INSURANCE OF OBLIGATIONS OF FARM CREDIT SYSTEM.

SEC. 302. INSURANCE OF OBLIGATIONS OF FARM CREDIT SYSTEM. Title V (12 U.S.C. 2221 et seq.) is amended by adding at the end thereof the following new part: 101 STAT. 1611 “PART E— FARM CREDIT SYSTEM INSURANCE CORPORATION “SEC. 5.51. 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 section 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 the date of the enactment of this part, on behalf of any System bank; and “(B) after such date, on behalf of any insured System bank. “(4) Insured system bank.— The term ‘insured System bank’ means any System bank whose participation in notes, bonds, debentures, and other obligations issued under subsection (c) or (d) of section 4.2 is insured under this part. “(5) Receiver.— The term ‘receiver’ means a receiver or conservator appointed by the Farm Credit Administration to liquidate a System institution. “(6) 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. ESTABLISHMENT OF FARM CREDIT SYSTEM 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, debentures, 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. 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 Administration Board. “SEC. 5.54. 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. 101 STAT. 1612 “SEC. 5.55. PREMIUMS. “(a) Amount in Fund Not Exceeding Secure Base Amount.— Until the aggregate of amounts in the Farm Credit Insurance Fund exceeds the secure base amount, the annual premium due from any insured System bank for any calendar year shall be equal to the sum of— “(1) the annual average principal outstanding for such year on loans made by the bank that are in accrual status, multiplied by 0.0015; and “(2) the annual average principal outstanding for such year on loans made by the bank that are in nonaccrual status, multiplied by 0.0025. “(b) Amount in Fund Exceeding Secure Base Amount.— At any time the aggregate of amounts in the Insurance Fund exceeds the secure base amount, the Corporation shall reduce the annual premium due from each insured System bank for the following calendar year by a percentage determined by the Corporation so that the aggregate of the premiums payable by all System banks is sufficient to ensure that the aggregate of amounts in the Insurance Fund after such premiums are paid is not less than the secure base amount at such time. “(c) Secure Base Amount.— For purposes of this part, the term ‘secure base amount’ means, with respect to any point in time, 2 percent of the aggregate outstanding insured obligations of all insured System banks at such time, 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 obligations. “(d) Determination of Principal Outstanding.— For the purpose of subsection (a), the principal outstanding on all loans made by a Federal intermediate credit bank shall be determined based on all loans made— “(1) by the production credit associations in the district in which such bank is located; “(2) by any bank, company, institution, corporation, union, or association described in section 2.3(a)(2), that is able to make such loans because such entity is receiving, or has received, funds provided through the Federal intermediate credit bank; and “(3) by such Federal intermediate credit bank (other than loans made to any party described in paragraph (1) or (2)). “SEC. 5.56. CERTIFICATION OF PREMIUMS. “(a) Filing Certified Statement.— Annually, on a date to be determined in the sole discretion of the Board of Directors, each insured System bank that became insured before the beginning of such year shall file with the Corporation a certified statement showing the annual average principal outstanding on loans made by the bank that are in accrual status, the annual average principal outstanding on loans that are in nonaccrual status, and the amount of the premium due the Corporation from the bank for such year. “(b) Contents and Form of Statement.— The certified statement 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 101 STAT. 1613directors 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) Initial Premium Payment.— Each System bank shall pay to the Corporation the amount of the initial premium it is required to certify under subsection (a) as soon as practicable after January 1, 1990, based on the application of section 5.55 to the accruing loan volume of the bank for calendar year 1989. “(d) Subsequent Premium Payments.— The premium payments required from insured System banks under subsection (a) shall be made not less frequently than annually in such manner and at such time or times as the Board of Directors shall prescribe, except that the amount of the premium shall be established not later than 60 days after filing the certified statement setting forth the amount of the premium. “(e) 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. OVERPAYMENT AND UNDERPAYMENT OF PREMIUMS; REMEDIES. “(a) Overpayments.— The Corporation may refund to any insured System bank any premium payment made by the bank exceeding the amount due the Corporation. “(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 premium lawfully payable by the bank to the Corporation, whether or not the bank has made any report of condition required under section 5.55 or filed any certified statement under section 5.56, and whether or not suit has been brought to compel the bank to make any such report or 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 exceeding 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 made or 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. 101 STAT. 1614 “(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 participated 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. 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. “(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 common 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, 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 procedure 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 proceeding 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, to define their duties, fix their compensation, and require bonds of them and fix the penalty thereof, and to 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 appointment and compensation, as an officer or employee of the Corporation, of any officer or employee of the United States 101 STAT. 1615in any board, commission, independent establishment, 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 enjoyed. “(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. “(9) Receiver.— The Corporation may act as receiver. “(10) Rules and regulations.— The Corporation may prescribe by its Board of Directors such rules and regulations as it considers necessary to carry out this part (except to the extent that authority to issue such rules and regulations has been expressly and exclusively granted to any other regulatory agency). “SEC. 5.59. CONDUCT OF CORPORATE AFFAIRS; EXAMINATION OF INSURED SYSTEM BANKS. “(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 obligations 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 conditions as the executive departments of the Federal Government. “(4) Use of information.