec. 4.0. Revolving fund. Sec. 4.1. øRepealed¿ Sec. 4.2. Power To borrow; issue notes, bonds, debentures, and other obligations. Sec. 4.3. Capital adequacy of banks and associations. Sec. 4.3A. Capitalization of System institutions. Sec. 4.4. Liability of banks; United States not liable. Sec. 4.5. øRepealed¿ Sec. 4.6. Bonds as investments. Sec. 4.7. Purchase and sale by Federal Reserve System. Sec. 4.8. Purchase and sale of obligations. Sec. 4.9. Federal Farm Credit Banks Funding Corporation. Sec. 4.9A. Protection of borrower stock. PART B—DISSOLUTION Sec. 4.12. Dissolution; voluntary liquidation; mergers; receiverships; and conserva tors. Sec. 4.12A. Communications with stockholders. PART C—RIGHTS OF BORROWERS; LOAN RESTRUCTURING Sec. 4.13. Disclosure. Sec. 4.13A. Access to documents and information. Sec. 4.13B. Notice of action on application. Sec. 4.14. Reconsideration of actions. Sec. 4.14A. Restructuring distressed loans. Sec. 4.14B. Effect of restructuring on borrower stock. Sec. 4.14C. Review of restructuring denials. Sec. 4.14D. Protection of borrowers who meet all loan obligations. Sec. 4.14E. Waiver of mediation rights by borrowers. PART D—ACTIVITIES OF INSTITUTIONS OF THE SYSTEM Sec. 4.15. Nomination of association directors; representative selection of nominees. Sec. 4.16. øRepealed¿ Sec. 4.17. Interest rates. Sec. 4.18. Participation loans. Sec. 4.18A. Authority of Farm Credit Banks and direct lender associations to partici pate in loans to similar entities for risk management purposes. Sec. 4.19. Young, beginning, and small farmers and ranchers. Sec. 4.20. Prohibition against use of signed ballots. Sec. 4.21. Compensation of bank directors. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00002 Fmt 9001 Sfmt 6611 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 3 FARM CREDIT ACT OF 1971 PART E—SERVICE ORGANIZATIONS Sec. 4.25. Establishment. Sec. 4.26. Powers of the Farm Credit Administration. Sec. 4.27. Regulation and examination. Sec. 4.28. State laws. Sec. 4.28A. Definition of bank. PART F—SALE OF INSURANCE Sec. 4.29. Lines of insurance. PART G—MISCELLANEOUS Sec. 4.35. Limitation on separate sale. Sec. 4.36. Right of first refusal. Sec. 4.37. Application of uninsured accounts. Sec. 4.38. Affirmative action. Sec. 4.39. Encouragement of conservation practices. TITLE V—FARM CREDIT ADMINISTRATION ORGANIZATION PART A—DISTRICT ORGANIZATION Sec. 5.0. øTransferred¿ Sec. 5.1. øRepealed¿ Sec. 5.2. øRepealed¿ Sec. 5.3. øRepealed¿ Sec. 5.4. øRepealed¿ Sec. 5.5. øRepealed¿ Sec. 5.6. øRepealed¿ PART B—FARM CREDIT ADMINISTRATION ORGANIZATION Sec. 5.7. The Farm Credit Administration. Sec. 5.8. The Farm Credit Administration Board; appointment; term of office; orga nization and compensation. Sec. 5.9. Powers of the Board. Sec. 5.10. Chairman; responsibilities; governing standards. Sec. 5.11. Organization of the Farm Credit Administration. Sec. 5.12. Advisory commitees. Sec. 5.13. Seal. Sec. 5.13. Administrative expenses. Sec. 5.15. Farm Credit Administration operating expenses fund. Sec. 5.16. Quarters and facilities for the Farm Credit Administration. Sec. 5.17. Enumerated powers. Sec. 5.18. Prior delegations. Sec. 5.19. Examinations. Sec. 5.20. Conditions of other banks and lending institutions. Sec. 5.21. Consent to the availability of reports and to examinations. Sec. 5.22. Reports on conditions of institutions receiving loans or deposits. Sec. 5.22A Uniform financial reporting instructions. Sec. 5.23 Jurisdiction. Sec. 5.24 State legislation. PART C—ENFORCEMENT POWERS OF FARM CREDIT ADMINISTRATION Sec. 5.25 Cease and desist proceedings. Sec. 5.26 Temporary cease and desist orders. Sec. 5.27 Enforcement of temporary cease and desist orders. Sec. 5.28 Suspension or removal of director or officer. Sec. 5.29 Suspension or removal of director or officer charged with felony. Sec. 5.30 Hearings and judicial review. Sec. 5.31 Jurisdiction and enforcement. Sec. 5.32 Penalty. Sec. 5.33 Further penalties. Sec. 5.34 Replacement of Suspended or Removed Directors. Sec. 5.35 Definitions. Sec. 5.36 Notice of service. Sec. 5.37 Ancillary provisions; subpena power; etc. Sec. 5.38. Power to remove directors and officers. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00003 Fmt 9001 Sfmt 6611 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 4 FARM CREDIT ACT OF 1971 PART D—MISCELLANEOUS Sec. 5.40. Repeal of other laws. Sec. 5.41. øAmendment¿ Sec. 5.42. Separability. Sec. 5.43. Reserve right to amend or repeal. Sec. 5.44. General Accounting Office audit: report to Congress. Sec. 5.45. Transition rules relating to amendment of certain FCA approval authori ties. PART E—FARM CREDIT SYSTEM INSURANCE CORPORATION Sec. 5.51. Definitions. Sec. 5.52. Establishment of Farm Credit System Insurance Corporation. Sec. 5.53. Board of Directors. Sec. 5.54. Commencement of insurance. Sec. 5.55. Premiums. Sec. 5.56. Certification of premiums. Sec. 5.57. Overpayment and underpayment of premiums; remedies. Sec. 5.58. General corporate powers. Sec. 5.59. Conduct of corporate affairs; examination of System institutions. Sec. 5.60. Insurance Fund. Sec. 5.61. Powers of Corporation with respect to troubled insured System banks. Sec. 5.61A. Oversight actions by the Corporation. Sec. 5.61B. Authority to regulate golden parachute and indemnification payments. Sec. 5.62. Investment of funds. Sec. 5.63. Exemption from taxation. Sec. 5.64. Reports. Sec. 5.65. Prohibitions. TITLE VI—ASSISTANCE TO FARM CREDIT SYSTEM Subtitle A—Assistance Board Sec. 6.0. Establishment of Board. Sec. 6.1. Purposes. Sec. 6.2. Board of Directors. Sec. 6.3. Corporate powers. Sec. 6.4. Certification of eligibility to issue preferred stock. Sec. 6.5. Assistance. Sec. 6.6. Special powers. Sec. 6.7. Administration. Sec. 6.8. Limitation of powers. Sec. 6.9. Succession. Sec. 6.10. Effect of regulations; audits. Sec. 6.11. Exemption from taxation. Sec. 6.12. Termination. Sec. 6.13. Transitional provisions. Subtitle B—Financial Assistance Corporation Sec. 6.20. Establishment of Corporation. Sec. 6.21. Purpose. Sec. 6.22. Board of Directors. Sec. 6.23. Stock. Sec. 6.24. Corporate powers. Sec. 6.25. Accounts. Sec. 6.26. Debt obligations. Sec. 6.27. Preferred stock. Sec. 6.28. Payments. Sec. 6.29. One-time stock purchase. Sec. 6.30. Exemption from taxation. Sec. 6.31. Termination. TITLE VII—RESTRUCTURING OF SYSTEM INSTITUTIONS Subtitle A—Merger of Banks Within a District Sec. 7.0. Power to merge. Sec. 7.1. Board of directors. Sec. 7.2. Powers of merged banks. Sec. 7.3. Capitalization. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00004 Fmt 9001 Sfmt 6611 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 5 FARM CREDIT ACT OF 1971 Sec. 7.4. øRepealed¿ Sec. 7.5. øTransferred¿ Subtitle B—Mergers, Transfers of Assets, and Powers of Associations Within a District CHAPTER 1—TRANSFERS BY FEDERAL LAND BANKS TO FEDERAL LAND BANK ASSOCIATIONS Sec. 7.6. Transfer of lending authority. Sec. 7.7. Equalization of loan-making powers of certain district associations. CHAPTER 2—MERGER OF LIKE AND UNLIKE ASSOCIATIONS Sec. 7.8. Merger of associations. CHAPTER 3—RECONSIDERATION Sec. 7.9. Reconsideration. CHAPTER 4—TERMINATION AND DISSOLUTION OF INSTITUTIONS Sec. 7.10. Termination of System institution status. Subtitle C—Approval of Disclosure Information and Issuance of Charters by the Farm Credit Administration Board Sec. 7.11. Approval of disclosure information and issuance of charters. Subtitle D—Mergers of Like Entities Sec. 7.12. Merger of similar banks. Sec. 7.13. Merger of similar associations. Subtitle E—Taxation of Merger Transactions Sec. 7.14. Transactions to accomplish mergers exempt from certain State taxes. TITLE VIII—AGRICULTURAL MORTGAGE SECONDARY MARKET Sec. 8.0. Definitions. Subtitle A—Establishment and Activities of Federal Agricultural Mortgage Corporation Sec. 8.1. Federal Agricultural Mortgage Corporation. Sec. 8.2. Board of directors. Sec. 8.3. Powers and duties of Corporation and Board. Sec. 8.4. Stock issuance. Sec. 8.5. Certification of agricultural mortgage marketing facilities. Sec. 8.6. Guarantee of qualified loans. Sec. 8.7. øRepealed¿ Sec. 8.8. Standards for qualified loans. Sec. 8.9. Exemption from restructuring and borrowers rights provisions for pooled loans. Sec. 8.10. Funding for guarantee; reserves of Corporation. Sec. 8.11. Supervision, examination, and report of condition. Sec. 8.12. Securities in credit enhanced pools. Sec. 8.13. Authority to issue obligations to cover guarantee losses of Corporation. Sec. 8.14. Federal jurisdiction. Subtitle B—Regulation of Financial Safety and Soundness of Federal Agricultural Mortgage Corporation Sec. 8.31. Definitions. Sec. 8.32. Risk-based capital levels. Sec. 8.33. Minimum capital level. Sec. 8.34. Critical capital level. Sec. 8.35. Enforcement levels. Sec. 8.36. Mandatory actions applicable to level II. Sec. 8.37. Supervisory actions applicable to level III. Sec. 8.38. Recapitalization of the Corporation. Subtitle C—Receivership, Conservator-ship, and Liquidation of the Federal Agricultural Mortgage Corporation Sec. 8.41. Conservatorship; liquidation; receivership. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00005 Fmt 9001 Sfmt 6611 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 6 Sec. 1.1 FARM CREDIT ACT OF 1971 AN ACT To further provide for the farmer-owned cooperative system of making credit available to farmers and ranchers and their cooperatives, for rural resi dences, and to associations and other entities upon which farming operations are dependent, to provide for an adequate and flexible flow of money into rural areas, and to modernize and consolidate existing farm credit law to meet current and future rural credit needs, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the ‘‘Farm Credit Act of 1971’’. POLICY AND OBJECTIVES SEC. 1.1. ø12 U.S.C. 2001¿ (a) It is declared to be the policy of the Congress, recognizing that a prosperous, productive agri culture is essential to a free nation and recognizing the growing need for credit in rural areas, that the farmer-owned cooperative Farm Credit System be designed to accomplish the objective of im proving the income and well-being of American farmers and ranch ers by furnishing sound, adequate, and constructive credit and closely related services to them, their cooperatives, and to selected farm-related businesses necessary for efficient farm operations. (b) It is the objective of this Act to continue to encourage farmer- and rancher-borrowers participation in the management, control, and ownership of a permanent system of credit for agri culture which will be responsive to the credit needs of all types of agricultural producers having a basis for credit, and to modernize and improve the authorizations and means for furnishing such credit and credit for housing in rural areas made available through the institutions constituting the Farm Credit System as herein pro vided. (c) It is declared to be the policy of Congress that the credit needs of farmers, ranchers, and their cooperatives are best served if the institutions of the Farm Credit System provide equitable and competitive interest rates to eligible borrowers, taking into consid eration the creditworthiness and access to alternative sources of credit for borrowers, the cost of funds, including any costs of defea sance under section 4.8(b), the operating costs of the institution, in cluding the costs of any loan loss amortization under section 5.19(b), the cost of servicing loans, the need to retain earnings to protect borrowers’ stock, and the volume of net new borrowing. Further, it is declared to be the policy of Congress that Farm Cred it System institutions take action in accordance with the Farm Credit Act Amendments of 1986 in such manner that borrowers from the institutions derive the greatest benefit practicable from that Act: Provided, That in no case is any borrower to be charged a rate of interest that is below competitive market rates for similar loans made by private lenders to borrowers of equivalent credit worthiness and access to alternative credit. SEC. 1.2. ø12 U.S.C. 2002¿ THE FARM CREDIT SYSTEM. (a) COMPOSITION.—The Farm Credit System shall include the Farm Credit Banks, the Federal land bank associations, the pro duction credit associations, the banks for cooperatives, and such other institutions as may be made a part of the System, all of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00006 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 7 Sec. 1.5 FARM CREDIT ACT OF 1971 which shall be chartered by and subject to regulation by the Farm Credit Administration. (b) FARM CREDIT DISTRICTS.—There shall be not more than twelve farm credit districts in the United States, which may be designated by number, one of which districts shall include the Commonwealth of Puerto Rico and one of which districts may, if authorized by the Farm Credit Administration, include the Virgin Islands of the United States: Provided, That the extension of credit and other services authorized by this Act in the Virgin Islands of the United States shall be undertaken only if determined to be fea sible under regulations of the Farm Credit Administration. The boundaries of the twelve farm credit districts existing on the date of enactment of this Act may be readjusted from time to time by the Farm Credit Administration, with the concurrence of the boards of the banks in each district involved. Two or more districts may be merged as provided in section 5.17(a)(2). TITLE I—FARM CREDIT BANKS SEC. 1.3. ø12 U.S.C. 2011¿ ESTABLISHMENT, CHARTERS, TITLES, BRANCHES. (a) ESTABLISHMENT.—The banks established pursuant to the merger of each District Federal Intermediate Credit Bank and Fed eral Land Bank (hereinafter referred to in this title as ‘‘Farm Cred it Banks’’), as provided in section 410 of the Agricultural Credit Act of 1987, shall be Federally chartered instrumentalities of the United States. (b) CHARTERS.—The Farm Credit Administration shall, con sistent with this Act, issue charters for, and approve amendments to charters of, the Farm Credit Banks. (c) TITLE.—Each Farm Credit Bank may include in its title the name of the city in which it is located or other geographical des ignation. (d) BRANCHES.—Each Farm Credit Bank may establish such branches or other offices as may be appropriate for the effective op eration of its business. SEC. 1.4. ø12 U.S.C. 2012¿ BOARD OF DIRECTORS. Each Farm Credit Bank shall elect a board of directors of such number, for such term, in such manner, and with such qualifica tions, as may be required in its bylaws, except that, at least one member shall be elected by the other directors, which member shall not be a director, officer, employee, or stockholder of a System in stitution. SEC. 1.5. ø12 U.S.C. 2013¿ GENERAL CORPORATE POWERS. Each Farm Credit Bank shall be a body corporate and, subject to regulation by the Farm Credit Administration, shall have power to— (1) adopt and use a corporate seal; (2) have succession until dissolved under the provisions of this Act or other Act of Congress; (3) make contracts; (4) sue and be sued; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00007 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 8 Sec. 1.5 FARM CREDIT ACT OF 1971 (5) acquire, hold, dispose, and otherwise exercise all the usual incidents of ownership of real and personal property nec essary or convenient to its business; (6) make, participate in, and discount loans, make commit ments for credit, accept advance payments, and provide serv ices as authorized in this Act, and charge fees for such; (7) operate under the direction of its board of directors; (8) provide by its board of directors for a president, one or more vice presidents, a secretary, a treasurer, and provide for such other officers, employees, and agents as may be nec essary, as provided in this Act, define their duties, and require surety bonds or make other provision against losses occasioned by employees; (9) prescribe, by its board of directors, its bylaws that shall be consistent with law, and that shall provide for— (A) the classes of its stock and the manner in which such stock shall be issued, transferred and retired; and (B) the manner in which it is to— (i) select officers, employees, and agents; (ii) acquire, hold, and transfer property; (iii) make loans and discounts; (iv) conduct general business; and (v) exercise and enjoy the privileges granted to it by law; (10) borrow money and issue notes, bonds, debentures, or other obligations individually, or in concert with one or more other banks of the System, of such character, terms, conditions, and rates of interest as may be determined as provided for in this Act; (11) purchase nonvoting stock in, or pay in surplus to, and accept deposits of securities or funds from associations in its district, and pay interest on such funds; (12) participate with— (A) one or more other Farm Credit Banks in loans under this title on such terms as may be agreed on among such banks; (B) one or more other Farm Credit System institutions in loans made under this title or other titles on the basis prescribed in section 4.18; and (C) lenders that are not Farm Credit System institu tions in loans that the bank is authorized to make under this title; (13) approve the salary scale of the officers and employees of the associations in its district and supervise the exercise by such associations of the functions vested in or delegated to them; (14) deposit the securities and current funds of the bank with any member bank of the Federal Reserve System or any insured State nonmember bank (within the meaning of section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) and pay fees and receive interest on such as may be agreed, and when designated for that purpose by the Secretary of the Treasury, such bank— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00008 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 9 Sec. 1.7 FARM CREDIT ACT OF 1971 (A) shall be a depository of public money, except re ceipts from customs, under such regulations as may be prescribed by the Secretary; (B) may be employed as a fiscal agent of the Govern ment; and (C) shall perform all such reasonable duties as a de pository of public money or financial agent of the Govern ment as may be required of such bank; except that no Government funds deposited under the provi sions of this paragraph shall be invested in loans or bonds or other obligations of the bank; (15) buy and sell obligations of, or insured by, the United States or any agency thereof, or securities backed by the full faith and credit of any such agency, and make other invest ments as may be authorized under regulations issued by the Farm Credit Administration; (16) sell to lenders that are not Farm Credit System insti tutions interests in loans, and buy from and sell to Farm Cred it System institutions interests in loans and other extensions of credit, and nonvoting stock as may be authorized under reg ulations issued by the Farm Credit Administration; (17) conduct studies and make and adopt standards for lending; (18) delegate to associations such functions as the bank de termines appropriate; (19) amend and modify loan contracts, documents, and payment schedules, and release, subordinate, or substitute se curity for any of such items; (20) for loans made by the bank, require associations to en dorse notes and other obligations of borrowers from the bank; (21) exercise through the board of directors or authorized officers, employees, or agents of the bank, all such incidental powers as may be necessary or expedient to carry on the busi ness of the bank; (22) accept contributions to the capital of the bank from associations and account for such in accordance with generally accepted accounting principles, except as may be authorized by the Farm Credit Administration; (23) as may be authorized by the board of directors of the bank agree with other Farm Credit System institutions to share loan and other losses, whether to protect against capital impairment or for any other purpose; and (24) operate as an originator and become certified as a cer tified facility under title VIII. SEC. 1.6. ø12 U.S.C. 2014¿ FARM CREDIT BANK CAPITALIZATION. In accordance with section 4.3A, the Farm Credit Banks shall provide, through bylaws and subject to Farm Credit Administration regulations, for the capitalization of the bank and the manner in which bank stock shall be issued, held, transferred, and retired and bank earnings distributed. SEC. 1.7. ø12 U.S.C. 2015¿ LENDING AUTHORITY. (a) REAL ESTATE LOANS AND RELATED ASSISTANCE.— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00009 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 10 Sec. 1.7 FARM CREDIT ACT OF 1971 (1) REAL ESTATE LOANS.—The Farm Credit Banks may make or participate with other lenders in long-term real estate mortgage loans in rural areas, as defined by the Farm Credit Administration, or to producers or harvesters of aquatic prod ucts, and make continuing commitments to make such loans under specified circumstances, for a term of not less than 5 nor more than 40 years. (2) FINANCIAL ASSISTANCE.—The Farm Credit Banks may provide and extend financial assistance to, and discount for, or purchase from, a Federal land bank association any note, draft, or other obligation with the endorsement or guarantee of the association, the proceeds of which have been advanced to per sons eligible and for purposes of financing by the association, as authorized under section 7.6(a). (b) INTERMEDIATE CREDIT.— (1) IN GENERAL.—The Farm Credit Banks are authorized to make loans and extend other similar financial assistance to and to discount for or purchase from— (A) any production credit association, or (B) any national bank, State bank, trust company, ag ricultural credit corporation, incorporated livestock loan company, savings institution, credit union, or any associa tion of agricultural producers engaged in the making of loans to farmers and ranchers, and any corporation en gaged in the making of loans to producers or harvesters of aquatic products, any note, draft, or other obligation with the institution’s en dorsement or guarantee, the proceeds of which note, draft, or other obligation have been advanced to persons and for pur poses eligible for financing by production credit associations as authorized by this Act. (2) PARTICIPATION WITH OTHER ENTITIES.—The Farm Cred it Banks may participate with one or more production credit associations or other Farm Credit Banks in the making of loans to eligible borrowers and may participate with one or more other Farm Credit System institutions in loans made under this title or other titles of this Act on the basis pre scribed in section 4.18 of this Act. (3) LIMITATIONS ON EXTENSION OF FINANCIAL SERVICES.— (A) GENERAL RULE.—No paper shall be purchased from or discounted for, and no loans shall be made or other similar financial assistance extended by a Farm Credit Bank to any entity identified in paragraph (1)(B) of this subsection if the amount of such paper added to the aggre gate liabilities of such entity, whether direct or contingent (other than bona fide deposit liabilities), exceeds ten times the paid-in and unimpaired capital and surplus of such en tity or the amount of such liabilities permitted under the laws of the jurisdiction creating such institution, which ever is the lesser. (B) LIMITATION ON NATIONAL BANK.—It shall be unlaw ful for any national bank which is indebted to any Farm Credit Bank, on paper discounted or purchased under paragraph (1), to incur any additional indebtedness, if by VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00010 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 11 Sec. 1.8 FARM CREDIT ACT OF 1971 virtue of such additional indebtedness its aggregate liabil ities direct or contingent, will exceed the limitation de scribed in subparagraph (A). (4) FCA REGULATIONS.— (A) IN GENERAL.—All of the loans, financial assistance, discounts and purchases authorized by this subsection shall be subject to regulations of the Farm Credit Adminis tration and shall be secured by collateral, if any, as may be required in such regulations. (B) REQUIREMENT OF REGULATIONS.—The regulations shall assure that such loans, financial assistance, dis counts, and purchases are available on a reasonable basis to any financing institution authorized to receive such services under paragraph (1)(B) of this subsection, and that— (i) is significantly involved in lending for agricul tural or aquatic purposes; (ii) demonstrates a continuing need for supple mentary sources of funds to meet the credit require ments of its agricultural or aquatic borrowers; (iii) has limited access to national or regional cap ital markets; and (iv) does not use such services to expand its fi nancing activities to persons and for purposes other than those authorized under title II. (C) FEES.—The regulations may authorize a Farm Credit Bank to charge reasonable fees for any commitment to extend service under this section to such a financing in stitution. (D) SUBSIDIARIES AND AFFILIATES.—For purposes of this subsection, a financing institution together with the subsidiaries and affiliates of such may be considered as one, but such determination to consider such institution to gether with the subsidiaries and affiliates of such as one shall be made in the first instance by the bank and in the event of a denial by the bank of its services to a financial institution, then by the Farm Credit Administration on a case-by-case basis with due regard to the total relationship of the financing institution, its subsidiaries, and affiliates. (5) EFFECTIVE DATE.—Nothing in this section shall require termination of discount relationships in existence on the effec tive date of the Farm Credit Act Amendments of 1980. SEC. 1.8. ø12 U.S.C. 2016¿ INTEREST RATES AND OTHER CHARGES. (a) IN GENERAL.—Loans and discounts made by a Farm Credit Bank shall bear such rate or rates of interest or discount, and be on such terms and conditions, as may be determined by the board of directors of the bank from time to time. (b) SETTING RATES AND CHARGES.—In setting rates and charges, it shall be the objective to provide the types of credit need ed by eligible borrowers at the lowest reasonable costs on a sound business basis taking into consideration the cost of money to the bank, necessary reserve and expenses of the bank and associations, and providing services to members. The loan documents or dis VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00011 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 12 Sec. 1.9 FARM CREDIT ACT OF 1971 counting and financing agreements, may provide for the interest rate or rates to vary from time to time during the repayment pe riod of the loan or agreement. SEC. 1.9. ø12 U.S.C. 2017¿ ELIGIBILITY. The credit and financial services authorized in this title may be made available to persons who are or become stockholders or members of the bank or associations in the district, and who are— (1) bona fide farmers, ranchers, or producers or harvesters of aquatic products; (2) persons furnishing to farmers and ranchers farm-re lated services directly related to their on-farm operating needs; or (3) owners of rural homes. SEC. 1.10. ø12 U.S.C. 2018¿ SECURITY; TERMS. (a) REAL ESTATE LOANS.— (1) MAXIMUM LEVEL OF LOANS.— (A) IN GENERAL.—Real estate mortgage loans origi nated by a Farm Credit Bank, or in which a Farm Credit Bank participates in with a lender that is not a System in stitution, shall not exceed 85 percent of the appraised value of the real estate security, except as provided for in subparagraphs (C) and (D). (B) REGULATION.—The Farm Credit Administration may, by regulation, require that loans not exceed 75 per cent of the appraised value of the real estate security. (C) GUARANTEED LOANS.—If the loan is guaranteed by Federal, State, or other governmental agencies, the loan may not exceed 97 percent of the appraised value of the real estate security, as may be authorized under regula tions of the Farm Credit Administration. (D) PRIVATE MORTGAGE INSURANCE.—A loan on which private mortgage insurance is obtained may exceed 85 per cent of the appraised value of the real estate security to the extent that the loan amount in excess of such 85 per cent is covered by the insurance. (2) SECURITY.—All loans originated or participated in by a bank under this section shall be secured by first liens on inter ests in real estate of such classes as may be prescribed by reg ulations of the Farm Credit Administration. (3) VALUE OF SECURITY.—To adequately secure the loan, the value of security shall be determined by appraisal under standards prescribed by the bank in accordance with regula tions of the Farm Credit Administration. (4) ADDITIONAL SECURITY.—Additional security for any loan may be required by the bank to supplement real estate se curity. Credit factors, other than the ratio between the amount of the loan and the security value, shall be given due consider ation. (b) INTERMEDIATE CREDIT.—Loans, other than real estate loans, and discounts made under the provisions of this title shall be repayable in not more than 7 years (15 years if made to pro ducers or harvesters of aquatic products) from the time that such are made or discounted by the Farm Credit Bank, except that the VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00012 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 13 Sec. 1.11 FARM CREDIT ACT OF 1971 Board of Directors, under regulations of the Farm Credit Adminis tration, may approve policies permitting loans, advances, or dis counts (other than those made to producers or harvesters of aquatic products) to be repayable in not more than 10 years from the time that such are made or discounted by such bank. SEC. 1.11. ø12 U.S.C. 2019¿ PURPOSES FOR EXTENSIONS OF CREDIT. (a) AGRICULTURAL OR AQUATIC PURPOSES (1) IN GENERAL.—Loans made by a Farm Credit Bank to farmers, ranchers, and producers or harvesters of aquatic prod ucts may be for any agricultural or aquatic purpose and other credit needs of the applicant, including financing for basic proc essing and marketing directly related to the applicant’s oper ations and those of other eligible farmers, ranchers, and pro ducers or harvesters of aquatic products, except that the oper ations of the applicant shall supply some portion of the total processing or marketing for which financing is extended. (2) LIMITATION ON LOANS FOR BASIC PROCESSING AND MAR KETING OPERATIONS.—The aggregate of the financing provided by any Farm Credit Bank for basic processing and marketing directly related to the operations of farmers, ranchers, and pro ducers or harvesters of aquatic products, if the operations of the applicant supply less than 20 percent of the total proc essing or marketing for which financing is extended, shall not exceed 15 percent of the total of all outstanding loans of such bank. (b) RURAL HOUSING FINANCING.— (1) IN GENERAL.—Loans and discounts may be made to rural residents for rural housing financing under regulations of the Farm Credit Administration. (2) LIMITATIONS.—Rural housing financed under this title shall be for single-family, moderate-priced dwellings and their appurtenances not inconsistent with the general quality and standards of housing existing in, or planned or recommended for, the rural area where it is located, except that a Farm Credit Bank may not at any one time have a total amount of loans outstanding for such rural housing to persons other than farmers or ranchers in amounts exceeding 15 percent of the total of all loans outstanding in such bank. (3) RURAL AREAS.—For rural housing purposes under this section the term ‘‘rural areas’’ shall not be defined to include any city or village having a population in excess of 2,500 in habitants. (c) FARM-RELATED SERVICES.— (1) IN GENERAL.—Loans to persons furnishing farm-related services to farmers and ranchers directly related to their on farm operating needs may be made for the necessary capital structures and equipment and initial working capital for such services. (2) FACILITIES.—The banks may own and lease, or lease with option to purchase, to persons eligible for credit under this title or title II, equipment or facilities needed in the oper ations of such persons. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00013 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 14 Sec. 1.12 FARM CREDIT ACT OF 1971 SEC. 1.12. ø12 U.S.C. 2020¿ RELATED SERVICES. (a) IN GENERAL.—The Farm Credit Banks may provide tech nical assistance to borrowers, members, and applicants from the bank and associations in the district, including persons obligated on paper discounted by the bank, and may make available to them at their option such financial related services appropriate to their on-farm and aquatic operations as determined to be feasible by the board of directors of the bank, under regulations of the Farm Cred it Administration. (b) AUTHORITY TO PASS ALONG COST OF INSURANCE PRE MIUMS.— (1) IN GENERAL.—Each Farm Credit Bank may assess each production credit association, other association making direct loans under the authority provided under section 7.6, and other financing institution described in section 1.7(b)(1)(B) in the district in which the bank is located to cover the costs of making premium payments under part E of title V. (2) COMPUTATION.—The assessment on any association or other financing institution described in paragraph (1) for any period shall be computed in an equitable manner, as deter mined by the Corporation. SEC. 1.13. ø12 U.S.C. 2021¿ LOANS THROUGH ASSOCIATIONS OR AGENTS. (a) IN GENERAL.—The Farm Credit Banks shall, except as oth erwise herein provided, make loans of the type authorized under section 1.7(a) through a Federal land bank association chartered to serve the territory in which the real estate of the borrower is lo cated. (b) NO ACTIVE ASSOCIATION.—If there is no active association chartered to serve territory where the real estate is located, the bank may make the loan directly or through such bank or trust company or savings or other financial institution as such bank may designate. (c) PURCHASE OF STOCK REQUIRED.—When the loan is not made through a Federal land bank association, the applicant shall purchase stock in the bank in accordance with the capitalization requirements provided for in the bylaws of the bank. SEC. 1.14. ø12 U.S.C. 2022¿ LIENS ON STOCK. The Farm Credit Banks shall have a first lien on the stock or participation certificates it issues for the payment of any liability of the stockholders to the bank. SEC. 1.15. ø12 U.S.C. 2023¿ TAXATION. The Farm Credit Banks and the capital, reserves, and surplus thereof, and the income derived therefrom, shall be exempt from Federal, State, municipal, and local taxation, except taxes on real estate held by a Farm Credit Bank to the same extent, according to its value, as other similar property held by other persons is taxed. The mortgages held by the Farm Credit Banks and the notes, bonds, debentures, and other obligations issued by the banks shall be considered and held to be instrumentalities of the United States and, as such, they and the income therefrom shall be ex empt from all Federal, State, municipal, and local taxation, other VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00014 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 15 Sec. 2.0 FARM CREDIT ACT OF 1971 than Federal income tax liability of the holder thereof under the Public Debt Act of 1941 (31 U.S.C. 3124). TITLE II—FARM CREDIT ASSOCIATIONS Subtitle A—Production Credit Associations SEC. 2.0. ø12 U.S.C. 2071¿ ORGANIZATION AND CHARTERS. (a) CHARTER.—Each production credit association shall con tinue as a Federally chartered instrumentality of the United States. (b) ORGANIZATION.— (1) IN GENERAL.—Production credit associations may be or ganized by 10 or more farmers or ranchers or producers or har vesters of aquatic products desiring to borrow money under the provisions of this subtitle. (2) ARTICLES OF ASSOCIATION.—The proposed articles of as sociation shall be forwarded to the Farm Credit Bank for the district accompanied by an agreement to subscribe on behalf of the association for stock in the bank in such amounts as may be required by the bank. (3) CONTENTS OF ARTICLES.—The articles shall specify in general terms the— (A) objects for which the association is formed; (B) powers to be exercised by the association in car rying out the functions authorized by this subtitle; and (C) territory the association proposes to serve. (4) SIGNATURES.—The articles shall be signed by persons desiring to form such an association and shall be accompanied by a statement signed by each such person establishing eligi bility to borrow from the association in which such person will become a stockholder. (5) COPY TO FCA.—A copy of the articles of association shall be forwarded to the Farm Credit Administration with the recommendations of the bank concerning the need for such an association in order to adequately serve the credit needs of eli gible persons in the proposed territory and whether that terri tory includes any area described in the charter of another pro duction credit association. (6) DENIAL OF CHARTER.—The Farm Credit Administration for good cause shown may deny the charter. (7) APPROVAL OF ARTICLES.—On approval of the proposed articles by the Farm Credit Administration, and on the issuance of a charter, the association shall become as of such date a federally chartered body corporate and an instrumen tality of the United States. (8) POWERS OF FCA.—The Farm Credit Administration shall have the power, under rules and regulations prescribed by the Farm Credit Administration or by prescribing in the terms of the charter, to— (A) provide for the organization of the association; (B) provide for the initial amount of stock of the asso ciation; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00015 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 16 Sec. 2.1 FARM CREDIT ACT OF 1971 (C) provide for the territory within which the associa tion’s operations may be carried on; and (D) approve amendments to the charter of the associa tion. SEC. 2.1. ø12 U.S.C. 2072¿ BOARD OF DIRECTORS. Each production credit association shall elect from the voting members of such association, a board of directors of such number, for such terms, with such qualifications, and in such manner as may be required by the bylaws of the association, except that, at least one member shall be elected by the other directors, which member shall not be a director, officer, employee, stockholder, or agent of a System institution. SEC. 2.2. ø12 U.S.C. 2073¿ GENERAL CORPORATE POWERS. Each production credit association shall be a body corporate and, subject to supervision by the Farm Credit Bank for the dis trict and regulation by the Farm Credit Administration, shall have the power to— (1) have succession until terminated in accordance with this Act or any other Act of Congress; (2) adopt and use a corporate seal; (3) make contracts; (4) sue and be sued; (5) acquire, hold, dispose, and otherwise exercise all of the usual incidents of ownership of real and personal property nec essary or convenient to the business of the association; (6) operate under the direction of the board of directors of the association in accordance with the provisions of this Act; (7) subscribe to stock of the bank; (8) purchase stock of the bank held by other production credit associations and stock of other production credit associa tions; (9) contribute to the capital of the bank or other produc tion credit associations; (10) invest funds of the association as may be approved by the Farm Credit Bank under regulations of the Farm Credit Administration and deposit the current funds and securities of such with the Farm Credit Bank, a member bank of the Fed eral Reserve System, or any bank insured under the Federal Deposit Insurance Corporation, and may pay fees therefor and receive interest thereon as may be agreed; (11) buy and sell obligations of or insured by the United States or of any agency thereof or of any banks of the Farm Credit System and buy from and sell to such banks, interests in loans and in other financial assistance extended and non voting stock, as may be authorized by the Farm Credit Bank in accordance with regulations of the Farm Credit Administra tion; (12) borrow money from the Farm Credit Bank, and with the approval of such bank, borrow from and issue notes or other obligations to any commercial bank or other financial in stitution; (13) make and participate in loans, accept advance pay ments, and provide services and other assistance as authorized VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00016 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 17 Sec. 2.3 FARM CREDIT ACT OF 1971 in this subtitle and charge fees therefor, and when authorized by the bank participate with one or more other Farm Credit System institutions in loans made under this title or other ti tles of this Act on the basis prescribed in section 4.18 of this Act; (14) endorse and become liable on loans discounted or pledged to the Farm Credit Bank; (15) as may be authorized by the Farm Credit Bank in ac cordance with regulations of the Farm Credit Administration, agree with other Farm Credit System institutions to share loan or other losses, whether to protect against capital impairment or for any other purpose; (16) prescribe, by the board of directors, its bylaws that shall be consistent with law, and that shall provide for— (A) the classes of its stock and the manner in which such stock shall be issued, transferred, and retired; and (B) the manner in which it is to— (i) select officers and employees; (ii) acquire, hold, and transfer property; (iii) conduct general business; and (iv) exercise and enjoy the privileges granted to it by law; (17) provide by its board of directors of a manager or other chief executive officer, and provide for such other officers or employees as may be necessary, including joint employees as provided in this Act, define their duties, and require surety bonds or make other provisions against losses occasioned by employees, but no director shall, within one year after the date when such director ceases to be a member of the board, serve as a salaried employee of the association on the board of which he served; (18) elect by the board of directors of the association a loan committee with power to approve applications for membership in the association and loans or participations or, with the ap proval of the bank, delegate the approval of applications for membership and loans or participations within specified limits to other committees or to authorized officers and employees of the association; (19) perform any functions delegated to the association by the bank; (20) exercise by the board of directors or authorized offi cers or employees of the association, all such incidental powers as may be necessary or expedient to carry on the business of the association; and (21) operate as an originator and become certified as a cer tified facility under title VIII. SEC. 2.3. ø12 U.S.C. 2074¿ PRODUCTION CREDIT ASSOCIATION CAPITAL IZATION. (a) IN GENERAL.—In accordance with section 4.3A, each pro duction credit association shall provide, through its bylaws and subject to Farm Credit Administration regulations, for its capital ization and the manner in which its stock shall be issued, held, transferred, and retired and, except as provided in subsection (b), its earnings distributed. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00017 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 18 Sec. 2.4 FARM CREDIT ACT OF 1971 (b) APPLICATION OF EARNINGS.—At the end of each fiscal year, each production credit association shall apply the amount of the earnings of the association for the fiscal year in excess of the oper ating expenses of the association (including provision for valuation reserves against loan assets in accordance with generally accepted accounting principles)— (1) first, to the restoration of the impairment (if any) of capital; and (2) second, to the establishment and maintenance of the surplus accounts, the minimum aggregate amount of which shall be prescribed by the Farm Credit Bank. (c) PATRONAGE.—When the bylaws of an association so provide and subject to the general directions of the Farm Credit Adminis tration, available net earnings at the end of any fiscal year may be distributed on a patronage basis in stock, participation certificates, or in cash. Any part of the earnings of the fiscal year in excess of the operating expenses for such year held in the surplus account may be allocated to patrons on a patronage basis. SEC. 2.4. ø12 U.S.C. 2075¿ SHORT- AND INTERMEDIATE-TERM LOANS; PARTICIPATION; OTHER FINANCIAL ASSISTANCE; TERMS; CONDITIONS; INTEREST; SECURITY. (a) SHORT- AND INTERMEDIATE-TERM LOANS.—Each production credit association, under standards prescribed by the board of di rectors of the Farm Credit Bank of the district, may make, guar antee, or participate with other lenders in short- and intermediate term loans and other similar financial assistance to— (1) bona fide farmers and ranchers and the producers or harvesters of aquatic products, for agricultural or aquatic pur poses and other requirements of such borrowers, including fi nancing for basic processing and marketing directly related to the operations of the borrower and those of other eligible farm ers, ranchers, and producers or harvesters of aquatic products, except that the operations of the borrower shall supply some portion of the total processing or marketing for which financing is extended, except that the aggregate of the financing pro vided by any association for basic processing and marketing di rectly related to the operations of farmers, ranchers, and pro ducers or harvesters of aquatic products, if the operations of the applicant supply less than 20 percent of the total proc essing or marketing for which financing is extended, shall not exceed 15 percent of the total of all outstanding loans of all as sociations in the district at the end of its preceding fiscal year; (2) rural residents for housing financing in rural areas, under regulations of the Farm Credit Administration; and (3) persons furnishing to farmers and ranchers farm-re lated services directly related to their on-farm operating needs. (b) RURAL HOUSING.— (1) IN GENERAL.—Rural housing financed under this sub title shall be for single-family, moderate-priced dwellings and the appurtenances of such not inconsistent with the general quality and standards of housing existing in, or planned or rec ommended for, the rural area where it is located. (2) LIMITATION.—The aggregate of such housing loans in an association to persons other than farmers or ranchers shall VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00018 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 19 Sec. 2.4 FARM CREDIT ACT OF 1971 not exceed 15 percent of the outstanding loans at the end of its preceding fiscal year except on prior approval by the Farm Credit Bank of the district. The aggregate of such housing loans in any farm credit district shall not exceed 15 percent of the outstanding loans of all associations in the district at the end of the preceding fiscal year. (3) RURAL AREAS.—For rural housing purposes under this section the term ‘‘rural areas’’ shall not be defined to include any city or village having a population in excess of 2,500 in habitants. (4) EQUIPMENT.—Each association may own and lease, or lease with option to purchase, to stockholders of the association equipment needed in the operations of the stockholder. (c) INTEREST RATES AND CHARGES.— (1) IN GENERAL.—Loans authorized in subsection (a) hereof shall bear such rate or rates of interest as are determined under standards prescribed by the board of the bank subject to the provisions of section 4.17 of this Act, and shall be made upon such terms, conditions, and upon such security, if any, as shall be authorized in such standards. (2) SETTING OF RATES.—In setting rates and charges, it shall be the objective to provide the types of credit needed by eligible borrowers, at the lowest reasonable cost on a sound business basis, taking into account the cost of money to the as sociation, necessary reserves and expenses of the association, and services provided to borrowers and members. (3) VARYING RATES.—The loan documents may provide for the interest rate or rates to vary from time to time during the repayment period of the loan in accordance with the rate or rates currently being charged by the association. (4) PRIOR APPROVAL.—Such standards may require prior approval of the bank on certain classes of loans, and may au thorize a continuing commitment to a borrower of a line of credit. (d) SPECIAL DISTRICT RULE.— (1) PROVISION OF CREDIT AND TECHNICAL ASSISTANCE OUT SIDE SERVICE TERRITORY.—Notwithstanding any territorial lim itation in the chapter of a production credit association located in a district in which there are only two such associations, the Farm Credit Administration Board, on request of such associa tion, may permit such association to provide credit and tech nical assistance to any borrower who is denied credit by the other production credit association in the district if the Board determines that such other production credit association in the district is unduly restrictive in the application of credit stand ards. (2) TIMING OF DETERMINATION.—If the Farm Credit Ad ministration Board approves the extension of credit and tech nical assistance under paragraph (1), the association shall ap prove or deny the application for credit within 90 days after re ceipt of the application from the borrower. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00019 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 20 Sec. 2.5 FARM CREDIT ACT OF 1971 SEC. 2.5. ø12 U.S.C. 2076¿ OTHER SERVICES. Each production credit association may provide technical as sistance to borrowers, applicants, and members and may make available to them at their option such financial related services ap propriate to their on-farm and aquatic operations as is determined feasible by the board of directors of each Farm Credit Bank, under regulations prescribed by the Farm Credit Administration. SEC. 2.6. ø12 U.S.C. 2076a¿ LIENS ON STOCK. Except with regard to stock or participation certificates held by other Farm Credit System institutions, each production credit asso ciation shall have a first lien on stock and participation certificates the association issues, on allocated surplus, and on investments in equity reserve, for any indebtedness of the holder of the capital in vestments and, in the case of equity reserves, for charges for asso ciation losses in excess of reserves and surpluses. SEC. 2.7. ø12 U.S.C. 2077¿ TAXATION. Each production credit association and its obligations are in strumentalities of the United States and as such any and all notes, debentures, and other obligations issued by such associations shall be exempt, both as to principal and interest, from all taxation (ex cept surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States or any State, territorial, or local tax ing authority, except that interest on such obligations shall be sub ject to Federal income taxation in the hands of the holder. Subtitle B—Federal Land Bank Associations SEC. 2.10. ø12 U.S.C. 2091¿ ORGANIZATIONS; ARTICLES; CHARTERS; POWERS OF THE FARM CREDIT ADMINISTRATION. (a) CHARTER.—Each Federal land bank association shall con tinue as a federally chartered instrumentality of the United States. (b) ORGANIZATION.— (1) IN GENERAL.—A Federal land bank association may be organized by any group of 10 or more persons desiring to bor row money from a Farm Credit Bank under section 1.7(a), in cluding persons to whom the Farm Credit Bank has made a loan directly or through an agent and has taken as security real estate located in the territory proposed to be served by the association. (2) ARTICLES OF ASSOCIATION.— (A) DESCRIPTION OF TERRITORY.—The articles of asso ciation shall describe the territory within which the asso ciation proposes to carry on its operations. (B) SUBMISSION TO FCA.—Proposed articles shall be forwarded to the Farm Credit Bank for the district, accom panied by an agreement to subscribe on behalf of the asso ciation for stock in accordance with the bylaws of the Farm Credit Bank. (C) STOCK PURCHASE.—Association stock may be paid for by surrendering for cancellation stock in the bank held by a borrower and the issuance of an equivalent amount of stock to such borrower in the association. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00020 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 21 Sec. 2.12 FARM CREDIT ACT OF 1971 (D) STATEMENT.—The articles shall be accompanied by a statement signed by each of the members of the proposed association establishing— (i) the individual’s eligibility and request for a Farm Credit Bank loan; (ii) that the real estate with respect to which the individual desires the loan for is not being served by another Federal land bank association; and (iii) that the individual is or will become a stock holder in the proposed association. (E) SUBMISSION TO FCA.—A copy of the articles of asso ciation shall be forwarded to the Farm Credit Administra tion with the recommendations of the bank concerning the need for the proposed association in order to adequately serve the credit needs of eligible persons in the proposed territory and a statement as to whether or not the terri tory includes any territory described in the charter of an other Federal land bank association. (3) DENIALS OF CHARTERS.—The Farm Credit Administra tion for good cause shown may deny the charter applied for. (4) APPROVAL OF ARTICLES.—On the approval of the pro posed articles by the Farm Credit Administration and the issuance of such charter, the association shall become as of such date a federally chartered body corporate and an instru mentality of the United States. (c) FCA AUTHORITY ON ORGANIZATION.—The Farm Credit Ad ministration shall have power, in the terms of the charter, under rules and regulations prescribed by the Farm Credit Administra tion— (1) to provide for the organization of the association; (2) to provide for the initial amount of stock of the associa tion; (3) to provide for the territory within which the association may carry on its operations; and (4) to approve amendments to the charter of such associa tion. SEC. 2.11. ø12 U.S.C. 2092¿ BOARD OF DIRECTORS. Each Federal land bank association shall elect from its voting shareholders a board of directors of such number, for such terms, in such manner, and with such qualifications as may be required by its bylaws except that, at least one member shall be elected by the other directors, which member shall not be a director, officer, employee, stockholder, or agent of a System institution. SEC. 2.12. ø12 U.S.C. 2093¿ GENERAL CORPORATE POWERS. Each Federal land bank association shall be a body corporate and, subject to supervision of the Farm Credit Bank for the district and the regulation of the Farm Credit Administration, shall have the power to— (1) adopt and use a corporate seal; (2) have succession until dissolved under the provisions of this Act or other Act of Congress; (3) make contracts; (4) sue and be sued; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00021 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 22 Sec. 2.12 FARM CREDIT ACT OF 1971 (5) acquire, hold, dispose, and otherwise exercise all of the usual incidents of ownership of real estate and personal prop erty necessary or convenient to the business of the association; (6) operate under the direction of the board of directors of the association in accordance with this Act; (7) provide by its board of directors for a manager or other chief executive officer, and provide for such other officers or employees as may be necessary, including joint employees as provided in this Act, define the duties of such, and require sur ety bonds or make other provision against losses occasioned by employees, except that no director shall, within one year after the date when such director ceases to be a member of the board, serve as a salaried employee of the association on the board of which such director served; (8) prescribe, by its board of directors, its bylaws that shall be consistent with law, and that shall provide for— (A) the classes of its stock and the manner in which such stock shall be issued, transferred, and retired; and (B) the manner in which it is to— (i) select officers and employees; (ii) acquire, hold, and transfer property; (iii) conduct general business; and (iv) exercise and enjoy the privileges granted to it by law; (9) accept applications for Farm Credit Bank loans and re ceive from such bank and disburse to the borrowers the pro ceeds of such loans; (10) subscribe to stock of the Farm Credit Bank of the dis trict; (11) elect by its board of directors a loan committee with power to elect applicants for membership in the association and recommend loans to the Farm Credit Bank, or with the approval of the Farm Credit Bank, delegate the election of ap plicants for membership and the approval of loans within spec ified limits to other committees or to authorized employees of the association; (12) on agreement with the bank, take such additional ac tions with respect to applications and loans and perform such functions as are vested by law in the Farm Credit Banks as may be agreed to by the association; (13) endorse and become liable to the bank on loans it makes to association members; (14) receive such compensation and deduct such sums from loan proceeds with respect to each loan as may be agreed be tween the association and the bank and make such other charges for services as may be approved by the bank; (15) provide technical assistance to members, borrowers, applicants, and other eligible persons and make available to them, at their option, such financial related services appro priate to their operations as it determines, with Farm Credit Bank approval, are feasible, under regulations of the Farm Credit Administration; (16) borrow money from the bank and, with the approval of such bank, borrow from and issue association notes or other VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00022 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 23 Sec. 2.16 FARM CREDIT ACT OF 1971 obligations to any commercial bank or other financial institu tion; (17) buy and sell obligations of or insured by the United States or any agency thereof or of any banks of the Farm Cred it System; (18) invest association funds in such obligations as may be authorized in regulations of the Farm Credit Administration and approved by the bank and deposit securities and current funds of the association with any member bank of the Federal Reserve System, with the Farm Credit Bank, or with any bank insured by the Federal Deposit Insurance Corporation, and pay fees therefor and receive interest thereon as may be agreed; (19) perform such other function delegated to the associa tion by the Farm Credit Bank of the district; (20) exercise by its board of directors or authorized officers or agents all such incidental powers as may be necessary or ex pedient in the conduct of its business; (21) contribute to the capital of the bank; and (22) operate as an originator and become certified as a cer tified facility under title VIII. SEC. 2.13. ø12 U.S.C. 2094¿ FEDERAL LAND BANK ASSOCIATION CAP ITALIZATION. In accordance with section 4.3A, the Federal land bank asso ciation shall provide, through its bylaws and subject to Farm Cred it Administration regulations, for its capitalization and the manner in which its stock shall be issued, held, transferred, and retired and its earnings distributed. SEC. 2.14. ø12 U.S.C. 2096¿ AGREEMENTS FOR SHARING GAINS OR LOSSES. Each Farm Credit Bank may enter into agreements with Fed eral land bank associations in its district for sharing the gain or losses on loans or on security held therefor or acquired in liquida tion thereof, and associations are authorized to enter into any such agreements and also, subject to bank approval, agreements with other associations in the district for sharing the risk of loss on loans endorsed by each such association. As may be authorized by the bank in accordance with regulations of the Farm Credit Admin istration, associations also may enter into agreements with other Farm Credit System institutions to share loan and other losses, whether to protect against capital impairment or for any other pur pose. SEC. 2.15. ø12 U.S.C. 2097¿ LIENS ON STOCK. Each Federal land bank association shall have a first lien on the stock and participation certificates it issues, except on stock or participation certificates held by other Farm Credit System institu tions, for the payment of any liability of the stockholder to the as sociation or to the bank, or to both of them. SEC. 2.16. ø12 U.S.C. 2098¿ TAXATION. Each Federal land bank association and the capital, reserves, and surplus thereof, and the income derived therefrom, shall be ex empt from Federal, State, municipal, and local taxation, except taxes on real estate held by a Federal land bank association to the same extent, according to its value, as other similar property held VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00023 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 24 Sec. 3.0 FARM CREDIT ACT OF 1971 by other persons is taxed. The mortgages held by the Federal land bank associations and the notes, bonds, debentures, and other obli gations issued by the associations shall be considered and held to be instrumentalities of the United States and, as such, they and the income therefrom shall be exempt from all Federal, State, mu nicipal, and local taxation, other than Federal income tax liability of the holder thereof under the Public Debt Act of 1941 (31 U.S.C. 3124). TITLE III—BANKS FOR COOPERATIVES PART A—BANKS FOR COOPERATIVES SEC. 3.0. ø12 U.S.C. 2121¿ ESTABLISHMENT; TITLES; BRANCHES.—(a) The banks for cooperatives established pursuant to sections 2 and 30 of the Farm Credit Act of 1933, as amended, shall continue as federally chartered instrumentalities of the United States. The Farm Credit Administration shall approve amendments consistent with this Act to charters and organiza tional certificates of banks for cooperatives. Unless an existing bank for cooperatives is merged with another bank, there shall be a bank for cooperatives in each farm credit district and a Central Bank for Cooperatives. A bank for cooperatives may include in its title the name of the city in which it is located or other geo graphical designation. The Central Bank for Cooperatives may be located in such place as its board of directors may determine with the approval of the Farm Credit Administration. When authorized by the Farm Credit Administration each bank for cooperatives may establish such branches or other offices as may be appropriate for the effective operation of its business. (b) Each bank for cooperatives shall elect from its voting stock holders a board of directors of such number, for such term, in such manner, and with such qualifications as may be required in its by laws, except that, at least one member shall be elected by the other directors, which member shall not be a director, officer, employee, or stockholder of a System institution. SEC. 3.1. ø12 U.S.C. 2122¿ CORPORATE EXISTENCE; GENERAL CORPORATE POWERS.