ORGANIZATION AND OPERATION OF THE MERGED BANK FOR COOPERATIVES.

SEC. 415. ORGANIZATION AND OPERATION OF THE MERGED BANK FOR COOPERATIVES. Title III (12 U.S.C. 2121 et seq.) is amended— (1) by inserting after the title designation the following: “Part A— Banks for Cooperatives”; and (2) by adding at the end thereof the following new part: “Part B— United and National Banks for Cooperatives “SEC. 3.20. 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 in this section as the ‘consolidated bank’) shall be a federally chartered instrumentality of the United States and an institution 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 Central Bank for Cooperatives and the boards of directors of such banks, as otherwise provided for in this Act. “(c) Operation.— The consolidated bank shall be organized and operated on a cooperative basis. “SEC. 3.21. BOARD OF DIRECTORS PROVISIONS. “(a) Initial Board of Directors.— The initial board of directors 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.— “(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 districts that had been served by constituent banks, as such districts existed on the date of the enactment of this section, 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 stockholder or borrower of a System institution or an officer or director of any such stockholder or borrower. “(2) Nomination and election.— For purposes of nominating and electing members of the board of directors under paragraph (1)(A): 101 STAT. 1643 “(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 district multiplied by the percentage (or fractional part thereof) of the total equity interest (including allocated, but not unallocated, surplus and reserves) in the consolidated bank of all such stockholders located in that district held by the individual voting stockholder— “(I) as of the final date of the 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 consolidated bank located in the district multiplied by two. “(3) Terms.— “(A) In general.— The members of the board of directors 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 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 Administration. “SEC. 3.22. CREDIT DELIVERY OFFICE. “On a determination by the board of directors of the United Bank for Cooperatives or the National Bank for Cooperatives 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 merger), the bank may consider the creation of regional service centers to accommodate such loan concentrations. 101 STAT. 1644 “SEC. 3.23. CONSOLIDATION OF FUNCTIONS. “Subject to section 3.22, to the greatest extent practicable, the functions of the consolidated bank shall be consolidated in the central office of the bank. “SEC. 3.24. EXCHANGE OF OWNERSHIP INTERESTS. “On the establishment of the consolidated bank, ownership interests 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. CAPITALIZATION. “The board of directors of the consolidated bank shall provide for the capitalization of such bank in accordance with the provisions of section 4.3A. “SEC. 3.26. 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 constituent farm credit district (as such district existed on the date of the enactment of this section); and “(2) allocate revenues, expenses, and net savings among such pools on an equitable basis. “SEC. 3.27. TRANSACTIONS TO ACCOMPLISH THE MERGER. “The receipt of assets or assumption of liabilities by the consolidated bank, the exchange of stock, equities, or other ownership interests, and any other transaction carried out in accomplishing the merger of the banks for cooperatives shall not be treated as a taxable 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 taxable institution to the extent that the net amount of the distribution is immediately reinvested 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. LENDING LIMITS. “The Farm Credit Administration may not establish lending limits for the consolidated bank with respect to any loans or borrowers that are more restrictive than the combined lending limits that were previously established by the Farm Credit Administration for a district bank for cooperatives and the Central Bank for Cooperatives with respect to such loans or borrowers.”.