ESTABLISHMENT OF RESERVE FOR LOSSES DUE TO INTEREST RATE FLUCTUATIONS.

SEC. 1413. ESTABLISHMENT OF RESERVE FOR LOSSES DUE TO INTEREST RATE FLUCTUATIONS. (a) Establishment of Reserve; Funding.— Section 406 of the Rural Electrification Act of 1936 (7 U.S.C. 947) is amended by adding at the end the following: “(h) There is hereby established in the telephone bank a reserve for losses due to interest rate fluctuations. Within 30 days after the date of the enactment of this subsection, the Governor of the telephone bank shall transfer to the reserve for losses due to interest rate fluctuations all amounts in the reserve for contingencies as of the date of the enactment of this subsection. Amounts in the reserve for interest rate fluctuations may be expended only to cover operating losses of the telephone bank (other than losses attributable to loan defaults) and only after taking into consideration any recommendations made by the General Accounting Office under section 1413(b) of the Rural Telephone Bank Borrowers Fairness Act of 1987.”. (b) Study by General Accounting Office.— Within 180 days after the date of the enactment of this Act, the General Accounting Office shall complete a study of operations of the telephone bank and report its recommendations to the Committees on Agriculture and Government Operations of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate with respect to— (1) the appropriate level of funding for the reserve for losses due to interest rate fluctuations established in section 406(h) of the Rural Electrification Act of 1936 (7 U.S.C. 947(h)) (as added by subsection (a)); (2) the circumstances under which amounts in the reserve for losses due to interest rate fluctuations should be expended; (3) the circumstances under which amounts should be added to the reserve for losses due to interest rate fluctuations; and (4) the disposition of excess reserves. In such study, the General Accounting Office shall consider the effects of such recommendations on telephone bank borrowers, the subscribers of such borrowers, and the United States Government. (c) Limitation on Establishment of New Reserves.— Subsection (g) of section 406 of the Rural Electrification Act of 1936 (7 U.S.C. 947(g)) is amended— (1) by striking out “reserves for losses,” and inserting in lieu thereof “the reserve for loan losses,”; and 101 STAT. 1330–27 (2) by adding at the end the following: “The telephone bank may not establish any reserve other than the reserves referred to in this subsection and in subsection (h).”.