—Each bank for cooperatives shall be a body corporate and, subject to regulation by the Farm Credit Adminis tration, shall have power to— (1) Adopt and use a corporate seal. (2) Have succession until dissolved under the provisions of this Act or other Act of Congress. (3) Make contracts. (4) Sue and be sued. (5) Acquire, hold, dispose, and otherwise exercise all of the usual incidents of ownership of real and personal property nec essary or convenient to its business. (6) Make loans and commitments for credit, provide services and other assistance as authorized in this Act, and charge fees therefor. (7) Operate under the direction of its board of directors. (8) Elect by its board of directors a president, any vice presi dents, a secretary, a treasurer, and provide for such other officers, employees, and agents as may be necessary, including joint employ VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00024 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 25 Sec. 3.1 FARM CREDIT ACT OF 1971 ees as provided in this Act, define their duties and require surety bonds or make other provisions against losses occasioned by em ployees. (9) Prescribe by its board of directors its bylaws not incon sistent with law providing for the classes of its stock and the man ner in which its stock shall be issued, transferred, and retired; its officers, employees, or agents elected or provided for; its property acquired, held, and transferred; its loans made; its general busi ness conducted; and the privileges granted it by law exercised and enjoyed. (10) Borrow money and issue notes, bonds, debentures, or other obligations individually or in concert with one or more other banks of the System, of such character, and such terms, conditions, and rates of interest as may be determined. (11)(A) Participate in loans under this title with one or more other banks for cooperatives and with commercial banks and other financial institutions upon such terms as may be agreed among them, and participate with one or more other Farm Credit System institutions in loans made under this title or other titles of this Act on the basis prescribed in section 4.18 of this Act. (B)(i) Participate in any loan of a type otherwise authorized under this title that is made to a similar entity by any institution in the business of extending credit, including purchases of partici pations in loans to finance international trade transactions involv ing the sale of agricultural commodities or the products thereof, ex cept that— (I) a bank for cooperatives may not participate in a loan— (aa) if the participation would cause the total amount of all loan participations by the bank under this subpara graph involving a single credit risk to exceed 10 percent of the bank’s total capital; or (bb) if the participation by the bank will itself equal or exceed 50 percent of the principal of the loan or, when taken together with participations in the loan by other Farm Credit System institutions, will cause the cumu lative amount of the participations by all Farm Credit Sys tem institutions in the loan to equal or exceed 50 percent of the principal of the loan; (II) a bank for cooperatives may not participate in a loan to a similar entity under this subparagraph if the similar enti ty has a loan or loan commitment outstanding with a Farm Credit Bank or an association chartered under this Act, unless agreed to by the Bank or association; and (III) the cumulative amount of participations that a bank for cooperatives may have outstanding under this subpara graph at any time may not exceed 15 percent of the bank’s total assets. (ii) As used in this subparagraph, the term ‘‘similar entity’’ means an entity that, while not eligible for a loan under section 3.8, is functionally similar to an entity eligible for a loan under sec tion 3.8 in that it derives a majority of its income from, or has a majority of its assets invested in, the conduct of activities function ally similar to those conducted by the entity. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00025 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 26 Sec. 3.1 FARM CREDIT ACT OF 1971 (iii) As used in this subparagraph, the term ‘‘participate’’ or ‘‘participation’’ refers to multilender transactions, including syn dications, assignments, loan participations, subparticipations, or other forms of the purchase, sale, or transfer of interests in loans, other extensions of credit, or other technical and financial assist ance. (12) Deposit its securities and its current funds with any mem ber bank of the Federal Reserve System or any insured State non member bank (within the meaning of section 3 of the Federal De posit Insurance Act (12 U.S.C. 1813)) or, to the extent necessary to facilitate transactions which may be financed under section 3.7(b) of this Act, any other financial organization, domestic or foreign, as may be authorized by its board of directors, and pay fees therefor and receive interest thereon as may be agreed. When designated for that purpose by the Secretary of the Treasury, it shall be a de pository of public money, except receipts from customs, under such regulations as may be prescribed by the Secretary; may be em ployed as a fiscal agent of the Government, and shall perform all such reasonable duties as a depository of public money or financial agent of the Government as may be required of it. No Government funds deposited under the provisions of this subsection shall be in vested in loans or bonds or other obligations of the bank. (13)(A) Buy and sell obligations of or insured by the United States or of any agency thereof, or securities backed by the full faith and credit of any such agency and make such other invest ments as may be authorized under regulations issued by the Farm Credit Administration. (B) As may be authorized by its board of directors and ap proved by the Farm Credit Administration, buy from and sell to Farm Credit System institutions interests in loans and in other fi nancial assistance extended and nonvoting stock. (C) As may be authorized by its board of directors, and solely for the purposes of obtaining credit information and other services needed to facilitate transactions which may be financed under sec tion 3.7(b) of this Act, invest in ownership interests in foreign busi ness entities that are principally engaged in providing credit infor mation to and performing such servicing functions for their mem bers in connection with the members’ international activities. (14) Conduct studies and adopt standards for lending. (15) Amend and modify loan contracts, documents, and pay ment schedules, and release, subordinate, or substitute security for any of them. (16) Exercise by its board of directors or authorized officers, employees, or agents all such incidental powers as may be nec essary or expedient to carry on the business of the bank. (17) As may be authorized by the board of directors, maintain credit balances and pay or receive fees or interest thereon, for the purpose of assisting in the transfer of funds to or from parties to transactions that may be financed under section 3.7(b) of this Act: Provided, however, That nothing herein shall authorize the banks for cooperatives to engage in the business of accepting domestic de posits. (18) As may be authorized by its board of directors, agree with other Farm Credit System institutions to share loan or other VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00026 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 27 Sec. 3.3 FARM CREDIT ACT OF 1971 losses, whether to protect against capital impairment or for any other purpose. SEC. 3.2. ø12 U.S.C. 2123¿ BOARD OF DIRECTORS.— (a)(1) Each bank for cooperatives not merged into the United Bank for Cooperatives or the National Bank for Cooperatives shall elect a board of directors of such number, for such term, in such manner, and with such qualifications as may be required in its by laws, except that at least one member shall be elected by the other directors, which member shall not be a director, officer, employee, or stockholder of a System institution. (2)(A) If approved by the stockholders through a bylaw amend ment, the nomination and election of one member from a bank for cooperatives (other than the National Bank for Cooperatives) shall be carried out with each voting stockholder of a bank for coopera tives having one vote, plus a number of votes (or fractional part thereof) equal to— (i) the number of stockholders eligible to vote; multiplied by (ii) the percentage (or fractional part thereof) of the total equity interest (including allocated, but not unallocated, sur plus and reserves) in the bank of all stockholders held by the individual voting stockholder at the close of the immediately preceding fiscal year of the bank. (B) The total number of votes under this paragraph shall be the number of voting stockholders of a bank for cooperatives multi plied by two. (b) The board of directors of the Central Bank for Cooperatives shall consist of one member elected by the board of each bank for cooperatives, including the United Bank for Cooperatives if the Central Bank for Cooperatives is not merged into such bank, and one member appointed by the Farm Credit Administration. SEC. 3.3. ø12 U.S.C. 2124¿ BANK FOR COOPERATIVES STOCK; VALUE; CLASSES OF STOCK; VOTING; EXCHANGE.—(a) The capital stock of each bank for cooperatives shall be in such amount as its board determines is required for the purpose of providing adequate capital to permit the bank to meet the credit needs of borrowers from the bank and such amounts may be increased or decreased from time to time in accordance with such needs. (b) The capital stock of each bank shall be divided into shares of par value of $100 each and may be of such classes as the board may determine. Such stock may be issued in fractional shares. (c) Voting stock may be issued or transferred to and held only by (i) cooperative associations eligible to borrow from the banks (ii) other categories of persons and entities described in sections 3.7 and 3.8 eligible to borrow from the bank, as determined by the bank’s board of directors; and (iii) other banks for cooperatives, and shall not be otherwise transferred, pledged, or hypothecated except as consented to by the issuing bank under regulations of the Farm Credit Administration. (d) Each holder of one or more shares of voting stock which is eligible to borrow from a bank for cooperatives shall be entitled only to one vote and only in the affairs of the bank in the district in which its principal office is located unless otherwise authorized under regulations issued by the Farm Credit Administration, ex VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00027 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 28 Sec. 3.4 FARM CREDIT ACT OF 1971 cept that if such holder has not been a borrower from the bank in which it holds such stock within a period of two years next pre ceding the date fixed by the Farm Credit Administration prior to the commencement of voting, it shall not be entitled to vote. (e) Nonvoting investment stock may be issued in such series and in such amounts as may be determined by the board and may be exchanged for voting stock or sold or transferred to any person subject to the approval of the issuing bank. (f) Participation certificates may be issued to parties to whom voting stock may not be issued. SEC. 3.4. ø12 U.S.C. 2125¿ DIVIDENDS.—Dividends may be pay able only on nonvoting investment stock, other than stock held by the Farm Credit Administration, if declared by the board of direc tors of the bank, subject to the general direction of the Farm Credit Administration. SEC. 3.5. ø12 U.S.C. 2126¿ RETIREMENT OF STOCK.—Nonvoting investment stock and participation certificates may be called for re tirement at par. With the approval of the issuing bank, the holder may elect not to have the called stock or participation certificates retired in response to a call, reserving the right to have such stock or participation certificates included in the next call for retirement. Voting stock may also be retired at par, on call or on such revolv ing basis as the board may determine with due regard for its total capital needs: Provided, however, That all equities in the district banks issued or allocated with respect to the year of the enactment of this Act and prior years shall be retired on a revolving basis ac cording to the year of issue with the oldest outstanding equities being first retired. Equities issued for subsequent years shall not be called or retired until equities described in the preceding sen tence of this proviso have been retired. SEC. 3.6. ø12 U.S.C. 2127¿ GUARANTY FUND SUBSCRIPTIONS IN LIEU OF STOCK.—If any cooperative association is not authorized under the laws of the State in which it is organized to take and hold stock in a bank for cooperatives, the bank shall, in lieu of any requirement for stock purchase, require the association to pay into or have on deposit in a guaranty fund, or the bank may retain out of the amount of the loan and credit to the guaranty fund account of the borrower, a sum equal to the amount of stock which the as sociation would otherwise be required to own. Each reference to stock of the banks for cooperatives in this Act shall include such guaranty fund equivalents. The holder of the guaranty fund equiva lent and the bank shall each be entitled to the same rights and ob ligations with respect thereto as the rights and obligations associ ated with the class or classes of stock involved. SEC. 3.7. ø12 U.S.C. 2128¿ LENDING POWER.—(a) The banks for cooperatives are authorized to make loans and commitments to eligible cooperative associations and to extend to them other tech nical and financial assistance at any time (whether or not they have a loan from the bank outstanding), including but not limited to discounting notes and other obligations, guarantees, currency ex change necessary to service individual transactions that may be fi nanced under subsection (b) of this section, collateral custody, or participation with other banks for cooperatives and commercial banks or other financial institutions in loans to eligible coopera VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00028 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 29 Sec. 3.7 FARM CREDIT ACT OF 1971 tives, under such terms and conditions as may be determined to be feasible by the board of directors of each bank for cooperatives under regulations of the Farm Credit Administration. Such regula tions may include provisions for avoiding duplication between the Central Bank and district banks for cooperatives. Each bank may own and lease, or lease with option to purchase, to stockholders eli gible to borrow from the bank equipment needed in the operations of the stockholder and may make or participate in loans or commit ments and extend other technical and financial assistance to other domestic parties for the acquisition of equipment and facilities to be leased to such stockholders for use in their operations in the United States. (b)(1) A bank for cooperatives is authorized to make or partici pate in loans and commitments to, and to extend other technical and financial assistance to a domestic or foreign party with respect to its transactions with an association that is a voting stockholder of the bank for the import of agricultural commodities or products thereof, agricultural supplies, or aquatic products through pur chases, sales or exchanges, if the bank for cooperatives determines, under regulations of the Farm Credit Administration, that the vot ing stockholder will benefit substantially as a result of such loan, commitment, or assistance. (2)(A) A bank for cooperatives may make or participate in loans and commitments to, and extend other technical and finan cial assistance to— (i) any domestic or foreign party for the export, including (where applicable) the cost of freight, of agricultural commod ities or products thereof, agricultural supplies, or aquatic prod ucts from the United States under policies and procedures es tablished by the bank to ensure that the commodities, prod ucts, or supplies are originally sourced, where reasonably available, from one or more eligible cooperative associations de scribed in section 3.8(a) on a priority basis, except that if the total amount of the balances outstanding on loans made by a bank under this clause that— (I) are made to finance the export of commodities, products, or supplies that are not originally sourced from a cooperative, and (II) are not guaranteed or insured, in an amount equal to at least 95 percent of the amount loaned, by a depart ment, agency, bureau, board, commission, or establishment of the United States or a corporation wholly-owned directly or indirectly by the United States, exceeds an amount that is equal to 50 percent of the bank’s capital, then a sufficient interest in the loans shall be sold by the bank for cooperatives to commercial banks and other non System lenders to reduce the total amount of such outstanding balances to an amount not greater than an amount equal to 50 percent of the bank’s capital; and (ii) except as provided in subparagraph (B), any domestic or foreign party in which an eligible cooperative association de scribed in section 3.8(a) (including, for the purpose of facili tating its domestic business operations only, a cooperative or other entity described in section 3.8(b)(1)(A)) has an ownership VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00029 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 30 Sec. 3.7 FARM CREDIT ACT OF 1971 2 Margin so in law. interest, for the purpose of facilitating the domestic or foreign business operations of the association, except that if the owner ship interest by an eligible cooperative association, or associa tions, is less than 50 percent, the financing shall be limited to the percentage held in the party by the association or associa tions. (B) A bank for cooperatives shall not use the authority pro vided in subparagraph (A)(ii) to provide financial assistance to a party for the purpose of financing the relocation of a plant or facil ity from the United States to another country. (3) A bank for cooperatives is authorized to provide such serv ices as may be customary and normal in maintaining relationships with domestic or foreign entities to facilitate the activities specified in paragraphs (1) and (2), consistent with this Act. (4) 2 DEFINITION OF AGRICULTURAL SUPPLY.—In this sub section, the term ‘‘agricultural supply’’ includes— (A) a farm supply; and (B)(i) agriculture-related processing equipment; (ii) agriculture-related machinery; and (iii) other capital goods related to the storage or han dling of agricultural commodities or products. (c) Loans, commitments, and assistance authorized by sub section (b) of this section shall be extended in accordance with poli cies adopted by the board of directors of the bank under regulations of the Farm Credit Administration. (d) The regulations of the Farm Credit Administration imple menting subsection (b) of this section and the other provisions of this title relating to the authority under subsection (b) of this sec tion may not confer upon the banks for cooperatives powers and authorities greater than those specified in this title. The Farm Credit Administration shall, during the formulation of such regula tions, closely consult on a continuing basis with the Board of Gov ernors of the Federal Reserve System to ensure that such regula tions conform to national banking policies, objectives, and limita tions. (e) Notwithstanding any other provision of this title, the banks for cooperatives shall not make or participate in loans or commit ments for the purpose of financing speculative futures transactions by eligible borrowers in foreign currencies. (f) The banks for cooperatives may, for the purpose of install ing, maintaining, expanding, improving, or operating water and waste disposal facilities in rural areas, make and participate in loans and commitments and extending other technical and finan cial assistance to— (1) cooperatives formed specifically for the purpose of es tablishing or operating such facilities; and (2) public and quasi-public agencies and bodies, and other public and private entities that, under authority of State or local law, establish or operate such facilities. For purposes of this subsection, the term ‘‘rural area’’ means all territory of a State that is not within the outer boundary of any VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00030 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 31 Sec. 3.8 FARM CREDIT ACT OF 1971 city or town having a population of more than 20,000 based on the latest decennial census of the United States. SEC. 3.8. ø12 U.S.C. 2129¿ ELIGIBILITY.—(a) Any association of farmers, producers or harvesters of aquatic products, or any federa tion of such associations, which is operated on a cooperative basis, and has the powers for processing, preparing for market, handling, or marketing farm or aquatic products; or for purchasing, testing, grading, processing, distributing, or furnishing farm or aquatic sup plies or furnishing farm or aquatic business services or services to eligible cooperatives and conforms to either of the two following re quirements: (1) no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein; or (2) does not pay dividends on stock or membership capital in excess of such per centum per annum as may be approved under regulations of the Farm Credit Administration; and in any case (3) does not deal in farm products or aquatic products, or products processed therefrom, farm or aquatic supplies, farm or aquatic business services, or services to eligible cooperatives with or for nonmembers in an amount greater in value than the total amount of such business transacted by it with or for members, excluding from the total of member and nonmember business transactions with the United States or any agency or instrumentality thereof or services or supplies furnished as a public utility; and (4) a percentage of the voting control of the association not less than 80 per centum (60 per centum (A) in the case of rural electric, telephone, public utility, and service cooperatives; (B) in the case of local farm supply cooperatives that have histori cally served needs of the community that would not adequately be served by other suppliers and have experienced a reduction in the percentage of farmer membership due to changed cir cumstances beyond their control such as, but not limited to, ur banization of the community; and (C) in the case of local farm supply cooperatives that provide or will provide needed serv ices to a community and that are or will be in competition with a cooperative specified in paragraph (B)) or, with respect to any type of association or cooperative, such higher percentage as established by the bank board, is held by farmers, producers or harvesters of aquatic products, or eligible cooperative asso ciations as defined herein; shall be eligible to borrow from a bank for cooperatives. Any such association that has received a loan from a bank for cooperatives shall, without regard to the requirements of paragraphs (1) through (4), continue to be eligible for so long as more than 50 per cent (or such higher percentage as is established by the bank board) of the voting control of the association is held by farmers, producers or harvesters of aquatic products, or eligible cooperative associations. (b) Notwithstanding any other provision of this section: (1) The following entities shall also be eligible to borrow from a bank for cooperatives: VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00031 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 32 Sec. 3.9 FARM CREDIT ACT OF 1971 (A) Cooperatives and other entities that have received a loan, loan commitment, or loan guarantee from the Rural Electrification Administration, or a loan or loan commitment from the Rural Telephone Bank, or that are eligible under the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.) for a loan, loan commitment, or loan guarantee from the Administration or the Bank (or a suc cessor of the Administration or the Bank), and subsidiaries of such cooperatives or other entities. (B) Any legal entity that (i) holds more than 50 per cent of the voting control of an association or other entity that is eligible to borrow from a bank for cooperatives under subsection (a) or subparagraph (A) of this para graph, and (ii) borrows for the purpose of making funds available to that association or entity, and makes funds available to that association or entity under the same terms and conditions that the funds are borrowed from a bank for cooperatives. (C) Any cooperative or other entity described in sub section (b) or (f) of section 3.7. (D) Any creditworthy private entity that satisfies the requirements for a service cooperative under paragraphs (1), (2), and (4), or under the last sentence, of subsection (a) and subsidiaries of the entity, if the entity is organized to benefit agriculture in furtherance of the welfare of its farmer-members and is operated on a not-for-profit basis. (2) Notwithstanding the provisions of section 3.9, the board of directors of a bank for cooperatives may determine that, with respect to a loan to any borrower eligible to borrow from a bank under paragraph (1)(A) that is fully guaranteed by the United States, no stock purchase requirement shall apply, other than the requirement that a borrower eligible to own vot ing stock shall purchase one share of such stock. (3) Each association and other entity eligible to borrow from a bank for cooperatives under this subsection, for pur poses of section 3.7(a), shall be treated as an eligible coopera tive association and a stockholder eligible to borrow from the bank. (4) Nothing in this subsection shall be construed to ad versely affect the eligibility, as it existed on the date of the en actment of this subsection, of cooperatives and other entities for any other credit assistance under Federal law. SEC. 3.9. ø12 U.S.C. 2130¿ OWNERSHIP OF STOCK BY BOR ROWERS.—(a) Each borrower entitled to hold voting stock shall, at the time a loan is made by a bank for cooperatives, own at least one share of voting stock and shall be required by the bank to in vest in additional voting stock or nonvoting investment stock at that time, or from time to time, as the lending bank may deter mine, but the requirement for investment in stock at the time the loan is closed shall not exceed an amount equal to 10 per centum of the face amount of the loan. Such additional ownership require ments may be based on the face amount of the loan, the out standing loan balance or on a percentage of the interest payable by the borrower during any year or during any quarter thereof, or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00032 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 33 Sec. 3.11 FARM CREDIT ACT OF 1971 upon such other basis as the bank determines will provide ade quate capital for the operation of the bank and equitable ownership thereof among borrowers. In the case of a direct loan by the Cen tral Bank, the borrower shall be required to own or invest in the necessary stock in a district bank or banks and such district bank shall be required to own a corresponding amount of stock in the Central Bank, but voting stock shall be in the one district bank designated by the Farm Credit Administration. (b) Notwithstanding the provisions of subsection (a) of this sec tion, the purchase of stock need not be required with respect to that part of any loan made by a bank for cooperatives which it sells to or makes in participation with financial institutions other than any of the banks for cooperatives. In such cases the distribution of earnings of the bank for cooperatives shall be on the basis of the interest in the loan retained by such bank. SEC. 3.10. ø12 U.S.C. 2131¿ INTEREST RATES; SECURITY; LIEN; CANCELLATION; AND APPLICATION ON INDEBTEDNESS.—(a) Loans made by a bank for cooperatives shall bear interest at a rate or rates determined by the board of directors of the bank from time to time. In setting rates and charges, it shall be the objective to provide the types of credit needed by eligible borrowers at the low est reasonable cost on a sound business basis, taking into account the net cost of money to the bank, necessary reserves and expenses of the bank, and services provided. The loan documents may pro vide for the interest rate or rates to vary from time to time during the repayment period of the loan, in accordance with the rate or rates currently being charged by the bank. (b) Loans shall be made upon such terms, conditions, and secu rity, if any, as may be determined by the bank in accordance with regulations of the Farm Credit Administration. (c) Each bank for cooperatives shall have a first lien on all stock or other equities in the bank as collateral for the payment of any indebtedness of the owner thereof to the bank. In the case of a direct loan to an eligible cooperative by the Central Bank, the Central Bank shall have a first lien on the stock and equities of the borrower in the district bank and the district bank shall have a lien thereon junior only to the lien of the Central Bank. (d) In any case where the debt of a borrower is in default, or in any case of liquidation or dissolution of a present or former bor rower from a bank for cooperatives, the bank may, but shall not be required to, retire and cancel all or a part of the stock, allocated surplus or contingency reserves, or any other equity in the bank owned by or allocated to such borrower, at the fair market value thereof not exceeding par, and, to the extent required in such cases, corresponding shares and allocations and other equity inter ests held by a district bank in another district bank on account of such indebtedness, shall be retired or equitably adjusted. In no event shall the bank’s equities be retired or canceled if the retire ment or cancellation would adversely affect the bank’s capital structure, as determined by the Farm Credit Administration. SEC. 3.11. ø12 U.S.C. 2132¿ EARNINGS AND RESERVES; APPLI CATION OF SAVINGS.— (a) At the end of each fiscal year, the net savings shall, under regulations prescribed by the Farm Credit Administration, con VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00033 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 34 Sec. 3.11 FARM CREDIT ACT OF 1971 tinue to be applied on a cooperative basis with provision for sound, adequate capitalization to meet the changing financing needs of eli gible cooperative borrowers and prudent corporate fiscal manage ment, to the end that current year’s patrons carry their fair share of the capitalization, ultimate expenses, and reserves related to the year’s operations and the remaining net savings shall be distrib uted as patronage refunds as provided in subsections (b) and (c) of this section. Such regulations may provide for application of net savings to the restoration or maintenance of an allocated surplus account, reasonable additions to unallocated surplus, or to unallocated reserves after payment of operating expenses, and pro vide for allocations to patrons not qualified under the Internal Rev enue Code, or payment of such per centum of patronage refunds in cash, as the board may determine. (b) The net savings of each district bank for cooperatives, after the earnings for the fiscal year have been applied in accordance with subsection (a) shall be paid in stock, participation certificates, or cash, or in any of them, as determined by its board, as patron age refunds to borrowers to whom such refunds are payable who are borrowers of the fiscal year for which such patronage refunds are distributed. Except as provided in subsection (c) below, all pa tronage refunds shall be paid in proportion that the amount of in terest and service fees on the loans to each borrower during the year bears to the interest and service fees on the loans of all bor rowers during the year or on such other proportionate patronage basis as may be approved by the board of directors. (c) The net savings of the Central Bank for Cooperatives after the earnings for the fiscal year have been applied in accordance with subsection (a) shall be paid in stock or cash, or both, as deter mined by the board, as patronage refunds to the district banks on the basis of interest held by the Central Bank in loans made by the district banks and upon any direct loans made by the Central Bank to cooperative associations, or on such other proportionate patronage basis as may be approved by the board of directors. In cases of direct loans, such refund shall be paid to the district bank or banks which issued their stock to the borrower incident to such loans, and the district bank or banks shall issue a like amount of patronage refunds to the borrower. (d) In the event of a net loss in any fiscal year after providing for all operating expenses (including reasonable valuation reserves and losses in excess of any applicable reserves), such loss may be carried forward or carried back, if appropriate, or otherwise shall be absorbed by charges to unallocated reserve or surplus accounts established after the date of enactment of this Act; charges to allo cated contingency reserve account; charges to allocated surplus ac counts; charges to other contingency reserve and surplus accounts; the impairment of voting stock; or the impairment of all other stock. (e) Notwithstanding any other provisions of this section any costs or expenses attributable to a prior year or years but not rec ognized in determining the net savings for such year or years may be charged to reserves or surplus of the bank or to patronage allo cations for such years, as may be determined by the board of direc tors. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00034 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 35 Sec. 3.21 FARM CREDIT ACT OF 1971 (f) A bank for cooperatives may pay in cash such portion of its patronage refunds as will permit its taxable income to be deter mined without taking into account savings applied as allocated sur plus, allocated contingency reserves, and patronage refunds under subsection (a) of this section. SEC. 3.12. ø12 U.S.C. 2133¿ DISTRIBUTION OF ASSETS AND LIQ UIDATION OR DISSOLUTION.—In the case of liquidation or dissolu tion of any bank for cooperatives, after payment or retirement, first, of all liabilities; second, of all capital stock issued before Jan uary 1, 1956, at par, and all nonvoting stock at par; and third, all voting stock at par; any surplus and reserves existing on January 1, 1956, shall be paid to the holders of stock issued before that date, and voting stock pro rata; and any remaining allocated sur plus and reserves shall be distributed to those entities to which they are allocated on the books of the banks, and any other remain ing surplus shall be paid to the holders of outstanding voting stock. If it should become necessary to use any surplus or reserves to pay any liabilities or to retire any capital stock, unallocated reserves or surplus, allocated reserves and surplus shall be exhausted in ac cordance with rules prescribed by the Farm Credit Administration. SEC. 3.13. ø12 U.S.C. 2134¿ TAXATION.—Each bank for co operatives and its obligations are instrumentalities of the United States and as such any and all notes, debentures, and other obliga tions issued by such bank shall be exempt, both as to principal and interest from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States or any State, terrritorial, or local taxing authority, except that interest on such obligations shall be subject to Federal income taxation in the hands of the holder. PART B—UNITED AND NATIONAL BANKS FOR COOPERATIVES SEC. 3.20. ø12 U.S.C. 2141¿ CHARTER, POWERS, AND OPERATION. (a) CHARTER.—The National Bank for Cooperatives or the United Bank for Cooperatives, as the case may be (hereinafter in this part referred to as the consolidated bank), established under section 413 of the Agricultural Credit Act of 1987, shall be a feder ally chartered instrumentality of the United States and an institu tion of the Farm Credit System. (b) POWERS.—The consolidated bank and the board of directors of such bank shall have all of the powers, rights, responsibilities, and obligations of the district banks for cooperatives and the Cen tral Bank for Cooperatives and the boards of directors of such banks, except as otherwise provided for in this Act. (c) OPERATION.—The consolidated bank shall be organized and operated on a cooperative basis. SEC. 3.21. ø12 U.S.C. 2142¿ BOARD OF DIRECTORS PROVISIONS. (a) INITIAL BOARD OF DIRECTORS.—The initial board of direc tors of a consolidated bank shall include the members of the boards of directors of the farm credit districts who were elected by voting stockholders of the constituent district banks for cooperatives (as such banks existed on the date of the enactment of this section) and who shall serve out the terms for which they were elected. (b) PERMANENT BOARD OF DIRECTORS.— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00035 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 36 Sec. 3.21 FARM CREDIT ACT OF 1971 (1) COMPOSITION.—The permanent board of directors of a consolidated bank shall consist of— (A) three members, elected by the voting stockholders of the consolidated bank, from each of the farm credit dis tricts that had been served by constituent banks, as such districts existed on the date of the enactment of this sec tion, at least one of whom, from each such district, shall be a farmer; (B) one member elected by the voting stockholders of each district bank for cooperatives that is not a constituent of the consolidated bank; and (C) one member appointed by the members chosen under subparagraphs (A) and (B) who shall not be a stock holder or borrower of a System institution or an officer or director of any such stockholder or borrower. (2) NOMINATION AND ELECTION.—For purposes of nomi nating and electing members of the board of directors under paragraph (1)(A): (A) FIRST MEMBER.—The nomination and election of the first member from each district shall be carried out on the basis provided for in section 3.3(d). (B) SECOND MEMBER.— (i) IN GENERAL.—The nomination and election of the second member from each district shall be carried out with each voting stockholder of the consolidated bank located in the district having one vote, plus a number of votes (or fractional part thereof) equal to the number of stockholders eligible to vote in that dis trict multiplied by the percentage (or fractional part thereof) of the total equity interest (including allo cated, but not unallocated, surplus and reserves) in the consolidated bank of all such stockholders located in that district held by the individual voting stock holder— (I) at the close of the immediately preceding fiscal year of the consolidated bank; or (II) with respect to the first election held under this subsection, as of such date as the Farm Credit Administration shall prescribe. (ii) TOTAL NUMBER OF VOTES.—The total number of votes for each district under this subparagraph shall be the number of voting stockholders of the con solidated bank located in the district multiplied by two. (C) THIRD MEMBER.—The nomination and election of the third member from each district shall be carried out in accordance with procedures prescribed in the bylaws of the consolidated bank. (3) TERMS.— (A) IN GENERAL.—The members of the board of direc tors of the consolidated bank shall serve for a term of 3 years. (B) TIMING OF ELECTIONS.—Procedures for electing members of the board of directors of the consolidated bank VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00036 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 37 Sec. 3.26 FARM CREDIT ACT OF 1971 under this subsection shall ensure that the beginning of the terms of such members coincide with the expiration of the terms of members of the interim board of directors of the bank under subsection (a). (4) FCA REGULATIONS.—The nomination and election of the members of the board of directors of the consolidated bank under this subsection shall be carried out in accordance with regulations issued by the Farm Credit Administration. (c) MODIFICATION OF BOARD OF DIRECTORS PROVISIONS.—The provisions of subsection (b) relating to the board of directors of the consolidated bank, other than the provisions relating to the initial composition, nomination, and election of the members of the board, may be modified on an affirmative vote of at least two-thirds of the voting stockholders of the bank, with each such stockholder to have, for such purposes, only one vote. Any proposals for modifying such provisions shall be submitted for a vote by such stockholders in accordance with procedures prescribed by the Farm Credit Ad ministration. SEC. 3.22. ø12 U.S.C. 2143¿ CREDIT DELIVERY OFFICE. On a determination by the board of directors of the consoli dated bank that the bank’s loan portfolio is concentrated in any one district or districts (according to the district boundaries in effect immediately prior to the effective date of the establishment of the bank under section 413 of the Agricultural Credit Act of 1987), the bank may consider the creation of regional service centers to ac commodate such loan concentrations. SEC. 3.23. ø12 U.S.C. 2144¿ CONSOLIDATION OF FUNCTIONS. Subject to section 3.22, to the greatest extent practicable, the functions of the consolidated bank shall be consolidated in the cen tral office of the bank. SEC. 3.24. ø12 U.S.C. 2145¿ EXCHANGE OF OWNERSHIP INTERESTS. On the establishment of the consolidated bank, ownership in terests of the stockholders and subscribers to the guaranty funds of the constituent district banks for cooperatives (including stock, participation certificates, and allocated equities) shall be exchanged for like ownership interests in the consolidated bank on a book value basis. SEC. 3.25. ø12 U.S.C. 2146¿ CAPITALIZATION. In accordance with section 4.3A, each consolidated bank shall provide, through bylaws and subject to Farm Credit Administration regulations, for the capitalization of the bank and the manner in which bank stock shall be issued, held, transferred, and retired and bank earnings distributed. SEC. 3.26. ø12 U.S.C. 2147¿ PATRONAGE POOLS. Under such terms and conditions as may be determined by its board of directors, the consolidated bank may— (1) for a period of at least 3 years following the date of the enactment of this section, establish separate patronage pools consisting of loans to eligible borrowers located in each con stituent farm credit district (as such district existed on the date of the enactment of this section); and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00037 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 38 Sec. 3.27 FARM CREDIT ACT OF 1971 (2) allocate revenues, expenses, and net savings among such pools on an equitable basis. SEC. 3.27. ø12 U.S.C. 2148¿ TRANSACTIONS TO ACCOMPLISH THE MERG ER. The receipt of assets or assumption of liabilities by the consoli dated bank, the exchange of stock, equities, or other ownership in terests, and any other transaction carried out in accomplishing the merger of the banks for cooperatives shall not be treated as a tax able event under the laws of the United States or of any State or political subdivision thereof. The preceding sentence shall also apply to the receipt of assets and liabilities by a cooperative to the extent that the net amount of the distribution is immediately rein vested in stock of a consolidated bank (and in such case the basis of such stock shall be appropriately reduced by the amount of gain not recognized by reason of this sentence). SEC. 3.28. ø12 U.S.C. 2149¿ LENDING LIMITS. The Farm Credit Administration may not establish lending limits for the consolidated bank with respect to any loans or bor rowers that are more restrictive than the combined lending limits that were previously established by the Farm Credit Administra tion for a district bank for cooperatives and the Central Bank for Cooperatives with respect to such loans or borrowers. SEC. 3.29. ø12 U.S.C. 2150¿ REPORTS BY MERGED BANKS FOR COOPERA TIVES. (a) IN GENERAL.—When two or more banks for cooperatives merge, the resulting bank shall, not later than December 31 of each year of the succeeding 5 years following the date of the merg er, file an annual report with the Farm Credit Administration that— (1) analyzes the effect of the merger; (2) includes a breakdown of loans outstanding according to the size of the cooperative stockholders of the bank; and (3) describes the adequacy of credit and other assistance services provided smaller cooperatives. (b) AVAILABILITY.—A copy of the report required in subsection (a) shall be made available to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutri tion, and Forestry of the Senate. TITLE IV—PROVISIONS APPLICABLE TO TWO OR MORE CLASSES OF INSTITUTIONS OF THE SYSTEM PART A—FUNDING SEC. 4.0. ø12 U.S.C. 2151¿ REVOLVING FUND. The revolving fund established by this section (in effect imme diately before the date of the enactment of the Agricultural Credit Act of 1987) shall be available to the Farm Credit Administration and the Assistance Board during the periods, and for the purposes, provided for in sections 6.13 and 6.7, respectively. øSection 4.1 - Repealed by section 207 of P.L. 100–233¿ SEC. 4.2. ø12 U.S.C. 2153¿ POWER TO BORROW; ISSUE NOTES, BONDS, DEBENTURES, AND OTHER OBLIGATIONS.—Each of the banks VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00038 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 39 Sec. 4.3 FARM CREDIT ACT OF 1971 of the System, in order to obtain funds for its authorized purposes, shall have power, subject to regulation by the Farm Credit Admin istration, and subject to the limitations of paragraph (e) of this sec tion, to— (a) Borrow money from or loan to any other institution of the System, borrow from any commercial bank or other lending institu tion, issue its notes or other evidence of debt on its own individual responsibility and full faith and credit, and invest its excess funds in such sums, at such times, and on such terms and conditions as it may determine. (b) Issue its own notes, bonds, debentures, or other similar ob ligations, fully collateralized as provided in section 4.3(c) by the notes, mortgages, and security instruments it holds in the perform ance of its functions under this Act in such sums, maturities, rates of interest, and terms and conditions of each issue as it may deter mine with approval of the Farm Credit Administration. (c) Join with any or all banks organized and operating under the same title of this Act in borrowing or in issuance of consoli dated notes, bonds, debentures, or other obligations as may be agreed with approval of the Farm Credit Administration. (d) Join with other banks of the System in issuance of System wide notes, bonds, debentures, and other obligations in the man ner, form, amounts, and on such terms and conditions as may be agreed upon with approval of the Farm Credit Administration. Such System-wide issue by the participating banks and such par ticipations by each bank shall not exceed the limits to which each such bank is subject in the issuance of its individual or consoli dated obligations and each such issue shall be subject to approval of the Farm Credit Administration: Provided, however, There shall be no issues of System-wide obligations without the concurrence of the boards of directors of each bank and the approval of the Farm Credit Administration for such issues shall be conditioned on and be evidence of the compliance with this provision. (e) No bank or banks shall issue notes, bonds, debentures, or other obligations individually or in concert with one or more banks of the System other than through the Federal Farm Credit Banks Funding Corporation under any provision of this Act except under subsection (a) of this section: Provided, That any bank or banks may issue investment bonds or like obligations other than through the Federal Farm Credit Banks Funding Corporation if the interest rate is not in excess of the interest allowable on savings deposits of commercial banks of comparable amounts and maturities under Federal Reserve regulation on its member banks. SEC. 4.3. ø12 U.S.C. 2154¿ CAPITAL ADEQUACY OF BANKS AND ASSOCIATIONS.—(a) The Farm Credit Administration shall cause System institutions to achieve and maintain adequate capital by establishing minimum levels of capital for such System institutions and by using such other methods as the Farm Credit Administra tion deems appropriate. The Farm Credit Administration may es tablish such minimum level of capital for a System institution as the Farm Credit Administration, in its discretion, deems to be nec essary or appropriate in light of the particular circumstances of the System institution. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00039 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 40 Sec. 4.3A FARM CREDIT ACT OF 1971 (b)(1) Failure of a System institution to maintain capital at or above its minimum level as established under the subsection (a) may be deemed by the Farm Credit Administration, in its discre tion, to constitute an unsafe and unsound practice within the meaning of this Act. (2) In addition to, or in lieu of, any other action authorized by law, including paragraph (1), the Farm Credit Administration may issue a directive to a System institution that fails to maintain cap ital at or above its required level as established under subsection (a). Such directive may require the System institution to submit and adhere to a plan acceptable to the Farm Credit Administration describing the means and timing by which the System institution shall achieve its required capital level, but may not require merger or consolidation without a majority vote of the voting stockholders or the contributors to the guaranty fund of the institution. (3) The Farm Credit Administration may consider such System institution’s progress in adhering to any plan required under para graph (2) whenever such System institution, or an affiliate thereof, seeks the requisite approval of the Farm Credit Administration for any proposal that would divert earnings, diminish capital, or other wise impede such System institution’s progress in achieving its minimum capital level. The Farm Credit Administration may deny such approval where it determines that such proposal would ad versely affect the ability of the System institution to comply with such plan. (c) Each bank shall have on hand at the time of issuance of any note, bond, debenture, or other similar obligation and at all times thereafter maintain, free from any lien or other pledge, notes and other obligations representing loans made under this Act or real or personal property acquired in connection with loans made under this Act, obligations of the United States or any agency thereof direct or fully guaranteed, other bank assets (including marketable securities) approved by the Farm Credit Administra tion, or cash, in an aggregate value equal to the total amount of notes, bonds, debentures, or other similar obligations outstanding for which the bank is primarily liable. SEC. 4.3A. ø12 U.S.C. 2154a¿ CAPITALIZATION OF SYSTEM INSTITU TIONS. (a) DEFINITIONS.—As used in this section: (1) PERMANENT CAPITAL.—The term ‘‘permanent capital’’ means— (A) current year retained earnings; (B) allocated and unallocated earnings (which, in the case of earnings allocated in any form by a System bank to any association or other recipient and retained by the bank, shall be considered, in whole or in part, permanent capital of the bank or of any such association or other re cipient as provided under an agreement between the bank and each such association or other recipient); (C) all surplus (less allowances for losses); (D) stock issued by a System institution, except— (i) stock that may be retired by the holder of the stock on repayment of the holder’s loan, or otherwise at the option or request of the holder; or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00040 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 41 Sec. 4.3A FARM CREDIT ACT OF 1971 (ii) stock that is protected under section 4.9A or is otherwise not at risk; and (E) any other debt or equity instruments or other ac counts that the Farm Credit Administration determines appropriate to be considered permanent capital. (2) STOCK.—The term ‘‘stock’’ means voting and nonvoting stock (including preferred stock), equivalent contributions to a guaranty fund, participation certificates, allocated equities, and other forms and types of equities. (b) ADOPTION OF BYLAWS.—Subject to approval by shareholders under subsection (c)(2), each bank and association shall adopt by laws, developed by its board of directors, that provide for the cap italization of the institution in accordance with subsection (c)(1). (c) REQUIREMENTS OF BYLAWS.— (1) IN GENERAL.—Notwithstanding any other provision of this Act, the bylaws adopted under subsection (b)— (A) shall provide for such classes, par value, and amounts of the stock of the institution, the manner in which such stock shall be issued, transferred, and retired, and the payment of dividends and patronage refunds, as determined appropriate by the Board of Directors, subject to this section; (B) may provide for the charging of loan origination fees as determined appropriate by the Board of Directors; (C) shall enable the institution to meet the capital adequacy standards established under the regulations issued under section 4.3(a); (D) shall provide for the issuance of voting stock, which may only be held by— (i) borrowers who are farmers, ranchers, or pro ducers or harvesters of aquatic products, and coopera tive associations eligible to borrow from System insti tutions under this Act; (ii) persons and entities eligible to borrow from the banks for cooperatives, as described in section 3.3(c)(ii); (iii) in the case of a Central Bank for Coopera tives, other banks for cooperatives; and (iv) in the case of banks other than banks for co operatives, System associations; (E) shall require that— (i) as a condition of borrowing from or through the institution, any borrower who is entitled to hold voting stock or participation certificates shall, at the time a loan is made, acquire voting stock or participation cer tificates in an amount not less than $1,000 or 2 per cent of the amount of the loan, whichever is less; and (ii) within 2 years after the loan of a borrower is repaid in full, any voting stock held by the borrower be converted to nonvoting stock; (F) may provide that persons who are not borrowers from the institution may hold nonvoting stock of the insti tution; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00041 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 42 Sec. 4.3A FARM CREDIT ACT OF 1971 (G) shall require that any holder of voting stock issued before the adoption of bylaws under this section exchange a portion of such stock for new voting stock; (H) do not need to provide for maximum or minimum standards of borrower stock ownership based on a percent age of the loan of the borrower, except as otherwise pro vided in this section; (I) shall permit the retirement of stock at the discre tion of the institution if the institution meets the capital adequacy standards established under section 4.3(a); and (J) shall permit stock to be transferable. (2) EFFECTIVE DATE.—The bylaws adopted by the board of directors of a System institution under subsection (b) shall take effect only on approval of a majority of the stockholders of such institution present and voting, or voting by written proxy, at a duly authorized stockholders’ meeting. (d) REDUCTION OF CAPITAL.— (1) GENERAL RULE.—Except as provided in paragraph (2) the board of directors of a System institution may not reduce the permanent capital of the institution through the payment of patronage refunds or dividends, or the retirement of stock if, after or due to such action, the permanent capital of the in stitution would thereafter fail to meet the minimum capital adequacy standards established under section 4.3(a). (2) EXCEPTIONS.—Paragraph (1) shall not apply to the pay ment of noncash patronage refunds by any institution exempt from Federal income tax if the entire refund paid qualifies as permanent capital. Notwithstanding paragraph (1), any System institution subject to Federal income tax may pay patronage refunds partially in cash as long as the cash portion of the re fund is the minimum amount required to qualify the refund as a deductible patronage distribution for Federal income tax pur poses and the remaining portion of the refund paid qualifies as permanent capital. (e) COMPLIANCE.—The Farm Credit Administration may issue a directive that requires compliance with subsection (d), to the board of directors of any System institution that fails to comply therewith. (f) LOANS DESIGNATED FOR SALE OR SOLD INTO THE SEC ONDARY MARKET.— (1) IN GENERAL.—Subject to paragraph (2) and notwith standing any other provision of this section, the bylaws adopt ed by a bank or association under subsection (b) may provide— (A) in the case of a loan made on or after the date of enactment of this paragraph that is designated, at the time the loan is made, for sale into a secondary market, that no voting stock or participation certificate purchase requirement shall apply to the borrower for the loan; and (B) in the case of a loan made before the date of enact ment of this paragraph that is sold into a secondary mar ket, that all outstanding voting stock or participation cer tificates held by the borrower with respect to the loan shall, subject to subsection (d)(1), be retired. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00042 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 43 Sec. 4.4 FARM CREDIT ACT OF 1971 (2) APPLICABILITY.—Notwithstanding any other provision of this section, in the case of a loan sold to a secondary market under title VIII, paragraph (1) shall apply regardless of wheth er the bank or association retains a subordinated participation interest in a loan or pool of loans or contributes to a cash re serve. (3) EXCEPTION.— (A) IN GENERAL.—Subject to subparagraph (B) and notwithstanding any other provision of this section, if a loan designated for sale under paragraph (1)(A) is not sold into a secondary market during the 180-day period that begins on the date of the designation, the voting stock or participation certificate purchase requirement that would otherwise apply to the loan in the absence of a bylaw pro vision described in paragraph (1)(A) shall be effective. (B) RETIREMENT.—The bylaws adopted by a bank or association under subsection (b) may provide that if a loan described in subparagraph (A) is sold into a secondary market after the end of the 180-day period described in the subparagraph, all outstanding voting stock or participation certificates held by the borrower with respect to the loan shall, subject to subsection (d)(1), be retired. (g) CONSTRUCTION.—This section shall not be construed to af fect the provisions of this Act that confer on System institutions a lien on borrower stock or other equities and the privilege to retire or cancel such stock or other equities for application against the in debtedness on a defaulted or restructured loan. (h) CONTROLLING AUTHORITY.—To the extent that any provi sion of this section is inconsistent with any other provision of this Act (other than section 4.9A), the provision of this section shall control. SEC. 4.4. ø12 U.S.C. 2155¿ LIABILITY OF BANKS; UNITED STATES NOT LIABLE.—(a)(1) Each bank of the System shall be fully liable on notes, bonds, debentures, or other obligations issued by it individually, and shall be liable for the interest payments on long term notes, bonds, debentures, or other obligations issued by other banks operating under the same title of this Act. (2)(A) Each bank shall also be primarily liable for the portion of any issue of consolidated or System-wide obligations made on its behalf and be jointly and severally liable for the payment of any additional sums as called upon by the Farm Credit Administration in order to make payments of interest or principal which any bank primarily liable therefor shall be unable to make. (B) Such calls first shall be made on all nondefaulting banks in proportion to each such bank’s proportionate share of the aggre gate available collateral held by all such banks. (C) For purposes of this paragraph, the term ‘‘available collat eral’’ means the amount (determined at the close of the last cal endar quarter ending before such call) by which a bank’s collateral as described in section 4.3 exceeds the collateral required to sup port the bank’s outstanding notes, bonds, debentures, and other similar obligations. (D) If the Farm Credit Administration makes any such call and the available collateral of all such banks does not fully satisfy the VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00043 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 44 Sec. 4.6 FARM CREDIT ACT OF 1971 liability necessitating such calls, such calls shall be made on all nondefaulting banks in proportion to each such bank’s remaining assets. (E) Any System bank that, pursuant to a call by the Farm Credit Administration, makes a payment of principal or interest to the holder of any consolidated or System-wide obligation issued on behalf of another System bank shall be subrogated to all rights of the holder against such other bank to the extent of such payment. (F) On making such a call with respect to obligations issued on behalf of a System bank, the Farm Credit Administration shall ap point a receiver for the bank, which shall expeditiously liquidate or otherwise wind up the affairs of the bank. (b) Each bank participating in an issue shall by appropriate resolution undertake such responsibility as provided in subsection (a), and in the case of consolidated or System-wide obligations shall authorize the execution of such long-term notes, bonds, debentures, or other obligations on its behalf. When a consolidated or System wide issue is approved, the notes, bonds, debentures, or other obli gations shall be executed and the banks shall be liable thereon as provided herein. (c) The United States shall not be liable or assume any liability directly or indirectly thereon. (d) Beginning 5 years after the date of the enactment of this subsection, the Farm Credit Administration shall not call on any System institution to satisfy the liability of the institution on any joint, consolidated, or System-wide obligation participated in by the institution or with respect to which the institution is primarily, or jointly and severally, liable, before the Farm Credit Insurance Fund is exhausted, even if the Fund is only able to make a partial payment because of insufficient amounts in the Fund. øSection 4.5 - Repealed by section 204 of P.L. 100–233¿ SEC. 4.6. ø12 U.S.C. 2157¿ BONDS AS INVESTMENTS.—The bonds, debentures, and other similar obligations issued under the authority of this Act shall be lawful investments for all fiduciary and trust funds and may be accepted as security for all public de posits. SEC. 4.7. ø12 U.S.C. 2158¿ PURCHASE AND SALE BY FEDERAL RESERVE SYSTEM.—Any member of the Federal Reserve System may buy and sell bonds, debentures, or other similar obligations issued under the authority of this Act and any Federal Reserve bank may buy and sell such obligations to the same extent and subject to the same limitations placed upon the purchase and sale by said banks of State, county, district, and municipal bonds under section 355 of title 12, United States Code. SEC. 4.8. ø12 U.S.C. 2159¿ PURCHASE AND SALE OF OBLIGA TIONS.—(a) Each bank of the System may purchase its own obliga tions and the obligations of other banks of the System and may provide for the sale of obligations issued by it, consolidated obliga tions, or System-wide obligations through a fiscal agent or agents, by negotiation, offer, bid, syndicate sale, and to deliver such obliga tions by book entry, wire transfer, or such other means as may be appropriate. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00044 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 45 Sec. 4.9 FARM CREDIT ACT OF 1971 (b) Through December 31, 1992, each bank of the System, in addition to purchasing obligations as authorized by this Act, may, with the prior approval of the Farm Credit Administration and subject to such conditions as it may establish, (1) reduce the cost of its borrowings by doing one or more of the following: (A) con tracting with a third party, or an entity that is established as a limited purpose System institution under section 4.25 and that is not to be included in the combined financial statements of other System institutions, with respect to the payment of interest on the bank’s obligations and the obligations of other banks incurred be fore January 1, 1985, in consideration of the payment of market in terest rates on such obligations, plus a premium, or (B) for the pe riod July 1, 1986, through December 31, 1992, capitalizing interest costs on obligations incurred before January 1, 1985, in excess of the estimated interest costs on an equivalent amount of Farm Credit System obligations at prevailing market rates on such obli gations of similar maturities as of the date of the enactment of this subsection, or (C) taking other similar action; and (2) amortize, over a period of not to exceed 20 years, the capitalization of the premium, capitalization of interest expense, or like costs of any ac tion taken under clause (1). SEC. 4.9. ø12 U.S.C. 2160¿ FEDERAL FARM CREDIT BANKS FUNDING CORPORATION. (a) ESTABLISHMENT.—There is hereby established the Federal Farm Credit Banks Funding Corporation (hereinafter in this sec tion referred to as the ‘‘Corporation’’), which shall be an institution of the Farm Credit System. (b) DUTIES.—The Corporation— (1) shall issue, market, and handle the obligations of the banks of the Farm Credit System, and interbank or inter system flow of funds as may from time to time be required; (2) acting for the banks of the Farm Credit System, subject to approval of the Farm Credit Administration, shall determine the amount, maturities, rates of interest, terms, and conditions of participation by the several banks in each issue of joint, con solidated, or System-wide obligations; and (3) shall exercise such other powers as were provided to the predecessor Federal Farm Credit Banks Funding Corpora tion in accordance with its charter issued under section 4.25, in effect immediately before the date of the enactment of the Agricultural Credit Act of 1987. (c) OFFICERS AND COMMITTEES.