— The Corporation, with the consent 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 information, services, and facilities thereof in carrying out this part. “(b) Examination of Insured System Banks.— “(1) Appointment of examiners.— The Board of Directors may appoint examiners who may, on behalf of the Corporation, examine any insured System bank, any production credit association, and any System institution in receivership, if in the judgment of the Board of Directors an examination of the institution is necessary. “(2) Powers and report.— Each examiner may make a thorough examination of all affairs of the institution, and shall make a full and detailed report of the condition of the institution to the Corporation. “(3) Appointment of claim agents.— The Board of Directors, in like manner, shall appoint claim agents who may investigate and examine all claims for insured obligations. “(c) Oath, Affirmations, and Testimony.— In connection with examinations under this section, the Corporation or its designated 101 STAT. 1616representatives may administer oaths and affirmations, and may examine, take, and preserve testimony under oath, as to any matter with respect to the affairs of any such institution. “(d) Cooperation With FCA Examiners.— The examiners appointed 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. 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 Corporation. “(b) Amounts in Fund.— “(1) Revolving fund.— All amounts in the revolving fund established by section 4.0 (in effect immediately before the date of the enactment of this part) 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, except 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.— Beginning 5 years after the date of the enactment of this part, 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 5 years after the date of the enactment of this part, the Corporation 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 5 years after the date of enactment of this part, 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 “(B) ensure the retirement of borrower stock at par value and participation certificates or other similar equities at face value as provided for under section 4.9A(c)(2). “(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. POWERS OF CORPORATION WITH RESPECT TO TROUBLED INSURED SYSTEM BANKS. “(a) Authority to Provide Assistance.— “(1) In general.— 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 assets or securities of, assume the liabilities of, or make contributions to, any insured System bank if such action is taken— 101 STAT. 1617 “(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 stability of a significant number of insured System banks or of insured System banks possessing significant financial resources. “(2) Enumerated powers.— “(A) Facilitation of mergers or consolidation.— To facilitate a merger or consolidation 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 liabilities by such other insured System bank, or the acquisition of the stock of such insured System bank by such other insured System bank, the Corporation, in its sole discretion and on such terms and conditions as the Board of Directors 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 conditions exist that threaten the stability of a significant number of insured System banks or of insured System banks possessing significant financial resources, requires assistance under subparagraph (A) to lessen the risk to the Corporation posed by such insured System bank under such threat of instability. “(3) Limitation.— “(A) Cost of liquidation.— Assistance shall not be provided to an insured System bank under this subsection if the amount of such assistance exceeds an amount determined by the Corporation to be the cost of liquidating the bank (including paying the insured obligations issued on behalf of the bank). This subparagraph shall not apply to the provision of assistance to a bank if the Corporation determines that the continued operation of the bank is essential to provide adequate agricultural credit services in the area of operations of the bank. “(B) 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 Corporation to enter 101 STAT. 1618into 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 provided 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 purchase, 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 insured 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 receive 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 Corporation 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. “(f) Effective Date.— The Corporation shall not exercise any authority under this section during the 5-year period beginning on the date of the enactment of this part. “SEC. 5.62. INVESTMENT OF FUNDS. “Money of the Corporation not otherwise employed shall be invested in obligations of the United States or in obligations guaranteed as to principal and interest by the United States. “SEC. 5.63. EXEMPTION FROM TAXATION. “Notwithstanding any other provision of law, the Corporation, including its franchise, and its capital, reserves, surplus, and income, shall be exempt from all taxation imposed by the United 101 STAT. 1619States, or by any State, county, municipality, or local taxing authority, 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. REPORTS. “(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 calendar 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 Corporation during the calendar year; and “(3) estimates of the aggregate amount to be collected as premiums during the calendar year. “SEC. 5.65. 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 Insurance 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 Corporation, by virtue of the name under which such person or entity does business. “(2) False representation.— “(A) By outside person or entities.— It shall be unlawful for any person or entity to falsely represent by any device, that the notes, bonds, debentures, or other obligations of the person or entity are insured or in any way guaranteed by the Corporation. “(B) System banks.— It shall be unlawful for any insured System bank or person that markets insured obligations to falsely represent the extent to which or the manner in which such obligations are insured by the Corporation. “(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 System 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 premium due to the Corporation. “(2) Liability of directors.— Each director or officer of any insured System bank who willfully participates in the declaration or payment of any dividend or interest or in any distribution 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 101 STAT. 1620such 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 premium 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 conduct with respect 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. “(d) Employment of Persons Convicted of Criminal Offenses.— “(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 insured System bank. “(2) Penalty.— For each willful violation of paragraph (1), the bank involved shall be subject to a penalty of not more than $100 for each day during which the violation continues, which the Corporation may recover for its use.”.