— (1) DESIGNATION.—The board of directors may designate such officers and committees for such terms and such purposes as may be agreed on by the board. (2) ISSUANCE OF OBLIGATIONS.—When appropriate to the board’s functions under this section, a committee of the board of directors of the Corporation, or representatives thereof, may act on behalf of the board in connection with the issuance of joint, consolidated, and System-wide obligations. (d) BOARD OF DIRECTORS.— (1) COMPOSITION.—The board of directors shall be com posed of nine voting members and one nonvoting member, as follows: VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00045 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 46 Sec. 4.9 FARM CREDIT ACT OF 1971 (A) Four voting members shall be current or former di rectors of the System banks elected by the shareholders of the Corporation. (B) Three voting members shall be chief executive offi cers or presidents of System banks elected by the share holders of the Corporation. (C) Two voting members shall be appointed by the members elected under subparagraphs (A) and (B) after the elected members have received recommendations for such appointments from, and consulted with, the Secretary of the Treasury and the Chairman of the Board of Gov ernors of the Federal Reserve System. The appointed members shall be selected from United States citizens— (i) who are not borrowers from, shareholders in, or employees or agents of any System institution, who are not affiliated with the Farm Credit Administra tion, and who are not actively engaged with a bank or investment organization that is a member of the Cor poration’s selling group for System-wide securities; and (ii) who are experienced or knowledgeable in cor porate and public finance, agricultural economics, and financial reporting and disclosure. (D) The president of the Corporation shall serve as a nonvoting member of the board. In selecting candidates under subparagraphs (A) and (B), due consideration shall be given to choosing individuals knowledge able in agricultural economics, public and corporate finance, and financial reporting and disclosure. (2) NON-VOTING REPRESENTATIVES.— (A) ASSISTANCE BOARD.—During the period in which the Assistance Board is in existence, the board of directors of the Assistance Board shall designate one of its directors to serve as a non-voting representative to the board of di rectors of the Corporation. (B) MEETINGS.—The person designated by the Assist ance Board under subparagraph (A) may attend and par ticipate in all deliberations of the board of directors of the Corporation. (C) TERMINATION OF ASSISTANCE BOARD.—After termi nation of the Assistance Board, neither the Assistance Board nor its successor, the Farm Credit System Insur ance Corporation, shall have any representation on the board of directors of the Corporation. (e) TRANSITIONAL AUTHORITY.—Until a majority of the voting members of the board of directors of the Corporation is elected, which shall occur as soon as is practicable after the enactment of this section— (1) the finance committee established under section 4.5 in effect before the date of the enactment of this section, and the fiscal agency established under section 4.9 in effect before such date of enactment, shall continue to operate as if this section had not been enacted; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00046 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 47 Sec. 4.9A FARM CREDIT ACT OF 1971 (2) the board of directors of the predecessor Federal Farm Credit Banks Funding Corporation shall be the board of direc tors of the Financial Assistance Corporation. (f) SUCCESSION.— (1) ASSETS AND LIABILITIES.—The Corporation shall, by op eration of law and without any further action by the Farm Credit Administration, the predecessor Federal Farm Credit Banks Funding Corporation (hereinafter referred to in this subsection as ‘‘the predecessor corporation’’) chartered under this Act, or any court, succeed to the assets of and assume all debts, obligations, contracts, and other liabilities of the prede cessor corporation, matured or unmatured, accrued, absolute, contingent or otherwise, and whether or not reflected or re served against on balance sheets, books of account, or records of the predecessor corporation. (2) CONTRACTS.—The existing contractual obligations, se curity instruments, and title instruments of the predecessor corporation shall, by operation of law and without any further action by the Farm Credit Administration, the predecessor cor poration, or any court, become and be converted into obliga tions, entitlements, and instruments of the Corporation. (3) STOCK.—The stock of the predecessor corporation, issued before the date of the enactment of this section shall, by operation of law and without any further action by the Farm Credit Administration, the predecessor corporation, or any court, become and be converted into stock of the Corpora tion established by this section. (4) TAXATION.—The succession to assets, assumption of li abilities, conversion of obligations, instruments, and stock, and effectuation of any other transaction by the Corporation to carry out this subsection shall not be treated as a taxable event under the laws of any State or political subdivision thereof. SEC. 4.9A. ø12 U.S.C. 2162¿ PROTECTION OF BORROWER STOCK. (a) RETIREMENT OF STOCK.—Notwithstanding any other section of this Act, each institution of the Farm Credit System, when retir ing eligible borrower stock in accordance with this Act, shall retire such stock at par value. (b) CERTAIN POWERS NOT AFFECTED.—This section does not af fect the authority of any institution of the Farm Credit System— (1) to retire or cancel borrower stock at part value for ap plication against a loan in default; (2) to cancel borrow stock at par value under section 4.14B; or (3) to apply, against any outstanding indebtedness to a System association arising out of or in connection with a liq uidation referred to in subsection (d)(2), the par value of bor rower stock frozen in such liquidation. (c) INABILITY TO RETIRE STOCK AT PAR VALUE.—If an institu tion is unable to retire eligible borrower stock at par value due to the liquidation of the institution, the receiver of the institution shall retire such stock at par value as would have been retired in the ordinary course of business of the institution, and— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00047 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 48 Sec. 4.12 FARM CREDIT ACT OF 1971 (1) during the 5-year period beginning on the date of the enactment of the Agricultural Credit Act of 1987, the Assist ance Board shall direct the Financial Assistance Corporation to provide the receiver with sufficient funds to enable the receiver to carry out this subsection; and (2) after such 5-year period, the Farm Credit System In surance Corporation shall provide the receiver with sufficient funds from the Farm Credit Insurance Fund to enable the re ceiver to carry out this subsection. (d) DEFINITIONS.—For purposes of this section: (1) BORROWER STOCK.—The term ‘‘borrower stock’’ means voting and nonvoting stock, equivalent contributions to a guar anty fund, participation certificates, allocated equities, and other similar entities that are subject to retirement under a re volving cycle issued by any System institution and held by any person other than any System institution. (2) ELIGIBLE BORROWER STOCK.—The term ‘‘eligible bor rower stock’’ means borrower stock that— (A) is outstanding on the date of the enactment of this section; (B) is issued or allocated after the date of the enact ment of this section, but prior to the earlier of— (i) in the case of each bank and association, the date of approval, by the stockholders of such bank or association, of the capitalization requirements of the institution in accordance with section 4.3A; or (ii) the date that is 9 months after the date of the enactment of this section; (C) was, after January 1, 1983, but before the date of the enactment of this section, frozen by an institution that was placed in liquidation; or (D) was retired at less than par value by an institu tion that was placed in liquidation after January 1, 1983, but before the date of the enactment of this section. (3) INSTITUTION.—The term ‘‘institution’’ means a bank or association chartered under this Act. (4) PAR VALUE.—The term ‘‘par value’’ means— (A) in the case of stock, par value; (B) in the case of participation certificates and other equities and interests not described in subparagraph (C), face or equivalent value; or (C) in the case of participation certificates and allo cated equities subject to retirement under a revolving cycle but that a System institution elects to retire out of order for application against a loan in default or otherwise as provided in this Act, par or face value discounted, at a rate determined by the institution, to reflect the present value of the equity or interest as of the date of such retirement. PART B—DISSOLUTION SEC. 4.12. ø12 U.S.C. 2183¿ DISSOLUTION; VOLUNTARY LIQ UIDATION; MERGERS; RECEIVERSHIPS; AND CONSERVATORS.—(a) No institution of the System shall go into voluntary liquidation with VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00048 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 49 Sec. 4.12 FARM CREDIT ACT OF 1971 out the consent of the Farm Credit Administration and with such consent may liquidate only in accordance with regulations pre scribed by the Farm Credit Administration. In the case of a vol untary liquidation of an association, such regulations, among other things, shall direct the supervising bank to institute such measures as it deems appropriate to minimize the adverse effect of the liq uidation on those borrowers whose loans are purchased by or other wise transferred to another System institution. The Farm Credit Administration Board may require an association to merge with another association whenever it determines, with the concurrence of the board of the supervising bank, that an association has failed to meet its outstanding obligations or failed to conduct its oper ations in accordance with this Act. (b) The Farm Credit Administration Board may appoint a con servator or receiver for any System institution on the determina tion by the Farm Credit Administration Board that one or more of the following exists, or is occurring, with respect to the institution: (1) insolvency, in that the assets of the institution are less than its obligations to its creditors and others, including its members; (2) substantial dissipation of assets or earnings due to any violation of law, rules, or regulations, or to any unsafe or unsound practice; (3) an unsafe or unsound condition to transact business; (4) willful vio lation of a cease and desist order that has become final; (5) conceal ment of books, papers, records, or assets of the institution or re fusal to submit books, papers, records, or other material relating to the affairs of the institution for inspection to any examiner or to any lawful agent of the Farm Credit Administration; (6) the insti tution is unable to timely pay principal or interest on any insured obligation (as defined in section 5.51(3)) issued by the institution. The Farm Credit Administration Board shall have exclusive power and jurisdiction to appoint a conservator or receiver, and such re ceiver or conservator, after the 5-year period beginning on the date of the enactment of the Agricultural Credit Act of 1987, shall be the Farm Credit System Insurance Corporation. If the Farm Credit Administration Board determines that a ground for the appoint ment of a conservator or receiver as herein provided exists, the Farm Credit Administration Board may appoint ex parte and with out notice a conservator or receiver for the institution. In the event of such appointment, the institution, within thirty days thereafter, may bring an action in the United States district court for the judi cial district in which the home office of such institution is located, or in the United States District Court for the District of Columbia, for an order requiring the Farm Credit Administration Board to re move such conservator or receiver, and the court shall, on the mer its, dismiss such action or direct the Farm Credit Administration Board to remove such conservator or receiver. On the commence ment of such an action, the court having jurisdiction of any other action or enforcement proceeding authorized under this Act to which the institution is a party shall stay such action or proceeding during the pendency of the action for removal of the conservator or receiver. (c) In the case of an involuntary liquidation of an association, regulations of the Farm Credit Administration, among other things, shall direct the supervising bank to institute such measures VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00049 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 50 Sec. 4.12A FARM CREDIT ACT OF 1971 as it deems appropriate to minimize the adverse effect of the liq uidation on those borrowers whose loans are purchased by or other wise transferred to another System institution. SEC. 4.12A. ø12 U.S.C. 2184¿ COMMUNICATIONS WITH STOCKHOLDERS. (a) PROVISION OF STOCKHOLDER LISTS.— (1) IN GENERAL.—Within 7 days after receipt of a written request by a stockholder, a bank for cooperatives, Federal land bank association, or production credit association shall provide a current list of its stockholders to such requesting stockholder. (2) CONDITIONS.—As a condition of providing a stockholder list under paragraph (1), the bank or association may require that the stockholder agree and certify in writing that the stock holder will— (A) use the list exclusively for communicating with stockholders for permissible purposes; and (B) not make the list available to any person, other than the stockholder’s attorney or accountant, without first obtaining the written consent of the institution. (b) ALTERNATIVE COMMUNICATIONS.— (1) REQUEST TO ISSUE.—As an alternative to receiving a list of stockholders, a stockholder may request the institution to mail or otherwise furnish to each stockholder a communica tion for a permissible purpose on behalf of the requesting stockholder. (2) WHEN PERMISSIBLE.—Alternative communications may be used, at the discretion of the requesting stockholder, if the requester agrees to defray the reasonable costs of the commu nication. If the requester decides to exercise this option, the in stitution shall provide the requester with a written estimate of the costs of handling and mailing the communication as soon as is practicable after receipt of the stockholder’s request to furnish the communication. PART C—RIGHTS OF BORROWERS; LOAN RESTRUCTURING SEC. 4.13. ø12 U.S.C. 2199¿ DISCLOSURE. (a) IN GENERAL.—In accordance with regulations of the Farm Credit Administration, qualified lenders shall provide to borrowers, for all loans that are not subject to the Truth in Lending Act (15 U.S.C. 1601 et seq.), meaningful and timely disclosure not later than the time of the loan closing, of— (1) the current rate of interest on the loan; (2) in the case of an adjustable or variable rate loan, the amount and frequency by which the interest rate can be in creased during the term of the loan or, if there are no such lim itations, a statement to that effect, and the factors (including the cost of funds, operating expenses, and provision for loan losses) that will be taken into account by the qualified lender in determining adjustments to the interest rate; (3) the effect, as shown by a representative example or ex amples, of any loan origination charges or purchases of stock or participation certificates on the effective rate of interest; (4) any change in the interest rate applicable to the bor rower’s loan, and notice to the borrower of a change in the in VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00050 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 51 Sec. 4.14 FARM CREDIT ACT OF 1971 terest rate applicable to the loan of the borrower may be made within a reasonable time after the effective date of an increase or decrease in the interest rate; (5) except with respect to stock guaranteed under section 4.9A, a statement indicating that stock that is purchased is at risk; and (6) a statement indicating the various types of loan options available to borrowers, with an explanation of the terms and borrowers’ rights that apply to each type of loan. (b) DIFFERENTIAL INTEREST RATES.—A qualified lender offering more than one rate of interest to borrowers shall, at the request of a borrower of a loan— (1) provide a review of the loan to determine if the proper interest rate has been established; (2) explain to the borrower in writing the basis for the in terest rate charged; and (3) explain to the borrower in writing how the credit status of the borrower may be improved to receive a lower interest rate on the loan. SEC. 4.13A. ø12 U.S.C. 2200¿ ACCESS TO DOCUMENTS AND IN FORMATION.—In accordance with regulations of the Farm Credit Administration, qualified lenders shall provide their borrowers, at the time of execution of loans, copies of all documents signed by the borrower and at any time thereafter, on a borrower’s request, cop ies of all documents signed or delivered by the borrower and at any time, on request, a copy of the institution’s articles of incorporation or charter and bylaws and copies of each appraisal of the bor rower’s assets made or used by the qualified lender. SEC. 4.13B. ø12 U.S.C. 2201¿ NOTICE OF ACTION ON APPLICATION. (a) LOAN APPLICATIONS.—Each qualified lender to which a per son has applied for a loan shall provide the person with prompt written notice of— (1) the action on the application; (2) if the loan applied for is reduced or denied, the reasons for such action; and (3) the applicant’s right to review under section 4.14. (b) DISTRESSED LOANS.—Each qualified lender that has a dis tressed loan outstanding that is subject to restructuring require ments under this Act shall provide, in accordance with regulations prescribed by the Farm Credit Administration, the borrower with prompt written notice of— (1) any action taken with respect to restructuring the loan under section 4.14A; (2) if restructuring is denied, the reasons for such action; and (3) the borrower’s right to review under section 4.14. SEC. 4.14. ø12 U.S.C. 2202¿ RECONSIDERATION OF ACTIONS. (a) CREDIT REVIEW COMMITTEES.— (1) IN GENERAL.—The board of directors of each qualified lender shall establish one or more credit review committees, which shall include farmer board representation. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00051 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 52 Sec. 4.14A FARM CREDIT ACT OF 1971 (2) MEMBERSHIP.—In no case shall a loan officer involved in the initial decision on a loan serve on the credit review com mittee when the committee reviews such loan. (b) REVIEW OF DECISIONS.— (1) DENIALS OR REDUCTIONS.—Any applicant for a loan from a qualified lender that has received a written notice issued under section 4.13B of a decision to deny or reduce the loan applied for may submit a written request, not later than 30 days after receiving a notice denying or reducing the amount of the loan application, to obtain a review of the deci sion before the credit review committee. (2) DENIALS OF RESTRUCTURING.—A borrower of a loan from a qualified lender that has received notice, under section 4.13B, of a decision to deny loan restructuring with respect to a loan made to the borrower, if the borrower so requests in writing within 7 days after receiving such notice, may obtain a review of such decision in person before the credit review committee. (c) PERSONAL APPEARANCE.—An applicant for a loan or for re structuring, who is entitled to and has requested a review under this section, may appear in person before the credit review com mittee, and may be accompanied by counsel or by any other rep resentative of such person’s choice, to seek a reversal of the deci sion on the application under review. (d) INDEPENDENT APPRAISAL.— (1) IN GENERAL.—An appeal filed with a credit review com mittee under this section may include, as a part of the request for a review of the decision filed under subsection (b)(1) or (2), a request for an independent appraisal, by an accredited ap praiser, of any interests in property securing the loan (other than the stock or participation certificates of the qualified lend er held by the borrower). (2) ARRANGEMENT AND COST.—Within 30 days after a re quest for an appraisal under paragraph (1), the credit review committee shall present the borrower with a list of three ap praisers approved by the appropriate qualified lender from which the borrower shall select an appraiser to conduct the ap praisal the cost of which shall be borne by the borrower, and shall consider the results of such appraisal in any final deter mination with respect to the loan. (3) COPY TO BORROWER.—A copy of any appraisal made under this subsection shall be provided to the borrower. (4) ADDITIONAL COLLATERAL.—An independent appraisal shall be permitted if additional collateral for a loan is de manded by the qualified lender when determining whether to restructure the loan. (e) NOTIFICATION OF APPLICANT.—Promptly after a review by the credit review committee, the committee shall notify the appli cant or borrower, as the case may be, in writing of the decision of the committee and the reasons for the decision. SEC. 4.14A. ø12 U.S.C. 2202a¿ RESTRUCTURING DISTRESSED LOANS. (a) DEFINITIONS.—As used in this part: VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00052 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 53 Sec. 4.14A FARM CREDIT ACT OF 1971 (1) APPLICATION FOR RESTRUCTURING.—The term ‘‘applica tion for restructuring’’ means a written request— (A) from a borrower for the restructuring of a dis tressed loan in accordance with a preliminary restruc turing plan proposed by the borrower as a part of the ap plication; (B) submitted on the appropriate forms prescribed by the qualified lender; and (C) accompanied by sufficient financial information and repayment projections, where appropriate, as required by the qualified lender to support a sound credit decision. (2) COST OF FORECLOSURE.—The term ‘‘cost of foreclosure’’ includes— (A) the difference between the outstanding balance due on a loan made by a qualified lender and the liquida tion value of the loan, taking into consideration the bor rower’s repayment capacity and the liquidation value of the collateral used to secure the loan; (B) the estimated cost of maintaining a loan as a non performing asset; (C) the estimated cost of administrative and legal ac tions necessary to foreclose a loan and dispose of property acquired as the result of the foreclosure, including attor neys’ fees and court costs; (D) the estimated cost of changes in the value of collat eral used to secure a loan during the period beginning on the date of the initiation of an action to foreclose or liq uidate the loan and ending on the date of the disposition of the collateral; and (E) all other costs incurred as the result of the fore closure or liquidation of a loan. (3) DISTRESSED LOAN.—The term ‘‘distressed loan’’ means a loan that the borrower does not have the financial capacity to pay according to its terms and that exhibits one or more of the following characteristics: (A) The borrower is demonstrating adverse financial and repayment trends. (B) The loan is delinquent or past due under the terms of the loan contract. (C) One or both of the factors listed in subparagraphs (A) and (B), together with inadequate collateralization, present a high probability of loss to the lender. (4) FORECLOSURE PROCEEDING.—The term ‘‘foreclosure pro ceeding’’ means— (A) a foreclosure or similar legal proceeding to enforce a lien on property, whether real or personal, that secures a nonaccrual or distressed loan; or (B) the seizing of and realizing on nonreal property collateral, other than collateral subject to a statutory lien arising under title I or II, to effect collection of a non accrual or distressed loan. (5) LOAN.— (A) IN GENERAL.—Subject to subparagraph (B), the term ‘‘loan’’ means a loan made to a farmer, rancher, or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00053 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 54 Sec. 4.14A FARM CREDIT ACT OF 1971 producer or harvester of aquatic products, for any agricul tural or aquatic purpose and other credit needs of the bor rower, including financing for basic processing and mar keting directly related to the borrower’s operations and those of other eligible farmers, ranchers, and producers or harvesters of aquatic products. (B) EXCLUSION FOR LOANS DESIGNATED FOR SALE INTO SECONDARY MARKET.— (i) IN GENERAL.—Except as provided in clause (ii), the term ‘‘loan’’ does not include a loan made on or after the date of enactment of this subparagraph that is designated, at the time the loan is made, for sale into a secondary market. (ii) UNSOLD LOANS.— (I) IN GENERAL.—Except as provided in sub clause (II), if a loan designated for sale under clause (i) is not sold into a secondary market dur ing the 180-day period that begins on the date of the designation, the provisions of this section and sections 4.14, 4.14B, 4.14C, 4.14D, and 4.36 that would otherwise apply to the loan in the absence of the exclusion described in clause (i) shall be come effective with respect to the loan. (II) LATER SALE.—If a loan described in sub clause (I) is sold into a secondary market after the end of the 180-day period described in subclause (I), subclause (I) shall not apply with respect to the loan beginning on the date of the sale. (6) QUALIFIED LENDER.—The term ‘‘qualified lender’’ means— (A) a System institution that makes loans (as defined in paragraph (5)) except a bank for cooperatives; and (B) each bank, institution, corporation, company, union, and association described in section 1.7(b)(1)(B) but only with respect to loans discounted or pledged under sec tion 1.7(b)(1). (7) RESTRUCTURE AND RESTRUCTURING.—The terms ‘‘re structure’’ and ‘‘restructuring’’ include rescheduling, re amortization, renewal, deferral of principal or interest, mone tary concessions, and the taking of any other action to modify the terms of, or forbear on, a loan in any way that will make it probable that the operations of the borrower will become fi nancially viable. (b) NOTICE.— (1) IN GENERAL.—On a determination by a qualified lender that a loan made by the lender is or has become a distressed loan, the lender shall provide written notice to the borrower that the loan may be suitable for restructuring, and include with such notice— (A) a copy of the policy of the lender established under subsection (g) that governs the treatment of distressed loans; and (B) all materials necessary to enable the borrower to submit an application for restructuring on the loan. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00054 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 55 Sec. 4.14A FARM CREDIT ACT OF 1971 (2) NOTICE BEFORE FORECLOSURE.—Not later than 45 days before any qualified lender begins foreclosure proceedings with respect to a loan outstanding to any borrower, the lender shall notify the borrower that the loan may be suitable for restruc turing and that the lender will review any such suitable loan for restructuring, and shall include with such notice a copy of the policy and the materials described in paragraph (1). (3) LIMITATION ON FORECLOSURE.—No qualified lender may foreclose or continue any foreclosure proceeding with respect to any distressed loan before the lender has completed any pend ing consideration of the loan for restructuring under this sec tion. (c) MEETINGS.—On determination by a qualified lender that a loan made by the lender is or has become a distressed loan, the lender shall provide a reasonable opportunity for the borrower thereof to personally meet with a representative of the lender— (1) to review the status of the loan, the financial condition of the borrower, and the suitability of the loan for restruc turing; and (2) with respect to a loan that is in nonaccrual status, to develop a plan for restructuring the loan if the loan is suitable for restructuring. (d) CONSIDERATION OF APPLICATIONS.— (1) IN GENERAL.—When a qualified lender receives an ap plication for restructuring from a borrower, the qualified lend er shall determine whether or not to restructure the loan, tak ing into consideration— (A) whether the cost to the lender of restructuring the loan is equal to or less than the cost of foreclosure; (B) whether the borrower is applying all income over and above necessary and reasonable living and operating expenses to the payment of primary obligations; (C) whether the borrower has the financial capacity and the management skills to protect the collateral from diversion, dissipation, or deterioration; (D) whether the borrower is capable of working out ex isting financial difficulties, reestablishing a viable oper ation, and repaying the loan on a rescheduled basis; and (E) in the case of a distressed loan that is not delin quent, whether restructuring consistent with sound lend ing practices may be taken to reasonably ensure that the loan will not become a loan that it is necessary to place in nonaccrual status. (2) APPLICATIONS NOT REQUIRED FOR RESTRUCTURING PLANS.—This section shall not prevent a qualified lender from proposing a restructuring plan for an individual borrower in the absence of an application for restructuring from the bor rower. (e) RESTRUCTURING.— (1) IN GENERAL.—If a qualified lender determines that the potential cost to such qualified lender of restructuring the loan in accordance with a proposed restructuring plan is less than or equal to the potential cost of foreclosure, the qualified lender shall restructure the loan in accordance with the plan. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00055 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 56 Sec. 4.14A FARM CREDIT ACT OF 1971 (2) COMPUTATION OF COST OF RESTRUCTURING.—In deter mining whether the potential cost to the qualified lender of re structuring a distressed loan is less than or equal to the poten tial cost of foreclosure, a qualified lender shall consider all rel evant factors, including— (A) the present value of interest income and principal forgone by the lender in carrying out the restructuring plan; (B) reasonable and necessary administrative expenses involved in working with the borrower to finalize and im plement the restructuring plan; (C) whether the borrower has presented a preliminary restructuring plan and cash-flow analysis taking into ac count income from all sources to be applied to the debt and all assets to be pledged, showing a reasonable probability that orderly debt retirement will occur as a result of the proposed restructuring; and (D) whether the borrower has furnished or is willing to furnish complete and current financial statements in a form acceptable to the institution. (f) LEAST COST ALTERNATIVE.—If two or more restructuring al ternatives are available to a qualified lender under this section with respect to a distressed loan, the lender shall restructure the loan in conformity with the alternative that results in the least cost to the lender. (g) RESTRUCTURING POLICY.— (1) ESTABLISHMENT.—Each bank board of directors shall develop a policy within 60 days after the date of the enactment of this section, that is consistent with this section, to govern the restructuring of distressed loans. Such policy shall con stitute the restructuring policy of each qualified lender within the district. (2) CONTENTS OF POLICY.—The policy established under paragraph (1) shall include an explanation of— (A) the procedure for submitting an application for re structuring; and (B) the right of borrowers with distressed loans to seek review by a credit review committee in accordance with section 4.14 of a denial of an application for restructuring. (3) SUBMISSION OF POLICY TO FCA.—Each bank board shall submit the policy of the district governing the treatment of dis tressed loans under this section to the Farm Credit Adminis tration. Notwithstanding the duty imposed by the preceding sentence, the other duties imposed by this section shall take ef fect on the date of the enactment of this section. (h) REPORTS.—During the 5-year period beginning on the date of the enactment of this section, each qualified lender shall submit semiannual reports to the Farm Credit Administration con taining— (1) the results of the review of distressed loans of the lend er; and (2) the financial effect of loan restructurings and liquida tions on the lender. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00056 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 57 Sec. 4.14C FARM CREDIT ACT OF 1971 (i) COMPLIANCE.—The Farm Credit Administration may issue a directive requiring compliance with any provision of this section to any qualified lender that fails to comply with such provision. (j) PERMITTED FORECLOSURES.—This section shall not be con strued to prevent any qualified lender from enforcing any contrac tual provision that allows the lender to foreclose a loan, or from taking such other lawful action as the lender deems appropriate, if the lender has reasonable grounds to believe that the loan collat eral will be destroyed, dissipated, consumed, concealed, or perma nently removed from the State in which the collateral is located. (k) APPLICATION OF SECTION.—The time limitation prescribed in subsection (b)(2), and the requirements of subsection (c), shall not apply to a loan that became a distressed loan before the date of the enactment of this section if the borrower and lender of the loan are in the process of negotiating loan restructuring with re spect to the loan. (l) ASSISTANCE IN RESTRUCTURING.—Each Farm Credit Bank on request of any production credit association, may assist the as sociation in restructuring loans under this section. SEC. 4.14B. ø12 U.S.C. 2202b¿ EFFECT OF RESTRUCTURING ON BOR ROWER STOCK. (a) FARM CREDIT BANK.—If a Farm Credit Bank forgives and writes off, under section 4.14A, any of the principal outstanding on a loan made to any borrower, the Federal land bank association of which the borrower is a member and stockholder shall cancel the same dollar amount of borrower stock held by the borrower in re spect of the loan, up to the total amount of such stock, to the extent provided for in the bylaws of the bank relating to its capitalization, the bank shall retire an equal amount of stock owned by the Fed eral land bank association. (b) PRODUCTION CREDIT ASSOCIATION.—If a production credit association forgives and writes off, under section 4.14A, any of the principal outstanding on a loan made to any borrower, the associa tion shall cancel the same dollar amount of borrower stock held by the borrower in respect of the loan, up to the total amount of such stock. (c) RETENTION OF STOCK.—Notwithstanding subsections (a) and (b), the borrower shall be entitled to retain at least one share of stock to maintain the borrower’s membership and voting interest in the association. SEC. 4.14C. ø12 U.S.C. 2202c¿ REVIEW OF RESTRUCTURING DENIALS. (a) REQUIREMENTS FOR RESTRUCTURING BY SYSTEM INSTITU TIONS.— (1) EXISTING NONACCRUAL LOANS.—Within 9 months after a qualified lender is certified under section 6.4, such lender shall review each loan that has not been previously restruc tured and that is in nonaccrual status on the date the lender is certified, and determine whether to restructure the loan. (2) NEW NONACCRUAL LOANS.—Within 6 months after a loan made by a certified lender is placed in nonaccrual status, the lender shall determine whether to restructure the loan. (b) SPECIAL ASSET GROUPS.— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00057 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 58 Sec. 4.14D FARM CREDIT ACT OF 1971 (1) ESTABLISHMENT.—Within 30 days after a qualified lender in a district is certified to issue preferred stock under section 6.27, the Farm Credit Bank board shall establish a spe cial asset group that shall review each determination by the lender not to restructure a loan. (2) RESTRUCTURING PLAN.—If a special asset group deter mines under paragraph (1) that a loan under review should be restructured, the group shall prescribe a restructuring plan for the loan that the qualified lender shall implement. (c) NATIONAL SPECIAL ASSET COUNCIL.— (1) ESTABLISHMENT.—A National Special Asset Council shall be established by the Assistance Board to— (A) monitor compliance with the restructuring require ments of this section by qualified lenders certified to issue preferred stock under section 6.27, and by special asset groups established under subsection (b); and (B) review a sample of determinations made by each special asset group that a loan will not be restructured. (2) REVIEW OF DETERMINATION.—The National Special Asset Council shall review a sufficient number of determina tions made by each special asset group to foreclose on any loan to assure the Council that such group is complying with this section. With regard to each determination reviewed, the Coun cil shall make an independent judgment on the merits of the decision to foreclose rather than restructure the loan. (3) NONCOMPLIANCE.—If the National Special Asset Coun cil determines that any special asset group is not in substan tial compliance with this section, the Council shall notify the group of the determination, and may take such other action as the Council considers necessary to ensure that such group com plies with this section. (d) REPORT.—With respect to determinations by a special asset group that a loan will not be restructured, the special asset group shall submit to the National Special Asset Council a report evalu ating the loan and the basis for the determination that the loan should not be restructured. (e) RESTRUCTURING FACTORS.—In determining whether a loan is to be restructured, the National Special Asset Council, each spe cial asset group, and each qualified lender certified under section 6.4 shall take into consideration the factors specified in section 4.14A(d)(1). SEC. 4.14D. ø12 U.S.C. 2202d¿ PROTECTION OF BORROWERS WHO MEET ALL LOAN OBLIGATIONS. (a) FORECLOSURE PROHIBITED.—A qualified lender may not foreclose on any loan because of the failure of the borrower thereof to post additional collateral, if the borrower has made all accrued payments of principal, interest, and penalties with respect to the loan. (b) PROHIBITION AGAINST REQUIRED PRINCIPAL REDUCTION.—A qualified lender may not require any borrower to reduce the out standing principal balance of any loan made to the borrower by any amount that exceeds the regularly scheduled principal installment payment (when due and payable), unless— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00058 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 59 Sec. 4.15 FARM CREDIT ACT OF 1971 (1) the borrower sells or otherwise disposes of part or all of the collateral; or (2) the parties agree otherwise in a written agreement en tered into by the parties. (c) NONENFORCEMENT.—After a borrower has made all accrued payments of principal, interest, and penalties with respect to a loan made by a qualified lender, the lender shall not enforce accelera tion of the borrower’s repayment schedule due to the borrower hav ing not timely made one or more principal or interest payments. (d) PLACING LOANS IN NONACCRUAL STATUS.— (1) NOTIFICATION.—If a qualified lender places any loan in nonaccrual status, the lender shall document such change of status and promptly notify the borrower thereof in writing of such action and the reasons therefor. (2) REVIEW OF DENIAL.—If the borrower was not delin quent in any principal or interest payment under the loan at the time of such action and the borrower’s request to have the loan placed back into accrual status is denied, the borrower may obtain a review of such denial before the appropriate cred it review committee under section 4.14. (3) APPLICATION.—This subsection shall only apply if a loan being placed in nonaccrual status results in an adverse action being taken against the borrower. SEC. 4.14E. ø12 U.S.C. 2202e¿ WAIVER OF MEDIATION RIGHTS BY BOR ROWERS. No System institution may make a loan secured by a mortgage or lien on agricultural property to a borrower on the condition that the borrower waive any right under the mediation program of any State. PART D—ACTIVITIES OF INSTITUTIONS OF THE SYSTEM SEC. 4.15. ø12 U.S.C. 2203¿ NOMINATION OF ASSOCIATION DI RECTORS; REPRESENTATIVE SELECTION OF NOMINEES.—Each pro duction credit association and each Federal land bank association shall elect a nominating committee by vote of the stockholders at the annual meeting to serve for the following year. Each nomi nating committee shall review lists of farmers from the association territory, determine their willingness to serve, and submit for elec tion a slate of eligible candidates which shall include at least two nominees for each elective office to be filled. In doing so, the com mittee shall endeavor to assure representation to all sections of the association territory and as nearly as possible to all types of agri culture practiced within the area. Employees of the association shall not be eligible to be nominated, elected, or serve as a member of the board. Nominations shall also be accepted from the floor. Members of the board are not eligible to serve on the nominating committee. Regulations of the Farm Credit Administration gov erning the election of bank directors shall similarly assure a choice of two nominees for each elective office to be filled and that the bank board represent as nearly as possible all types of agriculture in the district. øSection 4.16 - Repealed by section 508 of P.L. 102–552¿ VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00059 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 60 Sec. 4.17 FARM CREDIT ACT OF 1971 SEC. 4.17. ø12 U.S.C. 2205¿ INTEREST RATES.—Interest rates on loans from institutions of the Farm Credit System shall not be subject to any interest rate limitation imposed by any State con stitution or statute or other laws. Such limitation is preempted for purposes of this Act. Interest rates on loans made by agricultural credit corporations organized in conjunction with cooperative asso ciations for the purpose of financing the ordinary crop operations of the members of such associations or other producers and eligible to discount with the Federal intermediate credit banks and Farm Credit Banks shall be exempt from any interest rate limitation im posed by any State constitution or statute or other laws which are hereby preempted for purposes of this Act. SEC. 4.18. ø12 U.S.C. 2206¿ PARTICIPATION LOANS.—Notwith standing any other provisions of this Act, the terms of any loan participated in by two or more Farm Credit System institutions op erating under different titles of this Act, including provisions for capitalization of the portion of the loan participated in by each in stitution, shall be as may be agreed upon among such institutions and authorized under regulations issued by the Farm Credit Ad ministration, except that for purposes of determining borrower eli gibility, membership, term, amount, loan security, and purchase of stock or participation certificates by the borrower, the provisions of law applicable to the loan shall be the provisions in the title under which the institution that originates the loan operates. SEC. 4.18A. ø12 U.S.C. 2206a¿ AUTHORITY OF FARM CREDIT BANKS AND DIRECT LENDER ASSOCIATIONS TO PARTICIPATE IN LOANS TO SIMILAR ENTITIES FOR RISK MANAGEMENT PURPOSES. (a) DEFINITIONS.—As used in this section: (1) PARTICIPATE AND PARTICIPATION.—The terms ‘‘partici pate’’ and ‘‘participation’’ shall have the meaning provided in section 3.1(11)(B)(iii). (2) SIMILAR ENTITY.—The term ‘‘similar entity’’ means a person that— (A) is not eligible for a loan from the Farm Credit Bank or association; and (B) has operations that are functionally similar to a person that is eligible for a loan from the Farm Credit Bank or association in that the person derives a majority of the income of the person from, or has a majority of the assets of the person invested in, the conduct of activities that are functionally similar to the activities that are con ducted by an eligible person. (b) LOAN PARTICIPATION AUTHORITY—Notwithstanding any other provision of this Act, any Farm Credit Bank or direct lender association chartered under this Act may participate in any loan of a type otherwise authorized under title I or II made to a similar entity by any person in the business of extending credit, except that a Farm Credit Bank or direct lender association may not par ticipate in a loan under this section if— (1) the participation would cause the total amount of all participations by the Farm Credit Bank or association under this section involving a single credit risk to exceed 10 percent (or the applicable higher lending limit authorized under regu VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00060 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 61 Sec. 4.21 FARM CREDIT ACT OF 1971 lations issued by the Farm Credit Administration if the stock holders of the respective Farm Credit Bank or association so approve) of the total capital of the Farm Credit Bank or asso ciation; (2) the participation by the Farm Credit Bank or associa tion would equal or exceed 50 percent of the principal of the loan or, when taken together with participations in the loan by other Farm Credit System institutions, would cause the cumu lative amount of the participations by all Farm Credit System institutions in the loan to equal or exceed 50 percent of the principal of the loan; (3) the participation would cause the cumulative amount of participations that the Farm Credit Bank or association has outstanding under this section to exceed 15 percent of the total assets of the Farm Credit Bank or association; or (4) the loan is of the type authorized under section 1.11(b) or 2.4(a)(2). SEC. 4.19. ø12 U.S.C. 2207¿ YOUNG, BEGINNING, AND SMALL FARMERS AND RANCHERS.— (a) Under policies of the district Farm Credit Bank board, each Federal land bank association and production credit association shall prepare a program for furnishing sound and constructive credit and related services to young, beginning, and small farmers and ranchers. Such programs shall assure that such credit and services are available in coordination with other units of the Farm Credit System serving the territory and with other governmental and private sources of credit. Each program shall be subject to re view and approval by the supervising bank. (b) The Farm Credit Bank for each district shall annually ob tain from associations under its supervision reports of activities under programs developed pursuant to subsection (a) and progress toward program objectives. On the basis of such reports, the bank shall provide to the Farm Credit Administration an annual report summarizing the operations and achievements in its district under such programs. SEC. 4.20. ø12 U.S.C. 2208¿ PROHIBITION AGAINST USE OF SIGNED BAL LOTS. In any election or merger vote, or other proceeding subject to a vote of the stockholders (or subscribers to the guaranty fund of a bank for cooperatives), conducted by a lending institution of the Farm Credit System, the institution— (1) may not use signed ballots; and (2) shall implement measures to safeguard the voting proc ess for the protection of the right of stockholders (or sub scribers) to a secret ballot. SEC. 4.21. ø12 U.S.C. 2209¿ COMPENSATION OF BANK DIRECTORS. (a) IN GENERAL.—The Farm Credit Administration shall mon itor the compensation of members of the board of directors of a Sys tem bank received as compensation for serving as a director of the bank to ensure that the amount of the compensation does not ex ceed a level of $20,000 per year, as adjusted to reflect changes in the Consumer Price Index for all urban consumers published by the Bureau of Labor Statistics, unless the Farm Credit Administra VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00061 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 62 Sec. 4.25 FARM CREDIT ACT OF 1971 tion determines that such level adversely affects the safety and soundness of the bank. (b) WAIVER.—The Farm Credit Administration may waive the limitation prescribed in subsection (a) under exceptional cir cumstances, as determined in accordance with regulations promul gated by the Farm Credit Administration. PART E—SERVICE ORGANIZATIONS SEC. 4.25. ø12 U.S.C. 2211¿ ESTABLISHMENT.—Any bank of the Farm Credit System, or two or more of such banks acting together, may organize a corporation or corporations for the purpose of per forming functions and services for or on behalf of the organizing bank or banks that the bank or banks may perform pursuant to this Act: Provided, That a corporation so organized shall have no authority either to extend credit or provide insurance services for borrowers from Farm Credit System institutions, nor shall it have any greater authority with respect to functions and services than the organizing bank or banks possess under this Act. The orga nizing bank or banks shall apply for a Federal charter for the cor poration by forwarding to the Farm Credit Administration a state ment of the need for the corporation and proposed articles speci fying in general terms the objectives for which the corporation is formed, the powers to be exercised by it in carrying out the func tions and services, and the territory it is to serve. The Farm Credit Administration for good cause may deny the charter applied for. Upon the approval of articles by the Farm Credit Administration and the issuance of a charter, the corporation shall become as of such date a federally chartered body corporate and an instrumen tality of the United States. SEC. 4.26. ø12 U.S.C. 2212¿ POWERS OF THE FARM CREDIT AD MINISTRATION.—The Farm Credit Administration shall have power, under rules and regulations prescribed by the Farm Credit Admin istration, to provide for the organization of any corporation char tered under this part and the territory within which its operations may be carried on, and to approve amendments consistent with this Act to charters or articles of service corporations. SEC. 4.27. ø12 U.S.C. 2213¿ REGULATION AND EXAMINATION.— The corporations organized under this part shall be institutions of the Farm Credit System and shall be subject to the same regula tion and examination by the Farm Credit Administration as are the organizing bank or banks under this Act. SEC. 4.28. ø12 U.S.C. 2214¿ STATE LAWS.—State and other laws shall apply to corporations organized pursuant to this part to the same extent such laws would apply to the organizing banks en gaged in the same activity in the same jurisdiction: Provided, how ever, That to the extent that sections 1.15, 2.16, and 3.13 of this Act may exempt banks or associations of the Farm Credit System from taxation, such exemptions, other than with respect to fran chise taxes, shall not extend to corporations organized pursuant to this part. SEC. 4.28A. ø12 U.S.C. 2214a¿ DEFINITION OF BANK. In this part, the term ‘‘bank’’ includes each association oper ating under title II. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00062 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 63 Sec. 4.29 FARM CREDIT ACT OF 1971 PART F—SALE OF INSURANCE SEC. 4.29. ø12 U.S.C. 2218¿ LINES OF INSURANCE.—(a)(1) The regulations of the Farm Credit Administration governing finan cially related services that the banks and associations of the Farm Credit System may provide under titles I and II may authorize the sale to any member of or borrower from any such bank or associa tion, on an optional basis, of credit or term life and credit disability insurance appropriate to protect the loan commitment in the event of death or disability of the debtors and other insurance necessary to protect the member’s farm or aquatic unit, but limited to, hail and multiple-peril crop insurance, title insurance, and insurance to protect the facilities and equipment of aquatic borrowers. A mem ber or borrower shall have the option, without coercion from the bank or association of such member or borrower, to accept or reject such insurance. (2) In making insurance available through private insurers, the banks shall approve the programs of more than two insurers for each type of insurance offered in the district, if more than two in surers for each type of insurance have proposed programs to a bank that will, in all likelihood, have long-term viability and meet the requirements of subsection (b)(2)(D). The banks may provide comparative information relating to costs and quality of approved programs and the financial conditions of approved companies. Asso ciations shall offer at least two insurers for each program from among those approved by the Farm Credit Banks, if at least two insurers have been approved in accordance with this paragraph. (b) Such regulations shall provide that— (1) in any case in which insurance is required as a condi tion for a loan or other financial assistance from a bank or as sociation, notice be given that it is not necessary to purchase the insurance from the bank or association and that the bor rower has the option of obtaining the insurance elsewhere; (2) such insurance services may be offered only if— (A) the bank or association has the capacity to render insurance service under this Act in an effective and effi cient manner; (B) there exists the probability that any insurance pro gram under this Act will generate sufficient revenue to cover all costs; (C) rendering insurance service will not have an ad verse effect on the bank’s or association’s credit or other operations; (D) the insurance program has been approved by the bank or association from among specific programs made available to it by insurers— (i) meeting reasonable financial and quality of service standards; and (ii) licensed under State law to do business in the State; and (E) in making insurance available through approved insurers, the board of directors of the association or bank selects and offers at least two approved insurers for each type of insurance made available to the members and bor VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00063 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 64 Sec. 4.35 FARM CREDIT ACT OF 1971 rowers, if at least two insurers have been approved in ac cordance with subsection (a)(2); and (3) no bank or association shall directly or indirectly dis criminate in any manner against any agent, broker, or insurer that is not affiliated with such bank or association, or against any party who purchases insurance through any such non affiliated insurance agent, broker, or insurer. (c) Notwithstanding any provision of this section to the con trary, any bank or association that on the date of enactment of the Farm Credit Act Amendments of 1980, is offering insurance cov erages not authorized by this section may continue to sell such cov erages for a period of not more than one year from such date of en actment and may continue to service such coverages until their ex piration. PART G—MISCELLANEOUS SEC. 4.35. ø12 U.S.C. 2219¿ LIMITATION ON SEPARATE SALE.— If real property is acquired by any institution of the Farm Credit System through foreclosure, no institution of the Farm Credit Sys tem shall sell the surface rights to that real property to any person unless the institution also sells all mineral rights to that real prop erty to that person. SEC. 4.36. ø12 U.S.C. 2219a¿ RIGHT OF FIRST REFUSAL. (a) GENERAL RULE.—Agricultural real estate that is acquired by an institution of the System as a result of a loan foreclosure or a voluntary conveyance by a borrower (hereinafter in this section referred to as the ‘‘previous owner’’) who, as determined by the in stitution, does not have the financial resources to avoid foreclosure (hereinafter in this section referred to as ‘‘acquired real estate’’) shall be subject to the right of first refusal of the previous owner to repurchase or lease the property, as provided in this section. (b) APPLICATION OF RIGHT OF FIRST REFUSAL TO SALE OF PROP ERTY.— (1) ELECTION TO SELL AND NOTIFICATION.—Within 15 days after an institution of the System first elects to sell acquired real estate, or any portion of such real estate, the institution shall notify the previous owner by certified mail of the owner’s right— (A) to purchase the property at the appraised fair mar ket value of the property, as established by an accredited appraiser; or (B) to offer to purchase the property at a price less than the appraised value. (2) ELIGIBILITY TO PURCHASE.—To be eligible to purchase the property under paragraph (1), the previous owner must, within 30 days after receiving the notice required by such paragraph, submit an offer to purchase the property. (3) MANDATORY SALE.—An institution of the System receiv ing an offer from the previous owner to purchase the property at the appraised value shall, within 15 days after the receipt of such offer, accept such offer and sell the property to the pre vious owner. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00064 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 65 Sec. 4.36 FARM CREDIT ACT OF 1971 (4) PERMISSIVE SALE.—An institution of the System receiv ing an offer from the previous owner to purchase the property at a price less than the appraised value may accept such offer and sell the property to the previous owner. Notice shall be provided to the previous owner of the acceptance or rejection of such offer within 15 days after the receipt of such offer. (5) REJECTION OF OFFER OF PREVIOUS OWNER.— (A) DUTIES OF INSTITUTION.—An institution of the Sys tem that rejects an offer from the previous owner to pur chase the property at a price less than the appraised value may not sell the property to any other person— (i) at a price equal to, or less than, that offered by the previous owner; or (ii) on different terms and conditions than those that were extended to the previous owner, without first affording the previous owner an opportunity to purchase the property at such price or under such terms and conditions. (B) NOTICE.—Notice of the opportunity in subpara graph (A) shall be provided to the previous owner by cer tified mail, and the previous owner shall have 15 days in which to submit an offer to purchase the property at such price or under such terms and conditions. (c) APPLICATION OF RIGHT OF FIRST REFUSAL TO LEASING OF PROPERTY.— (1) ELECTION TO LEASE AND NOTIFICATION.—Within 15 days after an institution of the System first elects to lease ac quired real estate, or any portion of such real estate, the insti tution shall notify the previous owner by certified mail of the owner’s right— (A) to lease the property at a rate equivalent to the appraised rental value of the property, as established by an accredited appraiser; or (B) to offer to lease the property at a rate that is less than the appraised rental value of the property. (2) ELIGIBILITY TO LEASE.—To be eligible to lease the prop erty under paragraph (1), the previous owner must, within 15 days after receiving the notice required by such paragraph, submit an offer to lease the property. (3) MANDATORY LEASE.—An institution of the System re ceiving an offer from the previous owner to lease the property at a rate equivalent to the appraised rental value of the prop erty shall, within 15 days after the receipt of such offer, accept such offer and lease the property to the previous owner unless the institution determines that the previous owner— (A) does not have the resources available to conduct a successful farming or ranching operation; or (B) cannot meet all of the payments, terms, and condi tions of such lease. (4) PERMISSIVE LEASE.—An institution of the System re ceiving an offer from the previous owner to lease the property at a rate that is less than the appraised rental value of the property may accept such offer and lease the property to the previous owner. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00065 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 66 Sec. 4.36 FARM CREDIT ACT OF 1971 (5) NOTICE TO PREVIOUS OWNER.—An institution of the System receiving an offer from the previous owner to lease the property at a rate less than the appraised rental value of the property shall notify the previous owner of its acceptance or re jection of the offer within 15 days after the receipt of such offer. (6) REJECTION OF OFFER OF PREVIOUS OWNER.— (A) DUTIES OF INSTITUTION.—An institution of the Sys tem rejecting an offer from the previous owner to lease the property at a rate less than the appraised rental value of the property may not lease the property to any other per son— (i) at a rate equal to or less than that offered by the previous owner; or (ii) on different terms and conditions than those that were extended to the previous owner, without first affording the previous owner an opportunity to lease the property at such rate or under such terms and conditions. (B) NOTICE.—Notice of the opportunity described in subparagraph (A) shall be given to the previous owner by certified mail, and the previous owner shall have 15 days after the receipt of such notice in which to agree to lease the property at such rate or under such terms and condi tions. (d) PUBLIC OFFERINGS.— (1) NOTIFICATION OF PREVIOUS OWNER.—If an institution of the System elects to sell or lease acquired property or a portion thereof through a public auction, competitive bidding process, or other similar public offering, the institution shall notify the previous owner, by certified mail, of the availability of the property. Such notice shall contain the minimum amount, if any, required to qualify a bid as acceptable to the institution and any terms and conditions to which such sale or lease will be subject. (2) PRIORITY.—If two or more qualified bids in the same amount are received by the institution under paragraph (1), such bids are the highest received, and one of the qualified bids is offered by the previous owner, the institution shall ac cept the offer by the previous owner. (3) NONDISCRIMINATION.—No institution of the System may discriminate against a previous owner in any public auc tion, competitive bidding process, or other similar public offer ing of property acquired by the institution from such person. (e) TERM OR CONDITION.—For the purposes of this section, fi nancing by a System institution shall not be considered to be a term or condition of a sale of acquired real estate. (f) FINANCING.—Notwithstanding any other provision of this section, a System institution shall not be required to provide fi nancing to the previous owner in connection with the sale of ac quired real estate. (g) MAILING OF NOTICE.—Notwithstanding any other provision of this section, each certified mail notice requirement in this sec VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00066 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 67 Sec. 5.7 FARM CREDIT ACT OF 1971 tion shall be fully satisfied by mailing one certified mail notice to the last known address of the previous owner. (h) STATE LAWS.—The rights provided in this section shall not diminish any such right of first refusal under the law of the State in which the property is located. (i) APPLICABILITY.—This section shall not apply to a bank for cooperatives. SEC. 4.37. ø12 U.S.C. 2219b¿ APPLICATION OF UNINSURED ACCOUNTS. (a) IN GENERAL.—Money of a borrower held by a Farm Credit System institution in an uninsured voluntary or involuntary ac count as authorized under regulations issued by the Farm Credit Administration (as in effect immediately before the date of the en actment of this section), including all such other accounts known as ‘‘advanced payment accounts’’ or ‘‘future prepayment accounts’’ shall, in the event the institution is placed in liquidation, be imme diately applied as payment against the indebtedness of any out standing loans of such borrower. (b) REGULATIONS.—The Farm Credit Administration shall pro mulgate regulations— (1) that define the term ‘‘uninsured voluntary or involun tary account’’; and (2) to otherwise effectively carry out this section. SEC. 4.38. ø12 U.S.C. 2219c¿ AFFIRMATIVE ACTION. The Assistance Board established under section 6.0 and all in stitutions of the Farm Credit System with more than 20 employees shall establish and maintain an affirmative action program plan that applies the affirmative action standards otherwise applied to contractors of the Federal Government. SEC. 4.39. ø12 U.S.C. 2219d¿ ENCOURAGEMENT OF CONSERVATION PRACTICES. At the time a System institution or an agricultural mortgage loan originator (as defined in section 8.0(7)) approves a loan made to a borrower that, in the opinion of the institution or originator, would be ineligible for a loan made, insured, or guaranteed under the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) by reason of subtitle B or C of title XII of the Food Security Act of 1985 (16 U.S.C. 3811 et seq.), the institution or originator, as the case may be, shall encourage the borrower to contact the De partment of Agriculture Soil Conservation Service to obtain infor mation about soil conservation methods and practices. TITLE V—FARM CREDIT ADMINISTRATION ORGANIZATION PART A—DISTRICT ORGANIZATION øSection 5.0 was transferred by section 901(r) of P.L. 100–399 (102 Stat. 1008) and sections 5.1 through 5.6 were repealed by sec tion 409(d) of P.L. 100–399 (102 Stat. 1003)¿ PART B—FARM CREDIT ADMINISTRATION ORGANIZATION SEC. 5.7. ø12 U.S.C. 2241¿ THE FARM CREDIT ADMINISTRA TION.—The Farm Credit Administration shall be an independent VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00067 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 68 Sec. 5.8 FARM CREDIT ACT OF 1971 agency in the executive branch of the Government. It shall be com posed of the Farm Credit Administration Board and such other per sonnel as are employed in carrying out the functions, powers, and duties vested in the Farm Credit Administration by this Act. SEC. 5.8. ø12 U.S.C. 2242¿ THE FARM CREDIT ADMINISTRATION BOARD; APPOINTMENT; TERM OF OFFICE; ORGANIZATION AND COM PENSATION.—(a) The management of the Farm Credit Administra tion shall be vested in a Farm Credit Administration Board (re ferred to in this part as ‘‘the Board’’). The Board shall consist of three members, who shall be citizens of the United States and broadly representative of the public interest. Members of the Board shall be appointed by the President, by and with the advice and consent of the Senate. Not more than two members of the Board shall be members of the same political party. Of the persons thus appointed, one shall be designated by the President to serve as Chairman of the Board for the duration of the member’s term. The members of the Board shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any institution of the Farm Credit System. (b) The term of office of each member of the Board shall be six years, except that the terms of the two members, other than the Chairman, first appointed under subsection (a) shall expire, one on the expiration of two years after the date of appointment, and one on the expiration of four years after the date of appointment. Mem bers of the Board shall not be appointed to succeed themselves, ex cept that the members first appointed under subsection (a) for a term of less than six years may be reappointed for a full six-year term and members appointed to fill unexpired terms of three years or less may be reappointed for a full six-year term. Any vacancy shall be filled for the unexpired term on like appointment. Any member of the Board shall continue to serve as such after the expi ration of the member’s term until a successor has been appointed and qualified. (c) Each member of the Board, within fifteen days after notice of appointment, shall subscribe to the oath of office. The Board may transact business if a vacancy exists, provided a quorum is present. A quorum shall consist of two members of the Board. The Board shall hold at least one meeting each month and such additional meetings at such times and places as it may fix and determine. Such meetings shall be held on the call of the Chairman or any two Board members. The Board shall adopt such rules as it deems ap propriate for the transaction of business by the Board, and shall keep permanent and accurate records and minutes of the actions and proceedings of the Board. (d) The members of the Board shall devote their full time and attention to the business of the Board. The Chairman of the Board shall receive compensation at the rate prescribed for level III of the Executive Schedule under section 5314 of title 5 of the United States Code. Each of the other members of the Board shall receive compensation at the rate prescribed for level IV of the Executive Schedule under section 5315 of title 5 of the United States Code. Each member of the Board shall be reimbursed for necessary trav el, subsistence, and other expenses in the discharge of the mem ber’s official duties without regard to other laws with respect to al VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00068 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 69 Sec. 5.10 FARM CREDIT ACT OF 1971 lowance for travel and subsistence of officers and employees of the United States. This subsection shall be subject to the provisions of section 5.11 of this Act. (e) The President shall appoint members of the Board who— (1) are experienced or knowledgeable in agricultural eco nomics and financial reporting and disclosure; (2) are experienced or knowledgeable in the regulation of financial entities; or (3) have a strong financial, legal, or regulatory back ground. SEC. 5.9. ø12 U.S.C. 2243¿ POWERS OF THE BOARD.—The Board shall manage and administer, and establish policies for, the Farm Credit Administration. It— (1) shall approve the rules and regulations for the imple mentation of this Act not inconsistent with its provisions; (2) shall provide for the examination of the condition of, and general regulation of the performance of the powers, func tions, and duties vested in, each institution of the Farm Credit System; (3) shall provide for the performance of all the powers and duties vested in the Farm Credit Administration; and (4) may require such reports as it deems necessary from the institutions of the Farm Credit System. SEC. 5.10. ø12 U.S.C. 2244¿ CHAIRMAN; RESPONSIBILITIES; GOVERNING STANDARDS.— (a)(1) The Chairman of the Board shall be the chief executive officer of the Farm Credit Administration. (2) In carrying out the responsibilities of the chief executive of ficer, the Chairman shall be responsible for directing the imple mentation of policies and regulations adopted by the Board and, after consultation with the Board, the execution of the administra tive functions and duties of the Farm Credit Administration. (3) In carrying out policies as directed by the Board, the Chair man shall act as spokesperson for the Board and represent the Board and the Farm Credit Administration in their official rela tions within the Federal Government. (4) Under policies adopted by the Board, the Chairman shall consult on a regular basis with— (A) the Secretary of the Treasury concerning the exercise, by the System, of the powers conferred under section 4.2; (B) the Board of Governors of the Federal Reserve System concerning the effect of System lending activities on national monetary policy; and (C) the Secretary of Agriculture concerning the effect of System policies on farmers, ranchers, and the agricultural economy. (b) In carrying out responsibilities under this Act, the Chair man of the Board shall be governed by general policies adopted by the Board and by such regulatory decisions, findings, and deter minations as the Board may by law be authorized to make and, as to third persons, all acts of the Chairman of the Board shall be con clusively presumed to be in compliance with such general policies and regulatory decisions, findings, and determinations. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00069 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 70 Sec. 5.11 FARM CREDIT ACT OF 1971 (c) The Chairman of the Board shall enforce the rules, regula tions, and orders of the Board. Except as provided in section 518 of title 28 of the United States Code, relating to litigation before the Supreme Court, attorneys designated by the Chairman shall represent the Farm Credit Administration in any civil proceeding or civil action brought in connection with the administration of conservatorships and receiverships. Attorneys designated by the Chairman may represent the Farm Credit Administration in any other civil proceedings or civil action when so authorized by the At torney General under provisions of title 28. SEC. 5.11. ø12 U.S.C. 2245¿ ORGANIZATION OF THE FARM CREDIT AD MINISTRATION. (a) POLICIES OF THE BOARD.—The Chairman of the Farm Cred it Administration Board, in carrying out the powers and duties vested in the Chairman by this Act, and Acts supplementary there to, shall be governed by policies of the Board and by such regu latory decisions, findings, and determinations as the Board may by law be authorized to make. (b) APPOINTMENTS.—The Chairman of the Board shall appoint such personnel as may be necessary to carry out the functions of the Farm Credit Administration. The appointment by the Chair man of the heads of major administrative divisions under the Board shall be subject to the approval of the Board. (c) PERSONNEL.— (1) APPOINTMENTS BY BOARD MEMBERS.—Personnel em ployed regularly and full-time in the immediate offices of Board members shall be appointed by each such Board mem ber. (2) OFFICERS AND EMPLOYEES.— (A) APPOINTMENT, COMPENSATION, AND BENEFITS.— The Chairman shall fix the compensation and number of, and appoint and direct, employees of the Administration. The Chairman may set and adjust the rates of basic pay for employees of the Administration without regard to the provisions of chapter 51, or subchapter III of chapter 53, of title 5, United States Code. The Chairman may provide such additional compensation and benefits to employees of the Administration as is necessary to maintain com parability with the total amount of compensation and ben efits provided by other Federal bank regulatory agencies. In setting and adjusting the total amount of compensation and benefits for employees of the Administration, the Chairman shall consult with, and seek to maintain com parability with, other Federal bank regulatory agencies. (B) OTHER FEDERAL BANK REGULATORY AGENCIES DE FINED.—For purposes of this subsection, the term ‘‘other Federal bank regulatory agencies’’ has the same meaning given to the term ‘‘appropriate Federal banking agency’’ in section 3(q) of the Federal Deposit Insurance Act. (C) ETHICS IN GOVERNMENT.—The officers and employ ees of the agency shall be— (i) subject to the Ethics in Government Act of 1978; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00070 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 71 Sec. 5.15 FARM CREDIT ACT OF 1971 (ii) considered officers or employees of the United States for the purposes of sections 201 through 203, and sections 205 through 209, of title 18, United States Code. (3) DELEGATION.—The powers of the Chairman as chief ex ecutive officer necessary for day to day management may be exercised and performed by the Chairman through such other officers and employees of the Administration as the Chairman shall designate, except that the Chairman may not delegate powers specifically reserved to the Chairman by this Act with out Board approval. (d) FUNDING.—The operations of the Farm Credit Administra tion, and the salaries of members of the Board and employees of the Administration, shall be funded and paid for from the fund cre ated under section 5.15. SEC. 5.12. ø12 U.S.C. 2246¿ ADVISORY COMMITTEES.—The Chairman of the Board, subject to the approval of the Board, may establish one or more advisory committees in accordance with the Federal Advisory Committee Act and may appoint to such com mittee or committees individuals who are members of the Federal Farm Credit Board when such Board is terminated by the Farm Credit Amendments Act of 1985. SEC. 5.13. ø12 U.S.C. 2248¿ SEAL.—The Farm Credit Adminis tration shall have a seal, as adopted by the Board, which shall be judicially noted. SEC. 5.14. ø12 U.S.C. 2249¿ ADMINISTRATIVE EXPENSES.—The Farm Credit Administration may, within the limits of funds avail able therefor, make necessary expenditures for personnel services and rent at the seat of Government and elsewhere; contract steno graphic reporting services; purchase and exchange lawbooks, books of reference, periodicals, newspapers, expenses of attendance at meetings and conferences; purchase, operation, and maintenance at the seat of Government and elsewhere of motor-propelled pas senger-carrying vehicles and other vehicles; printing and binding; and for such other facilities and services, including temporary em ployment by contract or otherwise, as it may from time to time find necessary for the proper administration of this Act. The Farm Credit Administration may dispose of property so acquired and any amounts collected from the disposition of such property shall be de posited in the special fund provided for in section 5.15(b) of this Act and shall be available to the Administration in the same manner and for the same purposes as the funds collected under section 5.15(a) of this Act. SEC. 5.15. ø12 U.S.C. 2250¿ FARM CREDIT ADMINISTRATION OPERATING EXPENSES FUND. (a) DETERMINATIONS REQUIRED.— (1) GENERALLY.—Prior to the first day of each fiscal year, the Farm Credit Administration shall determine— (A) the cost of administering this Act for the subse quent fiscal year, including expenses for official functions; (B) the amount of assessments that will be required to pay such administrative expenses, taking into consider ation the funds contained in the Administrative Expense Account, and maintain a necessary reserve; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00071 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 72 Sec. 5.16 FARM CREDIT ACT OF 1971 (C) the amount of assessments that will be required to pay the costs of supervising and examining the Mortgage Corporation established under title VIII. (2) APPORTIONMENTS.—On the basis of the determinations made under paragraph (1), the Farm Credit Administration shall— (A) apportion the amount of the assessment described in paragraph (1)(B) among the System institutions on a basis that is determined to be equitable by the Farm Cred it Administration; (B) assess and collect such apportioned amounts from time to time during the fiscal year as determined nec essary by the Farm Credit Administration; and (C) assess and collect from the Mortgage Corporation, from time to time during the fiscal year, the amount de scribed in paragraph (1)(C). (b) DEPOSITS INTO FUND.— (1) TREASURY FUND.—The amounts collected under sub section (a) shall be deposited in the Farm Credit Administra tion Administrative Expense Account. The Expense Account shall be maintained in the Treasury of the United States and shall be available, without regard, for purposes of sequestra tion, to the Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 901 note), to pay the expenses of the Farm Credit Administration. (2) NONGOVERNMENT FUNDS.—The funds contained in the Expense Account shall not be construed to be Federal Govern ment funds or appropriated moneys. (3) INVESTMENT.— (A) AUTHORITY.—On request of the Farm Credit Ad ministration, the Secretary of the Treasury shall invest and reinvest such amounts contained in the Expense Ac count as, in the determination of the Farm Credit Admin istration, are in excess of the amounts necessary for cur rent expenses of the Farm Credit Administration. (B) RETURNS.—All income earned from such invest ments and reinvestments shall be deposited in the Ex pense Account. (C) TYPE.—Such investments shall be made in public debt securities with maturities suitable to the needs of the Expense Account, as determined by the Farm Credit Ad ministration, and bearing interest at rates determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obliga tions of the United States of comparable maturities. SEC. 5.16. ø12 U.S.C. 2251¿ QUARTERS AND FACILITIES FOR THE FARM CREDIT ADMINISTRATION.—As an alternate to the rental of quarters under section 5.14, and without regard to any other provi sion of law, the banks of the System, with the concurrence of two thirds of the bank boards, are hereby authorized— (1) To lease or acquire real property in the District of Columbia or elsewhere for quarters of the Farm Credit Administration. (2) To construct, develop, furnish, and equip such building thereon and such facilities appurtenant thereto as in their judg VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00072 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 73 Sec. 5.17 FARM CREDIT ACT OF 1971 3 Effective January 1, 2010, sec. 5407(c)(1)(A) of the Food, Conservation, and Energy Act of 2008, Public Law 102–246, 122 Stat. 1921, amends para. (2) by striking ‘‘(2)(A)’’ and inserting ‘‘(2)’’. ment may be appropriate to provide, to the extent the Board may deem advisable, suitable, and adequate quarters and facilities for the Farm Credit Administration. (3) To enlarge, remodel, or reconstruct the same. (4) To make or enter into contracts for any of the foregoing. (5) To sell or otherwise dispose of any interest in property leased or acquired under the foregoing if authorized by the Board. The Board may require of the respective banks of the System, and they shall make to the Farm Credit Administration, such advances of funds for the purposes set out in this section as in the sole judg ment of the Board may from time to time be advisable for the pur poses of this section. Such advances shall be in addition to and kept in a separate fund from the assessments authorized in section 5.15 and shall be apportioned by the Board among the banks in proportion to the total assets of the respective banks, and deter mined in such manner and at such times as the Board may pre scribe. The powers of the banks of the System and purposes for which obligations may be issued by such banks are hereby enlarged to include the purpose of obtaining funds to permit the making of advances required by this section. The plans and decisions for such building and facilities and for the enlargement, remodeling, or re construction thereof shall be such as is approved in the sole discre tion of the Board. In actions undertaken by the banks pursuant to the foregoing provisions of this section, the Farm Credit Adminis tration may act as agent for the banks. SEC. 5.17. ø12 U.S.C. 2252¿ ENUMERATED POWERS.—(a) The Farm Credit Administration shall have the following powers, func tions, and responsibilities in connection with the institutions of the Farm Credit System and the administration of this Act: (1) Modify the boundaries of farm credit districts, with due regard for the farm credit needs of the country, as approved by the Board, with the concurrence of the district banks involved. (2)(A)(2) 3 Where necessary or appropriate to carry out the policy and objectives of this Act, issue and approve amend ments to Federal charters of institutions of the System; ap prove change in names of banks operating under this Act; ap prove the merger of districts when agreed to by the district bank boards involved and by a majority vote of the voting stockholders and contributors to the guaranty funds of each bank for each of such districts, voting in the same manner as is provided in section 7.0 of this Act; approve mergers and any related activities as provided for in title VII; and approve the consolidation or division of the territories of institutions when agreed to by a majority vote of the voting stockholders or con tributors to the guaranty fund of each of the institutions in volved; and approve consolidations of boards of directors when agreed to by a majority vote of the voting stockholders or con tributors to the guaranty fund of each of the institutions in volved. In issuing charters and certificates of territory for dis trict-wide mergers of associations where stockholders of one or more associations did not approve the merger, the charter of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00073 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 74 Sec. 5.17 FARM CREDIT ACT OF 1971 4 Effective January 1, 2010, sec. 5407(c)(1)(B) of the Food, Conservation, and Energy Act of 2008, Public Law 102–246, 122 Stat. 1921, amends para. (2) by striking subparas. (B) and (C). the new or merged association shall not include the territory of the disagreeing association or associations; charters issued during calendar year 1985 for district-wide new or merged as sociations which included the territory of a disagreeing associa tion shall be revoked and reissued to exclude such territory, unless subsequently agreed to by the board of directors of such association or associations. The Farm Credit Administration Board shall ensure that disapproving associations (A) shall not be charged any assessment under this Act at a rate higher than that charged other like associations in the district, and (B) shall be provided with financial services and assistance on the same basis as other like associations in the district (includ ing, but not limited to, access to credit and rates of interest on loans and discounts) by a district Farm Credit bank to the as sociation and its member-borrowers. The Farm Credit Admin istration Board, after consultation with the respective boards of directors of the affected banks, may require two or more banks operating under the same or different titles to merge if the Board determines that one of such banks has failed to meet its outstanding obligations. (B) 4 The Farm Credit Administration shall not issue a charter to, or approve an amendment to the charter of, any in stitution of the Farm Credit System to operate under title I or II that would authorize the institution to exercise lending au thority, whether directly or indirectly as an agent of a Farm Credit Bank, in a territory in which the charter of another such institution authorizes the other institution to exercise like authority, whether directly or indirectly as an agent of a Farm Credit Bank, except with the approval of— (i) in a case affecting only the charter of one or more associations— (I) a majority of the shareholders (present and voting or voting by proxy) of each of the associations that would have like lending authority (whether di rectly or indirectly as an agent of a Farm Credit Bank) in any of that territory if the charter action were taken; and (II) a majority of the board of directors of the Farm Credit Bank with which the affected associa tions are affiliated; or (ii) in a case affecting the charter of one or more banks— (I) a majority of the shareholders (present and voting or voting by proxy) of the affiliated associations of each of the banks that would have like lending au thority in any of that territory if the charter action were taken; (II) a majority of the shareholders (present and voting or voting by proxy) of each of the banks that would have like lending authority in any of that terri tory if the charter action were taken; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00074 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 75 Sec. 5.17 FARM CREDIT ACT OF 1971 (III) a majority vote of the boards of directors of each of the banks that would have like lending author ity in any of that territory if the charter action were taken. (C) Subparagraph (B) shall apply only in those geographic areas where, due to the failure of a Federal intermediate credit bank to merge in accordance with section 410(a) of the Agricul tural Credit Act of 1987 (12 U.S.C. 2011 note), the Federal in termediate credit bank or its successor is chartered to provide short- and intermediate-term credit, and a neighboring Farm Credit Bank that is not the successor to the Federal inter mediate credit bank is chartered to provide long-term credit, in the same geographic territory. (3) Make annual reports directly to Congress on the condi tion of the System and its institutions, based on the examina tions carried out under section 5.19 of this Act, and on the manner and extent to which the purposes and objectives of this Act are being carried out and, from time to time, recommend directly legislative changes. The annual reports shall include a summary and analysis of the reports submitted to the Farm Credit Administration by the Farm Credit Banks under section 4.19(b) Federal land banks and Federal intermediate credit banks under section 4.19(b) of this Act relating to programs for serving young, beginning, and small farmers and ranchers. (4) Approve the issuance of obligations of the System under subsections (c) and (d) of section 4.2 of this Act for the purpose of funding the authorized operations of the institutions of the System, and prescribe collateral therefor. (5) Grant approvals provided for under this Act either on a case-by-case basis or through regulations that confer ap proval on actions of Farm Credit System institutions. (6) Establish standards for the System institutions with respect to loan security requirements and regulate the bor rowing, repayment, and transfer of funds and equities between institutions of the System. (7) Conduct loan and collateral security review. (8) Regulate the preparation by System institutions and the dissemination to stockholders and investors of information on the financial condition and operations of such institutions, except that the requirements of the Farm Credit Administra tion governing the dissemination to stockholders of quarterly reports of System institutions may not be more burdensome or costly than the requirements applicable to national banks, and the Farm Credit Administration may not require any System institution to disclose in any report to stockholders information concerning the condition or classification of a loan— (A) to a director of the institution— (i) who has resigned before the time for filing the applicable report with the Farm Credit Administra tion; or (ii) whose term of office will expire no later than the date of the meeting of stockholders to which the report relates; or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00075 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 76 Sec. 5.17 FARM CREDIT ACT OF 1971 (B) to a member of the immediate family of a director of the institution unless— (i) the family member resides in the same house hold as the director; or (ii) the director has a material financial or legal interest in the loan or business operation of the family member. (9) Prescribe rules and regulations necessary or appro priate for carrying out this Act. (10) Exercise the powers conferred on it under part C of this title for the purpose of ensuring the safety and soundness of System institutions. (11) Exercise such incidental powers as may be necessary or appropriate to fulfill its duties and carry out the purposes of this Act. (12) Require surety bonds or other provisions for protection of the assets of the institutions of the System against losses oc casioned by employees. (13)(A) Subject to subparagraph (B), the Farm Credit Ad ministration may approve an amendment to the charter of any institution of the Farm Credit System operating under title I or II, which would authorize the institution to exercise lending authority in any territory— (i) in the geographic area served by an association that was reassigned pursuant to section 433 of the Agricultural Credit Act of 1987 (12 U.S.C. 2071 note) (where the geo graphic area was a part of the association’s territory as of the date of the reassignment); and (ii) in which the charter of an institution that is not seeking the charter amendment authorizes the institution to exercise the type of lending authority that is the subject of the charter request. (B) The Farm Credit Administration may approve a char ter amendment under subparagraph (A) only on the approval of— (i) the respective boards of directors of the associations that, if the charter request is approved, would exercise like lending authority in any of the territory that is the subject of the charter request; (ii) a majority of the stockholders of each association described in clause (i) voting, in person or by proxy, at a duly authorized stockholders’ meeting; and (iii) the respective boards of directors of the Farm Credit Banks that, if the charter request is approved, would exercise, either directly or through associations, like lending authority in any of the territory described in sub paragraph (A)(i). (14)(A) Subject to subparagraph (B), the Farm Credit Ad ministration may approve a request to charter an association of the Farm Credit System to operate under title II where the proposed charter— (i) will include any of the geographic area included in the territory served by an association that was reassigned pursuant to section 433 of the Agricultural Credit Act of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00076 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 77 Sec. 5.17 FARM CREDIT ACT OF 1971 5 Effective January 1, 2010, sec. 5407(b) of the Food, Conservation, and Energy Act of 2008, Public Law 102–246, 122 Stat. 1921, adds para. (15). 1987 (12 U.S.C. 2071 note) (where the geographic area was a part of the association’s territory as of the date of the re assignment); and (ii) will authorize the association to exercise lending authority in any territory in the geographic area in which the charter of an association that is not requesting the charter authorizes the association to exercise the type of lending authority that is the subject of the charter request. (B) The Farm Credit Administration may approve a char ter request under subparagraph (A) only on the approval of— (i) the respective boards of directors of the associations that, if the charter request is approved, would exercise like lending authority in any of the territory that is the subject of the charter request; (ii) a majority vote of the stockholders (if any) of each association described in clause (i) voting, in person or by proxy, at a duly authorized stockholder’s meeting; and (iii) the respective boards of directors of the Farm Credit Banks that, if the charter request is approved, would exercise, either directly or through associations, like lending authority in any of the territory described in sub paragraph (A)(i). (15)(A) 5 Approve amendments to the charters of institu tions of the Farm Credit System to implement the equalization of loan-making powers of a Farm Credit System association under section 7.7. (B) Amendments described in subparagraph (A) to the charters of an association and the related Farm Credit Bank shall be approved by the Farm Credit Administration, subject to any conditions of approval imposed, by not later than 30 days after the date on which the Farm Credit Administration receives all approvals required by section 7.7(a)(2). (b) The Farm Credit Administration shall not have authority, either direct or indirect, to approve bylaws, or any amendments or modifications or changes to bylaws, of System institutions. (c)(1) At least thirty days prior to publishing any proposed reg ulation in the Federal Register, the Farm Credit Administration shall transmit a copy of the regulation to the Committee on Agri culture of the House of Representatives and the Committee on Ag riculture, Nutrition, and Forestry of the Senate. The Farm Credit Administration shall also transmit to such committees a copy of any final regulation prior to its publication in the Federal Register. Except as provided in paragraph (2) of this subsection, no final reg ulation of the Farm Credit Administration shall become effective prior to the expiration of thirty calendar days after it is published in the Federal Register during which either or both Houses of the Congress are in session. (2) In the case of an emergency, a final regulation of the Farm Credit Administration may become effective without regard to the last sentence of paragraph (1) of this subsection if the Farm Credit Administration notifies in writing the Committee on Agriculture of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00077 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 78 Sec. 5.18 FARM CREDIT ACT OF 1971 the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate setting forth the reasons why it is necessary to make the regulation effective prior to the expira tion of the thirty-day period. (d)(1) If there are any unresolved differences between the Farm Credit Administration and the Board of Governors of the Federal Reserve System as to whether any regulation implementing section 3.7(b) or the other provisions of title III relating to the authority under secton 3.7(b) conforms to national banking policies, objec tives, and limitations, simultaneously with promulgation of any such regulation under this Act, and simultaneously with promulga tion of any regulation implementing section 1.7(b), the Farm Credit Administration shall transmit a copy thereof to the Secretary of the Senate and the Clerk of the House of Representatives. Except as provided in paragraph (2), the regulation shall not become effective if, within ninety calendar days of continuous session of Congress after the date of promulgation, both Houses of Congress adopt a concurrent resolution, the matter after the resolving clause of which is as follows: ‘‘That Congress disapproves the regulation pro mulgated by the Farm Credit Administration dealing with the mat ter of llllllll, which regulation was transmitted to llllllll Congress onllllllll’’, the blank spaces therein being appropriately filled. (2) If at the end of sixty calendar days of continuous session of Congress after the date of promulgation of a regulation, no com mittee of either House of Congress has reported or been discharged from further consideration of a concurrent resolution disapproving the regulation, and neither House has adopted such a resolution, the regulation may go into effect immediately. If, within such sixty calendar days, such a committee has reported or been discharged from further consideration of such a resolution, or either House has adopted such a resolution, the regulation may go into effect not sooner than ninety calendar days of continuous session of Congress after its promulgation unless disapproved as provided in paragraph (1). (3) For the purposes of paragraphs (1) and (2) of this sub section— (i) continuity of session is broken only by an adjournment of Congress sine die; and (ii) the days on which either House is not in session be cause of an adjournment of more than three days to a day cer tain are excluded in the computation of sixty and ninety cal endar days of continuous session of Congress. (4) Congressional inaction on or rejection of a resolution of dis approval shall not be deemed an expression of approval of such reg ulation. SEC. 5.18. ø12 U.S.C. 2253¿ PRIOR DELEGATIONS.—Any delega tions by the Farm Credit Administration and redelegations thereof made in accordance with section 5.19 of the Farm Credit Act of 1971 as in effect prior to the effective date of the Farm Credit Amendments Act of 1985 may continue in full force and effect, at the discretion of the Farm Credit Administration, for the period ending twelve months after the date of enactment of such Act. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00078 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 79 Sec. 5.19 FARM CREDIT ACT OF 1971 SEC. 5.19. ø12 U.S.C. 2254¿ EXAMINATIONS.—(a) Except for Federal land bank associations, each institution of the System shall be examined by Farm Credit Administration examiners at such times as the Board may determine, but in no event less than once during each 18-month period. Each Federal land bank association shall be examined by Farm Credit Administration examiners at such times as the Farm Credit Administration Board may deter mine, except that each such association shall be examined at least once every three years. Such examinations may include, if appro priate, but are not limited to, an analysis of credit and collateral quality and capitalization of the institution, and appraisals of the effectiveness of the institution’s management and application of policies governing the carrying out of this Act and regulations of the Farm Credit Administration and servicing all eligible bor rowers. Examination of banks shall include an analysis of the com pensation paid to the chief executive officer and the salary scales of the employees of the bank. At the direction of the Board, Farm Credit Administration examiners also shall make examinations of the condition of any organization, other than federally regulated fi nancial institutions, to, for, or with which any institution of the System contemplates making a loan or discounting paper. For the purposes of this Act, examiners of the Farm Credit Administration shall be subject to the same requirements, responsibilities, and penalties as are applicable to examiners under the National Bank Act, the Federal Reserve Act, and Federal Deposit Insurance Act, and other provisions of law and shall have the same powers and privileges as are vested in such examiners by law. (b)(1) Each institution of the System shall make and publish an annual report of condition as prescribed by the Farm Credit Ad ministration. Each such report shall contain financial statements prepared in accordance with generally accepted accounting prin ciples, except with respect to any actions taken by any banks of the System under section 4.8(b), and contain such additional informa tion as the Farm Credit Administration by regulation may require. Notwithstanding the provisions of the preceding sentence and any other provision of this Act, for the period July 1, 1986, through De cember 31, 1988, the institutions of the Farm Credit System may, on the prior approval of the Farm Credit Administration and sub ject to such conditions as it may establish, capitalize annually their provision for losses that is in excess of one-half of 1 percent of loans outstanding and amortize such capitalized amounts over a period not to exceed 20 years. Such financial statements of System institu tions shall be audited by an independent public accountant. (2) In accordance with the regulations of the Farm Credit Ad ministration, for the period ending December 31, 1992, System in stitutions are authorized to use the authorities contained in the third sentence of paragraph (1) except as otherwise provided in sec tion 6.6. (3) Any preferred stock issued under section 6.27 shall be sub ordinated to, and impaired before, other stock or equities of the in stitution. (c) The Farm Credit Administration may publish the report of examination of any System institution that does not, before the end of the 120th day after the date of notification of the recommenda VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00079 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 80 Sec. 5.20 FARM CREDIT ACT OF 1971 tions and suggestions of the Farm Credit Administration, based on such examination, comply with such recommendations and sugges tions to the satisfaction of the Farm Credit Administration. The Farm Credit Administration shall give notice of intention to pub lish in the event of such noncompliance at least 90 days before such publication. Such notice of intention may be given any time after such notification of recommendations and suggestions. (d) On receipt of a request made under section 5.59(b)(1)(B) with respect to a System institution, the Farm Credit Administra tion shall— (1) furnish for the confidential use of the Farm Credit Sys tem Insurance Corporation reports of examination of the insti tution and other reports or information on the institution; and (2)(A) examine, or obtain other information on, the institu tion and furnish for the confidential use of the Farm Credit System Insurance Corporation the report of the examination and such other information; or (B) if the Farm Credit Administration Board determines that compliance with the request would substantially impair the ability of the Farm Credit Administration to carry out the other duties and responsibilities of the Farm Credit Adminis tration under this Act, notify the Board of Directors of the Farm Credit System Insurance Corporation that the Farm Credit Administration will be unable to comply with the re quest. SEC. 5.20. ø12 U.S.C. 2255¿ CONDITIONS OF OTHER BANKS AND LENDING INSTITUTIONS.—The Comptroller of the Currency is au thorized and directed, upon request of the Farm Credit Administra tion to furnish for confidential use of an institution of the System such reports, records, and other information as he may have avail able relating to the financial condition of national banks through, for, or with which such institution of the System has made or con templates making discounts or loans and to make such further ex amination, as may be agreed, of organizations through, for, or with which such institution of the Farm Credit System has made or con templates making discounts or loans. SEC. 5.21. ø12 U.S.C. 2256¿ CONSENT TO THE AVAILABILITY OF REPORTS AND TO EXAMINATIONS.—Any organization other than State banks, trust companies, and savings associations shall, as a condition precedent to securing discount privileges with a bank of the Farm Credit System, file with such bank its written consent to examination by farm credit examiners as may be directed by the Farm Credit Administration; and State banks, trust companies, and savings associations may be required in like manner to file a written consent that reports of their examination by constituted State authorities may be furnished by such authorities upon the re quest of the Farm Credit Administration. SEC. 5.22. ø12 U.S.C. 2257¿ REPORTS ON CONDITIONS OF INSTI TUTIONS RECEIVING LOANS OR DEPOSITS.—The executive depart ments, boards, commissions, and independent establishments of the Government of the United States, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Board of Gov ernors of the Federal Reserve System, and the Federal Reserve banks are severally authorized under such conditions as they may VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00080 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 81 Sec. 5.25 FARM CREDIT ACT OF 1971 prescribe, upon request of the Farm Credit Administration, to make available to it or to any institution of the System in con fidence all reports, records, or other information relating to the con dition of any organization to which such institution of the System has made or contemplates making loan or for which it has or con templates discounting paper, or which it is using or contemplates using as a custodian of securities or other credit instruments, or a depository. The Federal Reserve banks in their capacity as deposi tories, agents, and custodians for bonds, debentures, and other obli gations issued by the banks of the System or book entries thereof are also authorized and directed, upon request of the Farm Credit Administration, to make available for audit by farm credit exam iners all appropriate books, accounts, financial records, files, and other papers. SEC. 5.22A. ø12 U.S.C. 2257a¿ UNIFORM FINANCIAL REPORTING IN STRUCTIONS. (a) IN GENERAL.—Each System institution shall comply with uniform financial reporting instructions required by the Farm Credit Administration, to standardize and facilitate the reporting of System data. (b) COMPUTERIZED SYSTEM.—If the financial reports are main tained by a computer system, each System institution may develop an internal computer system or it may contract out to a vendor under open competitive bidding any or all aspects of the computer ized system. (c) SUBMISSION OF PROPOSAL.—Within 6 months of the date of the enactment of this section, each System institution shall submit to the Farm Credit Administration a report on the plan of that in stitution to bring the operations of the institution into compliance with the uniform financial reporting instructions required by the Farm Credit Administration. SEC. 5.23. ø12 U.S.C. 2258¿ JURISDICTION.—Each institution of the System shall for the purposes of jurisdiction be deemed to be a citizen of the State, commonwealth, or District of Columbia in which its principal office is located. SEC. 5.24. ø12 U.S.C. 2259¿ STATE LEGISLATION.—Whenever it is determined by the Farm Credit Administration, or by judicial de cision, that a State law is applicable to the obligations and securi ties authorized to be held by the institutions of the System under this Act, which law would provide insufficient protection or inad equate safeguards against loss in the event of default, the Farm Credit Administration may declare such obligations or securities to be ineligible as collateral for the issuance of new notes, bonds, de bentures, and other obligations under this Act. PART C—ENFORCEMENT POWERS OF FARM CREDIT ADMINISTRATION SEC. 5.25. ø12 U.S.C. 2261¿ CEASE AND DESIST PRO CEEDINGS.—(a) If, in the opinion of the Farm Credit Administra tion, any institution in the Farm Credit System, or any director, of ficer, employee, agent, or other person participating in the conduct of the affairs of such an institution is engaging or has engaged, or the Farm Credit Administration has reasonable cause to believe that the institution or any director, officer, employee, agent, or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00081 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 82 Sec. 5.26 FARM CREDIT ACT OF 1971 other person participating in the conduct of the affairs of such in stitution is about to engage, in an unsafe or unsound practice in conducting the business of such institution, or is violating or has violated, or the Farm Credit Administration has reasonable cause to believe that the institution or any director, officer, employee, agent, or other person participating in the conduct of the affairs of such institution is about to violate, a law, rule, or regulation, or any condition imposed in writing by the Farm Credit Administra tion in connection with the granting of any application or other re quest by the institution or any written agreement entered into with the Farm Credit Administration, the Farm Credit Administration may issue and serve upon the institution or such director, officer, employee, agent, or other person a notice of charges in respect thereof. The notice shall contain a statement of the facts consti tuting the alleged violation or violations or the unsafe or unsound practice or practices, and shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist therefrom should issue against the institution or the direc tor, officer, employee, agent, or other person participating in the conduct of the affairs of such institution. Such hearing shall be fixed for a date not earlier than thirty days nor later than sixty days after service of such notice unless an earlier or a later date is set by the Farm Credit Administration at the request of any party so served. Unless the party or parties so served shall appear at the hearing personally or by a duly authorized representative, they shall be deemed to have consented to the issuance of the cease and desist order. In the event of such consent, or if upon the record made at any such hearing, the Farm Credit Administration shall find that any violation or unsafe or unsound practice specified in the notice of charges has been established, the Farm Credit Admin istration may issue and serve upon the institution or the director, officer, employee, agent, or other person participating in the con duct of the affairs of such institution an order to cease and desist from any such violation or practice. Such order may, by provisions that may be mandatory or otherwise, require the institution or its directors, officers, employees, agents, and other persons partici pating in the conduct of the affairs of such institution to cease and desist from the same, and, further, to take affirmative action to correct the conditions resulting from any such violation or practice. (b) A cease and desist order shall become effective at the expi ration of thirty days after the service of such order upon the insti tution or other person concerned (except in the case of a cease and desist order issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforce able as provided therein except to such extent as it is stayed, modi fied, terminated, or set aside by action of the Farm Credit Adminis tration or a reviewing court. SEC. 5.26. ø12 U.S.C. 2262¿ TEMPORARY CEASE AND DESIST ORDERS.—(a) Whenever the Farm Credit Administration shall de termine that the violation or threatened violation or the unsafe or unsound practice or practices, specified in the notice of charges served upon the institution or any director, officer, employee, agent, or other person participating in the conduct of the affairs of such institution under section 5.25, or the continuation thereof, is VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00082 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 83 Sec. 5.28 FARM CREDIT ACT OF 1971 likely to cause insolvency or substantial dissipation of assets or earnings of the institution, or is likely to seriously weaken the con dition of the institution or otherwise seriously prejudice the inter ests of the investors in Farm Credit System obligations or share holders in the institution prior to the completion of the proceedings conducted under section 5.25, the Farm Credit Administration may issue a temporary order requiring the institution or such director, officer, employee, agent, or other person to cease and desist from any such violation or practice and to take affirmative action to pre vent such insolvency, dissipation, condition, or prejudice pending completion of such proceedings. Such order shall become effective upon service upon the institution or such director, officer, em ployee, agent, or other person participating in the conduct of the affairs of such institution and, unless set aside, limited, or sus pended by a court in proceedings authorized by subsection (b), shall remain effective and enforceable pending the completion of the ad ministrative proceedings pursuant to such notice and until such time as the Farm Credit Administration shall dismiss the charges specified in such notice, or if a cease and desist order is issued against the institution or such director, officer, employee, agent, or other person, until effective date of such order. (b) Within ten days after the institution concerned or any di rector, officer, employee, agent, or other person participating in the conduct of the affairs of such institution has been served with a temporary cease and desist order, the institution or such director, officer, employee, agent, or other person may apply to the United States district court for the judicial district in which the home of fice of the institution is located, or the United States district court for the District of Columbia, for an injunction setting aside, lim iting, or suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative pro ceedings pursuant to the notice of charges served upon the institu tion or such director, officer, employee, agent, or other person under section 5.25, and such court shall have jurisdiction to issue such injunction. SEC. 5.27. ø12 U.S.C. 2263¿ ENFORCEMENT OF TEMPORARY CEASE AND DESIST ORDERS.—In the case of violation or threatened violation of, or failure to obey, a temporary cease and desist order issued under section 5.26, the Farm Credit Administration may apply to the United States district court, or the United States court of any territory, within the jurisdiction of which the home office of the institution is located, for an injunction to enforce such order, and, if the court shall determine that there has been such violation or threatened violation or failure to obey, it shall be the duty of the court to issue such injunction. SEC. 5.28. ø12 U.S.C. 2264¿ SUSPENSION OR REMOVAL OF DI RECTOR OR OFFICER.—(a) Whenever, in the opinion of the Farm Credit Administration, any director or officer of any institution in the Farm Credit System has committed any violation of law, rule, or regulation or of a cease and desist order that has become final, or has engaged or participated in any unsafe or unsound practice in connection with the institution, or has committed or engaged in any act, omission, or practice which constitutes a breach of a fidu ciary duty as such director or officer, and the Farm Credit Admin VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00083 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 84 Sec. 5.28 FARM CREDIT ACT OF 1971 istration determines that the institution has suffered or will prob ably suffer substantial financial loss or other damage or that the interests of its shareholders or investors in Farm Credit System ob ligations could be seriously prejudiced by reason of such violation or practice or breach of fiduciary duty, or that the director or officer has received financial gain by reason of such violation or practice or breach of fiduciary duty, and that such violation or practice or breach of fiduciary duty is one involving personal dishonesty on the part of such director or officer, or one that demonstrates a willful or continuing disregard for the safety or soundness of the System institution, the Farm Credit Administration may serve upon such director or officer a written notice of its intention to remove him from office. (b) Whenever, in the opinion of the Farm Credit Administra tion, any director or officer of an institution in the Farm Credit System, by conduct or practice with respect to another institution in the Farm Credit System or other business institution that re sulted in substantial financial loss or other damage, has evidenced either his personal dishonesty or a willful or continuing disregard for its safety and soundness and, in addition, has evidenced his unfitness to continue as a director or officer, and whenever, in the opinion of the Farm Credit Administration, any other person par ticipating in the conduct of the affairs of an institution in the Farm Credit System, by the conduct or practice with respect to such in stitution or other institution in the Farm Credit System or other business institution that resulted in substantial financial loss or other damage, has evidenced either personal dishonesty or a willful or continuing disregard for its safety and soundness and, in addi tion, has evidenced his unfitness to participate in the conduct of the affairs of such institution, the Farm Credit Administration may serve upon such director, officer, or other person a written notice of its intention to remove that director, officer, or other person from office or to prohibit his further participation in any manner in the conduct of the affairs of the institution. (c) In respect to any director or officer of an institution in the Farm Credit System or any other person referred to in subsection (a) or (b) of this section, the Farm Credit Administration may, if it deems it necessary for the protection of the institution or the in terests of its shareholders and the investors in the Farm Credit System obligations, by written notice to such effect served upon such director, officer, or other person, suspend such director, offi cer, or other person from office or prohibit such director, officer, or other person from further participation in any manner in the con duct of the affairs of the institution. Such suspension or prohibition shall become effective upon service of such notice and, unless stayed by a court in proceedings authorized by subsection (e) of this section, shall remain in effect pending the completion of the admin istrative proceedings pursuant to the notice served under sub section (a) or (b) and until such time as the Farm Credit Adminis tration shall dismiss the charges specified in such notice, or, if an order of removal or prohibition is issued against the director or offi cer or other person, until the effective date of any such order. Cop ies of any such notice shall also be served upon the institution of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00084 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 85 Sec. 5.29 FARM CREDIT ACT OF 1971 which the person is a director or officer or in the conduct of whose affairs the person has participated. (d) A notice of intention to remove a director, officer, or other person from office or to prohibit such director’s, officer’s, or other person’s participation in the conduct of the affairs of an institution in the Farm Credit System, shall contain a statement of the facts constituting grounds therefor, and shall fix a time and place at which a hearing will be held thereon. Such hearing shall be fixed for a date not earlier than thirty days nor later than sixty days after the date of service of such notice, unless an earlier or a later date is set by the Farm Credit Administration at the request of (1) such director or officer or other person, and for good cause shown, or (2) the Attorney General of the United States. Unless such direc tor, officer, or other person shall appear at the hearing in person or by a duly authorized representative, such director, officer, or other person shall be deemed to have consented to the issuance of an order of such removal or prohibition. In the event of such con sent, or if upon the record made at any such hearing the Farm Credit Administration shall find that any of the grounds specified in such notice have been established, the Farm Credit Administra tion may issue such orders of suspension or removal from office, or prohibition from participation in the conduct of the affairs of the institution, as it may deem appropriate. A copy of an order issued under this subsection shall be served upon the institution con cerned. Any such order shall become effective at the expiration of thirty days after service upon such institution and the director, of ficer, or other person concerned (except in the case of an order issued upon consent, which shall become effective at the time speci fied therein). Such order shall remain effective and enforceable ex cept to such extent as it is stayed, modified, terminated, or set aside by action of the agency or a reviewing court. (e) Within ten days after any director, officer, or other person has been suspended from office or prohibited from participation in the conduct of the affairs of a System institution under subsection (c) of this section, such director, officer, or other person may apply to the United States district court for the judicial district in which the home office of the institution is located, or the United States district court for the District of Columbia, for a stay of either such suspension or prohibition, or both, pending the completion of the administrative proceedings pursuant to the notice served upon such director, officer, or other person under subsection (a) or (b), and such court shall have jurisdiction to stay either such suspension or prohibition, or both. SEC. 5.29. ø12 U.S.C. 2265¿ SUSPENSION OR REMOVAL OF DI RECTOR OR OFFICER CHARGED WITH FELONY.—(a) Whenever any director or officer of an institution in the Farm Credit System, or other person participating in the conduct of the affairs of such in stitution, is charged in any information, indictment, or complaint authorized by a United States attorney, with the commission of or participation in a crime involving dishonesty or breach of trust that is punishable by imprisonment for a term exceeding one year under State or Federal law, the Farm Credit Administration may, if con tinued service or participation by the individual may pose a threat to the interests of the institution’s shareholders or investors in VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00085 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 86 Sec. 5.29 FARM CREDIT ACT OF 1971 Farm Credit System obligations or may threaten to impair public confidence in the institution or the Farm Credit System, by written notice served upon such director, officer, or other person, suspend such director, officer, or other person from office or prohibit such director, officer, or other person from further participation in any manner in the conduct of the affairs of the institution. A copy of such notice shall also be served upon the institution. Such suspen sion or prohibition shall remain in effect until such information, in dictment, or complaint is finally disposed of or until terminated by the Farm Credit Administration. In the event that a judgment of conviction with respect to such crime is entered against such direc tor, officer, or other person, and at such time as such judgment is not subject to further appellate review, the Farm Credit Adminis tration may, if continued service or participation by the individual may pose a threat to the interests of the institution’s shareholders or the investors in Farm Credit System obligations or may threaten to impair public confidence in the institution or the Farm Credit System, issue and serve upon such director, officer, or other person an order removing such director, officer, or other person from office or prohibiting such director, officer, or other person from further participation in any manner in the conduct of the affairs of the in stitution except with the consent of the Farm Credit Administra tion. A copy of such order shall also be served upon such institu tion, whereupon such director or officer shall cease to be a director or officer of such institution. A finding of not guilty or other dis position of the charge shall not preclude the Farm Credit Adminis tration from thereafter instituting proceedings to remove such di rector, officer, or other person from office or to prohibit further par ticipation in Farm Credit System affairs under section 5.28. Any notice of suspension or order of removal issued under this para graph shall remain effective and outstanding until the completion of any hearing or appeal authorized under subsection (b) unless terminated by the Farm Credit Administration. (b) Within thirty days from service of any notice of suspension or order of removal issued under subsection (a), the director, offi cer, or other person concerned may request in writing an oppor tunity to appear before the Farm Credit Administration to show that the continued service to or participation in the conduct of the affairs of the institution by such individual does not, or is not likely to, pose a threat to the interest of the institution’s shareholders or the investors in Farm Credit System obligations or threaten to im pair public confidence in the institution or the Farm Credit System. Upon receipt of any such request, the Farm Credit Administration shall fix a time (not more than thirty days after receipt of such re quest, unless extended at the request of the concerned director, of ficer, or other person) and place at which the director, officer, or other person may appear, personally or through counsel, before the Chairman of the Farm Credit Administration or designated em ployees of the Farm Credit Administration to submit written mate rials (or, at the discretion of the Farm Credit Administration, oral testimony) and oral argument. Within sixty days of such hearing, the Farm Credit Administration shall notify the director, officer, or other person whether the suspension or prohibition from participa tion in any manner in the conduct of the affairs of the institution VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00086 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 87 Sec. 5.30 FARM CREDIT ACT OF 1971 will be continued, terminated, or otherwise modified, or whether the order removing such director, officer, or other person from of fice or prohibiting such individual from further participation in any manner in the conduct of the affairs of the institution will be re scinded or otherwise modified. Such notification shall contain a statement of the basis for the Farm Credit Administration’s deci sion, if adverse to the director, officer, or other person. The Farm Credit Administration may prescribe such rules as may be nec essary to effectuate the purposes of this subsection. SEC. 5.30. ø12 U.S.C. 2266¿ HEARINGS AND JUDICIAL RE VIEW.—(a) Any hearing provided for in this part (other than the hearing provided for in section 5.29) shall be held in the Federal judicial district or in the territory in which the home office of the institution is located unless the party afforded the hearing consents to another place, and shall be conducted in accordance with the provisions of chapter 5 of title 5 of the United States Code. Such hearing shall be private, unless the Farm Credit Administration, in its discretion, after fully considering the views of the party afforded the hearing, determines that a public hearing is necessary to pro tect the public interest. After such hearing, and within ninety days after the Farm Credit Administration has notified the parties that the case has been submitted to it for final decision, it shall render its decision (which shall include findings of fact upon which its de cision is predicated) and shall issue and serve upon each party to the proceeding an order or orders consistent with the provisions of this part. Judicial review of any such order shall be exclusively as provided in this section. Unless a petition for review is timely filed in a court of appeals of the United States, as hereinafter provided in subsection (b), and thereafter until the record in the proceeding has been filed as so provided, the Farm Credit Administration may at any time, upon such notice and in such manner as it shall deem proper, modify, terminate, or set aside any such order. Upon such filing of the record, the Farm Credit Administration may modify, terminate, or set aside any such order with permission of the court. (b) Any party to the proceeding, or any person required by an order issued under this part to cease and desist from any of the violations or practices stated therein, may obtain a review of any order served under subsection (a) (other than an order issued with the consent of the System institution or the director or officer or other person concerned, or an order issued under section 5.29) by the filing in the court of appeals of the United States for the circuit in which the home office of the institution is located, or in the United States Court of Appeals for the District of Columbia Circuit, within thirty days after the date of service of such order, a written petition praying that the order of the Farm Credit Administration be modified, terminated, or set aside. A copy of such petition shall be forthwith transmitted by the clerk of the court to the Farm Credit Administration, and thereupon the Farm Credit Administra tion shall file in the court the record in the proceeding, as provided in section 2112 of title 28 of the United States Code. Upon the fil ing of such petition, such court shall have jurisdiction, which upon the filing of the record shall except as provided in the last sentence of subsection (a) be exclusive, to affirm, modify, terminate, or set aside, in whole or in part, the order of the Farm Credit Administra VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00087 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 88 Sec. 5.31 FARM CREDIT ACT OF 1971 tion. Review of such proceedings shall be had as provided in chap ter 7 of title 5 of the United States Code. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari, as provided in sec tion 1254 of title 28 of the United States Code. (c) The commencement of proceedings for judicial review under subsection (b) shall not, unless specifically ordered by the court, op erate as a stay of any order issued by the Farm Credit Administra tion. SEC. 5.31. ø12 U.S.C. 2267¿ JURISDICTION AND ENFORCE MENT.—The Farm Credit Administration may in its discretion apply to the United States district court, or the United States court of any territory, within the jurisdiction of which the home office of the institution is located, for the enforcement of any effective and outstanding notice or order issued under this part, and such courts shall have jurisdiction and power to order and require compliance herewith; but except as otherwise provided in this part no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under this part, or to review, modify, suspend, terminate, or set aside any such notice or order. For purposes of this section, any directive issued under section 4.3(b)(2), 4.3A(e), or 4.14A(i) shall be treated as an effective and outstanding order issued under section 5.25 that has become final. SEC. 5.32. ø12 U.S.C. 2268¿ PENALTY.—(a) Any institution in the System that violates or any officer, director, employee, agent, or other person participating in the conduct of the affairs of such an institution who violates the terms of any order that has become final and was issued under section 5.25 or 5.26 of this Act, shall forfeit and pay a civil penalty of not more than $1,000 per day for each day during which such violation continues. Any such institu tion or person who violates any provision of this Act or any regula tion issued under this Act shall forfeit and pay a civil penalty of not more than $500 per day for each day during which such viola tion continues. Notwithstanding the preceding sentences, the Farm Credit Administration may, in its discretion, compromise, modify, or remit any civil money penalty that is subject to imposition or has been imposed under such authority. The penalty may be as sessed and collected by the Farm Credit Administration by written notice. (b) Before determining whether to assess a civil money penalty and determining the amount of such penalty, the Farm Credit Ad ministration shall notify the institution or person to be assessed of the violation or violations alleged to have occurred or to be occur ring, and shall solicit the views of the institution or person regard ing the imposition of such penalty. In determining the amount of the penalty, the Farm Credit Administration shall take into ac count the appropriateness of the penalty with respect to the size of financial resources and good faith of the System institution or person charged, the gravity of the violation, the history of previous violations, and such other matters as justice may require. (c) The System institution or person assessed shall be afforded an opportunity for a hearing by the Farm Credit Administration, upon request made within ten days after issuance of the notice of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00088 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 89 Sec. 5.34 FARM CREDIT ACT OF 1971 assessment. In such hearing all issues shall be determined on the record pursuant to section 554 of title 5 of the United States Code. The Farm Credit Administration determination shall be made by final order which may be reviewed only as provided in subsection (d). If no hearing is requested as herein provided, the assessment shall constitute a final and unappealable order. (d) Any System institution or person against whom an order imposing a civil money penalty has been entered after a Farm Credit Administration hearing under this section may obtain re view by the United States court of appeals for the circuit in which the home office of the System institution is located, or the United States Court of Appeals for the District of Columbia Circuit, by fil ing a notice of appeal in such court within twenty days after the service of such order, and simultaneously sending a copy of such notice by registered or certified mail to the Farm Credit Adminis tration. The Farm Credit Administration shall promptly certify and file in such Court the record upon which the penalty was imposed, as provided in section 2112 of title 28 of the United States Code. Final orders of the Farm Credit Administration issued under sub section (c) shall be reviewable under chapter 7 of title 5, United States Code. (e) If any System institution or person fails to pay an assess ment after it has become a final and unappealable order, or after the court of appeals has entered final judgment in favor of the Farm Credit Administration, the Farm Credit Administration shall refer the matter to the Attorney General, who shall recover the amount assessed by action in the appropriate United States district court. In such action, the validity and appropriateness of the final order imposing the penalty shall not be subject to review. (f) The Farm Credit Administration shall promulgate regula tions establishing procedures necessary to implement section 5.31 and this section. (g) All penalties collected under authority of this section shall be covered into the Treasury of the United States. (h) For purposes of this section, any directive issued under sec tion 4.3(b)(2), 4.3A(e), or 4.14A(i) shall be treated as an order that has become final and was issued under section 5.25. SEC. 5.33. ø12 U.S.C. 2269¿ FURTHER PENALTIES.—Any direc tor or officer, or former director or officer of a System institution, or any other person, against whom there is outstanding and effec tive any notice or order (which is an order which has become final) served upon such director, officer, or other person under section 5.28 or 5.29 of this Act, and who (1) participates in any manner in the conduct of the affairs of the institution involved, or directly or indirectly solicits or procures, or transfers or attempts to trans fer, or votes or attempts to vote, any proxies, consents, or author izations in respect of any voting rights in such institution, or (2) without the prior written approval of the Farm Credit Administra tion, votes for a director, serves or acts as a director, officer, or em ployee of any System institution, shall upon conviction be fined not more than $5,000 or imprisoned for not more than one year, or both. SEC. 5.34. ø12 U.S.C. 2270¿ REPLACEMENT OF SUSPENDED OR REMOVED DIRECTORS.—If at any time, because of the suspension or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00089 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 90 Sec. 5.35 FARM CREDIT ACT OF 1971 removal of one or more directors pursuant to section 5.28 or 5.29 of this Act, there shall be on the board of directors of a System in stitution less than a quorum of directors not so suspended, the Chairman shall appoint persons to serve temporarily as directors in their place and stead so as to establish a quorum until such time as those who have been removed are reinstated or their respective successors are duly elected and take office. SEC. 5.35. ø12 U.S.C. 2271¿ DEFINITIONS.—As used in this part— (1) the terms ‘‘cease and desist order that has become final’’ and ‘‘order which has become final’’ mean a cease and desist order, or an order, issued by the Farm Credit Adminis tration with the consent of the System institution or the direc tor or officer or other person concerned, or with respect to which no petition for review of the action of the Farm Credit Administration has been filed and perfected in a court of ap peals as specified in section 5.30(b) of this Act, or with respect to which the action of the court in which such petition is so filed is not subject to further review by the Supreme Court of the United States in proceedings provided for in section 5.30(b) of this Act, or an order issued under section 5.29 of this Act; (2) the term ‘‘violation’’ includes without limitation any ac tion (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abet ting a violation; (3) the terms ‘‘institution in the System’’, ‘‘System institu tion’’, and ‘‘institution’’ mean all institutions enumerated in section 1.2 of this Act, any service organization chartered under part E of title IV of this Act, and the Financial Assist ance Corporation; and (4) the term ‘‘unsafe or unsound practice’’ shall— (A) have the meaning given to it by the Farm Credit Administration by regulation, rule, or order; (B) during the period beginning on the date of the en actment of this paragraph and ending December 31, 1992, mean any noncompliance by a System institution, as deter mined by the Farm Credit Administration in consultation with the Assistance Board, with any term or condition im posed on the institution by the Assistance Board under section 6.6; and (C) after December 31, 1992, mean any significant noncompliance by a System institution (as determined by the Farm Credit Administration, in consultation with the Farm Credit System Insurance Corporation) with any term or condition imposed on the institution by the Farm Credit System Assistance Board under section 6.6 or by the Farm Credit System Insurance Corporation under section 5.61. SEC. 5.36. ø12 U.S.C. 2272¿ NOTICE OF SERVICE.—Any service required or authorized to be made by the Farm Credit Administra tion under this section may be made by registered mail, or in such other manner reasonably calculated to give actual notice as the Farm Credit Administration may by regulation or otherwise pro vide. Any such service by mail is complete upon mailing. Copies of any notice or order served by the Farm Credit Administration on VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00090 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 91 Sec. 5.40 FARM CREDIT ACT OF 1971 any association or any director or officer thereof or other person participating in the conduct of its affairs, under the provisions of this part, shall also be sent to the supervisory bank. SEC. 5.37. ø12 U.S.C. 2273¿ ANCILLARY PROVISIONS; SUBPENA POWER; ETC.—In the course of or in connection with any pro ceeding under this part or any examination or investigation under this Act, the Farm Credit Administration or any designated rep resentative thereof, including any person designated to conduct any hearing under this part, shall have the power to administer oaths and affirmations, to take or cause to be taken depositions, and to issue, revoke, quash, or modify subpenas and subpenas duces tecum; and the Farm Credit Administration is empowered to make rules and regulations with respect to any such proceedings, exami nations, or investigations. The attendance of witnesses and the pro duction of documents provided for in this section may be required from any place in any State or in any territory or other place sub ject to the jurisdiction of the United States at any designated place where such proceeding is being conducted. The Farm Credit Ad ministration or any party to proceedings under this part may apply to the United States District Court for the District of Columbia, or the United States district court for the judicial district or the United States court in any territory in which such proceeding is being conducted, or where the witness resides or carries on busi ness, for enforcement of any subpena or subpena duces tecum issued pursuant to this part, and such courts shall have jurisdic tion and power to order and require compliance therewith. Wit nesses subpenaed under this section shall be paid the same fees and mileage that are paid witnesses in the district courts of the United States. Any court having jurisdiction of any proceeding in stituted under this part by a System institution or a director or of ficer thereof, may allow to any such party such reasonable ex penses and attorneys’ fees as it deems just and proper; and such expenses and fees shall be paid by the System institution or from its assets. Any person who willfully shall fail or refuse to attend or testify or to answer any lawful inquiry or to produce books, pa pers, correspondence, memoranda, contracts, agreements, or other records, if in such person’s power so to do, in obedience to the sub pena of the Farm Credit Administration, shall be guilty of a mis demeanor and, upon conviction, shall be subject to a fine of not more than $1,000 or to imprisonment for a term of not more than one year or both. SEC. 5.38. ø12 U.S.C. 2274¿ POWER TO REMOVE DIRECTORS AND OFFI CERS. Notwithstanding any other provision of this Act, a farm credit district board, bank board, or bank officer or employee shall not re move any director or officer of any production credit association or Federal land bank association. PART D—MISCELLANEOUS SEC. 5.40. REPEAL.—(a) The Federal Farm Loan Act, as amended; section 2 of the Act of March 10, 1924 (Public Numbered 35, Sixty-eighth Congress, 43 Stat. 17), as amended; section 6 of the Act of January 23, 1932 (Public Numbered 3, Seventy-second VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00091 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 92 Sec. 5.41 FARM CREDIT ACT OF 1971 Congress, 47 Stat. 14), as amended; the Farm Credit Act of 1933, as amended; sections 29 and 40 of the Emergency Farm Mortgage Act of 1933; Act of June 18, 1934 (Public Numbered 381, Seventy third Congress, 48 Stat. 983); Act of June 4, 1936 (Public Num bered 644, Seventy-fourth Congress, 49 Stat. 1461), as amended; sections 5, 6, 20, 25(b) and 39 of the Farm Credit Act of 1937, as amended; sections 601 and 602 of the Act of September 21, 1944 (Public Law 425, Seventy-eighth Congress, 58 Stat. 740, 741), as amended; sections 1, 2, 3, 4, 5, 6, 7, 8, 16, and 17(b) of the Farm Credit Act of 1953, as amended; sections 2, 101, and 201(b) of the Farm Credit Act of 1956 are hereby repealed. All references in other legislation, State or Federal, rules and regulations of any agency, stock, contracts, deeds, security instruments, bonds, deben tures, notes, mortgages and other documents of the institutions of the System, to the Acts repealed hereby shall be deemed to refer to comparable provisions of this Act. (b) All regulations of the Farm Credit Administration or the in stitutions of the System and all charters, bylaws, resolutions, stock classifications, and policy directives issued or approved by the Farm Credit Administration, and all elections held and appoint ments made under the Acts repealed by subsection (a) of this sec tion shall be continuing and remain valid until superseded, modi fied, or replaced under the authority of this Act. All stock, notes, bonds, debentures, and other obligations issued under the repealed acts shall be valid and enforceable upon the terms and conditions under which they were issued, including the pledge of collateral against which they were issued, and all loans made and security or collateral therefor held by, and all contracts entered into by, in stitutions of the System shall remain enforceable according to their terms unless and until modified in accordance with the provisions of this Act; it being the purpose of this subsection to avoid disrup tion in the effective operation of the System by reason of said re peals. SEC. 5.41. øOmitted Amendment¿ SEC. 5.42. SEPARABILITY.—If any provision of this Act, or the application thereof to any persons or in any circumstances, is held invalid, the remainder of this Act and the application of such provi sion to other persons or in other circumstances shall not be affected thereby. SEC. 5.43. RESERVE RIGHT TO AMEND OR REPEAL.—The right to alter, amend, or repeal any provision or all of this Act is ex pressly reserved. SEC. 5.44. ø12 U.S.C. 2275¿ GENERAL ACCOUNTING OFFICE AUDIT: REPORT TO CONGRESS.— (a) The Comptroller General shall conduct an evaluation of the programs and activities authorized under the 1980 amendments to this Act, and shall make an interim report to the Congress no later than December 31, 1982, and a final report to the Congress no later than December 31, 1984. The Comptroller General shall in clude in such evaluation the effect that this Act, as amended, will have on agricultural credit services provided by the Farm Credit System, Federal agencies, and other entities. The Comptroller Gen eral may make such interim reports to the Congress on the pro VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00092 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 93 Sec. 5.51 FARM CREDIT ACT OF 1971 grams and activities under these amendments as the Comptroller General deems necessary or as requested by Members of Congress. (b) For the purpose of conducting program evaluations required in subsection (a) of this section, the Comptroller General or his duly authorized representatives shall have access to and the right to examine all books, documents, papers, records, or other recorded information within the possession or control of the Federal land banks and Federal land bank associations, Federal intermediate credit banks and production credit associations and banks for co operatives. SEC. 5.45. ø12 U.S.C. 2275a¿ TRANSITION RULES RELATING TO AMEND MENT OF CERTAIN FCA APPROVAL AUTHORITIES. (a) IN GENERAL.—Any approvals granted by the Farm Credit Administration before the date of the enactment of this section shall remain in effect on and after such date. (b) AUTHORITY TO ISSUE REGULATIONS.— (1) IN GENERAL.—Any approval authority of the Farm Credit Administration that, under the amendments made by section 802 of the Agricultural Credit Act of 1987, became an authority to issue regulations may be exercised only until the earlier of the date the Farm Credit Administration issues final regulations under such authority, or 1 year after the date of the enactment of this section. (2) ENFORCEMENT ACTIONS.—At the close of the 1-year pe riod referred to in paragraph (1), the Farm Credit Administra tion shall not take any enforcement action against any System institution with respect to any provision so amended, until the Farm Credit Administration issues final regulations under such provision. (c) EFFECT OF SECTION.—This section shall not affect the au thority of the Farm Credit Administration to exercise any other ap proval authority either on a case-by-case basis or through regula tion, as provided in section 5.17(a)(5). PART E—FARM CREDIT SYSTEM INSURANCE CORPORATION SEC. 5.51. ø12 U.S.C. 2277a¿ DEFINITIONS. As used in this part: (1) BOARD OF DIRECTORS.—The term ‘‘Board of Directors’’ means the Board of Directors of the Corporation. (2) CORPORATION.—The term ‘‘Corporation’’ means the Farm Credit System Insurance Corporation established in sec tion 5.52. (3) INSURED OBLIGATION.—The term ‘‘insured obligation’’ means any note, bond, debenture, or other obligation issued under subsection (c) or (d) of section 4.2— (A) on or before January 5, 1989, on behalf of any Sys tem bank; and (B) after such date, which, when issued, is issued on behalf of any insured System bank. (4) INSURED SYSTEM BANK.—The term ‘‘insured System bank’’ means any System bank whose participation in notes, VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00093 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 94 Sec. 5.52 FARM CREDIT ACT OF 1971 bonds, debentures, and other obligations issued under sub section (c) or (d) of section 4.2 is insured under this part. (5) STATE.—The term ‘‘State’’ means any of the 50 States, the District of Columbia, any Territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, or the Virgin Islands. SEC. 5.52. ø12 U.S.C. 2277a–1¿ ESTABLISHMENT OF FARM CREDIT SYS TEM INSURANCE CORPORATION. There is hereby established the Farm Credit System Insurance Corporation which shall insure, in accordance with this part, the timely payment of principal and interest on notes, bonds, deben tures, and other obligations issued under subsection (c) or (d) of section 4.2 on behalf of one or more System banks all of which are entitled to the benefits of insurance under this part. SEC. 5.53. ø12 U.S.C. 2277a–2¿ BOARD OF DIRECTORS. (a) ESTABLISHMENT.—The Corporation shall be managed by a Board of Directors that shall consist of the members of the Farm Credit Administration Board. (b) CHAIRMAN.—The Board of Directors shall be chaired by any Board member other than the Chairman of the Farm Credit Ad ministration Board. SEC. 5.54. ø12 U.S.C. 2277a–3¿ COMMENCEMENT OF INSURANCE. Effective beginning on January 1, 1989, or 12 months after the date of the enactment of this part, whichever is later, each System bank shall be an insured System bank and shall be subject to this part. Each System bank that is authorized to commence or resume operations under a title of this Act shall be an insured System bank from the time of such authorization. A bank resulting from the merger or consolidation of insured System banks shall be an insured System bank. SEC. 5.55. ø12 U.S.C. 2277a–4¿ PREMIUMS. (a) AMOUNT IN FUND NOT EXCEEDING SECURE BASE AMOUNT.— (1) IN GENERAL.—If at the end of any calendar year the ag gregate of amounts in the Farm Credit Insurance Fund does not exceed the secure base amount, subject to paragraph (3), the premium due from any insured System bank for the cal endar year shall be equal to the sum of— (A) the average outstanding insured obligations issued by the bank for the calendar year, after deducting from the obligations the percentages of the guaranteed portions of loans and investments described in paragraph (2), multi plied by 0.0020; and (B) the product obtained by multiplying— (i) the sum of— (I) the average principal outstanding for the calendar year on loans made by the bank that are in nonaccrual status; and (II) the average amount outstanding for the calendar year of other-than-temporarily impaired investments made by the bank; by (ii) 0.0010. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00094 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 95 Sec. 5.55 FARM CREDIT ACT OF 1971 (2) DEDUCTIONS FROM AVERAGE OUTSTANDING INSURED OB LIGATIONS.—The average outstanding insured obligations issued by the bank for the calendar year referred to in para graph (1)(A) shall be reduced by deducting from the obligations the sum of (as determined by the Corporation)— (A) 90 percent of each of— (i) the average principal outstanding for the cal endar year on the guaranteed portions of Federal gov ernment-guaranteed loans made by the bank that are in accrual status; and (ii) the average amount outstanding for the cal endar year of the guaranteed portions of Federal gov ernment-guaranteed investments made by the bank that are not permanently impaired; and (B) 80 percent of each of— (i) the average principal outstanding for the cal endar year on the guaranteed portions of State gov ernment-guaranteed loans made by the bank that are in accrual status; and (ii) the average amount outstanding for the cal endar year of the guaranteed portions of State govern ment-guaranteed investments made by the bank that are not permanently impaired. (3) REDUCED PREMIUMS.—The Corporation, in the sole dis cretion of the Corporation, may reduce by a percentage uni formly applied to all insured System banks the premium due from each insured System bank during any calendar year, as determined under paragraph (1). (4) DEFINITION OF GOVERNMENT-GUARANTEED LOANS OR IN VESTMENTS.—In this section, the term ‘‘government-guaran teed’’, when applied to a loan or an investment, means a loan, credit, or investment, or portion of a loan, credit, or invest ment, that is guaranteed— (A) by the full faith and credit of the United States Government or any State government; (B) by an agency or other entity of the United States Government whose obligations are explicitly guaranteed by the United States Government; or (C) by an agency or other entity of a State government whose obligations are explicitly guaranteed by such State government. (b) AMOUNT IN FUND EXCEEDING SECURE BASE AMOUNT.—At any time the aggregate of amounts in the Farm Credit Insurance Fund exceeds the secure base amount, the Corporation shall reduce the premium due from each insured System bank, as determined under subsection (a)(1), by a percentage determined by the Cor poration so that the aggregate of the premiums payable by all Sys tem banks is sufficient to ensure that the aggregate of amounts in the Farm Credit Insurance Fund after such premiums are paid is not less than the secure base amount at such time. (c) SECURE BASE AMOUNT.— (1) IN GENERAL.—For purposes of this part, the term ‘‘se cure base amount’’ means, with respect to any point in time, 2 percent of the aggregate outstanding insured obligations of VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00095 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 96 Sec. 5.55 FARM CREDIT ACT OF 1971 6 So in original. Probably should be ‘‘Corporation’’. all insured System banks at such time (as adjusted under paragraph (2)), or such other percentage of the aggregate amount as the Corporation in its sole discretion determines is actuarially sound to maintain in the Insurance Fund taking into account the risk of insuring outstanding insured obliga tions. (2) ADJUSTMENT.—The aggregate outstanding insured obli gations of all insured System banks under paragraph (1) shall be adjusted downward to exclude an amount equal to the sum of (as determined by the corporation 6)— (A) 90 percent of each of— (i) the guaranteed portions of principal out standing on Federal government-guaranteed loans in accrual status made by the banks; and (ii) the guaranteed portions of the amount of Fed eral government-guaranteed investments made by the banks that are not permanently impaired; and (B) 80 percent of each of— (i) the guaranteed portions of principal out standing on State government-guaranteed loans in ac crual status made by the banks; and (ii) the guaranteed portions of the amount of State government-guaranteed investments made by the banks that are not permanently impaired. (d) DETERMINATION OF LOAN AND INVESTMENT AMOUNTS.—For the purpose of subsections (a) and (c), the principal outstanding on all loans made by an insured System bank, and the amount out standing on all investments made by an insured System bank, shall be determined based on— (1) all loans or investments made by any production credit association, or any other association making direct loans under authority provided under section 7.6, that is able to make such loans or investments because such association is receiving, or has received, funds provided through the insured System bank; (2) all loans or investments made by any bank, company, institution, corporation, union, or association described in sec tion 1.7(b)(1)(B) that is able to make such loans or investments because such entity is receiving, or has received, funds pro vided through the insured System bank; and (3) all loans or investments made by such insured System bank (other than loans made to any party described in para graph (1) or (2)). (e) ALLOCATION TO SYSTEM INSTITUTIONS OF EXCESS RE SERVES.— (1) ESTABLISHMENT OF ALLOCATED INSURANCE RESERVES ACCOUNTS.—There is hereby established in the Farm Credit In surance Fund an Allocated Insurance Reserves Account— (A) for each insured System bank; and (B) subject to paragraph (6)(C), for all holders, in the aggregate, of Financial Assistance Corporation stock. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00096 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 97 Sec. 5.55 FARM CREDIT ACT OF 1971 (2) TREATMENT.—Amounts in any Allocated Insurance Re serves Account shall be considered to be part of the Farm Credit Insurance Fund. (3) ANNUAL ALLOCATIONS.—If, at the end of any calendar year, the aggregate of the amounts in the Farm Credit Insur ance Fund exceeds the secure base amount, the Corporation shall allocate to the Allocated Insurance Reserves Accounts the excess amount less the amount that the Corporation, in its sole discretion, determines to be the sum of the estimated operating expenses and estimated insurance obligations of the Corpora tion for the immediately succeeding calendar year. (4) ALLOCATION FORMULA.—From the total amount re quired to be allocated at the end of a calendar year under paragraph (3)— (A) 10 percent of the total amount shall be credited to the Allocated Insurance Reserves Account established under paragraph (1)(B), subject to paragraph (6)(C); and (B) there shall be credited to the allocated insurance reserves account of each insured system bank an amount that bears the same ratio to the total amount (less any amount credited under subparagraph (A)) as— (i) the average principal outstanding for the cal endar year on insured obligations issued by the bank (after deducting from the principal the percentages of the guaranteed portions of loans and investments de scribed in subsection (a)(2)); bears to (ii) the average principal outstanding for the cal endar year on insured obligations issued by all insured System banks (after deducting from the principal the percentages of the guaranteed portions of loans and investments described in subsection (a)(2)). (5) USE OF FUNDS IN ALLOCATED INSURANCE RESERVES AC COUNTS.—To the extent that the sum of the operating expenses of the Corporation and the insurance obligations of the Cor poration for a calendar year exceeds the sum of operating ex penses and insurance obligations determined under paragraph (3) for the calendar year, the Corporation shall cover the ex penses and obligations by— (A) reducing each Allocated Insurance Reserves Ac count by the same proportion; and (B) expending the amounts obtained under subpara graph (A) before expending other amounts in the Fund. (6) OTHER DISPOSITION OF ACCOUNT FUNDS.— (A) IN GENERAL.—As soon as practicable during each calendar year, the Corporation may— (i) subject to subparagraph (D), pay to each in sured System bank, in a manner determined by the Corporation, an amount equal to the balance in the Al located Insurance Reserves Account of the System bank; and (ii) subject to subparagraphs (C) and (E), pay to each System bank and association holding Financial Assistance Corporation stock a proportionate share, determined by dividing the number of shares of Finan VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00097 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 98 Sec. 5.55 FARM CREDIT ACT OF 1971 cial Assistance Corporation stock held by the institu tion by the total number of shares of Financial Assist ance Corporation stock outstanding at the time of the termination of the Financial Assistance Corporation, of the balance in the Allocated Insurance Reserves Ac count established under paragraph (1)(B). (B) AUTHORITY TO ELIMINATE OR REDUCE PAYMENTS.— The Corporation may eliminate or reduce payments during a calendar year under subparagraph (A) if the Corporation determines, in its sole discretion, that the payments, or other circumstances that might require use of the Farm Credit Insurance Fund, could cause the amount in the Farm Credit Insurance Fund during the calendar year to be less than the secure base amount. (C) REIMBURSEMENT FOR FINANCIAL ASSISTANCE COR PORATION STOCK.— (i) SUFFICIENT FUNDING.—Notwithstanding para graph (4)(A), on provision by the Corporation for the accumulation in the Account established under para graph (1)(B) of funds in an amount equal to $56,000,000, the Corporation shall not allocate any further funds to the Account except to replenish the Account if funds are diminished below $56,000,000 by the Corporation under paragraph (5). (ii) TERMINATION OF ACCOUNT.—On disbursement of an amount equal to $56,000,000, the Corporation shall— (I) close the account established under para graph (1)(B); and (II) transfer any remaining funds in the Ac count to the remaining Allocated Insurance Re serves Accounts in accordance with paragraph (4)(B) for the calendar year in which the transfer occurs. (D) DISTRIBUTION OF PAYMENTS RECEIVED.—Not later than 60 days after receipt of a payment made under sub paragraph (A)(i), each insured System bank, in consulta tion with affiliated associations of the insured System bank, and taking into account the direct or indirect pay ment of insurance premiums by the associations, shall de velop and implement an equitable plan to distribute pay ments received under subparagraph (A)(i) among the bank and associations of the bank. (E) EXCEPTION FOR PREVIOUSLY REIMBURSED ASSOCIA TIONS.—For purposes of subparagraph (A)(ii), in any Farm Credit district in which the funding bank has reimbursed 1 or more affiliated associations of the bank for the pre viously unreimbursed portion of the Financial Assistance Corporation stock held by the associations, the funding bank shall be deemed to be the holder of the shares of Fi nancial Assistance Corporation stock for which the funding bank has provided the reimbursement. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00098 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 99 Sec. 5.57 FARM CREDIT ACT OF 1971 SEC. 5.56. ø12 U.S.C. 2277a–5¿ CERTIFICATION OF PREMIUMS. (a) FILING CERTIFIED STATEMENT.—On a date to be determined in the sole discretion of the Board of Directors of the Corporation, each insured System bank that became insured before the begin ning of the period for which premiums are being assessed (referred to in this section as the ‘‘period’’) shall file with the Corporation a certified statement showing— (1) the average outstanding insured obligations for the pe riod issued by the bank; (2)(A) the average principal outstanding for the period on the guaranteed portion of Federal government-guaranteed loans that are in accrual status; and (B) the average amount outstanding for the period of Fed eral government-guaranteed investments that are not perma nently impaired (as defined in section 5.55(a)(4)); (3)(A) the average principal outstanding for the period on State government-guaranteed loans that are in accrual status; and (B) the average amount outstanding for the period of State government-guaranteed investments that are not permanently impaired (as defined in section 5.55(a)(4)); (4)(A) the average principal outstanding for the period on loans that are in nonaccrual status; and (B) the average amount outstanding for the period of other-than-temporarily impaired investments; and (5) the amount of the premium due the Corporation from the bank for the period. (b) CONTENTS AND FORM OF STATEMENT.—The certified state ment required to be filed with the Corporation under subsection (a) shall be in such form and set forth such supporting information as the Board of Directors shall prescribe, and shall be certified by the president of the bank or any other officer designated by its board of directors that to the best of the person’s knowledge and belief the statement is true, correct, complete, and has been prepared in accordance with this part and all regulations issued thereunder. (c) PREMIUM PAYMENTS.— (1) IN GENERAL.—Except as provided in paragraph (2), each insured System bank shall pay to the Corporation the premium payments required under subsection (a), not more frequently than once in each calendar quarter, in such manner and at such 1 or more times as the Board of Directors shall prescribe. (2) PREMIUM AMOUNT.—The amount of the premium shall be established not later than 60 days after filing the certified statement specifying the amount of the premium. (d) REGULATIONS.—The Board of Directors shall prescribe all rules and regulations necessary for the enforcement of this section. The Board of Directors may limit the retroactive effect, if any, of any of its rules or regulations. SEC. 5.57. ø12 U.S.C. 2277a–6¿ OVERPAYMENT AND UNDERPAYMENT OF PREMIUMS; REMEDIES. (a) OVERPAYMENTS.—The Corporation may refund to any in sured System bank any premium payment made by the bank ex ceeding the amount due the Corporation. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00099 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 100 Sec. 5.58 FARM CREDIT ACT OF 1971 (b) UNDERPAYMENTS.— (1) RECOVERY.—The Corporation, in a suit brought at law or in equity in any court of competent jurisdiction, may recover from any insured System bank the amount of any unpaid pre mium lawfully payable by the bank to the Corporation, wheth er or not the bank has filed any certified statement under sec tion 5.56, and whether or not suit has been brought to compel the bank to file any such statement. (2) LIMITATION.—Any action or proceeding for the recovery of any premium due the Corporation under paragraph (1), or for the recovery of any amount paid to the Corporation exceed ing the amount due the Corporation, shall be brought within 5 years after the right accrued for which the claim is made. If an insured System bank has filed with the Corporation a false or fraudulent certified statement with the intent to evade, in whole or in part, the payment of a premium, the claim shall not be deemed to have accrued until the Corporation discovers that the certified statement is false or fraudulent. (c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.— (1) FORFEITURE OF RIGHTS.—If any insured System bank fails to file any certified statement required to be filed by such bank under section 5.56 or fails to pay any premium required to be paid by such bank under any provision of this part, and if the bank does not correct such failure within 30 days after the Corporation gives written notice to an officer of the bank, citing this subsection and stating that the bank has failed to so file or pay as required by law, all the rights, privileges, and franchises of the bank granted to it under this Act shall be thereby forfeited. (2) ENFORCEMENT.—The Corporation may bring an action to enforce this subsection against any such bank in any court of competent jurisdiction for the judicial district in which the bank is located. (3) LIABILITY OF DIRECTORS.—Every director who partici pated in or assented to a failure (described in paragraph (1)) shall be held personally liable for all consequential damages. (d) EFFECT ON OTHER REMEDIES.—The remedies provided in subsections (b) and (c) shall not be construed as limiting any other remedies against any insured System bank, but shall be in addition thereto. SEC. 5.58. ø12 U.S.C. 2277a–7¿ GENERAL CORPORATE POWERS. On the date of the enactment of this part, the Corporation shall become a body corporate and as such shall have the following powers: (1) SEAL.—The Corporation may adopt and use a corporate seal. (2) SUCCESSION.—The Corporation may have succession until dissolved by an Act of Congress. The Corporation shall succeed to the rights of the Farm Credit System Assistance Board under agreements between the Farm Credit System As sistance Board and System institutions certifying the institu tions as eligible to issue preferred stock pursuant to title VI on VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00100 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 101 Sec. 5.58 FARM CREDIT ACT OF 1971 the termination of the Assistance Board on the date provided in section 6.12. (3) CONTRACTS.—The Corporation may make contracts. (4) LEGAL ACTIONS.— (A) IN GENERAL.—The Corporation may sue and be sued, complain and defend, in any court of law or equity, State or Federal. (B) JURISDICTION.—All suits of a civil nature at com mon law or in equity to which the Corporation shall be a party shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction thereof, without regard to the amount in controversy, and the Corporation, in any capac ity, without bond or security, may remove any such action, suit, or proceeding from a State court to the United States district court for the district or division embracing the place where the same is pending by following any proce dure for removal then in effect. (C) ATTACHMENT AND EXECUTION.—No attachment or execution may be issued against the Corporation or its property before final judgment in any suit, action, or pro ceeding in any State, county, municipal, or United States court. (D) AGENT FOR SERVICE OF PROCESS.—The Board of Directors shall designate an agent on whom service of process may be made in any State or jurisdiction in which any insured System bank is located. (5) OFFICERS AND EMPLOYEES.— (A) IN GENERAL.—The Corporation may appoint by its Board of Directors such officers and employees as are not otherwise provided for in this part, define their duties, fix their compensation, and require bonds of them and fix the penalty thereof, and dismiss at pleasure such officers or employees. (B) EMPLOYEES OF THE UNITED STATES.—Nothing in this or any other Act shall be construed to prevent the ap pointment and compensation, as an officer or employee of the Corporation, of any officer or employee of the United States in any board, commission, independent establish ment, or executive department thereof. (6) BYLAWS.—The Corporation may prescribe, by its Board of Directors, bylaws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and en joyed. (7) INCIDENTAL POWERS.—The Corporation may exercise by its Board of Directors, or duly authorized officers or agents, all powers specifically granted by the provisions of this part, and such incidental powers as shall be necessary to carry out the powers so granted. (8) INFORMATION.—The Corporation may, when necessary, make examinations of, and require information and reports from, System institutions, as provided in this part. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00101 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 102 Sec. 5.59 FARM CREDIT ACT OF 1971 (9) CONSERVATOR OR RECEIVER.—The Corporation may act as a conservator or receiver. (10) RULES AND REGULATIONS.—The Corporation may pre scribe by its Board of Directors such rules and regulations as it considers necessary to carry out this part and section 1.12(b) (except to the extent that authority to issue such rules and reg ulations has been expressly and exclusively granted to any other regulatory agency). SEC. 5.59. ø12 U.S.C. 2277a–8¿ CONDUCT OF CORPORATE AFFAIRS; EX AMINATION OF SYSTEM INSTITUTIONS. (a) CONDUCT OF CORPORATE AFFAIRS.— (1) FAIR ADMINISTRATION.—The Board of Directors shall administer the affairs of the Corporation fairly and impartially and without discrimination. (2) OBLIGATIONS AND EXPENSES.—The Board of Directors shall determine and prescribe the manner in which the obliga tions of the Corporation may be incurred and the expenses of the Corporation may be allowed and paid. (3) USE OF MAILS.—The Corporation may use the United States mails in the same manner and under the same condi tions as the executive departments of the Federal Government. (4) USE OF INFORMATION.—The Corporation, with the con sent of any board, commission, independent establishment, or executive department of the Federal Government, including any field service thereof, may avail itself of the use of informa tion, services, and facilities thereof in carrying out this part. (5) USE OF FARM CREDIT ADMINISTRATION PERSONNEL.—To the extent practicable, the Corporation shall use the personnel and resources of the Farm Credit Administration to minimize duplication of effort and to reduce costs. (b) EXAMINATION OF SYSTEM INSTITUTIONS.— (1) EXAMINATION AUTHORITY.— (A) IN GENERAL.—If the Board of Directors considers it necessary to examine an insured System bank, a produc tion credit association, an association making direct loans under the authority provided under section 7.6, or any System institution in receivership, the Board may, using Farm Credit Administration examiners, conduct the exam ination using reports and other information on the System institution prepared or held by the Farm Credit Adminis tration. Notwithstanding any other provision of this Act, on cancellation of the charter of a System institution, the Corporation shall have authority to examine the system institution in receivership. An examination shall be per formed at such intervals as the Corporation shall deter mine. (B) REQUEST FOR ADDITIONAL EXAMINATION OR OTHER INFORMATION.—If the Board determines that such reports or information are not adequate to enable the Corporation to carry out the duties of the Corporation under this sub section, the Board shall request the Farm Credit Adminis tration to examine or to obtain other information from or about the System institution and provide to the Corpora VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00102 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 103 Sec. 5.60 FARM CREDIT ACT OF 1971 tion the resulting examination report or such other infor mation. (2) APPOINTMENT OF EXAMINERS.—If the Farm Credit Ad ministration informs the Corporation that the Farm Credit Ad ministration is unable to comply with a request made under paragraph (1)(B) with respect to a System institution, the Board may appoint examiners to examine the institution. (3) POWERS AND REPORT.—Each examiner appointed under paragraph (2) shall make such examination of the affairs of the System institution as the Board may direct, and shall make a full and detailed report of the examination to the Corporation. (4) APPOINTMENT OF CLAIM AGENTS.—The Board of Direc tors of the Corporation shall appoint claim agents who may in vestigate and examine all claims for insured obligations. (c) OATH, AFFIRMATIONS, AND TESTIMONY.—In connection with examinations under this section, the Corporation or its designated representatives may administer oaths and affirmations, and may examine, take, and preserve testimony under oath, as to any mat ter with respect to the affairs of any such institution. (d) COOPERATION WITH FCA EXAMINERS.—The examiners ap pointed by the Board of Directors shall cooperate to the maximum extent possible with examiners of the Farm Credit Administration to minimize duplication of effort and minimize costs. SEC. 5.60. ø12 U.S.C. 2277a–9¿ INSURANCE FUND. (a) ESTABLISHMENT.—There is hereby established a Farm Credit Insurance Fund (hereinafter referred to in this section as the ‘‘Insurance Fund’’) for insuring the timely payment of principal and interest on insured obligations. The assets in the Fund shall be held by the Corporation for the uses and purposes of the Cor poration. (b) AMOUNTS IN FUND.— (1) REVOLVING FUND.—All amounts in the revolving fund established by section 4.0 shall be transferred into the Farm Credit Insurance Fund on January 1, 1989, or 12 months after the date of the enactment of this part, whichever is later, ex cept that the obligations to, and rights of, any person in such revolving fund arising out of any event or transaction before the date of the enactment of this part shall remain unimpaired. (2) DEPOSIT OF PREMIUMS.—The Corporation shall deposit in the Insurance Fund all premium payments received by the Corporation under this part. (c) USES OF FUND.— (1) MANDATORY USE.—Beginning January 1, 1993, the Cor poration shall expend amounts in the Insurance Fund to the extent necessary to insure the timely payment of interest and principal on insured obligations. (2) OTHER MANDATORY USES.—Beginning January 1, 1993, the Corporation shall use amounts in the Insurance Fund to— (A) satisfy System institution defaults through the purchase of preferred stock or other payments as provided for in section 6.26(d)(3); and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00103 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 104 Sec. 5.61 FARM CREDIT ACT OF 1971 (B) ensure the retirement of eligible borrower stock at par value under section 4.9A. (3) PERMISSIVE USES.—The Corporation may expend amounts in the Insurance Fund to carry out section 5.61 and to cover the operating costs of the Corporation. (4) CORPORATE PAYMENT OR REFUNDS.—The Corporation shall make all payments and refunds required to be made by the Corporation under this part from amounts in the Insurance Fund. SEC. 5.61. ø12 U.S.C. 2277a–10¿ POWERS OF CORPORATION WITH RE SPECT TO TROUBLED INSURED SYSTEM BANKS. (a) AUTHORITY TO PROVIDE ASSISTANCE.— (1) STAND-ALONE ASSISTANCE.—The Corporation, in its sole discretion and on such terms and conditions as the Board of Directors may prescribe, may make loans to, purchase the as sets or securities of, assume the liabilities of, or make contribu tions to, any insured System bank if such action is taken— (A) to prevent the placing of the bank in receivership; (B) to restore the bank to normal operation; or (C) to reduce the risk to the Corporation posed by the bank when severe financial conditions threaten the sta bility of a significant number of insured System banks or of insured System banks possessing significant financial resources. (2) FACILITATION OF MERGERS OR CONSOLIDATION.— (A) IN GENERAL.—To facilitate a merger or consolida tion of a qualifying insured System bank, the sale of assets of such insured System bank to another insured System bank, the assumption of such insured System bank’s liabil ities by such other insured System bank, or the acquisition of the stock of such insured System bank by such other in sured System bank, the Corporation, in its sole discretion and on such terms and conditions as the Board of Direc tors may prescribe, may— (i) purchase any such assets or assume any such liabilities; (ii) make loans or contributions to, or purchase debt securities of, such other insured System bank; (iii) guarantee such other insured System bank against loss by reason of such other insured System bank’s merging or consolidating with, or assuming the liabilities and purchasing the assets of, such insured System bank; or (iv) take any combination of the actions referred to in the preceding clauses. (B) QUALIFYING INSURED SYSTEM BANK.—For purposes of subparagraph (A), the term ‘‘qualifying insured System bank’’ means any insured System bank that— (i) is in receivership; (ii) is, in the judgment of the Board of Directors, in danger of being placed in receivership; or (iii) is, in the sole discretion of the Corporation, an insured System bank that, when severe financial con ditions exist that threaten the stability of a significant VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00104 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 105 Sec. 5.61 FARM CREDIT ACT OF 1971 number of insured System banks or of insured System banks possessing significant financial resources, re quires assistance under subparagraph (A) to lessen the risk to the Corporation posed by such insured Sys tem bank under such threat of instability. (3) LIMITATION.— (A) LEAST-COST RESOLUTION.—Assistance may not be provided to an insured System bank under this subsection unless the means of providing the assistance is the least costly means of providing the assistance by the Farm Credit Insurance Fund of all possible alternatives avail able to the Corporation, including liquidation of the bank (including paying the insured obligations issued on behalf of the bank). Before making a least-cost determination under this subparagraph, the Corporation shall accord such other insured System banks as the Corporation deter mines to be appropriate the opportunity to submit infor mation relating to the determination. (B) DETERMINING LEAST COSTLY APPROACH.—In deter mining the least costly alternative under subparagraph (A), the Corporation shall— (i) evaluate alternatives on a present-value basis, using a reasonable discount rate; (ii) document the evaluation and the assumptions on which the evaluation is based; and (iii) retain the documentation for not less than 5 years. (C) TIME OF DETERMINATION.— (i) GENERAL RULE.—For purposes of this sub section, the determination of the costs of providing any assistance under any provision of this section with re spect to any insured System bank shall be made as of the date on which the Corporation makes the deter mination to provide the assistance to the institution under this section. (ii) RULE FOR LIQUIDATIONS.—For purposes of this subsection, the determination of the costs of liquida tion of any insured System bank shall be made as of the earliest of— (I) the date on which a conservator is ap pointed for the insured System bank; (II) the date on which a receiver is appointed for the insured System bank; or (III) the date on which the Corporation makes any determination to provide any assistance under this section with respect to the insured Sys tem bank. (D) RULE FOR STAND-ALONE ASSISTANCE.—Before pro viding any assistance under paragraph (1), the Corpora tion shall evaluate the adequacy of managerial resources of the insured System bank. The continued service of any director or senior ranking officer who serves in a policy making role for the assisted insured System bank, as de VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00105 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 106 Sec. 5.61 FARM CREDIT ACT OF 1971 termined by the Corporation, shall be subject to approval by the Corporation as a condition of assistance. (E) DISCRETIONARY DETERMINATIONS.—Any determina tion that the Corporation makes under this paragraph shall be in the sole discretion of the Corporation. (F) PURCHASE OF STOCK.—The Corporation may not use its authority under this subsection to purchase any stock of an insured System bank. The preceding sentence shall not be construed to limit the ability of the Corpora tion to enter into and enforce covenants and agreements that it determines to be necessary to protect the financial interests of the Corporation. (4) SUBORDINATION.—Any assistance provided under this subsection may be in subordination to the rights of owners of obligations and other creditors. (5) REPORTS.—The Corporation, in its annual report to Congress, shall report the total amount saved, or it estimates to be saved, by the Corporation exercising the authority pro vided to the Corporation in this subsection. (b) AUTHORITY TO PLEDGE OR SELL ASSETS.—The Corporation, in its discretion, may make loans on the security of, or may pur chase, and liquidate or sell, any part of the assets of, any insured System bank that is placed in receivership because of the inability of the bank to pay principal or interest on any of its notes, bonds, debentures, or other obligations in a timely manner. (c) SUBROGATION.— (1) IN GENERAL.—On the payment to an owner of an in sured obligation issued on behalf of an insured System bank in receivership, the Corporation shall be subrogated to all rights of the owner against the bank to the extent of the payment. (2) RECEIPT OF DIVIDENDS.—Subrogation under paragraph (1) shall include the right on the part of the Corporation to re ceive the same dividends from the proceeds of the assets of the bank as would have been payable to the owner on a claim for the insured obligation. (d) RIGHT TO ASSETS.—Any agreement that shall diminish or defeat the right, title, or interest of the Corporation in any asset acquired by such Corporation under this section, either as security for a loan or by purchase, shall not be valid against the Corpora tion unless the agreement— (1) is in writing; (2) is executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank; (3) has been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of the board or committee; and (4) has been, continuously, from the time of its execution, an official record of the bank. (e) INSURED SYSTEM BANK.—As used in this section, the terms ‘‘insured System bank’’ and ‘‘bank’’ include each production credit association and other association making direct loans under the au thority provided under section 7.6. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00106 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 107 Sec. 5.61B FARM CREDIT ACT OF 1971 (f) EFFECTIVE DATE.—The Corporation shall not exercise any authority under this section during the 5-year period prior to Janu ary 1, 1993. SEC. 5.61A. ø12 U.S.C. 2277a–10a¿ OVERSIGHT ACTIONS BY THE COR PORATION. (a) DEFINITIONS.—In this section, the term ‘‘institution’’ means— (1) an insured System bank; and (2) a production credit association or other association making loans under section 7.6 with a direct loan payable to the funding bank of the association that comprises 20 percent or more of the funding bank’s total loan volume net of non accrual loans. (b) CONSULTATION REGARDING PARTICIPATION OF UNDER CAPITALIZED BANKS IN ISSUANCE OF INSURED OBLIGATIONS.—The Farm Credit Administration shall consult with the Corporation prior to approving an insured obligation that is to be issued by or on behalf of, or participated in by, any insured System bank that fails to meet the minimum level for any capital requirement estab lished by the Farm Credit Administration for the bank. (c) CONSULTATION REGARDING APPLICATIONS FOR MERGERS AND RESTRUCTURINGS.— (1) CORPORATION TO RECEIVE COPY OF TRANSACTION APPLI CATIONS.—On receiving an application for a merger or restruc turing of an institution, the Farm Credit Administration shall forward a copy of the application to the Corporation. (2) CONSULTATION REQUIRED.—If the proposed merger or restructuring involves an institution that fails to meet the min imum level for any capital requirement established by the Farm Credit Administration applicable to the institution, the Farm Credit Administration shall allow 30 days within which the Corporation may submit the views and recommendations of the Corporation, including any conditions for approval. In de termining whether to approve or disapprove any proposed merger or restructuring, the Farm Credit Administration shall give due consideration to the views and recommendations of the Corporation. SEC. 5.61B. ø12 U.S.C. 2277a–10b¿ AUTHORITY TO REGULATE GOLDEN PARACHUTE AND INDEMNIFICATION PAYMENTS. (a) DEFINITIONS.—In this section: (1) GOLDEN PARACHUTE PAYMENT.—The term ‘‘golden para chute payment’’— (A) means a payment (or any agreement to make a payment) in the nature of compensation for the benefit of any institution-related party under an obligation of any Farm Credit System institution that— (i) is contingent on the termination of the party’s relationship with the institution; and (ii) is received on or after the date on which— (I) the institution is insolvent; (II) a conservator or receiver is appointed for the institution; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00107 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 108 Sec. 5.61B FARM CREDIT ACT OF 1971 (III) the institution has been assigned by the Farm Credit Administration a composite CAMEL rating of 4 or 5 under the Farm Credit Adminis tration Rating System, or an equivalent rating; or (IV) the Corporation otherwise determines that the institution is in a troubled condition (as defined in regulations issued by the Corporation); and (B) includes a payment that would be a golden para chute payment but for the fact that the payment was made before the date referred to in subparagraph (A)(ii) if the payment was made in contemplation of the occurrence of an event described in any subclause of subparagraph (A); but (C) does not include— (i) a payment made under a retirement plan that is qualified (or is intended to be qualified) under sec tion 401 of the Internal Revenue Code of 1986 or other nondiscriminatory benefit plan; (ii) a payment made under a bona fide supple mental executive retirement plan, deferred compensa tion plan, or other arrangement that the Corporation determines, by regulation or order, to be permissible; or (iii) a payment made by reason of the death or dis ability of an institution-related party. (2) INDEMNIFICATION PAYMENT.—The term ‘‘indemnifica tion payment’’ means a payment (or any agreement to make a payment) by any Farm Credit System institution for the ben efit of any person who is or was an institution-related party, to pay or reimburse the person for any liability or legal ex pense with regard to any administrative proceeding or civil ac tion instituted by the Farm Credit Administration that results in a final order under which the person— (A) is assessed a civil money penalty; or (B) is removed or prohibited from participating in the conduct of the affairs of the institution. (3) INSTITUTION-RELATED PARTY.—The term ‘‘institution-re lated party’’ means— (A) a director, officer, employee, or agent for a Farm Credit System institution or any conservator or receiver of such an institution; (B) a stockholder (other than another Farm Credit System institution), consultant, joint venture partner, or any other person determined by the Farm Credit Adminis tration to be a participant in the conduct of the affairs of a Farm Credit System institution; and (C) an independent contractor (including any attorney, appraiser, or accountant) that knowingly or recklessly par ticipates in any violation of any law or regulation, any breach of fiduciary duty, or any unsafe or unsound practice that caused or is likely to cause more than a minimal fi nancial loss to, or a significant adverse effect on, the Farm Credit System institution. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00108 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 109 Sec. 5.61B FARM CREDIT ACT OF 1971 (4) LIABILITY OR LEGAL EXPENSE.—The term ‘‘liability or legal expense’’ means— (A) a legal or other professional expense incurred in connection with any claim, proceeding, or action; (B) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, or action; and (C) the amount of, and any cost incurred in connection with, any judgment or penalty imposed with respect to any claim, proceeding, or action. (5) PAYMENT.—The term ‘‘payment’’ means— (A) a direct or indirect transfer of any funds or any asset; and (B) any segregation of any funds or assets for the pur pose of making, or under an agreement to make, any pay ment after the date on which the funds or assets are seg regated, without regard to whether the obligation to make the payment is contingent on— (i) the determination, after that date, of the liabil ity for the payment of the amount; or (ii) the liquidation, after that date, of the amount of the payment. (b) PROHIBITION.—The Corporation may prohibit or limit, by regulation or order, any golden parachute payment or indemnifica tion payment by a Farm Credit System institution (including any conservator or receiver of the Federal Agricultural Mortgage Cor poration) in troubled condition (as defined in regulations issued by the Corporation). (c) FACTORS TO BE TAKEN INTO ACCOUNT.—The Corporation shall prescribe, by regulation, the factors to be considered by the Corporation in taking any action under subsection (b). The factors may include— (1) whether there is a reasonable basis to believe that an institution-related party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Farm Credit System institution involved that has had a material effect on the financial condition of the institution; (2) whether there is a reasonable basis to believe that the institution-related party is substantially responsible for the in solvency of the Farm Credit System institution, the appoint ment of a conservator or receiver for the institution, or the in stitution’s troubled condition (as defined in regulations pre scribed by the Corporation); (3) whether there is a reasonable basis to believe that the institution-related party has materially violated any applicable law or regulation that has had a material effect on the finan cial condition of the institution; (4) whether there is a reasonable basis to believe that the institution-related party has violated or conspired to violate— (A) section 215, 657, 1006, 1014, or 1344 of title 18, United States Code; or (B) section 1341 or 1343 of title 18, United States Code, affecting a Farm Credit System institution; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00109 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 110 Sec. 5.62 FARM CREDIT ACT OF 1971 7 This report is no longer required to be submitted, effective May 15, 2000. See section 3003 of the Federal Reports Elimination and Sunset Act of 1995 (Public Law 104–66; 109 Stat. 734). (5) whether the institution-related party was in a position of managerial or fiduciary responsibility; and (6) the length of time that the party was related to the Farm Credit System institution and the degree to which— (A) the payment reasonably reflects compensation earned over the period of employment; and (B) the compensation represents a reasonable payment for services rendered. (d) CERTAIN PAYMENTS PROHIBITED.—No Farm Credit System institution may prepay the salary or any liability or legal expense of any institution-related party if the payment is made— (1) in contemplation of the insolvency of the institution or after the commission of an act of insolvency; and (2) with a view to, or with the result of— (A) preventing the proper application of the assets of the institution to creditors; or (B) preferring 1 creditor over another creditor. (e) RULE OF CONSTRUCTION.—Nothing in this section— (1) prohibits any Farm Credit System institution from pur chasing any commercial insurance policy or fidelity bond, so long as the insurance policy or bond does not cover any legal or liability expense of an institution described in subsection (a)(2); or (2) limits the powers, functions, or responsibilities of the Farm Credit Administration. SEC. 5.62. ø12 U.S.C. 2277a–11¿ INVESTMENT OF FUNDS. Money of the Corporation not otherwise employed shall be in vested in obligations of the United States or in obligations guaran teed as to principal and interest by the United States. SEC. 5.63. ø12 U.S.C. 2277a–12¿ EXEMPTION FROM TAXATION. Notwithstanding any other provision of law, the Corporation, including its franchise, and its capital, reserves, surplus, and in come, shall be exempt from all taxation imposed by the United States, or by any State, county, municipality, or local taxing au thority, except that any real property of the Corporation shall be subject to State, county, municipal, and local taxation to the same extent according to its value as other real property is taxed. SEC. 5.64. ø12 U.S.C. 2277a–13¿ REPORTS. 7 (a) IN GENERAL.—The Corporation annually shall prepare and submit to Congress a report of the operations of the Corporation, as soon as practicable after the first day of January in each cal endar year. (b) CONTENTS.—Reports submitted under subsection (a) shall include information concerning the— (1) aggregate amount in the Insurance Fund at the close of the preceding calendar year; (2) projections of the costs to be incurred by the Corpora tion during the calendar year; and (3) estimates of the aggregate amount to be collected as premiums during the calendar year. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00110 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 111 Sec. 5.65 FARM CREDIT ACT OF 1971 SEC. 5.65. ø12 U.S.C. 2277a–14¿ PROHIBITIONS. (a) CORPORATE NAME.— (1) USE OF CORPORATE NAME.—It shall be unlawful for any person or entity to use the words ‘‘Farm Credit System Insur ance Corporation’’ or any combination of such words that would have the effect of leading the public to believe that there is any connection between such person or entity and the Cor poration, by virtue of the name under which such person or en tity does business. (2) FALSE REPRESENTATION.— (A) BY OUTSIDE PERSON OR ENTITIES.—It shall be un lawful for any person or entity to falsely represent by any device, that the notes, bonds, debentures, or other obliga tions of the person or entity are insured or in any way guaranteed by the Corporation. (B) SYSTEM BANKS.—It shall be unlawful for any in sured System bank or person that markets insured obliga tions to falsely represent the extent to which or the man ner in which such obligations are insured by the Corpora tion. (3) PENALTY.—Any person or entity that willfully violates any provision of this subsection shall be fined not more than $1,000, imprisoned for not more than 1 year, or both. (b) PAYMENTS OR DISTRIBUTIONS WHILE IN DEFAULT.— (1) IN GENERAL.—It shall be unlawful for any insured Sys tem bank to pay any dividends on bank stock or participation certificates or interest on the capital notes or debentures of such bank (if such interest is required to be paid only out of net profits) or distribute any of the capital assets of such bank while the bank remains in default in the payment of any pre mium due to the Corporation. (2) LIABILITY OF DIRECTORS.—Each director or officer of any insured System bank who willfully participates in the dec laration or payment of any dividend or interest or in any dis tribution in violation of this subsection shall be fined not more than $1,000, imprisoned not more than 1 year, or both. (3) APPLICABILITY.—This subsection shall not apply to any default that is due to a dispute between the insured System bank and the Corporation over the amount of such premium if such bank deposits security satisfactory to the Corporation for payment on final determination of the issue. (c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.— (1) IN GENERAL.—Any insured System bank that willfully fails or refuses to file any certified statement or pay any pre mium required under this part shall be subject to a penalty of not more than $100 for each day that such violations continue, which penalty the Corporation may recover for its use. (2) APPLICABILITY.—This subsection shall not apply to con duct with respect to any default that is due to a dispute be tween the insured System bank and the Corporation over the amount of such premium if such bank deposits security satis factory to the Corporation for payment on final determination of the issue. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00111 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 112 Sec. 6.0 FARM CREDIT ACT OF 1971 (d) EMPLOYMENT OF PERSONS CONVICTED OF CRIMINAL OF FENSES.— (1) IN GENERAL.—Except with the prior written consent of the Farm Credit Administration, it shall be unlawful for any person convicted of any criminal offense involving dishonesty or a breach of trust to serve as a director, officer, or employee of any System institution. (2) PENALTY.—For each willful violation of paragraph (1), the institution involved shall be subject to a penalty of not more than $100 for each day during which the violation con tinues, which the Corporation may recover for its use. TITLE VI—ASSISTANCE TO FARM CREDIT SYSTEM Subtitle A—Assistance Board SEC. 6.0. ø12 U.S.C. 2278a¿ ESTABLISHMENT OF BOARD. (a) CHARTERS.—On the date which is 15 days after the date of the enactment of this title, the Farm Credit Administration shall revoke the charter of the Farm Credit System Capital Corporation (hereinafter referred to in this title as the ‘‘Capital Corporation’’) and shall charter the Farm Credit System Assistance Board (here inafter referred to in this Act as the ‘‘Assistance Board’’) that, sub ject to this subtitle, shall be a Federally chartered instrumentality of the United States. (b) USE OF CAPITAL CORPORATION STAFF.—During the 90-day period beginning on the date of the revocation of the charter of the Capital Corporation, the Assistance Board may temporarily em ploy, by contract or otherwise under reasonable and necessary terms and conditions, such staff of the Capital Corporation as is necessary to facilitate and effectuate an orderly transition to, and commencement of, the Assistance Board, and the termination of the affairs of the Capital Corporation. SEC. 6.1. ø12 U.S.C. 2278a–1¿ PURPOSES. The purposes of the Assistance Board shall be to carry out a program to provide assistance to, and protect the stock of bor rowers of, the institutions of the Farm Credit System, and to assist in restoring System institutions to economic viability and permit ting such institutions to continue to provide credit to farmers, ranchers, and the cooperatives of such, at reasonable and competi tive rates. SEC. 6.2. ø12 U.S.C. 2278a–2¿ BOARD OF DIRECTORS. (a) MEMBERSHIP.—The Board of Directors of the Assistance Board (hereinafter referred to in this subtitle as the ‘‘Board of Di rectors’’) shall consist of three members— (1) one of which shall be the Secretary of the Treasury; (2) one of which shall be the Secretary of Agriculture; and (3) one of which shall be an agricultural producer experi enced in financial matters, and appointed by the President, by and with the advice and consent of the Senate. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00112 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 113 Sec. 6.3 FARM CREDIT ACT OF 1971 (b) CHAIRMAN.—The Board of Directors shall elect annually a Chairman from among the members of the Board. (c) TERMS OF OFFICE, SUCCESSION, AND VACANCIES.— (1) TERMS OF OFFICE AND SUCCESSION.—The term of each member of the Board of Directors shall expire when the Assist ance Board is terminated. (2) VACANCIES.—Vacancies on the Board of Directors shall be filled in the same manner as the vacant position was pre viously filled. (d) COMPENSATION OF BOARD MEMBERS.—Members of the Board of Directors— (1) appointed under paragraphs (1) and (2) of subsection (a) shall receive reasonable allowances for necessary expenses of travel, lodging, and subsistence incurred in attending meet ings and other activities of the Assistance Board, as set forth in the bylaws issued by the Board of Directors, except that such level shall not exceed the maximum fixed by subchapter I of chapter 57 of title 5, United States Code, for officers and employees of the United States; and (2) appointed under paragraph (3) of subsection (a) shall receive compensation for the time devoted to meetings and other activities at a daily rate not to exceed the daily rate of compensation prescribed for Level III of the Executive Sched ule under section 5314 of title 5, United States Code, and rea sonable allowances for necessary expenses of travel, lodging, and subsistence incurred in attending meetings and other ac tivities of the Assistance Board, as set forth in the bylaws issued by the Board of Directors, except that such level shall not exceed the maximum fixed by subchapter I of chapter 57 of title 5, United States Code, for officers and employees of the United States. (e) RULES AND RECORDS.—The Board of Directors of the Assist ance Board shall adopt such rules as it may deem appropriate for the transaction of the business of the Assistance Board, and shall keep permanent and accurate records and minutes of its acts and proceedings. (f) QUORUM REQUIRED.—A quorum shall consist of two mem bers of the Board of Directors. All decisions of the Board shall re quire an affirmative vote of at least a majority of the members vot ing. (g) CHIEF EXECUTIVE OFFICER.—A chief executive officer of the Assistance Board shall be selected by the Board of Directors of the Assistance Board and shall serve at the pleasure of the Board. SEC. 6.3. ø12 U.S.C. 2278a–3¿ CORPORATE POWERS. (a) IN GENERAL.—The Assistance Board shall be a body cor porate that shall have the power to— (1) operate under the direction of its Board of Directors; (2) adopt, alter, and use a corporate seal, which shall be judicially noted; (3) provide for one or more vice presidents, a secretary, a treasurer, and such other officers, employees, and agents, as may be necessary, define their duties, and require surety bonds VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00113 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 114 Sec. 6.4 FARM CREDIT ACT OF 1971 or make other provisions against losses occasioned by acts of such persons; (4) hire, promote, compensate, and discharge officers and employees of the Assistance Board, without regard to title 5, United States Code, except that no such officer or employee shall receive an annual rate of basic pay in excess of the rate prescribed for Level III of the Executive Schedule under sec tion 5314 of title 5, United States Code; (5) prescribe by its Board of Directors its bylaws, that shall be consistent with law, and that shall provide for the manner in which— (A) its officers, employees, and agents are selected; (B) its property is acquired, held, and transferred; (C) its general operations are to be conducted; and (D) the privileges granted by law are exercised and en joyed; (6) with the consent of any executive department or inde pendent agency, use the information, services, staff, and facili ties of such in carrying out this title; (7) enter into contracts and make advance, progress, or other payments with respect to such contracts; (8) sue and be sued in its corporate name, and complain and defend in courts of competent jurisdiction; (9) acquire, hold, lease, mortgage, or dispose of, at public or private sale, real and personal property, and otherwise exer cise all the usual incidents of ownership of property necessary and convenient to its operations; (10) obtain insurance against loss; (11) modify or consent to the modification of any contract or agreement to which it is a party or in which it has an inter est under this title; (12) deposit its securities and its current funds with any member bank of the Federal Reserve System or any insured State nonmember bank (within the meaning of section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) and pay fees therefor and receive interest thereon as may be agreed; and (13) exercise other powers as set forth in this title, and such other incidental powers as are necessary to carry out its powers, duties, and functions in accordance with this title. (b) POWER TO REMOVE; JURISDICTION.—Notwithstanding any other provision of law, any civil action, suit, or proceeding to which the Assistance Board is a party shall be deemed to arise under the laws of the United States, and the United States District Court for the District of Columbia shall have exclusive jurisdiction over such. The Assistance Board may, without bond or security, remove any such action, suit, or proceeding from a State court to the United States District Court for the District of Columbia. SEC. 6.4. ø12 U.S.C. 2278a–4¿ CERTIFICATION OF ELIGIBILITY TO ISSUE PREFERRED STOCK. (a) BOOK VALUE LESS THAN PAR VALUE OF STOCK AND EQUI TIES.—If the book value of the stock, participation certificates, and other similar equities of a System institution, based on generally accepted accounting principles, is less than the par value of the stock or the face value of the certificates or equities— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00114 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 115 Sec. 6.5 FARM CREDIT ACT OF 1971 (1) the Farm Credit Administration shall notify the Assist ance Board of such impairment; (2) the Assistance Board shall monitor the financial condi tion, business plans, and operations of the institution; and (3) the institution may request the Assistance Board to grant certification to issue preferred stock under section 6.27(a). (b) BOOK VALUE LESS THAN 75 PERCENT OF PAR VALUE OF STOCK AND EQUITIES.—If the book value of the stock, participation certificates, and other similar equities of a System institution, based on generally accepted accounting principles, is less than 75 percent of the par value of the stock or the face value of the certifi cates or equities, the institution shall request the Assistance Board to grant certification to issue preferred stock under section 6.27(a). (c) MANDATORY DETERMINATION OF ELIGIBILITY.— (1) IN GENERAL.—The Assistance Board shall determine whether to certify a System institution as eligible to issue pre ferred stock under section 6.27, if— (A) the institution requests such certification; (B) the book value of the stock, participation certifi cates, and other similar equities of the institution, based on generally accepted accounting principles, has declined to 75 percent of the par value of the stock or the face value of the certificates or equities; and (C) the institution agrees to meet the terms and condi tions specified by the Assistance Board pursuant to section 6.6. (2) EFFECTIVE DATE OF CERTIFICATION.—If the determina tion of the Assistance Board is to certify the institution under paragraph (1), such certification shall be effective at the time of such determination. (d) IMPLEMENTATION.—As soon as practicable after the date of the enactment of this title, the Assistance Board shall take such ac tions as are necessary to carry out this section. (e) DEFINITION.—Except where otherwise provided in this Act, the term ‘‘other similar equities’’ includes allocated equities. SEC. 6.5. ø12 U.S.C. 2278a–5¿ ASSISTANCE. (a) IN GENERAL.—The Assistance Board shall assist an institu tion that has been certified under section 6.4 by— (1) authorizing the institution to issue preferred stock under section 6.27, in amounts necessary to maintain the book value of stock, participation certificates, and other similar eq uities of the institution, at the level provided for in subsection (c); (2) in the case of high-cost debt for which the institution is primarily liable, authorizing the institution to issue pre ferred stock under section 6.27, in an amount equal to the pre mium that would be required by the holder of the debt for the institution to retire the debt at the then current market value; (3) on a request by the institution, authorizing the issuance of preferred stock under section 6.27 to facilitate the merger of the requesting institution with one or more other System institutions; or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00115 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 116 Sec. 6.6 FARM CREDIT ACT OF 1971 (4) providing assistance by such other methods as the As sistance Board determines appropriate. (b) DEFINITION OF HIGH-COST DEBT.—For purposes of sub section (a)(2), the term ‘‘high-cost debt’’ means securities or similar obligations issued before January 1, 1986, that mature on or after December 31, 1987, and bear a rate of interest in excess of the then current market rate for similar securities or obligations. (c) MINIMUM EQUITY VALUE.—The Assistance Board shall au thorize a certified institution to issue amounts of preferred stock under section 6.27 sufficient to— (1) maintain the value of stock, participation certificates and other similar equities at no less than 75 percent of the par value of the stock or the face value of the certificates or equi ties, as determined under generally accepted accounting prin ciples; and (2) strengthen the institution to a point where it is eco nomically viable, and capable of delivering credit at reasonable and competitive rates. (d) LIMITATION.—Except as provided in section 410(c) of the Agricultural Credit Act of 1987, no assistance shall be provided in connection with a merger until the stockholders and the institu tions involved have approved the merger and the Farm Credit Ad ministration has given final approval to the merger plan. SEC. 6.6. ø12 U.S.C. 2278a–6¿ SPECIAL POWERS. (a) IN GENERAL.—In the case of a System institution that re quests certification under section 6.4, the Assistance Board may— (1) require the institution to obtain approval from the As sistance Board before implementing business, operating, and investment plans and policies; (2) if one or more of the conditions described in section 4.12(b) are met, as determined by the Farm Credit Administra tion, direct the Farm Credit Administration Board to appoint a conservator for the institution, in accordance with such sec tion, and to instruct the conservator to evaluate the operations of the institution and report to the Farm Credit Administration Board and the Assistance Board on the possibility of restoring the institution to sound financial condition; (3) request that the Farm Credit Administration Board or the Farm Credit Administration, as appropriate— (A) approve or require a merger or consolidation of the institution to the extent authorized under this Act; (B) initiate action to appoint a receiver under section 4.12(b); or (C) exercise any enforcement power authorized under this Act; (4) require the institution to obtain approval from the As sistance Board before setting the terms and conditions of any debt issuances of the institution; (5) require the institution to obtain approval from the As sistance Board before setting the policy on credit standards to be used, and the policy on rates of interest to be charged on loans, by the institution, including requiring that— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00116 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 117 Sec. 6.6 FARM CREDIT ACT OF 1971 (A) the institution set interest rates at levels nec essary to ensure that the cost of money to the institution reflects the marginal cost to the institution of borrowing an additional amount of money at the time a new loan is made; and (B) loans primarily secured by real estate mortgages not exceed 85 percent of the appraised agricultural value of the real estate security, or 75 percent of the then cur rent market value of the real estate security, whichever is greater; (6) require the institution to obtain approval from the As sistance Board for the design of management information and accounting systems at the institution, and of the continued use by the institution of regulatory accounting practices in accord ance with sections 4.8(b) and 5.19(b); (7) require that the plans and policies of the institution re sulting from the merger of System banks reduce the overhead costs of such institution, to the maximum extent practicable, with respect to the delivery of services to, and performance of duties for, System associations in the district; (8) require the institution to obtain approval from the As sistance Board of— (A) the hiring policies of the institution; (B) the compensation and retirement benefits of the chief executive officer, other managers, and directors of the institution; (C) any change in the management of the institution; and (D) policy decisions regarding continued employment and promotion of the officials referred to in subparagraph (B); (9) suspend for any period of time, or terminate, any cer tification granted to an institution under section 6.4 if the Farm Credit Administration notifies the Assistance Board that the institution has substantially deviated from the institution’s business plan or has failed to comply with a term or condition governing the use of any financial assistance provided to the institution under this title; and (10) take such other action as the Assistance Board deter mines may be necessary to establish prudent operating prac tices at the institution and to return the institution to a sound financial condition. (b) SUSPENSION OF ASSISTANCE.— (1) NOTIFICATION.—The Assistance Board shall promptly notify the Farm Credit Administration of any action taken by the Assistance Board under subsection (a)(9). (2) ENFORCEMENT.—The Farm Credit Administration may use any of its enforcement powers, with respect to any institu tion to which the Assistance Board has provided assistance or has certified the institution to issue preferred stock under sec tion 6.27, to obtain the compliance of the institution with the terms or conditions governing the use of financial assistance provided under this title. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00117 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 118 Sec. 6.7 FARM CREDIT ACT OF 1971 (c) UNDATED LETTERS OF RESIGNATION.—The Assistance Board shall not, for any reason, request or require any member of the board of directors of any System institution to submit to the Assist ance Board an undated letter of resignation. Immediately after the date of the enactment of this title, the Assistance Board shall de stroy all such letters over which it has control. (d) REPORTS.—During the 5-year period beginning on the date of the enactment of this title, the Assistance Board, in coordination with the Financial Assistance Corporation, shall report annually to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Sen ate on the extent to which System institutions translate the sav ings in the cost of the operations of such institutions due to the Federal assistance provided to the System under this title into lower interest rates charged to System borrowers or enhanced fi nancial solvency of such institutions. SEC. 6.7. ø12 U.S.C. 2278a–7¿ ADMINISTRATION. (a) EXPENSES.—The Financial Assistance Corporation shall pay the necessary and reasonable administrative expenses of the As sistance Board from funds in the Assistance Fund established in section 6.25. (b) INTERIM FUNDING.—Before the availability of funding from the Assistance Fund, the Assistance Board may use the revolving fund established under section 4.0. Such amounts used shall be re paid to the revolving fund out of the Assistance Fund within the same fiscal year that such funds were received by the Assistance Board. (c) ASSISTANCE OPERATIONS.—The Farm Credit Administration shall provide such personnel and facilities to the Assistance Board as the Farm Credit Administration considers are necessary to avoid unnecessary duplication and waste. (d) ACCESS TO FCA DOCUMENTS.—The Assistance Board shall have access to all reports of examination and supervisory docu ments of the Farm Credit Administration, and relevant supporting material, for the purpose of carrying out the special powers of the Assistance Board under section 6.6, under such terms and condi tions, acceptable to the Farm Credit Administration Board, as are necessary and appropriate to protect the confidentiality of the docu ments and materials. SEC. 6.8. ø12 U.S.C. 2278a–8¿ LIMITATION OF POWERS. (a) PURPOSES.—The powers of the Assistance Board under this title shall be exercised only for the purposes specified in this title and shall not be exercised in a manner that would result in the As sistance Board supplanting the Farm Credit System lending insti tutions as the primary providers of credit and other financial serv ices to farmers, ranchers, and the cooperatives of such. (b) PROHIBITION.—The powers of the Assistance Board under this title shall not include the management, administration, or dis position of any loans or other assets owned by other System insti tutions, or the providing of technical assistance or other related services to other System institutions in connection with the admin istration of loans owned by such other institutions. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00118 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 119 Sec. 6.9 FARM CREDIT ACT OF 1971 SEC. 6.9. ø12 U.S.C. 2278a–9¿ SUCCESSION. (a) ASSETS AND LIABILITIES.—On the issuance by the Farm Credit Administration of the charter for the Assistance Board under this subtitle, the Assistance Board shall succeed to the as sets of and assume all debts, obligations, contracts, and other li abilities of the Capital Corporation, matured or unmatured, ac crued, absolute, contingent or otherwise, and whether or not re flected or reserved against on balance sheets, books of account, or records of the Capital Corporation. (b) CONTRACTS.—The existing contractual obligations, security instruments, and title instruments of the Capital Corporation shall, by operation of law and without any further action by the Farm Credit Administration, the Capital Corporation, or any court, be come and be converted into obligations, entitlements, and instru ments of the Assistance Board chartered under this subtitle. (c) ADJUSTMENT OF ASSESSMENTS.—Not later than 15 days after the issuance of the charter of the Assistance Board, the Board shall retire all debt and equity obligations issued to any System in stitution under section 4.28G(a)(14) or 4.28H (as in effect imme diately before the date of the enactment of this title) at the book value of such obligations (determined as of such date of enactment) and shall pay such amounts to the holders of such debt and equity obligations. (d) SURPLUS FUNDS.—To the extent that, on the extinguishing of liabilities assumed by the Assistance Board under this section, and on full performance or other final disposition of contract obliga tions of the Assistance Board, there remain surplus funds attrib utable to such obligations or contracts, the Assistance Board shall distribute such surplus funds among the System institutions that contributed funds to the Capital Corporation on the basis of the relative amount of funds so contributed by each institution. (e) PRESERVATION AGREEMENTS.— (1) TRANSFER OF OBLIGATIONS.—Notwithstanding any other provision of this Act or the terms and conditions of the Thirty-Seven Banks Capital Preservation Agreement, the Fed eral Land Banks Capital Preservation Agreement, the Federal Intermediate Credit Banks Capital Preservation Agreement, and the Banks for Cooperatives Loss Sharing Agreement— (A) at the time the receiving bank receives funds from the Financial Assistance Corporation in an equal and equivalent amount in accordance with this subsection, any amounts received by, or that remain accrued to, any Sys tem bank in accordance with the activation of any such agreement for the calendar quarter ending on September 30, 1986, shall be— (i) repaid to the contributing bank by the bank that received such payments; or (ii) cancelled; (B) on the date the Financial Assistance Corporation is chartered, the accounts payable of each contributing bank under such agreements for the calendar quarter end ing on September 30, 1986, shall, by operation of law and without any further action by such contributing bank, any other bank, or any court, become and be converted into ac VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00119 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 120 Sec. 6.9 FARM CREDIT ACT OF 1971 counts payable of the Financial Assistance Corporation to each receiving bank under such agreement for such cal endar quarter in the same amounts as previously carried on the books of each such receiving bank; and (C) on the date the Financial Assistance Corporation is chartered, the accounts receivable of each receiving bank under such agreements for the calendar quarter end ing September 30, 1986, shall, by operation of law and without any further action by such receiving bank or any other bank, or any court, become and be converted into ac counts receivable to such receiving bank from the Finan cial Assistance Corporation, in the same amount as pre viously carried on the books of such receiving bank and such receivables shall, for all financial reporting purposes, be accounted for as an asset on the books of such receiving bank in accordance with generally accepted accounting practices. (2)(A) Not later than 30 days after the first issuance of ob ligations by the Financial Assistance Corporation in accordance with section 6.26, the Corporation shall pay to each receiving bank such sums as are necessary to permit each receiving bank to repay, in accordance with paragraph (1), the amounts each such receiving bank received under any such agreement. (B) The accruals shall be paid by the Corporation to each receiving bank for the actual net loan charge-offs recorded on the books of each such bank before January 1, 1993, not pre viously paid by the contributing banks. (3) DEBT OBLIGATIONS.— (A) ISSUANCE.—For the purpose of obtaining funds to carry out this subsection, the Financial Assistance Cor poration shall issue debt obligations under section 6.26. Such obligations shall be subject to the terms and condi tions of such section, except as provided for in this para graph. (B) PAYMENT OF INTEREST.—During each year of the 15-year period of such obligation issued pursuant to sub paragraph (A), the banks operating under this Act shall pay to the Financial Assistance Corporation, at such times as the Corporation shall determine, an amount equal to the entire amount of interest due on such obligation. Each bank shall pay a proportion of such interest equal to— (i) the average accruing loan volume of the bank during the year preceding the year of such payment; divided by (ii) the average accruing loan volume of all of the banks of the System for the same period. (C) PAYMENT OF PRINCIPAL.— (i) IN GENERAL.—After the end of the 15-year pe riod beginning on the date of the issuance of any obli gation issued to carry out this subsection, the banks operating under this Act shall pay to the Financial As sistance Corporation, on demand, an amount equal to the outstanding principal of the obligation. Each bank shall pay a proportion of the principal equal to— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00120 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 121 Sec. 6.9 FARM CREDIT ACT OF 1971 (I) the average accruing loan volume of the bank for the preceding 15 years; divided by (II) the average accruing loan volume of all banks of the System for the same period. (ii) BANKS LEAVING SYSTEM.—Any bank leaving the Farm Credit System pursuant to section 7.10 shall be required, under regulations of the Farm Credit Ad ministration, to pay to the Financial Assistance Cor poration the estimated present value of the payment required under this subparagraph had the bank re mained in the System. (iii) BANKS UNDERGOING LIQUIDATION.—With re spect to any bank undergoing liquidation under this Act, a liability to the Financial Assistance Corporation in the amount of the payment required under this sub paragraph (calculated as if the bank had left the Sys tem on the date it was placed in liquidation) shall be recognized as a claim in favor of the Financial Assist ance Corporation against the estate of the bank. (iv) OBLIGATIONS OF OTHER BANKS.—The obliga tions of other banks shall not be reduced in anticipa tion of any recoveries under this subparagraph from banks leaving the System or in liquidation, but the Fi nancial Assistance Corporation shall apply the recov eries, when received, and all earnings on the recov eries, to reduce the other banks’ payment obligations, or, to the extent the recoveries are received after the other banks have met their entire payment obligation, shall refund the recoveries, when received, to the other banks in proportion to the other banks’ pay ments. (D) ANNUAL PAYMENTS.— (i) IN GENERAL.—In order to provide for the or derly funding and discharge over time of the obligation of each System bank to the Financial Assistance Cor poration under subparagraph (C), each System bank shall enter into or continue in effect an agreement with the Financial Assistance Corporation under which the bank will make annual annuity-type pay ments to the Financial Assistance Corporation, begin ning no later than December 31, 1992 (except for any bank that did not meet its interim capital requirement on December 31, 1990, in which case the bank shall begin making the payments no later than December 31, 1993) in amounts designed to accumulate, in total, including earnings on the amounts, to 90 percent of the bank’s ultimate obligation. The Financial Assist ance Corporation shall partially discharge the bank from its obligation under subparagraph (C) to the ex tent of each such payment and the earnings on the payment as earned. (ii) CAPITAL REQUIREMENTS.—The agreement shall not require payments to be made to the extent that making a particular payment or part of a payment VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00121 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 122 Sec. 6.10 FARM CREDIT ACT OF 1971 would cause the bank to fail to satisfy applicable regu latory permanent capital requirements, but shall pro vide for recalculation of subsequent payments accord ingly. (iii) INVESTMENT; AVAILABILITY.—The funds re ceived by the Financial Assistance Corporation pursu ant to the agreements shall be invested in eligible in vestments as defined in section 6.25(a)(1). The funds and the earnings on the funds shall be available only for the payment of the principal of the bonds issued by the Financial Assistance Corporation under this sub section. (E) Until each obligation issued in accordance with this subsection reaches maturity, for all financial reporting purposes, such obligation shall be considered to be the sole obligation of the Financial Assistance Corporation and shall not be considered a liability of any System bank, nor shall the obligation to make future annuity payments to the Financial Assistance Corporation under subparagraph (D) be considered a liability of any System bank. (4) FUNDS NOT CONSIDERED FINANCIAL ASSISTANCE.—The funds made available to each bank, whether through the issuance of stock or otherwise, by the Financial Assistance Cor poration to meet obligations under any agreement referred to in paragraph (1) or to meet any obligations of the contributing banks under any such agreement, as required by this sub section, shall not be considered financial assistance under this Act. (5) SUSPENSION OF PRESERVATION AGREEMENTS.—During the 5-year period beginning on the date of enactment of this subsection and thereafter whenever funds from the Farm Cred it System Insurance Fund are available for use in assisting System institutions to meet their obligations on their debt in struments, activation of the Thirty-Seven Banks Capital Pres ervation Agreement, the Federal Land Banks Capital Preser vation Agreement, the Federal Intermediate Credit Banks Cap ital Preservation Agreement, and the Banks for Cooperatives Loss Sharing Agreement shall be suspended, in exchange for the benefits flowing to the signatories to such agreements under the Agricultural Credit Act of 1987. SEC. 6.10. ø12 U.S.C. 2278a–10¿ EFFECT OF REGULATIONS; AUDITS. (a) ISSUANCE.—The Assistance Board may issue such regula tions, policies, procedures, guidelines, or statements as the Board considers necessary or appropriate to carry out this title, all of which shall be promulgated and enforced without regard to sub chapter II of chapter 5 of title 5, United States Code. (b) REGULATION BY FARM CREDIT ADMINISTRATION.—The As sistance Board shall not be subject to regulation by the Farm Cred it Administration. (c) AUDITS.—The Assistance Board shall not require an audit or examination of a System institution that would be duplicative of an audit or examination that is conducted under other provisions of law. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00122 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 123 Sec. 6.21 FARM CREDIT ACT OF 1971 SEC. 6.11. ø12 U.S.C. 2278a–11¿ EXEMPTION FROM TAXATION. The Assistance Board, the capital, reserves, and surplus there of, and the income derived therefrom, shall be exempt from Fed eral, State, municipal, and local taxation, except taxes on real es tate held by the Assistance Board to the same extent, according to its value, as other similar property held by other persons is taxed. SEC. 6.12. ø12 U.S.C. 2278a–12¿ TERMINATION. The Assistance Board and the authority provided to the Assist ance Board by this subtitle shall terminate on December 31, 1992. SEC. 6.13. ø12 U.S.C. 2278a–13¿ TRANSITIONAL PROVISIONS. (a) EXERCISE OF POWERS.—The powers of the Assistance Board under this title shall be exercised by the Farm Credit Administra tion Board until the issuance of the charter of the Assistance Board, or such later date not to exceed 30 days thereafter, as may be requested by the Assistance Board. (b) LIMITATION ON ASSISTANCE.—Any assistance provided to System institutions by the Farm Credit Administration in accord ance with this section shall be provided from, and shall not exceed, the amounts contained in the revolving fund established under sec tion 4.0. (c) ISSUANCE OF STOCK.—Each institution that receives assist ance from the Farm Credit Administration during the interim pe riod specified in subsection (a), in consideration thereof, shall issue preferred stock to the Financial Assistance Corporation in an amount equal to the amount of such assistance. Payments by the Financial Assistance Corporation under subsection (d) shall be con sidered to be payments to each such institution for such stock. (d) REPAYMENT.—The Financial Assistance Corporation shall pay to the Farm Credit Administration, for return to the revolving fund established under section 4.0, the full amount of all financial assistance provided by the Farm Credit Administration in accord ance with this section, from the proceeds from the sale of the first issue of obligations by the Financial Assistance Corporation in ac cordance with section 6.26. Subtitle B—Financial Assistance Corporation SEC. 6.20. ø12 U.S.C. 2278b¿ ESTABLISHMENT OF CORPORATION. Not later than 5 days after the date of the enactment of this title, the Farm Credit Administration shall charter the Farm Cred it System Financial Assistance Corporation (hereinafter referred to in this Act as the ‘‘Financial Assistance Corporation’’) which shall be— (1) an institution of the Farm Credit System; and (2) a Federally chartered instrumentality of the United States. SEC. 6.21. ø12 U.S.C. 2278b–1¿ PURPOSE. The purpose of the Financial Assistance Corporation shall be to carry out a program to provide capital to institutions of the Farm Credit System that are experiencing financial difficulty and to assist, pursuant to section 6.9(e) and subsections (c) through (g) VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00123 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 124 Sec. 6.22 FARM CREDIT ACT OF 1971 of section 6.26, in the repayment by System institutions to those persons who provided funds in connection with the program. SEC. 6.22. ø12 U.S.C. 2278b–2¿ BOARD OF DIRECTORS. (a) BOARD OF DIRECTORS.— (1) COMPOSITION.—The Board of Directors of the Financial Assistance Corporation (hereinafter referred to in this subtitle as the ‘‘Board of Directors’’) shall consist of the Board of Direc tors of the Federal Farm Credit Banks Funding Corporation. (2) CHAIRMAN.—The Board of Directors shall elect annu ally a Chairman from among the members of the Board. (3) COMPENSATION.—The members of the Board of Direc tors shall receive compensation for the time devoted to meet ings and other activities of the Board and reasonable allow ances for necessary expenses of travel, lodging, and subsistence incurred in attending meetings and other activities of the Board of Directors in amounts not exceeding levels set by the Farm Credit Administration Board. (b) RULES AND RECORDS.—The Board of Directors shall adopt such rules as it may deem appropriate for the transaction of its business and shall keep permanent and accurate records and min utes of its acts and proceedings. (c) QUORUM REQUIRED.—No business may be conducted at a meeting of the Board of Directors unless a quorum of the members of the Board is present, and a vote to approve an action requires a majority vote of the members voting. (d) CHIEF EXECUTIVE OFFICER.—A chief executive officer of the Financial Assistance Corporation shall be selected by the Board of Directors and shall serve at the pleasure of the Board. SEC. 6.23. ø12 U.S.C. 2278b–3¿ STOCK. The Financial Assistance Corporation shall issue stock with a par value of $5 to System institutions, as provided for in this sub title, and such stock shall not be transferable, except in the event of a restructuring or liquidation to a successor System institution. SEC. 6.24. ø12 U.S.C. 2278b–4¿ CORPORATE POWERS. (a) IN GENERAL.—The Financial Assistance Corporation shall have the power to— (1) operate under the direction of its Board of Directors; (2) adopt, alter, and use a corporate seal, which shall be judicially noted; (3) provide for such officers, employees, and agents, includ ing joint employees with the Funding Corporation, as may be necessary, define their duties, and require surety bonds or make other provisions against losses occasioned by acts of such persons; (4) adopt a salary scale for officers and employees of the Financial Assistance Corporation, in accordance with the direc tives of the Board of Directors; (5) prescribe by its Board of Directors bylaws, that are not inconsistent with law, and that shall provide for the manner in which— (A) its officers, employees, and agents are selected; (B) its property is acquired, held, and transferred; (C) its general business is conducted; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00124 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 125 Sec. 6.25 FARM CREDIT ACT OF 1971 (D) the privileges granted by law are exercised and en joyed; (6) enter into contracts and make advance, progress, or other payments with respect to such contracts; (7) sue and be sued in its corporate name and complain and defend in courts of competent jurisdiction; (8) acquire, hold, lease, mortgage, or dispose of, at public or private sale, real and personal property, and otherwise exer cise all the usual incidents of ownership of property necessary and convenient to its business; (9) obtain insurance against loss; (10) modify or consent to the modification of any contract or agreement to which it is a party or in which it has an inter est under this subtitle; (11) borrow from any commercial bank on its own indi vidual responsibility and on such terms and conditions as it may determine with the approval of the Farm Credit Adminis tration; (12) deposit its securities and its current funds with any member bank of the Federal Reserve System or any insured State nonmember bank (within the meaning of section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) and pay fees therefor and receive interest thereon as may be agreed; and (13) exercise such other incidental powers as are necessary to carry out its powers, duties, and functions in accordance with its charter and this subtitle. (b) POWER TO REMOVE, AND JURISDICTION.—Notwithstanding any other provision of law, any civil action, suit, or proceeding to which the Financial Assistance Corporation is a party shall be deemed to arise under the laws of the United States, and the United States District Court for the District of Columbia shall have exclusive jurisdiction over such. The Financial Assistance Corpora tion may, without bond or security, remove any such action, suit, or proceeding from a State court to the United States District Court for the District of Columbia. SEC. 6.25. ø12 U.S.C. 2278b–5¿ ACCOUNTS. (a) FARM CREDIT ASSISTANCE FUND.— (1) ESTABLISHMENT.—The Financial Assistance Corpora tion shall establish an account called the Farm Credit Assist ance Fund (referred to in this Act as the ‘‘Assistance Fund’’) which shall be available to the Financial Assistance Corpora tion as a revolving fund to carry out this subtitle. The moneys of such Assistance Fund shall be invested in direct obligations of the United States or obligations guaranteed by the United States or an agency thereof. (2) FUNDING.—The Assistance Fund shall be funded through the issuance of debt obligations and payments, as pro vided in section 6.26, and payments, as provided in section 6.28. (b) FINANCIAL ASSISTANCE CORPORATION TRUST FUND.—The Financial Assistance Corporation shall establish an account called the Financial Assistance Corporation Trust Fund (hereinafter re ferred to in this Act as the ‘‘Trust Fund’’) that shall consist of secu VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00125 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 126 Sec. 6.26 FARM CREDIT ACT OF 1971 rities of the United States Treasury purchased by the Financial As sistance Corporation with the funds received from the purchase of stock by System institutions from the Financial Assistance Cor poration under section 6.29. SEC. 6.26. ø12 U.S.C. 2278b–6¿ DEBT OBLIGATIONS. (a) ISSUANCE.—During the period beginning 61 days after the date of the enactment of this title and ending September 30, 1992, the Financial Assistance Corporation, subject to the approval of the Assistance Board, may issue uncollateralized bonds, notes, deben tures, and similar obligations, guaranteed as to the timely payment of principal and interest by the Secretary of the Treasury as set forth in subsection (d), with semiannual interest coupon payments and a maturity period of 15 years— (1) in an aggregate amount not to exceed $2,800,000,000; and (2) beginning January 1, 1989, in an additional amount, not to exceed $1,200,000,000, if— (A) debt obligations have been issued by the Corpora tion to the full extent authorized under paragraph (1); (B) the Assistance Board determines that such addi tional funds are needed to carry out this title; and (C) at least 90 days before the issuance of any debt ob ligations under this paragraph, the Assistance Board sub mits a report to Congress that sets forth the determination of the Assistance Board that such additional debt obliga tions should be issued, and that contains a detailed eval uation supporting the determination. (b) CONDITIONS.—The debt obligations shall be in such forms and denominations, bear such rates of interest, be subject to such conditions, be issued in such manner, and be sold at such prices as may be prescribed by the Financial Assistance Corporation. (c) INTEREST PAYMENTS.— (1) PAYMENT OF INTEREST DURING FIRST 5-YEAR PERIOD.— During each year of the first 5-year period of the 10-year pe riod beginning on the date of issuance of each obligation under subsection (a), the Financial Assistance Corporation shall pay, without recourse to System institutions, other than that de scribed in paragraph (5), all of the interest due on such obliga tion. (2) PAYMENT OF INTEREST DURING SECOND 5-YEAR PE RIOD.— (A) IN GENERAL.—During each year of the second 5 year period of the 10-year period beginning on the date of issuance of each obligation under subsection (a), the Fi nancial Assistance Corporation shall pay all of the interest due on such obligation. (B) PAYMENT BY SYSTEM BANKS TO FINANCIAL ASSIST ANCE CORPORATION.—During each year of the second 5 year period, System banks shall pay to the Financial As sistance Corporation 50 percent of the interest due on the obligations, except that System banks shall pay an addi tional 10 percent of the interest expense for each 1 percent that the unallocated retained earnings of the System (as VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00126 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 127 Sec. 6.26 FARM CREDIT ACT OF 1971 determined under generally accepted accounting prin ciples) exceed 5 percent of net assets (total assets less al lowance for loan losses) based on a year-end financial statement for the preceding year. (C) ALLOCATION.—During each year of the second 5 year period, each System bank shall pay to the Financial Assistance Corporation a proportion, as calculated by the Financial Assistance Corporation, of the interest due from System banks under this paragraph equal to— (i) the amount of the average accruing retail loan volume of the bank and its affiliated associations for the preceding year; divided by (ii) the total average accruing retail loan volume of all such banks and their affiliated associations for the preceding year. (3) PAYMENTS BY TREASURY.—The Secretary of the Treas ury, in accordance with section 6.28, shall pay to the Financial Assistance Corporation, in a timely manner, the balance of each interest payment not made by the System banks. (4) PAYMENT OF INTEREST AFTER FIRST 10-YEAR PERIOD.— During each year of the third 5-year period of the 15-year pe riod beginning on the date of the issuance of each obligation under subsection (a), the Financial Assistance Corporation shall pay all of the interest due on such obligation. During each year of such 5-year period, System banks shall pay the entire amount of interest due on the obligation allocated in the same manner as under paragraph (2)(C). Such payments shall be made to the Financial Assistance Corporation at such times as the Financial Assistance Corporation shall determine. (5) REPAYMENT OF TREASURY-PAID INTEREST.— (A) IN GENERAL.—On the maturity date of the last-ma turing debt obligation issued under subsection (a), the Fi nancial Assistance Corporation shall repay to the Sec retary of the Treasury the total amount of any annual in terest charges on the debt obligations that Farm Credit System institutions (other than the Financial Assistance Corporation) have not previously paid, and the Financial Assistance Corporation shall not be required to pay any additional interest charges on the payments. (B) ASSESSMENT.—In order to provide for the orderly funding by the banks of the System of the repayment by the Financial Assistance Corporation to the Secretary of the Treasury, the Financial Assistance Corporation shall assess each System bank, on or about December 31 of each year beginning in 1992, and each System bank shall promptly pay to the Financial Assistance Corporation, an annual annuity type payment in an amount designed to accumulate, in total, including earnings thereon, the amount of the bank’s ultimate obligation (as determined by the Corporation on a fair and equitable basis), and no greater than .0006 nor less than .0004 times the bank’s and its affiliated associations’ average accruing retail loan volume for the preceding year, subject to— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00127 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 128 Sec. 6.26 FARM CREDIT ACT OF 1971 (i) upward or downward adjustment, as appro priate, by the Financial Assistance Corporation during each of the last 5 years prior to the date the Financial Assistance Corporation is obligated to make the repay ment, in order to ensure that the Financial Assistance Corporation will have the amount of funds needed to make the repayment on the due date; and (ii) reduction or termination in any year when the funds paid to the Financial Assistance Corporation, in cluding any anticipated future earnings on the funds, are sufficient to make the repayment on the due date. (C) INVESTMENT OF FUNDS.—The Financial Assistance Corporation shall invest funds derived from the invest ment in eligible investments as defined in section 6.25(a)(1). The funds and the earnings on the funds shall be available only for the repayment to the Secretary of the Treasury provided for in subparagraph (A). (D) PASS THROUGH.—A bank may (and, to the extent necessary to satisfy its obligations, shall) pass on (either directly, or indirectly through loan pricing or otherwise) all or part of the assessments to its affiliated direct lender as sociations based on proportionate average accruing retail loan volumes for the preceding year, but the bank shall re main primarily liable for the amounts. (E) LIABILITY.— (i) BANKS TERMINATING SYSTEM STATUS OR IN LIQ UIDATION.—Any bank terminating System status pur suant to section 7.10 shall be required, under regula tions of the Farm Credit Administration, to pay to the Financial Assistance Corporation the estimated present value of all future such assessments against the bank had the bank remained in the System. A li ability to the Financial Assistance Corporation in this amount (calculated as if the bank had left the System on the date the bank was placed in liquidation) shall be recognized as a claim in favor of the Financial As sistance Corporation against the estate of any bank undergoing liquidation. (ii) NO ANTICIPATORY REDUCTIONS IN OTHER OBLI GATIONS.—The obligations of other banks shall not be reduced in anticipation of any recoveries under this subparagraph from banks leaving the System or in liq uidation. (iii) REFUND OF RECOVERIES.—The Financial As sistance Corporation shall apply the recoveries, when received, and all earnings on the recoveries, to reduce the other banks’ payment obligations, or, to the extent the recoveries are received after the other banks have met their entire payment obligation, shall refund the recoveries, when received, to the other banks in pro portion to the other banks’ payments. (F) ASSOCIATIONS TERMINATING SYSTEM STATUS OR IN LIQUIDATION.—Any association terminating System status pursuant to section 7.10 shall be required, under regula VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00128 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 129 Sec. 6.26 FARM CREDIT ACT OF 1971 tions of the Farm Credit Administration, to pay to its su pervising bank a share, based on the association’s retail loan volume relative to the retail loan volume of the bank and its affiliated associations had the association remained in the System, of the estimated present value of all future such assessments against the bank. A liability to the bank in this amount (calculated as if the association had left the System on the date it was placed in liquidation) shall be recognized as a claim in favor of the bank against the es tate of any association undergoing liquidation. (G) CAPITAL REQUIREMENTS.— (i) IN GENERAL.—Until the date that is 5 years prior to the date on which the Financial Assistance Corporation is required to repay the Secretary of the Treasury pursuant to subparagraph (A), all assess ments paid by banks to the Financial Assistance Cor poration pursuant to subparagraph (B), and any part of the obligation to pay future assessments to the Fi nancial Assistance Corporation under subparagraph (B) that is recognized as an expense on the books of any System bank or association, shall nonetheless be included in the capital of the bank or association for purposes of determining its compliance with regu latory capital requirements. (ii) DURING THE FINAL 5 YEARS PRIOR TO REPAY MENT.—During the— (I) period beginning 5 years, and ending 4 years, prior to the date on which the Financial As sistance Corporation is required to repay the Sec retary of the Treasury pursuant to subparagraph (A), 60 percent; (II) period beginning 4 years, and ending 3 years, prior to the date on which the Financial As sistance Corporation is required to repay the Sec retary of the Treasury pursuant to subparagraph (A), 30 percent; and (III) period beginning 3 years prior to the date on which the Financial Assistance Corporation is required to repay the Secretary of the Treasury pursuant to subparagraph (A), 0 percent, of all assessments paid by banks to the Financial As sistance Corporation pursuant to subparagraph (B), and of any part of the obligation to pay future assess ments to the Financial Assistance Corporation under subparagraph (B) that is recognized as an expense on the books of any System bank or association, shall nonetheless be included in the capital of the bank or association for purposes of determining its compliance with regulatory capital requirements. (d) REFINANCING AND PAYMENT OF PRINCIPAL; DEFAULTS.— (1) IN GENERAL.— (A) TIME OF REPAYMENT.—On maturity of an obliga tion issued under subsection (a), the obligation shall be re paid by the Financial Assistance Corporation. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00129 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 130 Sec. 6.26 FARM CREDIT ACT OF 1971 (B) PAYMENTS BY INSTITUTIONS.— (i) IN GENERAL.—Except as provided in subpara graph (C), in order to enable the Financial Assistance Corporation to repay the obligation referred to in sub paragraph (A), each institution that issued preferred stock under section 6.27(a) with respect to the obliga tion (or the successor to the institution) shall pay to the Financial Assistance Corporation, before the matu rity date of the obligation, an amount equal to the par value of the stock outstanding for the institution. (ii) ANNUAL APPROPRIATION.—Except as provided in clause (iii), each year beginning in 1992, as soon as practicable following the end of the prior year, each such institution (except institutions in receivership and institutions that have previously redeemed their preferred stock) shall appropriate from its earnings in the prior year to an appropriated unallocated surplus account with respect to preferred stock, the sum of— (I) the greater of— (aa) such amount as the institution may be required to appropriate under any assist ance agreement the institution has with the Farm Credit System Assistance Board or the Farm Credit System Insurance Corporation; or (bb) the amount that, if appropriated to the account in equal amounts in each year thereafter until the maturity of the obligation referred to in subparagraph (A), would cause the amount in the account to equal the par value of the preferred stock issued by the in stitution with respect to the obligation; plus (II) any amount that had been appropriated to the account in a previous year but had thereafter been offset by losses. (iii) LIMITATION.—An annual appropriation shall not be made to the extent that the appropriation would exceed the institution’s net income (as deter mined pursuant to generally accepted accounting prin ciples) in that year or to the extent that the appropria tion would cause the institution’s preferred stock to be impaired. (iv) USE.—The amount in the appropriated unallocated surplus account shall be unavailable to pay dividends or other allocations or distributions to shareholders or holders of participation certificates. The account shall be senior to all other unallocated surplus accounts but junior to all preferred and com mon stock for purposes of the application of operating losses. (v) PREFERRED STOCK.—The appropriations of sur plus by an institution shall not affect the treatment of its preferred stock (and of the appropriated VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00130 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 131 Sec. 6.26 FARM CREDIT ACT OF 1971 unallocated surplus) as equity for purposes of regu latory permanent capital requirements. (C) SYSTEMWIDE REPAYMENT.— (i) IN GENERAL.—In order to enable the Financial Assistance Corporation to repay the obligations issued to provide assistance under subsections (c) and (e) of section 410 of the Agricultural Credit Act of 1987 (12 U.S.C. 2011 note) and section 4.9A(c) of this Act, or issued to provide funds to cover the expenses of the Assistance Board or the Financial Assistance Corpora tion under sections 6.7(a) and 6.24, respectively, of this Act, each System bank shall pay to the Financial Assistance Corporation a proportion, as calculated by the Financial Assistance Corporation, of the obligation equal to— (I) the average accruing retail loan volume of the bank and its affiliated associations for the pre ceding 15 years; divided by (II) the average accruing retail loan volume of all such banks and their affiliated associations for the same period. (ii) EXPENSE ITEM.—The annual increase in the present value of the estimated obligation of each bank to the Financial Assistance Corporation under this subparagraph shall be recorded each year as an ex pense item, in accordance with generally accepted ac counting principles, on the books of the bank. (iii) PASS THROUGH.—A bank may (and, to the ex tent necessary to satisfy its obligations, shall) pass on (either directly, or indirectly through loan pricing or otherwise) all or part of the amount necessary to sat isfy the payment requirement to its affiliated direct lender associations based on proportionate average ac cruing retail loan volumes for the preceding 15 years, except that the bank shall remain primarily liable for the amount. (iv) BANKS LEAVING SYSTEM.—Any bank leaving the Farm Credit System pursuant to section 7.10 shall be required, under regulations of the Farm Credit Ad ministration, to pay to the Financial Assistance Cor poration the estimated present value of the payment required under this subparagraph had the bank re mained in the System. A liability to the Financial As sistance Corporation in this amount (calculated as if the bank had left the System on the date it was placed in liquidation) shall be recognized as a claim in favor of the Financial Assistance Corporation against the es tate of any bank undergoing liquidation. The obliga tions of other banks shall not be reduced in anticipa tion of any such recoveries from banks leaving the System or in liquidation, but the Financial Assistance Corporation shall apply the recoveries, when received, and all earnings on the recoveries, to reduce the other banks’ payment obligations, or, to the extent the re VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00131 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 132 Sec. 6.26 FARM CREDIT ACT OF 1971 coveries are received after the other banks have met their entire payment obligation, shall refund the re coveries, when received, to the other banks in propor tion to the other banks’ payments. (v) ASSOCIATIONS TERMINATING SYSTEM STATUS OR IN LIQUIDATION.—Any association leaving the Farm Credit System pursuant to section 7.10 shall be re quired, under regulations of the Farm Credit Adminis tration, to pay to its supervising bank a share, based on the association’s retail loan volume relative to the retail loan volume of the bank and its affiliated asso ciations had the association remained in the System, of the present value of the future payment obligation of its supervising bank. A liability to the bank in this amount (calculated as if the association had left the System on the date it was placed in liquidation) shall be recognized as a claim in favor of the bank against the estate of any association undergoing liquidation. (D) FUNDS FOR PAYMENTS.—Payments under subpara graphs (B) and (C) shall be made by each such institution from the funds of the institution or from funds raised by the institution through the issuance of debt obligations, which may be issued without a collateral requirement and without any guarantee by the Secretary of the Treasury. (2) REFINANCED OBLIGATIONS.—The refinanced obligations issued under paragraph (1) shall be solely the obligations of the institutions refinancing such, and sections 4.3 and 4.4 shall not apply to such obligations. (3) DEFAULTS.— (A) CERTAIN PRINCIPAL AND INTEREST OBLIGATIONS.— (i) PAYMENT BY CORPORATION.—If a System bank defaults on the payment of interest due under sub section (c) during the first 15 years after an obligation is issued under subsection (a), on the payment of prin cipal or interest due under subparagraphs (B) and (C) of section 6.9(e)(3), on the payment of principal due under paragraph (1)(C), or on the payment of an as sessment due under subsection (c)(5)(B), the Financial Assistance Corporation shall pay the amount due by the System bank out of the Trust Fund, and shall re cover the amount due from the defaulting System bank, and such amount shall be paid to the Trust Fund. (ii) PAYMENT BY INSURANCE FUND.—If the Finan cial Assistance Corporation has not recovered the full amount due from a defaulting bank by the end of the 12-month period beginning on the date of default, any uncollected amount shall be paid to the Trust Fund from the Insurance Fund established under section 5.60, to the full extent of funds available in the Insur ance Fund as of the date the Financial Assistance Cor poration notified the Farm Credit System Insurance Corporation of amounts due under this section. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00132 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 133 Sec. 6.26 FARM CREDIT ACT OF 1971 (iii) PAYMENT BY REMAINING INSTITUTIONS.—To the extent that the payment from the Insurance Fund is insufficient to reimburse the Trust Fund, the re maining balance shall be allocated to other System banks in accordance with the allocation mechanism applicable under this Act to the particular defaulted obligation. (B) PRINCIPAL OF BONDS ISSUED TO FUND PURCHASE OF PREFERRED STOCK.— (i) EVALUATION.—Not later than 90 days before the maturity of any obligation issued under subsection (a), the Farm Credit Administration shall complete an evaluation of the general financial condition of each System institution that issued preferred stock under section 6.27(a) with respect to such obligation to deter mine whether such System institution will be able to redeem such stock at par value on the maturity of the obligation, and remain a viable institution capable of providing credit to eligible borrowers at equitable and competitive interest rates. (ii) AVAILABILITY OF EVALUATION.—A copy of the evaluation required under clause (i) shall be furnished to the Secretary of the Treasury and the appropriate committees of Congress. (iii) REDEMPTION BY INSTITUTION; PURCHASE BY SECRETARY OF THE TREASURY.—If the Farm Credit Ad ministration determines, in consultation with the Sec retary of the Treasury, on the basis of the evaluation required under clause (i), that the redemption of such stock at par value would impair the other stock or eq uities of such institution or render such institution in capable of meeting its capital adequacy standards, the institution shall be prohibited from redeeming the pre ferred stock it issued under section 6.27 with respect to the maturing obligation. If the Farm Credit Admin istration determines, in consultation with the Sec retary of the Treasury, on the basis of the evaluation required under clause (i), that such institution will be able to redeem, in a timely manner and at par value, the preferred stock it issued under section 6.27 with respect to the maturing obligation, and remain a via ble and competitive institution, such institution shall have the option of redeeming or not redeeming such stock. If such institution is prohibited from redeeming or elects not to redeem such stock, the Financial As sistance Corporation shall withdraw funds from the Trust Fund in an amount equal to the par value of the preferred stock issued by such institution under sec tion 6.27 so as to enable the Financial Assistance Cor poration to pay the principal of the maturing obliga tion. Simultaneously with such withdrawal of funds from the Trust Fund, the Financial Assistance Cor poration shall transfer to the Insurance Fund an equal amount, at par value, of preferred stock of such insti VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00133 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 134 Sec. 6.26 FARM CREDIT ACT OF 1971 tution. To the extent that the Trust Fund is insuffi cient to enable the Financial Assistance Corporation to pay the full principal of the maturing obligation, the Insurance Fund shall be used by the Farm Credit Sys tem Insurance Corporation to purchase, at par value, the preferred stock issued by such institution under section 6.27(a) to enable the Financial Assistance Cor poration to pay the principal of the maturing obliga tion. To the extent that the Insurance Fund is insuffi cient to enable the Financial Assistance Corporation to pay the full principal of the maturing obligation, the Secretary of the Treasury shall purchase, at par value, the remaining quantity of the preferred stock issued by such institution to enable the Financial Assistance Corporation to make such full payment. For that pur pose, the Secretary of the Treasury may use, as a pub lic debt transaction, the proceeds from the sale of any securities issued under chapter 31 of title 31, United States Code. The purposes for which such securities may be issued under such chapter are extended to in clude such purchases of stock. Any preferred stock transferred to, or purchased by, the Farm Credit Sys tem Insurance Corporation under this clause shall be retired by the issuing institution at such times and under such terms and conditions as are agreed to be tween the Insurance Corporation and such institution. (C) RECOURSE BY OTHER SYSTEM BANKS.—A defaulting bank shall be liable to the remaining System banks for any amounts paid by the remaining banks under this paragraph. (4) PAYMENT BY UNITED STATES.— (A) INABILITY TO PAY.—Notwithstanding any other provision of this Act, if the Financial Assistance Corpora tion is unable to pay the principal or interest of any obliga tion issued under subsection (a) or section 6.9(e)(3)(A), the Secretary of the Treasury shall pay to the Financial As sistance Corporation the amount due which shall be used by the Financial Assistance Corporation to pay the obliga tion. (B) RECOVERY.— (i) CERTAIN PRINCIPAL AND INTEREST OBLIGA TIONS.—In each instance in which the Secretary of the Treasury is required to make a payment under sub paragraph (A) to the Financial Assistance Corporation as a result of a default made by a System bank on in terest due from such System bank under subsection (c), on the payment of principal or interest due under subparagraphs (B) and (C) of section 6.9(e)(3), on the payment of principal due under paragraph (1)(C), or on the payment of an assessment due under sub section (c)(5)(B), the Secretary of the Treasury shall recover the amount of the payments the Secretary made, with respect to each defaulting bank, from such defaulting bank. If the Secretary has not recovered the VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00134 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 135 Sec. 6.27 FARM CREDIT ACT OF 1971 full amount due from the defaulting bank by the end of the 12-month period beginning on the date of pay ment by the Secretary, the uncollected amount shall be paid to the Secretary from the Insurance Fund es tablished under section 5.60. (ii) PRINCIPAL OF BONDS ISSUED TO FUND PUR CHASE OF PREFERRED STOCK.—In each instance in which the Secretary of the Treasury is required under paragraph (3)(B)(iii) to purchase preferred stock issued by a System institution under section 6.27(a), the Farm Credit System Insurance Corporation shall use funds deposited in the Insurance Fund to repurchase, at par value, from the Secretary of the Treasury such stock required to be purchased under paragraph (3)(B)(iii) as funds become available for such repur chase. (iii) PRIORITY.—Notwithstanding any other provi sion of this Act except for section 5.60(c)(2)(B), during any year in which payments are due to the Secretary of the Treasury from the Insurance Fund under clause (i), or preferred stock held by the Secretary is due to be repurchased by the Insurance Fund under clause (ii), the funds in such Fund, and all funds deposited in such Fund during such year, shall be used first for the purposes specified in clauses (i) and (ii). (e) ADMINISTRATION.— (1) DEFINITION OF RETAIL LOAN VOLUME.—As used in this section, the term ‘‘retail loan volume’’ means all loans (as de fined in accordance with generally accepted accounting prin ciples) by a System bank or association, excluding loans by such a bank or association to another System institution. (2) CALCULATION OF AVERAGE ANNUAL LOAN VOLUMES.— For purposes of this section and section 6.9, average annual loan volumes shall be calculated using month-end balances. (3) EXCLUSION OF BANKS UNDERGOING LIQUIDATION.—For purposes of this section and section 6.9, the term ‘‘bank’’ shall not include a bank that had entered liquidation prior to the date of enactment of this subsection. SEC. 6.27. ø12 U.S.C. 2278b–7¿ PREFERRED STOCK. (a) ISSUANCE.— (1) IN GENERAL.—Each System institution that is certified under section 6.4 may issue a special class of preferred stock only in an amount, and subject to such terms and conditions, as authorized by the Assistance Board. (2) DIVIDENDS.— (A) IN GENERAL.—Except as provided in subparagraph (B), dividends shall not be payable on stock issued under this section. (B) EXCEPTION.—Stock issued under this section shall be issued under such terms and conditions as to enable the Secretary of the Treasury, with respect to any of such stock the Secretary purchases under section 6.26(d)(3)(B)(iii), and the Farm Credit System Insurance VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00135 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 136 Sec. 6.28 FARM CREDIT ACT OF 1971 Corporation, with respect to any of such stock that the In surance Corporation purchases or otherwise acquires under section 6.26(d)(3)(B)(iii) or section 6.26(d)(4)(B)(ii), to establish for such stock a stated dividend rate equal to the current market yield on outstanding, marketable obliga tions of the United States with maturities of 30 years, plus a premium to reflect the cost of capital for institutions in financial distress. (3) VOTING RIGHTS.—A holder of stock issued under this subsection shall have no voting rights with respect to the stock. (b) PURCHASE.—The Financial Assistance Corporation shall purchase shares of stock issued by certified System institutions under subsection (a) to the extent that the issuance of such stock is approved by the Assistance Board. SEC. 6.28. ø12 U.S.C. 2278b–8¿ PAYMENTS. (a) IN GENERAL.—Beginning in fiscal year 1989, the Secretary of the Treasury shall reimburse the Financial Assistance Corpora tion for any amounts such Corporation pays in interest charges under section 6.26(c) during fiscal year 1988, and thereafter the Secretary shall pay the Financial Assistance Corporation any amounts due from the Secretary to such Corporation under section 6.26(c). (b) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Secretary of the Treasury such sums on an annual basis as may be necessary to carry out this subtitle. SEC. 6.29. ø12 U.S.C. 2278b–9¿ ONE-TIME STOCK PURCHASE. (a) AMOUNT OF STOCK PURCHASE.— (1) IN GENERAL.—Except as provided in paragraphs (2) and (3), for the purpose of obtaining funds for the Trust Fund, each System institution shall purchase from the Financial Assist ance Corporation stock issued in accordance with section 6.23 in an amount equal to the amount by which the unallocated re tained earnings of the institution (after taking into account any funds received by the institution under section 6.9(c)) ex ceeds— (A) in the case of a System bank, 5 percent of assets; or (B) in the case of a production credit association or a Federal land bank association, 13 percent of assets. (2) REALLOCATION.—The district board of a district, subject to the unanimous consent of the bank and associations in the district that would be affected by the reallocation, may reallo cate the amount of stock required to be purchased by banks and associations in the district under paragraph (1) to equi tably reflect the ability of the banks and associations to pay, except that— (A) the total amount of stock purchased by banks and associations in the district under this paragraph shall equal the total amount of stock required to be purchased by the banks and associations under paragraph (1); and (B) the board may not impair the stock of an associa tion in carrying out this paragraph; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00136 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 137 Sec. 6.29 FARM CREDIT ACT OF 1971 (C) a district board’s authority to reallocate stock pur chases under this paragraph shall be limited to realloca tion among like associations of the amount of stock re quired to be purchased by such associations; reallocation of the amount of stock required to be purchased by produc tion credit associations among such associations and the district Federal intermediate credit bank; and reallocation of the amount of stock required to be purchased by Federal land bank associations among such associations and the district Federal land bank. Other reallocations than those enumerated above shall not be permitted. (3) PERIODIC PURCHASES.—(A) Notwithstanding any other provision of this section, the Financial Assistance Corporation shall establish a program under which System institutions shall purchase, as debt obligations are issued under section 6.26(a), stock of the Corporation in amounts described in this paragraph. (B) The program shall provide, with respect to each issuance of debt obligations under section 6.26(a), that each System institution originally required to purchase stock under paragraph (1), or the successor thereto, shall purchase Cor poration stock in an amount determined by multiplying the amount of stock such institution was originally required to purchase under that paragraph by a percentage equal to the percentage which the amount of the issuance bears to $4,000,000,000. (C) The Financial Assistance Corporation shall promptly rescind purchases of stock of the Corporation made under paragraph (1) or (2) by System institutions and refund to such institutions, or their successors, the purchase price for the stock, except that, with respect to each issuance of debt obliga tions that occurs before October 1, 1988, the Corporation shall deduct from any refund due any System institution, and re tain, the amount payable by such institution. (b) COMPUTATIONS.—For purposes of subsection (a), the unallocated retained earnings and assets of a System institution shall be computed in accordance with generally accepted account ing principles on the basis of the financial statement of the institu tion on December 31, 1986. (c) NOTICE.—(1) Within 15 days after the retirement of the ob ligations of the Capital Corporation under section 6.9— (A) the Financial Assistance Corporation shall notify each System institution of the amount of stock such institution is required to purchase under subsection (a); or (B) in the case of a district in which the district board has reallocated the stock purchase requirement in accordance with subsection (a)(2), the district board shall notify each System in stitution in the district of the amount of stock such institution is required to purchase under subsection (a). (2) Not later than 15 days before each issuance of debt obliga tions under section 6.26(a) occurring after September 30, 1988, the Financial Assistance Corporation shall notify each System institu tion required to purchase Corporation stock under subsection (a)(3) of the amount of the stock it is required to purchase. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00137 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 138 Sec. 6.30 FARM CREDIT ACT OF 1971 (d) INSTITUTION REQUIREMENTS AFTER NOTICE.—Within 15 days after a System institution is notified of the amounts due under subsection (c), the institution shall purchase from the Finan cial Assistance Corporation the amount of stock required to be pur chased by the institution under this section. No further stock pur chases, obligations, or assessments shall be required beyond that provided in section 6.26 and this section. (e) JURISDICTION OVER ACTIONS.—Notwithstanding any other provision of law, the United States district court for the District of Columbia shall have exclusive jurisdiction over any action brought under or arising out of this section. No suit or proceeding shall be maintained for the recovery of any amount of stock alleged to have been erroneously or illegally purchased, and no suit or proceeding shall be maintained to enjoin or otherwise prevent or impede the giving of notice or the purchase of stock required under this sec tion, unless the amount of stock required to be purchased under this section has been purchased and paid for in full. SEC. 6.30. ø12 U.S.C. 2278b–10¿ EXEMPTION FROM TAXATION. (a) ASSETS.—The Financial Assistance Corporation, and the capital, reserves, and surplus thereof, and the income derived therefrom, shall be exempt from Federal, State, municipal, and local taxation, except taxes on real estate held by the Financial As sistance Corporation to the same extent, according to its value, as other similar property held by other persons is taxed. (b) OBLIGATIONS.—The notes, bonds, debentures, and other ob ligations issued by the Financial Assistance Corporation shall be accorded the same tax treatment as System-wide obligations. SEC. 6.31. ø12 U.S.C. 2278b–11¿ TERMINATION. (a) FINANCIAL ASSISTANCE CORPORATION.—The Financial As sistance Corporation and the authority provided to such Corpora tion by this subtitle shall terminate on the complete discharge by the Financial Assistance Corporation of its responsibilities under section 6.9(e) and subsections (c) through (g) of section 6.26 with regard to repayments by System institutions, but in no event later than 2 years following the maturity and full payment of all debt obligations issued under section 6.26(a). (b) ACCOUNTS.—Simultaneously with the termination of the Fi nancial Assistance Corporation as provided in subsection (a), any funds in the accounts established under section 6.25 shall be trans ferred to the Insurance Fund established under section 5.60. TITLE VII—RESTRUCTURING OF SYSTEM INSTITUTIONS Subtitle A—Merger of Banks Within a District SEC. 7.0. ø12 U.S.C. 2279a¿ POWER TO MERGE. The banks within a district may merge into a single entity (hereinafter in this title referred to as a ‘‘merged bank’’) if the plan of merger is approved by— (1) the Farm Credit Administration Board; (2) the respective boards of directors of the banks involved; VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00138 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 139 Sec. 7.6 FARM CREDIT ACT OF 1971 (3) a majority of the stockholders of each bank voting, in person or by proxy, at a duly authorized stockholders’ meeting with each association entitled to cast a number of votes equal to the number of its voting stockholders; and (4) in the case of a bank for cooperatives, a majority of the total equity interests in such merging bank for cooperatives (including allocated, but not unallocated, surplus and reserves) held by those stockholders or subscribers to the guaranty fund of the bank voting. SEC. 7.1. ø12 U.S.C. 2279a–1¿ BOARD OF DIRECTORS. Each merged bank shall elect a board of directors of such num ber, for such term, in such manner, and with such qualifications, as may be required in its bylaws, except that at least one member shall be elected by other directors, which member shall not be a di rector, officer, employee, or stockholder of a System institution. SEC. 7.2. ø12 U.S.C. 2279a–2¿ POWERS OF MERGED BANKS. (a) IN GENERAL.—Except as otherwise provided in this title, a merged bank shall have all of the powers granted to, and shall be subject to all of the obligations imposed on, any of the constituent entities of the merged bank. (b) REGULATIONS.—The Farm Credit Administration shall issue regulations that establish the manner in which the powers and ob ligations of the banks that form the merged bank are consolidated, and to the extent necessary, reconciled in the merged bank. SEC. 7.3. ø12 U.S.C. 2279a–3¿ CAPITALIZATION. In accordance with section 4.3A, each merged bank shall pro vide, through bylaws and subject to Farm Credit Administration regulations, for the capitalization of the bank and the manner in which bank stock shall be issued, held transferred, and retired and bank earnings distributed. øSection 7.4 - Repealed by section 408 of P.L. 100–399¿ øSection 7.5 - Transferred to appear as section 3.29 by section 408 of P.L. 100–399¿ Subtitle B—Mergers, Transfers of Assets, and Powers of Associations Within a District Chapter 1—Transfers by Federal Land Banks to Federal Land Bank Associations SEC. 7.6. ø12 U.S.C. 2279b¿ TRANSFER OF LENDING AUTHORITY. (a) VOLUNTARY TRANSFERS.—A Federal land bank or a merged bank having a Federal land bank as one of its constituents, may transfer to a Federal land bank association, and the association may assume, the authority of the transferring bank in the terri torial area served by the association, to make and participate in long-term real estate mortgage loans under this Act if the transfer is approved by— (1) the Farm Credit Administration Board; (2) the Board of Directors of both institutions; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00139 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 140 Sec. 7.7 FARM CREDIT ACT OF 1971 8 Effective January 1, 2010, sec. 5407(a) of the Food, Conservation, and Energy Act of 2008, Public Law 102–246, 122 Stat. 1921, adds sec. 7.7. (3) a majority of the stockholders of the bank and of the association, in accordance with the voting provisions of sections 7.0 and 7.8, respectively. (b) DIRECT LOANS AND FINANCIAL ASSISTANCE.—After a trans fer described in subsection (a) or (d)— (1) the Federal land bank association shall possess all of the direct long-term real estate mortgage loan authority, for merly possessed by the transferring bank, in the territory served by the association; and (2) the bank may provide and extend financial assistance to, and discount for, or purchase from, the transferee Federal land bank association any note, draft, or other obligation with the endorsement or guarantee of the association, the proceeds of which have been advanced to persons eligible and for pur poses of financing by the association under subsection (a). (c) REGULATIONS.—The Farm Credit Administration shall issue regulations that establish the manner in which the powers and ob ligations of the banks that make transfers are consolidated and, to the extent necessary, reconciled in the association referred to in subsection (a). (d) MANDATORY TRANSFER.—On the merger of one or more pro duction credit associations with one or more Federal land bank as sociations, the bank supervising the Federal land bank association shall transfer all of the direct lending authority of the bank in the territory served by such Federal land bank association to such merged association. SEC. 7.7. ø12 U.S.C. 2279c¿ EQUALIZATION OF LOAN-MAKING POWERS OF CERTAIN DISTRICT ASSOCIATIONS. 8 (a) EQUALIZATION OF LOAN-MAKING POWERS.— (1) IN GENERAL.— (A) FEDERAL LAND BANK ASSOCIATIONS.—Subject to paragraph (2), any association that owns a Federal land bank association authorized as of January 1, 2007, to make long-term loans under title I in its chartered terri tory within the geographic area described in subsection (b) may make short- and intermediate-term loans and other wise operate as a production credit association under title II within that same chartered territory. (B) PRODUCTION CREDIT ASSOCIATIONS.—Subject to paragraph (2), any association that under its charter has title I lending authority and that owns a production credit association authorized as of January 1, 2007, to make short- and intermediate-term loans under title II in the ge ographic area described in subsection (b) may make long term loans and otherwise operate, directly or through a subsidiary association, as a Federal land bank association or Federal land credit association under title I in the geo graphic area. (C) FARM CREDIT BANK.—Notwithstanding section 5.17(a), the Farm Credit Bank with which any association had a written financing agreement as of January 1, 2007, VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00140 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 141 Sec. 7.8 FARM CREDIT ACT OF 1971 may make loans and extend other comparable financial as sistance with respect to, and may purchase, any loans made under the new authority provided under subpara graph (A) or (B) by an association exercising such author ity. (2) REQUIRED APPROVALS.—An association may exercise the additional authority provided for in paragraph (1) only after the exercise of the authority is approved by— (A) the board of directors of the association; and (B) a majority of the voting stockholders of the asso ciation (or, if the association is a subsidiary of another as sociation, the voting stockholders of the parent association) voting, in person or by proxy, at a duly authorized meeting of stockholders in accordance with the process described in section 7.11. (b) APPLICABILITY.—This section applies only to associations the chartered territory of which was within the geographic area served by the Federal intermediate credit bank immediately prior to its merger with a Farm Credit Bank under section 410(e)(1) of the Agricultural Credit Act of 1987 (12 U.S.C. 2011 note; Public Law 100–233). Chapter 2—Merger of Like and Unlike Associations SEC. 7.8. ø12 U.S.C. 2279c–1¿ MERGER OF ASSOCIATIONS. (a) IN GENERAL.—Two or more associations within the same district, whether or not organized under the same title of this Act, may merge into a single entity (hereinafter in this title referred to as a ‘‘merged association’’) if the plan of merger is approved by— (1) the Farm Credit Administration Board; (2) the boards of directors of the associations; (3) a majority of the shareholders of each association vot ing, in person or by proxy, at a duly authorized stockholders’ meeting; and (4) the Farm Credit Bank. (b) POWERS, OBLIGATIONS, AND CONSOLIDATION.— (1) POWERS AND OBLIGATIONS.—Except as otherwise pro vided by this title, a merged association shall— (A) possess all powers granted under this Act to the associations forming the merged association; and (B) be subject to all of the obligations imposed under this Act on the associations forming the merged associa tion. (2) CONSOLIDATION.—The Farm Credit Administration shall issue regulations that establish the manner in which the powers and obligations of the associations that form the merged association are consolidated and, to the extent nec essary, reconciled in the merged association. (c) STOCK ISSUANCE.— (1) PLAN OF MERGER.—Subject to section 4.3A, the number of shares of capital stock issued by a merged association to the stockholders of any association forming such merged associa tion, and the rights and privileges of such shares (including voting power, preferences on liquidation, and the right to divi VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00141 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 142 Sec. 7.9 FARM CREDIT ACT OF 1971 dends), shall be determined by the plan of merger adopted by the merged associations. (2) CAPITALIZATION.—In accordance with section 4.3A, each merged association shall provide, through bylaws and subject to Farm Credit Administration regulations, for the capitaliza tion of the association and the manner in which association stock shall be issued, held, transferred, and retired, and asso ciation earnings shall be distributed. Chapter 3—Reconsideration SEC. 7.9. ø12 U.S.C. 2279c–2¿ RECONSIDERATION. (a) PERIOD.—A stockholder vote in favor of— (1) the merger of districts under this Act; (2) the merger of banks within a district under section 7.0; (3) the transfer of the lending authority of a Federal land bank or a merged bank having a Federal land bank as one of its constituents, under section 7.6 or 7.13; (4) the merger of two or more associations under section 7.8; (5) the termination of the status of an institution as a Sys tem institution under section 7.10; or (6) the merger of similar banks under section 7.12; shall not take effect except in accordance with subsection (b). (b) RECONSIDERATION.— (1) NOTICE.—Not later than 30 days after a stockholder vote in favor of any of the actions described in subsection (a), the officer or employee that records such vote shall ensure that all stockholders of the voting entity receive notice of the final results of the vote. (2) EFFECTIVE DATE.—A voluntary merger, transfer, or ter mination that is approved by a vote of the stockholders of two or more banks or associations shall not take effect until the ex piration of 30 days after the date on which the stockholders of such banks or associations are notified of the final result of the vote in accordance with paragraph (1). (3) PETITION FILED.—If a petition for reconsideration of a merger, transfer, or termination vote, signed by at least 15 per cent of the stockholders of one or more of the affected banks or associations, is presented to the Farm Credit Administration within 30 days after the date of the notification required under paragraph (1)— (A) a voluntary merger, transfer, or termination shall not take effect until the expiration of 60 days after the date on which the stockholders were notified of the final result of the vote; and (B) a special meeting of the stockholders of the af fected banks or associations shall be held during the pe riod referred to in subparagraph (A) to reconsider the vote. (4) VOTE ON RECONSIDERATION.—If a majority of stock holders of any one of the affected banks or associations voting, in person or by written proxy, at a duly authorized stock holders’ meeting, vote against the proposed merger, transfer, or termination, such action shall not take place. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00142 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 143 Sec. 7.9 FARM CREDIT ACT OF 1971 (5) FAILURE TO FILE PETITION.—If a petition for reconsider ation of such vote is either not filed prior to the 60th day after the vote or, if timely filed, is not signed by at least 15 percent of the stockholders, the merger, transfer, or termination shall become effective in accordance with the plan of merger, trans fer, or termination. (c) SPECIAL RECONSIDERATION.— (1) ISSUANCE OF REGULATIONS.—Notwithstanding any other provision of this Act, the Farm Credit Administration shall issue regulations under which the stockholders of any as sociation that voluntarily merged with one or more associa tions after December 23, 1985, and before the date of the en actment of this section, may petition for the opportunity to or ganize as a separate association. (2) REQUIREMENTS.—The regulations issued by the Farm Credit Administration shall require that— (A) the petition be filed within 1 year after the date of the implementation of such regulations; (B) the petition be signed by at least 15 percent of the stockholders of any one of the associations that merged during the period; (C) the petition describe the territory in which the pro posed separate association will operate; (D) if the petition is approved— (i) the loans of the members of the new association will be transferred from the current association to such new association; (ii) the stock, participation certificates, and other similar equities of the current association held by members of the new association will be retired at book value and the proceeds of such will be transferred to the new association, and an equivalent amount of stock, participation certificates, and other similar equi ties will be issued to the members by the new associa tion; and (iii) the other assets of the current association will be distributed equitably among the current association and any resulting new association. (3) NOTIFICATION.— (A) IN GENERAL.—Not later than 30 days after the fil ing of the petition for organization, the current association shall notify its stockholders that a petition to establish the separate association has been filed. (B) CONTENTS.—The notification required under this paragraph shall contain— (i) the date of a special stockholders’ meeting to consider the petition for organization; and (ii) an enumerated statement of the anticipated benefits and the potential disadvantages to such stock holders if the new association is established. (C) FCA APPROVAL.— (i) IN GENERAL.—All notifications under this para graph shall be submitted to the Farm Credit Adminis VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00143 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 144 Sec. 7.10 FARM CREDIT ACT OF 1971 tration Board for approval prior to being distributed to the stockholders. (ii) AMENDING NOTIFICATION.—The Farm Credit Administration Board shall require that, prior to the distribution of the notification to the stockholders, the notification be amended as determined necessary by the Board to provide accurate information to the stock holders that will enable such stockholders to make an informed decision as to the advisability of establishing a new association. (D) SPECIAL STOCKHOLDERS’ MEETING.— (i) TIMING OF MEETING.—The special stockholders’ meeting to consider the petition shall be held within 60 days after the filing of the petition. (ii) APPROVAL.—If, at the special stockholders’ meeting, a majority of the stockholders of the current association who would be served by the new associa tion approve, by voting in person or by proxy, the es tablishment of the separate association, the Farm Credit Administration shall, within 30 days of such vote, issue a charter to the new association and amend the charter of the current association to reflect the ter ritory to be served by the new association. Chapter 4—Termination and Dissolution of Institutions SEC. 7.10. ø12 U.S.C. 2279d¿ TERMINATION OF SYSTEM INSTITUTION STATUS. (a) CONDITIONS.—A System institution may terminate the sta tus of the institution as a System institution if— (1) the institution provides written notice to the Farm Credit Administration Board not later than 90 days prior to the proposed termination date; (2) the termination is approved by the Farm Credit Admin istration Board; (3) the appropriate Federal or State authority grants ap proval to charter the institution as a bank, savings and loan association, or other financial institution; (4) the institution pays to the Farm Credit Assistance Fund, as created under section 6.25, if the termination is prior to January 1, 1992, or pays to the Farm Credit Insurance Fund, if the termination is after such date, the amount by which the total capital of the institution exceeds, 6 percent of the assets; (5) the institution pays or makes adequate provision for payment of all outstanding debt obligations of the institution; (6) the termination is approved by a majority of the stock holders of the institution voting, in person or by written proxy, at a duly authorized stockholders’ meeting, held prior to giving notice to the Farm Credit Administration Board; and (7) the institution meets such other conditions as the Farm Credit Administration Board by regulation considers appro priate. (b) EFFECT.—On termination of its status as a System institu tion— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00144 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 145 Sec. 7.12 FARM CREDIT ACT OF 1971 (1) the Farm Credit Administration Board shall revoke the charter of the institution; and (2) the institution shall no longer be an instrumentality of the United States under this Act. Subtitle C—Approval of Disclosure Information and Issuance of Charters by the Farm Credit Administration Board SEC. 7.11. ø12 U.S.C. 2279e¿ APPROVAL OF DISCLOSURE INFORMATION AND ISSUANCE OF CHARTERS. (a) DISCLOSURE OF INFORMATION.— (1) APPROVAL OF PLAN.—With respect to any plan of merg er, transfer of lending authority, dissolution, or termination, prior to submission to the voters (voting stockholders and, where required, contributors to guaranty funds) of the institu tions involved, such plan shall be submitted to the Farm Cred it Administration Board, together with all information that is to be distributed to the voters with respect to the contemplated action, including an enumerated statement of the anticipated benefits and potential disadvantages of such action. (2) NOTICE OF APPROVAL.—On notification that the Farm Credit Administration Board has approved such plan for sub mission to the stockholders, or after 60 days of no action on the plan by the Board, the submitting institutions may submit the plan, together with the disclosure information, to the voters for the prescribed vote. (b) NOTICE OF REASONS FOR DISAPPROVAL.—If the Farm Credit Administration Board disapproves the plan for submission to the stockholders, notification to the submitting institutions shall speci fy the reasons for the determination by the Board. If such plan is determined to be inadequate, it shall not be submitted to the voters for a vote. (c) FEDERAL CHARTER.—Each plan of merger or transfer of lending authority may include a proposed new or revised Federal charter for the merged or transferee entity. The Farm Credit Ad ministration Board shall issue such charter on the approval of the plan, as prescribed in this title, unless the Board determines that the charter submitted is not consistent with this Act. Subtitle D—Mergers of Like Entities SEC. 7.12. ø12 U.S.C. 2279f¿ MERGER OF SIMILAR BANKS. (a) IN GENERAL.—Banks organized or operating under this Act may merge with banks in other districts operating under the same title if the plan of merger is approved by— (1) the Farm Credit Administration Board; (2) the respective Boards of Directors of the banks in volved; (3) a majority vote of the stockholders of each bank voting, in person or by proxy, at a duly authorized stockholders’ meet ing, with each association having a number of votes equal to the number of such association’s voting stockholders; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00145 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 146 Sec. 7.13 FARM CREDIT ACT OF 1971 (4) in the case of a bank for cooperatives, a majority of the total equity interests in such merging bank for cooperatives (including allocated, but not unallocated, surplus and reserves) held by those stockholders or subscribers to the guaranty fund of the bank voting. (b) POWERS AND CAPITALIZATION.—Sections 7.2 and 7.3 shall apply to banks merged under this section. (c) BOARD OF DIRECTORS.— (1) IN GENERAL.—After a merger under subsection (a), a board of directors shall be created for the resulting bank. (2) COMPOSITION.—The board shall be composed of— (A) two directors elected by each of the bank boards, with at least one such director from each bank being elect ed by the eligible stockholders of, or subscribers to, the guaranty fund of the merging banks; and (B) one outside director elected by the directors elected under subparagraph (A). (3) OUTSIDE DIRECTOR.— (A) QUALIFICATIONS.—The outside director elected under paragraph (2)(B) shall be experienced in financial services and credit, and within the 2-year period prior to such election, shall not have been a borrower from, share holder in, or director, officer, employee, or agent of any in stitution of the Farm Credit System. (B) FAILURE TO ELECT.—If the other members of the board fail to elect an outside director, the Farm Credit Ad ministration Board shall appoint a qualified person to serve on the board of directors until such member is so elected. (4) BYLAWS.—Notwithstanding paragraph (2), the bylaws of the merged bank may, with the approval of the Farm Credit Administration, provide for a different number of directors to be selected in a different manner, except that the bylaws shall provide for at least one outside director. SEC. 7.13. ø12 U.S.C. 2279f–1¿ MERGER OF SIMILAR ASSOCIATIONS. (a) IN GENERAL.—Associations may voluntarily merge with other like associations if the plan of merger is approved by— (1) the Farm Credit Administration Board; (2) the respective Boards of Directors of the associations involved; (3) a majority vote of the stockholders of each association voting, in person or by proxy, at a duly authorized stock holders’ meeting; and (4) the Farm Credit Banks involved. (b) PROCEDURES.—The provisions of subsections (b) and (c) of section 7.8 shall apply to associations merged under this section. Subtitle E—Taxation of Merger Transactions SEC. 7.14. ø12 U.S.C. 2279g¿ TRANSACTIONS TO ACCOMPLISH MERGERS EXEMPT FROM CERTAIN STATE TAXES. No State or political subdivision thereof may treat the merger or consolidation of two or more institutions of the Farm Credit Sys VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00146 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 147 Sec. 8.0 FARM CREDIT ACT OF 1971 tem under this title or title IV of the Agricultural Credit Act of 1987 as resulting in a change of ownership of any property owned by any of such merging or consolidating institutions, for purposes of any law of such State or political subdivision providing for reas sessment of property on the occurrence of a change of ownership or imposing a tax on the ownership or transfer of property. TITLE VIII—AGRICULTURAL MORTGAGE SECONDARY MARKET SEC. 8.0. ø12 U.S.C. 2279aa¿ DEFINITIONS. For purposes of this title: (1) AGRICULTURAL REAL ESTATE.—The term ‘‘agricultural real estate’’ means— (A) a parcel or parcels of land, or a building or struc ture affixed to the parcel or parcels, that— (i) is used for the production of one or more agri cultural commodities or products; and (ii) consists of a minimum acreage or is used in producing minimum annual receipts, as determined by the Corporation; or (B) a principal residence that is a single family, mod erate-priced residential dwelling located in a rural area, excluding— (i) any community having a population in excess of 2,500 inhabitants; and (ii) any dwelling, excluding the land to which the dwelling is affixed, with a value exceeding $100,000 (as adjusted for inflation). (2) BOARD.—The term ‘‘Board’’ means— (A) the interim board of directors established in sec tion 8.2(a); and (B) the permanent board of directors established in section 8.2(b); as the case may be. (3) CERTIFIED FACILITY.—The term ‘‘certified facility’’ means— (A) an agricultural mortgage marketing facility that is certified under section 8.5; or (B) the Corporation and any affiliate thereof. (4) CORPORATION.—The term ‘‘Corporation’’ means the Federal Agricultural Mortgage Corporation established in sec tion 8.1. (5) GUARANTEE.—The term ‘‘guarantee’’ means the guar antee of timely payment of the principal and interest on securi ties representing interests in, or obligations backed by, pools of qualified loans, in accordance with this title. (6) INTERIM BOARD.—The term ‘‘interim board’’ means the interim board of directors established in section 8.2(a). (7) ORIGINATOR.—The term ‘‘originator’’ means any Farm Credit System institution, bank, insurance company, business and industrial development company, savings and loan associa tion, association of agricultural producers, agricultural coopera VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00147 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 148 Sec. 8.0 FARM CREDIT ACT OF 1971 tive, commercial finance company, trust company, credit union, or other entity that originates and services agricultural mort gage loans. (8) PERMANENT BOARD.—The term ‘‘permanent board’’ means the permanent board of directors established in section 8.2(b). (9) QUALIFIED LOAN.—The term ‘‘qualified loan’’ means an obligation— (A)(i) that is secured by a fee-simple or leasehold mort gage with status as a first lien, on agricultural real estate located in the United States that is not subject to any legal or equitable claims deriving from a preceding fee-simple or leasehold mortgage; (ii) of— (I) a citizen or national of the United States or an alien lawfully admitted for permanent residence in the United States; or (II) a private corporation or partnership whose members, stockholders, or partners holding a majority interest in the corporation or partnership are individ uals described in subclause (I); and (iii) of a person, corporation, or partnership that has training or farming experience that, under criteria estab lished by the Corporation, is sufficient to ensure a reason able likelihood that the loan will be repaid according to its terms; (B) that is the portion of a loan guaranteed by the Sec retary of Agriculture pursuant to the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.), except that— (i) subsections (b) through (d) of section 8.6, and sections 8.8 and 8.9, shall not apply to the portion of a loan guaranteed by the Secretary or to an obligation, pool, or security representing an interest in or obliga tion backed by a pool of obligations relating to the por tion of a loan guaranteed by the Secretary; and (ii) the portion of a loan guaranteed by the Sec retary shall be considered to meet all standards for qualified loans for all purposes under this Act; or (C) that is a loan, or an interest in a loan, for an elec tric or telephone facility by a cooperative lender to a bor rower that has received, or is eligible to receive, a loan under the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.). (10) STATE.—The term ‘‘State’’ has the meaning given such term in section 5.51. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00148 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 149 Sec. 8.2 FARM CREDIT ACT OF 1971 Subtitle A—Establishment and Activities of Federal Agricultural Mortgage Corpora tion SEC. 8.1. ø12 U.S.C. 2279aa–1¿ FEDERAL AGRICULTURAL MORTGAGE CORPORATION. (a) ESTABLISHMENT.— (1) IN GENERAL.—There is hereby established a corporation to be known as the Federal Agricultural Mortgage Corporation, which shall be a federally chartered instrumentality of the United States. (2) INSTITUTION WITHIN FARM CREDIT SYSTEM.—The Cor poration shall be an institution of the Farm Credit System. (3) LIABILITY.— (A) CORPORATION.—The Corporation shall not be liable for any debt or obligation of any other institution of the Farm Credit System. (B) SYSTEM INSTITUTIONS.—The Farm Credit System and System institutions (other than the Corporation) shall not be liable for any debt or obligation of the Corporation. (b) DUTIES.—The Corporation shall— (1) in consultation with originators, develop uniform un derwriting, security appraisal, and repayment standards for qualified loans; (2) determine the eligibility of agricultural mortgage mar keting facilities to contract with the Corporation for the provi sion of guarantees for specific mortgage pools; (3) provide guarantees for the timely repayment of prin cipal and interest on securities representing interests in, or ob ligations backed by, pools of qualified loans; and (4) purchase qualified loans and issue securities rep resenting interests in, or obligations backed by, the qualified loans, guaranteed for the timely repayment of principal and in terest. SEC. 8.2. ø12 U.S.C. 2279aa–2¿ BOARD OF DIRECTORS. (a) INTERIM BOARD.— (1) NUMBER AND APPOINTMENT.—Until the permanent board of directors established in subsection (b) first meets with a quorum of its members present, the Corporation shall be under the management of an interim board of directors com posed of 9 members appointed by the President within 90 days after the date of the enactment of this title as follows: (A) 3 members appointed from among persons who are representatives of banks, other financial institutions or en tities, and insurance companies. (B) 3 members appointed from among persons who are representatives of the Farm Credit System institutions. (C) 2 members appointed from among persons who are farmers or ranchers who are not serving, and have not served, as directors or officers of any financial institution or entity, of which not more than 1 may be a stockholder of any Farm Credit System institution. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00149 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 150 Sec. 8.2 FARM CREDIT ACT OF 1971 (D) 1 member appointed from among persons who rep resent the interests of the general public and are not serv ing, and have not served, as directors or officers of any fi nancial institution or entity. (2) POLITICAL AFFILIATION.—Not more than 5 members of the interim board shall be of the same political party. (3) VACANCY.—A vacancy in the interim board shall be filled in the manner in which the original appointment was made. (4) CONTINUATION OF MEMBERSHIP.—If— (A) any member of the interim board who was ap pointed to such board from among persons who are rep resentatives of banks, other financial institutions or enti ties, insurance companies, or Farm Credit System institu tions ceases to be such a representative; or (B) any member who was appointed from among per sons who are not or have not been directors or officers of any financial institution or entity becomes a director or an officer of any financial institution or entity; such member may continue as a member for not longer than the 45-day period beginning on the date such member ceases to be such a representative or becomes such a director or offi cer, as the case may be. (5) TERMS.—The members of the interim board shall be ap pointed for the life of such board. (6) QUORUM.—5 members of the interim board shall con stitute a quorum. (7) CHAIRPERSON.—The President shall designate 1 of the members of the interim board as the chairperson of the interim board. (8) MEETINGS.—The interim board shall meet at the call of the chairperson or a majority of its members. (9) VOTING COMMON STOCK.— (A) INITIAL OFFERING.—Upon the appointment of suffi cient members of the interim board to convene a meeting with a quorum present, the interim board shall arrange for an initial offering of common stock and shall take what ever other actions are necessary to proceed with the oper ations of the Corporation. (B) PURCHASERS.—Subject to subparagraph (C), the voting common stock shall be offered to banks, other finan cial entities, insurance companies, and System institutions under such terms and conditions as the interim board may adopt. (C) DISTRIBUTION.—The voting stock shall be fairly and broadly offered to ensure that no institution or institu tions acquire a disproportionate amount of the total amount of voting common stock outstanding of a class and that capital contributions and issuances of voting common stock for the contributions are fairly distributed between entities eligible to hold class A and class B stock, as pro vided under section 8.4. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00150 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 151 Sec. 8.2 FARM CREDIT ACT OF 1971 (10) TERMINATION.—The interim board shall terminate when the permanent board of directors established in sub section (b) first meets with a quorum present. (b) PERMANENT BOARD.— (1) ESTABLISHMENT.—Immediately after the date that banks, other financial institutions or entities, insurance compa nies, and System institutions have subscribed and fully paid for at least $20,000,000 of common stock of the Corporation, the Corporation shall arrange for the election and appointment of a permanent board of directors. After the termination of the interim board, the Corporation shall be under the management of the permanent board. (2) COMPOSITION.—The permanent board shall consist of 15 members, of which— (A) 5 members shall be elected by holders of common stock that are insurance companies, banks, or other finan cial institutions or entities; (B) 5 members shall be elected by holders of common stock that are Farm Credit System institutions; and (C) 5 members shall be appointed by the President, by and with the advice and consent of the Senate— (i) which members shall not be, or have been, offi cers or directors of any financial institutions or enti ties; (ii) which members shall be representatives of the general public; (iii) of which members not more than 3 shall be members of the same political party; and (iv) of which members at least 2 shall be experi enced in farming or ranching. (3) PRESIDENTIAL APPOINTEES.—The President shall ap point the members of the permanent board referred to in para graph (2)(C) not later than the later of— (A) the date referred to in paragraph (1); or (B) the expiration of the 270-day period beginning on the date of the enactment of this title. (4) VACANCY.— (A) ELECTED MEMBERS.—Subject to paragraph (6), a vacancy among the members elected to the permanent board in the manner described in subparagraph (A) or (B) of paragraph (2) shall be filled by the permanent board from among persons eligible for election to the position for which the vacancy exists. (B) APPOINTED MEMBERS.—A vacancy among the mem bers appointed to the permanent board under paragraph (2)(C) shall be filled in the manner in which the original appointment was made. (5) CONTINUATION OF MEMBERSHIP.—If— (A) any member of the permanent board who was ap pointed or elected to the permanent board from among per sons who are representatives of banks, other financial in stitutions or entities, insurance companies, or Farm Credit System institutions ceases to be such a representative; or VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00151 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 152 Sec. 8.3 FARM CREDIT ACT OF 1971 (B) any member who was appointed from persons who are not or have not been directors or officers of any finan cial institution or entity becomes a director or an officer of any financial institution or entity; such member may continue as a member for not longer than the 45-day period beginning on the date such member ceases to be such a representative, officer, or employee or becomes such a director or officer, as the case may be. (6) TERMS.— (A) APPOINTED MEMBERS.—The members appointed by the President shall serve at the pleasure of the President. (B) ELECTED MEMBERS.—The members elected under subparagraphs (A) and (B) of subsection (b)(2) shall each be elected annually for a term ending on the date of the next annual meeting of the common stockholders of the Corporation and shall serve until their successors are elected and qualified. Any seat on the permanent board that becomes vacant after the annual election of the direc tors shall be filled by the members of the permanent board from the same category of directors, but only for the unex pired portion of the term. (C) VACANCY APPOINTMENT.—Any member appointed to fill a vacancy occurring before the expiration of the term for which the predecessor of the member was appointed shall be appointed only for the remainder of such term. (D) SERVICE AFTER EXPIRATION OF TERM.—A member may serve after the expiration of the term of the member until the successor of the member has taken office. (7) QUORUM.—8 members of the permanent board shall constitute a quorum. (8) NO ADDITIONAL PAY FOR FEDERAL OFFICERS OR EMPLOY EES.—Members of the permanent board who are fulltime offi cers or employees of the United States shall receive no addi tional pay by reason of service on the permanent board. (9) CHAIRPERSON.—The President shall designate 1 of the members of the permanent board who are appointed by the President as the chairperson of the permanent board. (10) MEETINGS.—The permanent board shall meet at the call of the chairperson or a majority of its members. (c) OFFICERS AND STAFF.—The Board may appoint, employ, fix the pay of, and provide other allowances and benefits for such offi cers and employees of the Corporation as the Board determines to be appropriate. SEC. 8.3. ø12 U.S.C. 2279aa–3¿ POWERS AND DUTIES OF CORPORATION AND BOARD. (a) GUARANTEES.—After the Board has been duly constituted, subject to the other provisions of this title and other commitments and requirements established pursuant to law, the Corporation may provide guarantees on terms and conditions determined by the Corporation of securities issued on the security of, or in participa tion in, pooled interests in qualified loans. (b) DUTIES OF THE BOARD.— (1) IN GENERAL.—The Board shall— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00152 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 153 Sec. 8.3 FARM CREDIT ACT OF 1971 (A) determine the general policies that shall govern the operations of the Corporation; (B) select, appoint, and determine the compensation of qualified persons to fill such offices as may be provided for in the bylaws of the Corporation; and (C) assign to such persons such executive functions, powers, and duties as may be prescribed by the bylaws of the Corporation or by the Board. (2) EXECUTIVE OFFICERS AND FUNCTIONS.—The persons elected or appointed under paragraph (1)(B) shall be the execu tive officers of the Corporation and shall discharge the execu tive functions, powers, and duties of the Corporation. (c) POWERS OF THE CORPORATION.—The Corporation shall be a body corporate and shall have the following powers: (1) To operate under the direction of its Board. (2) To issue stock in the manner provided in section 8.4. (3) To adopt, alter, and use a corporate seal, which shall be judicially noted. (4) To provide for a president, 1 or more vice presidents, secretary, treasurer, and such other officers, employees, and agents, as may be necessary, define their duties and compensa tion levels, all without regard to title 5, United States Code, and require surety bonds or make other provisions against losses occasioned by acts of such persons. (5) To provide guarantees in the manner provided under section 8.6. (6) To have succession until dissolved by a law enacted by the Congress. (7) To prescribe bylaws, through the Board, not incon sistent with law, that shall provide for— (A) the classes of the stock of the Corporation; and (B) the manner in which— (i) the stock shall be issued, transferred, and re tired; (ii) the officers, employees, and agents of the Cor poration are selected; (iii) the property of the Corporation is acquired, held, and transferred; (iv) the commitments and other financial assist ance of the Corporation are made; (v) the general business of the Corporation is con ducted; and (vi) the privileges granted by law to the Corpora tion are exercised and enjoyed; (8) To prescribe such standards as may be necessary to carry out this title. (9) To enter into contracts and make payments with re spect to the contracts. (10) To sue and be sued in its corporate capacity and to complain and defend in any action brought by or against the Corporation in any State or Federal court of competent juris diction. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00153 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 154 Sec. 8.4 FARM CREDIT ACT OF 1971 9 Section 105(1) of the Farm Credit System Reform Act of 1996 (P.L. 104–105) attempted to amend section 8.3(d) by striking ‘‘may act as depositories for, or’’ and inserting ‘‘shall act as de positories for, and’’. The amendment was not executed because the phrase intended to be strick en does not appear. (11) To make and perform contracts, agreements, and com mitments with persons and entities both inside and outside of the Farm Credit System. (12) To acquire, hold, lease, mortgage or dispose of, at pub lic or private sale, real and personal property, purchase or sell any securities or obligations, and otherwise exercise all the usual incidents of ownership of property necessary and conven ient to the business of the Corporation. (13) To purchase, hold, sell, or assign a qualified loan, to issue a guaranteed security, representing an interest in, or an obligation backed by, the qualified loan, and to perform all the functions and responsibilities of an agricultural mortgage mar keting facility operating as a certified facility under this title. (14) To establish, acquire, and maintain affiliates (as such term is defined in section 8.11(e)) under applicable State laws to carry out any activities that otherwise would be performed directly by the Corporation under this title. (15) To exercise such other incidental powers as are nec essary to carry out the powers, duties, and functions of the Corporation in accordance with this title. (d) FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL AGENTS.—The Federal Reserve banks may act as depositaries for, or 9 as fiscal agents or custodians of, the Corporation. (e) ACCESS TO BOOK-ENTRY SYSTEM.—The Corporation shall have access to the book-entry system of the Federal Reserve Sys tem. SEC. 8.4. ø12 U.S.C. 2279aa–4¿ STOCK ISSUANCE. (a) VOTING COMMON STOCK.— (1) ISSUE.—The Corporation shall issue voting common stock having such par value as may be fixed by the Board from time to time. Each share of voting common stock shall be enti tled to one vote with rights of cumulative voting at all elections of directors. Voting shall be by classes as described in section 8.2(a)(9). The stock shall be divided into two classes with the same par value per share. Class A stock may be held only by entities that are not Farm Credit System institutions and that are entitled to vote for directors specified in section 8.2(b)(2)(A), including national banking associations (which shall be allowed to purchase and hold such stock). Class B stock may be held only by Farm Credit System institutions that are entitled to vote for directors specified in section 8.2(b)(2)(B). (2) LIMITATION ON ISSUE.—After the date the permanent board first meets with a quorum of its members present, voting common stock of the Corporation may be issued only to origi nators and certified facilities. (3) AUTHORITY OF BOARD TO ESTABLISH TERMS AND PROCE DURES.—The Board shall adopt such terms, conditions, and procedures with regard to the issue of stock under this section VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00154 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 155 Sec. 8.4 FARM CREDIT ACT OF 1971 as may be necessary, including the establishment of a max imum amount limitation on the number of shares of voting common stock that may be outstanding at any time. (4) TRANSFERABILITY.—Subject to such limitations as the Board may impose, any share of any class of voting common stock issued under this section shall be transferable among the institutions or entities to which shares of such class of common stock may be offered under paragraph (1), except that, as to the Corporation, such shares shall be transferable only on the books of the Corporation. (5) MAXIMUM NUMBER OF SHARES.—No stockholder, other than a holder of class B stock, may own, directly or indirectly, more than 33 percent of the outstanding shares of such class of the voting common stock of the Corporation. (b) REQUIRED CAPITAL CONTRIBUTIONS.— (1) IN GENERAL.—The Corporation may require each origi nator and each certified facility to make, or commit to make, such nonrefundable capital contributions to the Corporation as are reasonable and necessary to meet the administrative ex penses of the Corporation. (2) STOCK ISSUED AS CONSIDERATION FOR CONTRIBUTION.— The Corporation, from time to time, shall issue to each origi nator or certified facility voting common stock evidencing any capital contributions made pursuant to this subsection. (c) DIVIDENDS.— (1) IN GENERAL.—Such dividends as may be declared by the Board, in the discretion of the Board, shall be paid by the Corporation to the holders of the voting common stock of the Corporation pro rata based on the total number of shares of both classes of stock outstanding. (2) RESERVES REQUIREMENT.—No dividend may be declared or paid by the Board under this section unless the Board deter mines that adequate provision has been made for the reserve required under section 8.10(c)(1). (3) DIVIDENDS PROHIBITED WHILE OBLIGATIONS ARE OUT STANDING.—No dividend may be declared or paid by the Board under this section while any obligation issued by the Corpora tion to the Secretary of the Treasury under section 8.13 re mains outstanding. (d) NONVOTING COMMON STOCK.—The Corporation is author ized to issue nonvoting common stock having such par value as may be fixed by the Board from time to time. Such nonvoting com mon stock shall be freely transferable, except that, as to the Cor poration, such stock shall be transferable only on the books of the Corporation. Such dividends as may be declared by the Board, in the discretion of the Board, may be paid by the Corporation to the holders of the nonvoting common stock of the Corporation, subject to paragraphs (2) and (3) of subsection (c). (e) PREFERRED STOCK.— (1) AUTHORITY OF BOARD.—The Corporation is authorized to issue nonvoting preferred stock having such par value as may be fixed by the Board from time to time. Such preferred stock issued shall be freely transferable, except that, as to the VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00155 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 156 Sec. 8.5 FARM CREDIT ACT OF 1971 Corporation, such stock shall be transferred only on the books of the Corporation. (2) RIGHTS OF PREFERRED STOCK.—Subject to paragraphs (2) and (3) of subsection (c), the holders of the preferred stock shall be entitled to such rate of cumulative dividends, and such holders shall be subject to such redemption or other conversion provisions, as may be provided for at the time of issuance. No dividends shall be payable on any share of common stock at any time when any dividend is due on any share of preferred stock and has not been paid. (3) PREFERENCE ON TERMINATION OF BUSINESS.—In the event of any liquidation, dissolution, or winding up of the busi ness of the Corporation, the holders of the preferred shares of stock shall be paid in full at the par value thereof, plus all ac crued dividends, before the holders of the common shares re ceive any payment. SEC. 8.5. ø12 U.S.C. 2279aa–5¿ CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING FACILITIES. (a) ELIGIBILITY STANDARDS.— (1) ESTABLISHMENT REQUIRED.—Within 120 days after the date on which the permanent board first meets with a quorum present, the Corporation shall issue standards for the certifi cation of agricultural mortgage marketing facilities (other than the Corporation), including eligibility standards in accordance with paragraph (2). (2) MINIMUM REQUIREMENTS.—To be eligible to be certified under the standards referred to in paragraph (1), an agricul tural mortgage marketing facility (other than the Corporation) shall— (A) be an institution of the Farm Credit System or a corporation, association, or trust organized under the laws of the United States or of any State; (B) meet or exceed capital standards established by the Board; (C) have as one of the purposes of the facility, the sale or resale of securities representing interests in, or obliga tions backed by, pools of qualified loans that have been provided guarantees by the Corporation; (D) demonstrate managerial ability with respect to ag ricultural mortgage loan underwriting, servicing, and mar keting that is acceptable to the Corporation; (E) adopt appropriate agricultural mortgage loan un derwriting, appraisal, and servicing standards and proce dures that meet or exceed the standards established by the Board; (F) for purposes of enabling the Corporation to exam ine the facility, agree to allow officers or employees of the Corporation to have access to all books, accounts, financial records, reports, files, and all other papers, things, or prop erty, of any type whatsoever, belonging to or used by the Corporation that are necessary to facilitate an examination of the operations of the facility in connection with securi ties, and the pools of qualified loans that back securities, for which the Corporation has provided guarantees; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00156 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 157 Sec. 8.6 FARM CREDIT ACT OF 1971 (G) adopt appropriate minimum standards and proce dures relating to loan administration and disclosure to bor rowers concerning the terms and rights applicable to loans for which guarantee is provided, in conformity with uni form standards established by the Corporation. (3) NONDISCRIMINATION REQUIREMENT.—The standards es tablished under this subsection shall not discriminate between or against Farm Credit System and non-Farm Credit System applicants. (b) CERTIFICATION BY CORPORATION.—Within 60 days after re ceiving an application for certification under this section, the Cor poration shall certify the facility if the facility meets the standards established by the Corporation under subsection (a)(1). (c) MAXIMUM TIME PERIOD FOR CERTIFICATION.—Any certifi cation by the Corporation of an agricultural mortgage marketing facility shall be effective for a period determined by the Corpora tion of not to exceed 5 years. (d) REVOCATION.— (1) IN GENERAL.—After notice and an opportunity for a hearing, the Corporation may revoke the certification of an ag ricultural mortgage marketing facility if the Corporation deter mines that the facility no longer meets the standards referred to in subsection (a). (2) EFFECT OF REVOCATION.—Revocation of a certification shall not affect any pool guarantee that has been issued by the Corporation. (e) AFFILIATION OF FCS INSTITUTIONS WITH FACILITY.— (1) ESTABLISHMENT OF AFFILIATE AUTHORIZED.—Notwith standing any other provision of this Act, any Farm Credit Sys tem institution, acting for such institution alone or in conjunc tion with one or more other such institutions, may establish and operate, as an affiliate, an agricultural mortgage mar keting facility if, within a reasonable time after such establish ment, such facility obtains and thereafter retains certification under subsection (b) as a certified facility. (2) EXCLUSIVE AGENCY AGREEMENT AUTHORIZED.—Any number of Farm Credit System institutions (other than the Corporation) may enter into an agreement with any certified facility (including an affiliate established under paragraph (1)) to sell the qualified loans of such institutions exclusively to or through the facility. SEC. 8.6. ø12 U.S.C. 2279aa–6¿ GUARANTEE OF QUALIFIED LOANS. (a) GUARANTEE AUTHORIZED FOR CERTIFIED FACILITIES.— (1) IN GENERAL.—Subject to the requirements of this sec tion and on such other terms and conditions as the Corporation shall consider appropriate, the Corporation— (A) shall guarantee the timely payment of principal and interest on the securities issued by a certified facility that represents interests solely in, or obligations fully backed by, any pool consisting solely of qualified loans which meet the applicable standards established under section 8.8 and which are held by such facility; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00157 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 158 Sec. 8.6 FARM CREDIT ACT OF 1971 (B) may issue a security, guaranteed as to the timely payment of principal and interest, that represents an in terest solely in, or an obligation fully backed by, a pool consisting of qualified loans that— (i) meet the applicable standards established under section 8.8; and (ii) have been purchased and held by the Corpora tion. (2) INABILITY OF FACILITY TO PAY.—If the facility is unable to make any payment of principal or interest on any security for which a guarantee has been provided by the Corporation under paragraph (1), the Corporation shall make such payment as and when due in cash, and on such payment shall be sub rogated fully to the rights satisfied by such payment. (3) POWER OF CORPORATION.—Notwithstanding any other provision of law, the Corporation is empowered, in connection with any guarantee under this subsection, whether before or after any default, to provide by contract with the facility for the extinguishment, on default by the facility, of any redemp tion, equitable, legal, or other right, title, or interest of the fa cility in any mortgage or mortgages constituting the pool against which the guaranteed securities are issued. With re spect to any issue of guaranteed securities, in the event of de fault and pursuant otherwise to the terms of the contract, the mortgages that constitute such pool shall become the absolute property of the Corporation subject only to the unsatisfied rights of the holders of the securities based on and backed by such pool. (b) OTHER RESPONSIBILITIES OF AND LIMITATIONS ON CERTIFIED FACILITIES.—As a condition for providing any guarantees under this section for securities issued by a certified facility that rep resent interests in, or obligations backed by, any pool of qualified loans, the Corporation shall require such facility to agree to comply with the following requirements: (1) LOAN DEFAULT RESOLUTION.—The facility shall act in accordance with the standards of a prudent institutional lender to resolve loan defaults. (2) SUBROGATION OF UNITED STATES AND CORPORATION TO INTERESTS OF FACILITY.—The proceeds of any collateral, judg ments, settlements, or guarantees received by the facility with respect to any loan in such pool, shall be applied, after pay ment of costs of collection— (A) first, to reduce the amount of any principal out standing on any obligation of the Corporation that was purchased by the Secretary of the Treasury under section 8.13 to the extent the proceeds of such obligation were used to make guarantees in connection with such securi ties; and (B) second, to reimburse the Corporation for any such guarantee payments. (3) LOAN SERVICING.—The originator of any loan in such pool shall be permitted to retain the right to service the loan. (4) MINORITY PARTICIPATION IN PUBLIC OFFERINGS.—The facility shall take such steps as may be necessary to ensure VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00158 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 159 Sec. 8.6 FARM CREDIT ACT OF 1971 that minority owned or controlled investment banking firms, underwriters, and bond counsels throughout the United States have an opportunity to participate to a significant degree in any public offering of securities. (5) NO DISCRIMINATION AGAINST STATES WITH BORROWERS RIGHTS.—The facility may not refuse to purchase qualified loans originating in States that have established borrowers rights laws either by statute or under the constitution of such States, except that the facility may require discounts or charge fees reasonably related to costs and expenses arising from such statutes or constitutional provisions. (c) ADDITIONAL AUTHORITY OF THE BOARD.—To ensure the li quidity of securities for which guarantees have been provided under this section, the Board shall adopt appropriate standards re garding— (1) the characteristics of any pool of qualified loans serving as collateral for such securities; and (2) transfer requirements. (d) AGGREGATE PRINCIPAL AMOUNTS OF QUALIFIED LOANS.— (1) INITIAL YEAR.—During the first year after the date of the enactment of this title, the Corporation may not provide guarantees for securities representing interests in, or obliga tions backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an aggregate prin cipal amount in excess of 2 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year (as published by the Board of Governors of the Federal Reserve System), less all Farmers Home Administration agri cultural real estate debt. (2) SECOND YEAR.—During the year following the year re ferred to in paragraph (1), the Corporation may not provide guarantees for securities representing interests in, or obliga tions backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional prin cipal amount in excess of 4 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt. (3) THIRD YEAR.—During the year following the year re ferred to in paragraph (2), the Corporation may not provide guarantees for securities representing interests in, or obliga tions backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional prin cipal amount in excess of 8 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt. (4) SUBSEQUENT YEARS.—In years subsequent to the year referred to in paragraph (3), the Corporation may provide guarantees without regard to the principal amount of the qualified loans guaranteed. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00159 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 160 Sec. 8.8 FARM CREDIT ACT OF 1971 (e) PURCHASE OF GUARANTEED SECURITIES.— (1) PURCHASE AUTHORITY.—The Corporation (and affili ates) may purchase, hold, and sell any securities guaranteed under this section by the Corporation that represent interests in, or obligations backed by, pools of qualified loans. Securities issued under this section shall have maturities and bear rates of interest as determined by the Corporation. (2) ISSUANCE OF DEBT OBLIGATIONS.—The Corporation (and affiliates) may issue debt obligations solely for the purpose of obtaining amounts for the purchase of any securities under paragraph (1), for the purchase of qualified loans (as defined in section 8.0(9)), and for maintaining reasonable amounts for business operations (including adequate liquidity) relating to activities under this subsection. (3) TERMS AND LIMITATIONS.— (A) TERMS.—The obligations issued under this sub section shall have maturities and bear rates of interest as determined by the Corporation, and may be redeemable at the option of the Corporation before maturity in the man ner stipulated in the obligations. (B) REQUIREMENT.—Each obligation shall clearly indi cate that the obligation is not an obligation of, and is not guaranteed as to principal and interest by, the Farm Cred it Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation). (C) AUTHORITY.—The Corporation may not issue obli gations pursuant to paragraph (2) under this subsection while any obligation issued by the Corporation under sec tion 8.13(a) remains outstanding. øSection 8.7 - Repealed by section 108(b) of P.L. 104–105¿ SEC. 8.8. ø12 U.S.C. 2279aa–8¿ STANDARDS FOR QUALIFIED LOANS. (a) STANDARDS.— (1) IN GENERAL.—The Corporation shall establish under writing, security appraisal, and repayment standards for quali fied loans taking into account the nature, risk profile, and other differences between different categories of qualified loans. (2) SUPERVISION, EXAMINATION, AND REPORT OF CONDI TION.—The standards shall be subject to the authorities of the Farm Credit Administration under section 8.11. (3) MORTGAGE LOANS.—In establishing standards for quali fied loans, the Corporation shall confine corporate operations, so far as practicable, to mortgage loans that are deemed by the Board to be of such quality so as to meet, substantially and generally, the purchase standards imposed by private institu tional mortgage investors. (b) MINIMUM CRITERIA.—To further the purpose of this title to provide a new source of long-term fixed rate financing to assist farmers and ranchers to purchase agricultural real estate, the standards established by the Board pursuant to subsection (a) with respect to loans secured by agricultural real estate shall, at a min imum— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00160 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 161 Sec. 8.9 FARM CREDIT ACT OF 1971 (1) provide that no agricultural mortgage loan with a loan to-value ratio in excess of 80 percent may be treated as a quali fied loan; (2) require each borrower to demonstrate sufficient cash flow to adequately service the agricultural mortgage loan; (3) contain sufficient documentation standards; (4) contain adequate standards to protect the integrity of the appraisal process with respect to any agricultural mortgage loans; (5) contain adequate standards to ensure that the farmer or rancher is or will be actively engaged in agricultural produc tion, and require the borrower to certify to the originator that the borrower intends to continue agricultural production on the farm or ranch involved; (6) minimize speculation in agricultural real estate for nonagricultural purposes; and (7) in establishing the value of agricultural real estate, consider the purpose for which the real estate is taxed. (c) LOAN AMOUNT LIMITATION.— (1) IN GENERAL.—A loan secured by agricultural real estate may not be treated as a qualified loan if the principal amount of such loan exceeds $2,500,000, adjusted for inflation, except as provided in paragraph (2). (2) ACREAGE EXCEPTION.—Paragraph (1) shall not apply with respect to any agricultural mortgage loan described in such paragraph if such loan is secured by agricultural real es tate that, in the aggregate, comprises not more than 1,000 acres. (d) NONDISCRIMINATION REQUIREMENT.—The standards estab lished under subsection (a) shall not discriminate against small originators or small agricultural mortgage loans that are at least $50,000. The Board shall promote and encourage the inclusion of qualified loans for small farms and family farmers in the agricul tural mortgage secondary market. SEC. 8.9. ø12 U.S.C. 2279aa–9¿ EXEMPTION FROM RESTRUCTURING AND BORROWERS RIGHTS PROVISIONS FOR POOLED LOANS. (a) RESTRUCTURING.—Notwithstanding any other provision of law, sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 shall not apply to any loan included in a pool of qualified loans backing secu rities or obligations for which the Corporation provides guarantee. The loan servicing standards established by the Corporation shall be patterned after similar standards adopted by other federally sponsored secondary market facilities. (b) BORROWERS RIGHTS.—At the time of application for a loan (as defined in section 4.14A(a)(5)), originators that are Farm Credit System institutions shall give written notice to each applicant of the terms and conditions of the loan, setting forth separately terms and conditions for pooled loans and loans that are not pooled. This notice shall include a statement, if applicable, that the loan may be pooled and that, if pooled, sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D, and 4.36 shall not apply. This notice also shall inform the applicant that he or she has the right not to have the loan pooled. Within 3 days from the time of commitment, an applicant has the right to refuse to allow the loan to be pooled, thereby retaining VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00161 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 162 Sec. 8.10 FARM CREDIT ACT OF 1971 rights under sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D, and 4.36, if applicable. SEC. 8.10. ø12 U.S.C. 2279aa–10¿ FUNDING FOR GUARANTEE; RESERVES OF CORPORATION. (a) GUARANTEE.—The Corporation shall provide guarantees for securities representing interests in, or obligations backed by, pools of qualified loans through commitments issued by the Corporation providing for guarantees. (b) GUARANTEE FEES.— (1) INITIAL FEE.—At the time a guarantee is issued by the Corporation, the Corporation shall assess the certified facility a fee of not more than 1⁄2 of 1 percent of the initial principal amount of each pool of qualified loans. (2) ANNUAL FEES.—Beginning in the second year after the date the guarantee is issued under paragraph (1), the Corpora tion may, at the end of each year, assess the certified facility an annual fee of not more than 1⁄2 of 1 percent of the principal amount of the loans then constituting the pool. (3) DETERMINATION OF AMOUNT.—The Corporation shall establish such fees on the amount of risk incurred by the Cor poration in providing the guarantees with respect to which such fee is assessed, as determined by the Corporation. Fees assessed under paragraphs (1) and (2) shall be established on an actuarially sound basis. (4) REVIEW BY GAO.—The Comptroller General of the United States may review, and submit to the Congress a report regarding, the actuarial soundness and reasonableness of the fees established by the Corporation under this subsection. (c) CORPORATION RESERVE AGAINST GUARANTEES LOSSES RE QUIRED.— (1) IN GENERAL.—So much of the fees assessed under this section as the Board determines to be necessary shall be set aside by the Corporation in a segregated account as a reserve against losses arising out of the guarantee activities of the Cor poration. (2) EXHAUSTION OF RESERVE REQUIRED.—The Corporation may not issue obligations to the Secretary of the Treasury under section 8.13 in order to meet the obligations of the Cor poration with respect to any guarantees provided under this title until the reserve established under paragraph (1) has been exhausted. (d) FEES TO COVER ADMINISTRATIVE COSTS AUTHORIZED.—The Corporation may impose charges or fees in reasonable amounts in connection with the administration of its activities under this title to recover its costs for performing such administration. SEC. 8.11. ø12 U.S.C. 2279aa–11¿ SUPERVISION, EXAMINATION, AND RE PORT OF CONDITION. (a) REGULATION.— (1) AUTHORITY.—Notwithstanding any other provision of this Act, the Farm Credit Administration shall have the au thority to provide, acting through the Office of Secondary Mar ket Oversight— VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00162 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 163 Sec. 8.11 FARM CREDIT ACT OF 1971 (A) for the examination of the Corporation and its af filiates; and (B) for the general supervision of the safe and sound performance of the powers, functions, and duties vested in the Corporation and its affiliates by this title, including through the use of the authorities granted to the Farm Credit Administration under— (i) part C of title V; and (ii) beginning 6 months after December 13, 1991, section 5.17(a)(9). (2) CONSIDERATIONS.—In exercising its authority pursuant to this section, the Farm Credit Administration shall con sider— (A) the purposes for which the Corporation was cre ated; (B) the practices appropriate to the conduct of sec ondary markets in agricultural loans; and (C) the reduced levels of risk associated with appro priately structured secondary market transactions. (3) OFFICE OF SECONDARY MARKET OVERSIGHT.— (A) Not later than 180 days after the date of enact ment of this paragraph, the Farm Credit Administration Board shall establish within the Farm Credit Administra tion the Office of Secondary Market Oversight. (B) The Farm Credit Administration Board shall carry out the authority set forth in this section through the Of fice of Secondary Market Oversight. (C) The Office of Secondary Market Oversight shall be managed by a full-time Director who shall be selected by and report to the Farm Credit Administration Board. (b) EXAMINATIONS AND AUDITS.— (1) IN GENERAL.—The financial transactions of the Cor poration shall be examined by examiners of the Farm Credit Administration in accordance with the principles and proce dures applicable to commercial corporate transactions under such rules and regulations as may be prescribed by the Admin istration. (2) FREQUENCY.—The examinations shall occur at such times as the Farm Credit Administration Board may deter mine, but in no event less than once each year. (3) ACCESS.—The examiners shall— (A) have access to all books, accounts, financial records, reports, files, and all other papers, things, or prop erty belonging to or in use by the Corporation and nec essary to facilitate the audit; and (B) be afforded full access for verifying transactions with certified facilities and other entities with whom the Corporation conducts transactions. (c) ANNUAL REPORT OF CONDITION.—The Corporation shall make and publish an annual report of condition as prescribed by the Farm Credit Administration. Each report shall contain finan cial statements prepared in accordance with generally accepted ac counting principles and contain such additional information as the Farm Credit Administration may by regulation prescribe. The fi VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00163 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 164 Sec. 8.12 FARM CREDIT ACT OF 1971 nancial statements of the Corporation shall be audited by an inde pendent public accountant. (d) FCA ASSESSMENTS TO COVER COSTS.—The Farm Credit Ad ministration shall assess the Corporation for the cost to the Admin istration of any regulatory activities conducted under this section, including the cost of any examination. (e) DEFINITION OF AFFILIATE.—As used in this title, the term ‘‘affiliate’’ shall mean an entity effectively controlled or owned by the Corporation, except that such term shall not include an origi nator (as defined in section 8.0(7)). (f) The Farm Credit Administration Board shall ensure that— (1) the Office of Secondary Market Oversight has access to a sufficient number of qualified and trained employees to ade quately supervise the secondary market activities of the Cor poration; and (2) the supervision of the powers, functions, and duties of the Corporation is performed, to the extent practicable, by per sonnel who are not responsible for the supervision of the banks and associations of the Farm Credit System. SEC. 8.12. ø12 U.S.C. 2279aa–12¿ SECURITIES IN CREDIT ENHANCED POOLS. (a) FEDERAL LAWS.— (1) APPLICABILITY OF CERTAIN FEDERAL SECURITIES LAWS.— For purposes of section 3(a)(2) of the Securities Act of 1933, no security representing an interest in, or obligations backed by, a pool of qualified loans for which guarantees have been pro vided by the Corporation shall be deemed to be a security issued or guaranteed by a person controlled or supervised by, or acting as an instrumentality of, the Government of the United States. No such security shall be deemed to be a ‘‘gov ernment security’’ for purposes of the Securities Exchange Act of 1934 or for purposes of the Investment Company Act of 1940. (2) NO FULL FAITH AND CREDIT OF THE UNITED STATES.— Each security for which credit enhancement has been provided by the Corporation shall clearly indicate that the security is not an obligation of, and is not guaranteed as to principal or interest by, the Farm Credit Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation). (b) STATE SECURITIES LAWS.— (1) GENERAL EXEMPTION.—Any security or obligation that has been provided a guarantee by the Corporation shall be ex empt from any law of any State with respect to or requiring registration or qualification of securities or real estate to the same extent as any obligation issued by, or guaranteed as to principal and interest by, the United States or any agency or instrumentality of the United States. (2) STATE OVERRIDE.—The provisions of paragraph (1) shall not be applicable to any State that, during the 8-year period beginning on the date of the enactment of this title, enacts a law that— (A) specifically refers to this subsection; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00164 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 165 Sec. 8.12 FARM CREDIT ACT OF 1971 (B) expressly provides that paragraph (1) shall not apply to the State. (c) AUTHORIZED INVESTMENTS.— (1) IN GENERAL.—Securities representing an interest in, or obligations backed by, pools of qualified loans with respect to which the Corporation has provided a guarantee shall be au thorized investments of any person, trust, corporation, partner ship, association, business trust, or business entity created pursuant to or existing under the laws of the United States or any State to the same extent that the person, trust, corpora tion, partnership, association, business trust, or business entity is authorized under any applicable law to purchase, hold, or in vest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality of the United States. Such securities or obligations may be ac cepted as security for all fiduciary, trust, and public funds, the investment or deposits of which shall be under the authority and control of the United States or any State or any officers of either. (2) STATE LIMITATIONS ON PURCHASE, HOLDING, OR INVEST MENT.—If State law limits the purchase, holding, or invest ment in obligations issued by the United States by the person, trust, corporation, partnership, association, business trust, or business entity, securities or obligations of a certified facility issued on which the Corporation has provided a guarantee shall be considered to be obligations issued by the United States for purposes of the limitation. (3) NONAPPLICABILITY OF PROVISIONS.— (A) SUBSEQUENT STATE LAW.—Paragraphs (1) and (2) shall not apply with respect to a particular person, trust, corporation, partnership, association, business trust, or business entity, or class thereof, in any State that, prior to the expiration of the 8-year period beginning on the date of the enactment of this title, enacts a law that specifically refers to this section and either prohibits or provides for a more limited authority to purchase, hold, or invest in the securities by any person, trust, corporation, partnership, association, business trust, or business entity, or class thereof, than is provided in paragraphs (1) and (2). (B) EFFECT OF SUBSEQUENT STATE LAW.—The enact ment by any State of a law of the type described in sub paragraph (A) shall not affect the validity of any contrac tual commitment to purchase, hold, or invest that was made prior to the effective date of the law and shall not require the sale or other disposition of any securities ac quired prior to the effective date of the law. (d) STATE USURY LAWS SUPERSEDED.—A provision of the Con stitution or law of any State shall not apply to an agricultural loan made by an originator or a certified facility in accordance with this title for sale to the Corporation or to a certified facility for inclusion in a pool for which the Corporation has provided, or has committed to provide, a guarantee, if the loan, not later than 180 days after the date the loan was made, is sold to the Corporation or included VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00165 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 166 Sec. 8.13 FARM CREDIT ACT OF 1971 in a pool for which the Corporation has provided a guarantee, if the provision— (1) limits the rate or amount of interest, discount points, finance charges, or other charges that may be charged, taken, received, or reserved by an agricultural lender or a certified fa cility; or (2) limits or prohibits a prepayment penalty (either fixed or declining), yield maintenance, or make-whole payment that may be charged, taken, or received by an agricultural lender or a certified facility in connection with the full or partial pay ment of the principal amount due on a loan by a borrower in advance of the scheduled date for the payment under the terms of the loan, otherwise known as a prepayment of the loan prin cipal. SEC. 8.13. ø12 U.S.C. 2279aa–13¿ AUTHORITY TO ISSUE OBLIGATIONS TO COVER GUARANTEE LOSSES OF CORPORATION. (a) SALE OF OBLIGATIONS TO TREASURY.— (1) IN GENERAL.—Subject to the limitations contained in section 8.10(c) and the requirement of paragraph (2), the Cor poration may issue obligations to the Secretary of the Treasury the proceeds of which may be used by the Corporation solely for the purpose of fulfilling the obligations of the Corporation under any guarantee provided by the Corporation under this title. (2) CERTIFICATION.—The Secretary of the Treasury may purchase obligations of the Corporation under paragraph (1) only if the Corporation certifies to the Secretary that— (A) the requirements of section 8.10(c) have been ful filled; and (B) the proceeds of the sale of such obligations are needed to fulfill the obligations of the Corporation under any guarantee provided by the Corporation under this title. (b) EXPEDITIOUS TRANSACTION REQUIRED.—Not later than 10 business days after receipt by the Secretary of the Treasury of any certification by the Corporation under subsection (a)(2), the Sec retary of the Treasury shall purchase obligations issued by the Cor poration in an amount determined by the Corporation to be suffi cient to meet the guarantee liabilities of the Corporation. (c) LIMITATION ON AMOUNT OF OUTSTANDING OBLIGATIONS.— The aggregate amount of obligations issued by the Corporation under subsection (a)(1) which may be held by the Secretary of the Treasury at any time (as determined by the Secretary) shall not ex ceed $1,500,000,000. (d) TERMS OF OBLIGATION.— (1) INTEREST.—Each obligation purchased by the Secretary of the Treasury shall bear interest at a rate determined by the Secretary, taking into consideration the average rate on out standing marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of such obligation. (2) REDEMPTION.—The Secretary of the Treasury shall re quire that such obligations be repurchased by the Corporation within a reasonable time. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00166 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 167 Sec. 8.31 FARM CREDIT ACT OF 1971 (e) COORDINATION WITH TITLE 31, UNITED STATES CODE.— (1) AUTHORITY TO USE PROCEEDS FROM SALE OF TREASURY SECURITIES.—For the purpose of purchasing obligations of the Corporation, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale by the Secretary of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under such chapter are extended to include such pur chases. (2) TREATMENT OF TRANSACTIONS.—All purchases and sales by the Secretary of the Treasury of obligations issued by the Corporation under this section shall be treated as public debt transactions of the United States. (f) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Secretary of the Treasury $1,500,000,000, without fiscal year limitation, to carry out the purposes of this title. SEC. 8.14. ø12 U.S.C. 2279aa–14¿ FEDERAL JURISDICTION. Notwithstanding section 1349 of title 28, United States Code, or any other provision of law: (1) The Corporation shall be considered an agency under sections 1345 and 1442 of such title. (2) All civil actions to which the Corporation is a party shall be deemed to arise under the laws of the United States and, to the extent applicable, shall be deemed to be governed by Federal common law. The district courts of the United States shall have original jurisdiction of all such actions, with out regard to amount of value. (3) Any civil or other action, case, or controversy in a court of a State or any court, other than a district court of the United States, to which the Corporation is a party may at any time before trial be removed by the Corporation, without the giving of any bond or security— (A) to the District Court of the United States for the district and division embracing the place where the same is pending; or (B) if there is no such district court, to the District Court of the United States for the district in which the principal office of the Corporation is located; by following any procedure for removal for causes in effect at the time of such removal. (4) No attachment or execution shall be issued against the Corporation or any of the property of the Corporation before final judgment in any Federal, State, or other court. Subtitle B—Regulation of Financial Safety and Soundness of Federal Agricultural Mortgage Corporation SEC. 8.31. ø12 U.S.C. 2279bb¿ DEFINITIONS. For purposes of this subtitle: VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00167 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 168 Sec. 8.32 FARM CREDIT ACT OF 1971 (1) COMPENSATION.—The term ‘‘compensation’’ means any payment of money or the provision of any other thing of cur rent or potential value in connection with employment. (2) CORE CAPITAL.—The term ‘‘core capital’’ means, with respect to the Corporation, the sum of the following (as deter mined in accordance with generally accepted accounting prin ciples): (A) The par value of outstanding common stock. (B) The par value of outstanding preferred stock. (C) Paid-in capital. (D) Retained earnings. (3) DIRECTOR.—The term ‘‘Director’’ means the Director of the Office of Secondary Market Oversight of the Farm Credit Administration, selected under section 8.11(a)(3). (4) OFFICE.—The term ‘‘Office’’ means the Office of Sec ondary Market Oversight of the Farm Credit Administration, established in section 8.11(a). (5) REGULATORY CAPITAL.—The term ‘‘regulatory capital’’ means, with respect to the Corporation, the core capital of the Corporation plus an allowance for losses and guarantee claims, as determined in accordance with generally accepted account ing principles. (6) STATE.—The term ‘‘State’’ means the States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Is lands, Guam, the Virgin Islands, American Samoa, the Trust Territory of the Pacific Islands, and any other territory or pos session of the United States. SEC. 8.32. ø12 U.S.C. 2279bb–1¿ RISK-BASED CAPITAL LEVELS. (a) RISK-BASED CAPITAL TEST.—Not sooner than the expiration of the 3-year period beginning on the date of enactment of the Farm Credit System Reform Act of 1996, the Director of the Office of Secondary Market Oversight shall, by regulation, establish a risk-based capital test under this section for the Corporation. When applied to the Corporation, the risk-based capital test shall deter mine the amount of regulatory capital for the Corporation that is sufficient for the Corporation to maintain positive capital during a 10-year period in which both of the following circumstances occur: (1) CREDIT RISK.— (A) IN GENERAL.—With respect to securities rep resenting an interest in, or obligations backed by, a pool of qualified loans owned or guaranteed by the Corporation and other obligations of the Corporation, losses on the un derlying qualified loans occur throughout the United States at a rate of default and severity (based on any measurements of default reasonably related to prevailing industry practice in determining capital adequacy) reason ably related to the rate and severity that occurred in con tiguous areas of the United States containing an aggregate of not less than 5 percent of the total population of the United States that, for a period of not less than 2 years (as established by the Director), experienced the highest rates of default and severity of agricultural mortgage VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00168 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 169 Sec. 8.32 FARM CREDIT ACT OF 1971 losses, in comparison with such rates of default and sever ity of agricultural mortgage losses in other such areas for any period of such duration, as determined by the Direc tor. (B) RURAL UTILITY LOANS.—With respect to securities representing an interest in, or obligation backed by, a pool of qualified loans described in section 8.0(9)(C) owned or guaranteed by the Corporation, losses occur at a rate of de fault and severity reasonably related to risks in electric and telephone facility loans (as applicable), as determined by the Director. (2) INTEREST RATE RISK.—Interest rates on Treasury obli gations of varying terms increase or decrease over the first 12 months of such 10-year period by not more than the lesser of (A) 50 percent (with respect to the average interest rates on such obligations during the 12-month period preceding the 10 year period), or (B) 600 basis points, and remain at such level for the remainder of the period. This paragraph may not be construed to require the Director to determine interest rate risk under this paragraph based on the interest rates for var ious long-term and short-term obligations all increasing or all decreasing concurrently. (b) CONSIDERATIONS.— (1) ESTABLISHMENT OF TEST.—In establishing the risk based capital test under subsection (a)— (A) the Director shall take into account appropriate distinctions based on various types of agricultural mort gage products, varying terms of Treasury obligations, and any other factors the Director considers appropriate; (B) the Director shall conform loan data used in deter mining credit risk to the minimum geographic and com modity diversification standards applicable to pools of qualified loans eligible for guarantee; (C) the Director may take into account retained subor dinated participating interests under section 8.6(b)(2) (as in effect before the date of the enactment of the Farm Credit System Reform Act of 1996); (D) the Director may take into account other methods or tests to determine credit risk developed by the Corpora tion before December 13, 1991; and (E) the Director shall consider any other information submitted by the Corporation in writing during the 180 day period beginning on December 13, 1991. (2) REVISING TEST.—Upon the expiration of the 8-year pe riod beginning on December 13, 1991, the Director shall exam ine the risk-based capital test under subsection (a) and may re vise the test. In making examinations and revisions under this paragraph, the Director shall take into account that, before De cember 13, 1991, the Corporation has not issued guarantees for pools of qualified loans. To the extent that the revision of the risk-based capital test causes a change in the classification of the Corporation within the enforcement levels established under section 8.35, the Director shall waive the applicability of any additional enforcement actions available because of such VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00169 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 170 Sec. 8.33 FARM CREDIT ACT OF 1971 change for a reasonable period of time, to permit the Corpora tion to increase the amount of regulatory capital of the Cor poration accordingly. (c) RISK-BASED CAPITAL LEVEL.—For purposes of this subtitle, the risk-based capital level for the Corporation shall be equal to the sum of the following amounts: (1) CREDIT AND INTEREST RATE RISK.—The amount of regu latory capital determined by applying the risk-based capital test under subsection (a) to the Corporation, adjusted to ac count for foreign exchange risk. (2) MANAGEMENT AND OPERATIONS RISK.—To provide for management and operations risk, 30 percent of the amount of regulatory capital determined by applying the risk-based cap ital test under subsection (a) to the Corporation. (d) SPECIFIED CONTENTS.— (1) IN GENERAL.—The regulations establishing the risk based capital test under this section shall— (A) be issued by the Director for public comment in the form of a notice of proposed rulemaking, to be first published after the expiration of the period referred to in subsection (a); and (B) contain specific requirements, definitions, methods, variables, and parameters used under the risk-based cap ital test and in implementing the test (such as loan loss severity, float income, loan-to-value ratios, taxes, yield curve slopes, default experience, prepayment rates, and performance of pools of qualified loans). (2) SPECIFICITY.—The regulations referred to in paragraph (1) shall be sufficiently specific to permit an individual other than the Director to apply the test in the same manner as the Director. (e) AVAILABILITY OF MODEL.—The Director shall make copies of the statistical model or models used to implement the risk-based capital test under this section available for public acquisition and may charge a reasonable fee for such copies. SEC. 8.33. ø12 U.S.C. 2279bb–2¿ MINIMUM CAPITAL LEVEL. (a) IN GENERAL.—Except as provided in subsection (b), for pur poses of this subtitle, the minimum capital level for the Corpora tion shall be an amount of core capital equal to the sum of— (1) 2.75 percent of the aggregate on-balance sheet assets of the Corporation, as determined in accordance with generally accepted accounting principles; and (2) 0.75 percent of the aggregate off-balance sheet obliga tions of the Corporation, which, for the purposes of this sub title, shall include— (A) the unpaid principal balance of outstanding securi ties that are guaranteed by the Corporation and backed by pools of qualified loans; (B) instruments that are issued or guaranteed by the Corporation and are substantially equivalent to instru ments described in subparagraph (A); and (C) other off-balance sheet obligations of the Corpora tion. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00170 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 171 Sec. 8.34 FARM CREDIT ACT OF 1971 (b) TRANSITION PERIOD.— (1) IN GENERAL.—For purposes of this subtitle, the min imum capital level for the Corporation— (A) prior to January 1, 1997, shall be the amount of core capital equal to the sum of— (i) 0.45 percent of aggregate off-balance sheet obli gations of the Corporation; (ii) 0.45 percent of designated on-balance sheet as sets of the Corporation, as determined under para graph (2); and (iii) 2.50 percent of on-balance sheet assets of the Corporation other than assets designated under para graph (2); (B) during the 1-year period ending December 31, 1997, shall be the amount of core capital equal to the sum of— (i) 0.55 percent of aggregate off-balance sheet obli gations of the Corporation; (ii) 1.20 percent of designated on-balance sheet as sets of the Corporation, as determined under para graph (2); and (iii) 2.55 percent of on-balance sheet assets of the Corporation other than assets designated under para graph (2); (C) during the 1-year period ending December 31, 1998, shall be the amount of core capital equal to— (i) if the Corporation’s core capital is not less than $25,000,000 on January 1, 1998, the sum of— (I) 0.65 percent of aggregate off-balance sheet obligations of the Corporation; (II) 1.95 percent of designated on-balance sheet assets of the Corporation, as determined under paragraph (2); and (III) 2.65 percent of on-balance sheet assets of the Corporation other than assets designated under paragraph (2); or (ii) if the Corporation’s core capital is less than $25,000,000 on January 1, 1998, the amount deter mined under subsection (a); and (D) on and after January 1, 1999, shall be the amount determined under subsection (a). (2) DESIGNATED ON-BALANCE SHEET ASSETS.—For purposes of this subsection, the designated on-balance sheet assets of the Corporation shall be— (A) the aggregate on-balance sheet assets of the Cor poration acquired under section 8.6(e); and (B) the aggregate amount of qualified loans purchased and held by the Corporation under section 8.3(c)(13). SEC. 8.34. ø12 U.S.C. 2279bb–3¿ CRITICAL CAPITAL LEVEL. For purposes of this subtitle, the critical capital level for the Corporation shall be an amount of core capital equal to 50 percent of the total minimum capital amount determined under section 8.33. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00171 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 172 Sec. 8.35 FARM CREDIT ACT OF 1971 SEC. 8.35. ø12 U.S.C. 2279bb–4¿ ENFORCEMENT LEVELS. (a) IN GENERAL.—The Director shall classify the Corporation, for purposes of this subtitle, according to the following enforcement levels: (1) LEVEL I.—The Corporation shall be classified as within level I if the Corporation— (A) maintains an amount of regulatory capital that is equal to or exceeds the risk-based capital level established under section 8.32; and (B) equals or exceeds the minimum capital level estab lished under section 8.33. (2) LEVEL II.—The Corporation shall be classified as within level II if— (A) the Corporation— (i) maintains an amount of regulatory capital that is less than the risk-based capital level; and (ii) equals or exceeds the minimum capital level; or (B) the Corporation is otherwise classified as within level II under subsection (b) of this section. (3) LEVEL III.—The Corporation shall be classified as with in level III if— (A) the Corporation— (i) does not equal or exceed the minimum capital level; and (ii) equals or exceeds the critical capital level es tablished under section 8.34; or (B) the Corporation is otherwise classified as within level III under subsection (b) of this section. (4) LEVEL IV.—The Corporation shall be classified as with in level IV if the Corporation— (A) does not equal or exceed the critical capital level; or (B) is otherwise classified as within level IV under subsection (b) of this section. (b) DISCRETIONARY CLASSIFICATION.—If at any time the Direc tor determines in writing (and provides written notification to the Corporation and the Farm Credit Administration) that the Cor poration is taking any action not approved by the Director that could result in a rapid depletion of core capital or that the value of the property subject to mortgages securitized by the Corporation or property underlying securities guaranteed by the Corporation, has decreased significantly, the Director may classify the Corpora tion— (1) as within level II, if the Corporation is otherwise with in level I; (2) as within level III, if the Corporation is otherwise with in level II; or (3) as within level IV, if the Corporation is otherwise with in level III. (c) QUARTERLY DETERMINATION.—The Director shall determine the classification of the Corporation for purposes of this subtitle on not less than a quarterly basis (and as appropriate under sub VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00172 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 173 Sec. 8.37 FARM CREDIT ACT OF 1971 section (b)). The first such determination shall be made for the quarter ending March 31, 1992. (d) NOTICE.—Upon determining under subsection (b) or (c) that the Corporation is within level II or III, the Director shall provide written notice to the Congress and to the Corporation— (1) that the Corporation is within such level; (2) that the Corporation is subject to the provisions of sec tion 8.36 or 8.37, as applicable; and (3) stating the reasons for the classification of the Corpora tion within such level. (e) IMPLEMENTATION.—Notwithstanding paragraphs (1) and (2) of subsection (a), during the period beginning on December 13, 1991, and ending on the effective date of the risk based capital reg ulation issued by the Director under section 8.32, the Corporation shall be classified as within level I if the Corporation equals or ex ceeds the minimum capital level established under section 8.33. SEC. 8.36. ø12 U.S.C. 2279bb–5¿ MANDATORY ACTIONS APPLICABLE TO LEVEL II. (a) CAPITAL RESTORATION PLAN.—If the Corporation is classi fied as within level II, the Corporation shall, within the time period determined by the Director, submit to the Director a capital res toration plan and, after approval, carry out the plan. (b) RESTRICTION ON DIVIDENDS.—If the Corporation is classi fied as within level II, the Corporation may not make any payment of dividends that would result in the Corporation being reclassified as within level III or IV. (c) RECLASSIFICATION FROM LEVEL II TO LEVEL III.—The Direc tor shall immediately reclassify the Corporation as within level III (and the Corporation shall be subject to the provisions of section 8.37), if— (1) the Corporation is within level II; and (2)(A) the Corporation does not submit a capital restora tion plan that is approved by the Director; or (B) the Director determines that the Corporation has failed to make, in good faith, reasonable efforts necessary to comply with such a capital restoration plan and fulfill the schedule for the plan approved by the Director. (d) EFFECTIVE DATE.—This section shall take effect upon the expiration of the 30-month period beginning on the date of the en actment of this section. SEC. 8.37. ø12 U.S.C. 2279bb–6¿ SUPERVISORY ACTIONS APPLICABLE TO LEVEL III. (a) MANDATORY SUPERVISORY ACTIONS.— (1) CAPITAL RESTORATION PLAN.—If the Corporation is clas sified as within level III, the Corporation shall, within the time period determined by the Director, submit to the Director a capital restoration plan and, after approval, carry out the plan. (2) RESTRICTIONS ON DIVIDENDS.— (A) PRIOR APPROVAL.—If the Corporation is classified as within level III, the Corporation— (i) may not make any payment of dividends that would result in the Corporation being reclassified as within level IV; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00173 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 174 Sec. 8.38 FARM CREDIT ACT OF 1971 (ii) may make any other payment of dividends only if the Director approves the payment before the payment. (B) STANDARD FOR APPROVAL.—If the Corporation is classified as within level III, the Director may approve a payment of dividends by the Corporation only if the Direc tor determines that the payment (i) will enhance the abil ity of the Corporation to meet the risk-based capital level and the minimum capital level promptly, (ii) will con tribute to the long-term safety and soundness of the Cor poration, or (iii) is otherwise in the public interest. (3) RECLASSIFICATION FROM LEVEL III TO LEVEL IV.—The Director shall immediately reclassify the Corporation as within level IV if— (A) the Corporation is classified as within level III; and (B)(i) the Corporation does not submit a capital res toration plan that is approved by the Director; or (ii) the Director determines that the Corporation has failed to make, in good faith, reasonable efforts necessary to comply with such a capital restoration plan and fulfill the schedule for the plan approved by the Director. (b) DISCRETIONARY SUPERVISORY ACTIONS.—In addition to any other actions taken by the Director (including actions under sub section (a)), the Director may, at any time, take any of the fol lowing actions if the Corporation is classified as within level III: (1) LIMITATION ON INCREASE IN OBLIGATIONS.—Limit any increase in, or order the reduction of, any obligations of the Corporation, including off-balance sheet obligations. (2) LIMITATION ON GROWTH.—Limit or prohibit the growth of the assets of the Corporation or require contraction of the assets of the Corporation. (3) PROHIBITION ON DIVIDENDS.—Prohibit the Corporation from making any payment of dividends. (4) ACQUISITION OF NEW CAPITAL.—Require the Corpora tion to acquire new capital in any form and in any amount suf ficient to provide for the reclassification of the Corporation as within level II. (5) RESTRICTION OF ACTIVITIES.—Require the Corporation to terminate, reduce, or modify any activity that the Director determines creates excessive risk to the Corporation. (6) CONSERVATORSHIP.—Appoint a conservator for the Cor poration consistent with this Act. (c) EFFECTIVE DATE.—This section shall take effect on January 1, 1992. SEC. 8.38. ø12 U.S.C. 2279bb–7¿ RECAPITALIZATION OF THE CORPORA TION. (a) MANDATORY RECAPITALIZATION.—The Corporation shall in crease the core capital of the Corporation to an amount equal to or greater than $25,000,000, not later than the earlier of— (1) the date that is 2 years after the date of enactment of this section; or (2) the date that is 180 days after the end of the first cal endar quarter that the aggregate on-balance sheet assets of the VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00174 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 175 Sec. 8.41 FARM CREDIT ACT OF 1971 Corporation, plus the outstanding principal of the off-balance sheet obligations of the Corporation, equal or exceed $2,000,000,000. (b) RAISING CORE CAPITAL.—In carrying out this section, the Corporation may issue stock under section 8.4 and otherwise em ploy any recognized and legitimate means of raising core capital in the power of the Corporation under section 8.3. (c) LIMITATION ON GROWTH OF TOTAL ASSETS.—During the 2 year period beginning on the date of enactment of this section, the aggregate on-balance sheet assets of the Corporation plus the out standing principal of the off-balance sheet obligations of the Cor poration may not exceed $3,000,000,000 if the core capital of the Corporation is less than $25,000,000. (d) ENFORCEMENT.—If the Corporation fails to carry out sub section (a) by the date required under paragraph (1) or (2) of sub section (a), the Corporation may not purchase a new qualified loan or issue or guarantee a new loan-backed security until the core cap ital of the Corporation is increased to an amount equal to or great er than $25,000,000. Subtitle C—Receivership, Conservator ship, and Liquidation of the Federal Ag ricultural Mortgage Corporation SEC. 8.41. ø12 U.S.C. 2279cc¿ CONSERVATORSHIP; LIQUIDATION; RE CEIVERSHIP. (a) VOLUNTARY LIQUIDATION.—The Corporation may volun tarily liquidate only with the consent of, and in accordance with a plan of liquidation approved by, the Farm Credit Administration Board. (b) INVOLUNTARY LIQUIDATION.— (1) IN GENERAL.—The Farm Credit Administration Board may appoint a conservator or receiver for the Corporation under the circumstances specified in section 4.12(b). (2) APPLICATION.—In applying section 4.12(b) to the Cor poration under paragraph (1)— (A) the Corporation shall also be considered insolvent if the Corporation is unable to pay its debts as they fall due in the ordinary course of business; (B) a conservator may also be appointed for the Cor poration if the authority of the Corporation to purchase qualified loans or issue or guarantee loan-backed securities is suspended; and (C) a receiver may also be appointed for the Corpora tion if— (i)(I) the authority of the Corporation to purchase qualified loans or issue or guarantee loan-backed secu rities is suspended; or (II) the Corporation is classified under section 8.35 as within level III or IV and the alternative ac tions available under subtitle B are not satisfactory; and VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00175 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 176 Sec. 8.41 FARM CREDIT ACT OF 1971 (ii) the Farm Credit Administration determines that the appointment of a conservator would not be appropriate. (3) NO EFFECT ON SUPERVISORY ACTIONS.—The grounds for appointment of a conservator for the Corporation under this subsection shall be in addition to those in section 8.37. (c) APPOINTMENT OF CONSERVATOR OR RECEIVER.— (1) QUALIFICATIONS.—Notwithstanding section 4.12(b), if a conservator or receiver is appointed for the Corporation, the conservator or receiver shall be— (A) the Farm Credit Administration or any other gov ernmental entity or employee, including the Farm Credit System Insurance Corporation; or (B) any person that— (i) has no claim against, or financial interest in, the Corporation or other basis for a conflict of interest as the conservator or receiver; and (ii) has the financial and management expertise necessary to direct the operations and affairs of the Corporation and, if necessary, to liquidate the Cor poration. (2) COMPENSATION.— (A) IN GENERAL.—A conservator or receiver for the Corporation and professional personnel (other than a Fed eral employee) employed to represent or assist the conser vator or receiver may be compensated for activities con ducted as, or for, a conservator or receiver. (B) LIMIT ON COMPENSATION.—Compensation may not be provided in amounts greater than the compensation paid to employees of the Federal Government for similar services, except that the Farm Credit Administration may provide for compensation at higher rates that are not in excess of rates prevailing in the private sector if the Farm Credit Administration determines that compensation at higher rates is necessary in order to recruit and retain competent personnel. (C) CONTRACTUAL ARRANGEMENTS.—The conservator or receiver may contract with any governmental entity, in cluding the Farm Credit System Insurance Corporation, to make personnel, services, and facilities of the entity avail able to the conservator or receiver on such terms and com pensation arrangements as shall be mutually agreed, and each entity may provide the same to the conservator or re ceiver. (3) EXPENSES.—A valid claim for expenses of the con servatorship or receivership (including compensation under paragraph (2)) and a valid claim with respect to a loan made under subsection (f) shall— (A) be paid by the conservator or receiver from funds of the Corporation before any other valid claim against the Corporation; and (B) may be secured by a lien, on such property of the Corporation as the conservator or receiver may determine, that shall have priority over any other lien. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00176 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 177 Sec. 8.41 FARM CREDIT ACT OF 1971 (4) LIABILITY.—If the conservator or receiver for the Cor poration is not a Federal entity, or an officer or employee of the Federal Government, the conservator or receiver shall not be personally liable for damages in tort or otherwise for an act or omission performed pursuant to and in the course of the conservatorship or receivership, unless the act or omission con stitutes gross negligence or any form of intentional tortious conduct or criminal conduct. (5) INDEMNIFICATION.—The Farm Credit Administration may allow indemnification of the conservator or receiver from the assets of the conservatorship or receivership on such terms as the Farm Credit Administration considers appropriate. (d) JUDICIAL REVIEW OF APPOINTMENT.— (1) IN GENERAL.—Notwithstanding subsection (i)(1), not later than 30 days after a conservator or receiver is appointed under subsection (b), the Corporation may 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 conservator or receiver. The court shall, on the merits, dismiss the action or direct the Farm Credit Adminis tration Board to remove the conservator or receiver. (2) STAY OF OTHER ACTIONS.—On the commencement of an action under paragraph (1), any court having jurisdiction of any other action or enforcement proceeding authorized under this Act to which the Corporation is a party shall stay the ac tion or proceeding during the pendency of the action for re moval of the conservator or receiver. (e) GENERAL POWERS OF CONSERVATOR OR RECEIVER.—The conservator or receiver for the Corporation shall have such powers to conduct the conservatorship or receivership as shall be provided pursuant to regulations adopted by the Farm Credit Administra tion Board. Such powers shall be comparable to the powers avail able to a conservator or receiver appointed pursuant to section 4.12(b). (f) BORROWINGS FOR WORKING CAPITAL.— (1) IN GENERAL.—If the conservator or receiver of the Cor poration determines that it is likely that there will be insuffi cient funds to pay the ongoing administrative expenses of the conservatorship or receivership or that there will be insuffi cient liquidity to fund maturing obligations of the conservator ship or receivership, the conservator or receiver may borrow funds in such amounts, from such sources, and at such rates of interest as the conservator or receiver considers necessary or appropriate to meet the administrative expenses or liquidity needs of the conservatorship or receivership. (2) WORKING CAPITAL FROM FARM CREDIT BANKS.—A Farm Credit bank may loan funds to the conservator or receiver for a loan authorized under paragraph (1) or, in the event of re ceivership, a Farm Credit bank may purchase assets of the Corporation. (g) AGREEMENTS AGAINST INTERESTS OF CONSERVATOR OR RE CEIVER.—No agreement that tends to diminish or defeat the right, title, or interest of the conservator or receiver for the Corporation in any asset acquired by the conservator or receiver as conservator VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00177 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014 178 Sec. 8.41 FARM CREDIT ACT OF 1971 or receiver for the Corporation shall be valid against the conser vator or receiver unless the agreement— (1) is in writing; (2) is executed by the Corporation and any person claiming an adverse interest under the agreement, including the obligor, contemporaneously with the acquisition of the asset by the Corporation; (3) is approved by the Board or an appropriate committee of the Board, which approval shall be reflected in the minutes of the Board or committee; and (4) has been, continuously, from the time of the agree ment’s execution, an official record of the Corporation. (h) REPORT TO THE CONGRESS.—On a determination by the re ceiver for the Corporation that there are insufficient assets of the receivership to pay all valid claims against the receivership, the re ceiver shall submit to the Secretary of the Treasury, the Committee on Agriculture of the House of Representatives, and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report on the financial condition of the receivership. (i) TERMINATION OF AUTHORITIES.— (1) CORPORATION.—The charter of the Corporation shall be canceled, and the authority provided to the Corporation by this title shall terminate, on such date as the Farm Credit Admin istration Board determines is appropriate following the place ment of the Corporation in receivership, but not later than the conclusion of the receivership and discharge of the receiver. (2) OVERSIGHT.—The Office of Secondary Market Oversight established under section 8.11 shall be abolished, and section 8.11(a) and subtitle B shall have no force or effect, on such date as the Farm Credit Administration Board determines is appropriate following the placement of the Corporation in re ceivership, but not later than the conclusion of the receivership and discharge of the receiver. VerDate Nov 24 2008 11:25 Nov 18, 2014 Jkt 000000 PO 00000 Frm 00178 Fmt 9001 Sfmt 9001 F:\COMP\CONSFARM\FARM CREDIT ACT OF 1971.BEL HOLCPC November 18, 2014