STUDENT LOAN MARKETING ASSOCIATION.

SEC. 431. STUDENT LOAN MARKETING ASSOCIATION. (a) Board of Directors.— Subsection (c) of section 439 of the Act (20 U.S.C. 1087–2(c)) is amended to read as follows: “(c) Board of Directors.— “(1) Composition of board; chairman.— (A) The Association shall have a Board of Directors which shall consist of 21 persons, 7 of whom shall be appointed by the President and shall be representative of the general public. The remaining 14 directors shall be elected by the common stockholders of the Association entitled to vote pursuant to subsection (f). Commencing with the annual shareholders meeting to be held in 1993— “(i) 7 of the elected directors shall be affiliated with an eligible institution; and “(ii) 7 of the elected directors shall be affiliated with an eligible lender. “(B) The President shall designate 1 of the directors to serve as Chairman. “(2) Terms of appointed and elected members.— The directors appointed by the President shall serve at the pleasure of the President and until their successors have been appointed and have qualified. The remaining directors shall each be elected for a term ending on the date of the next annual meeting of the common stockholders of the Association, and shall serve until their successors have been elected and have qualified. Any appointive seat on the Board which becomes vacant shall be filled by appointment of the President. Any elective seat on the Board which becomes vacant after the annual election of the directors shall be filled by the Board, but only for the unexpired portion of the term. “(3) Affiliated members.— For the purpose of this subsection, the references to a director ‘affiliated with the eligible institution’ or a director ‘affiliated with an eligible lender’ means an individual who is, or within 5 years of election to the Board has been, an employee, officer, director, or similar official of— “(A) an eligible institution or an eligible lender; “(B) an association whose members consist primarily of eligible institutions or eligible lenders; or “(C) a State agency, authority, instrumentality, commission, or similar institution, the primary purpose of which relates to educational matters or banking matters. “(4) Meetings and functions of the board.—The Board of Directors shall meet at the call of its Chairman, but at least semiannually. The Board shall determine the general policies which shall govern the operations of the Association. The Chairman of the Board shall, with the approval of the Board, select, appoint, and compensate qualified persons to 106 STAT. 555fill the offices as may be provided for in the bylaws, with such functions, powers, and duties as may be prescribed by the bylaws or by the Board of Directors, and such persons shall be the officers of the Association and shall discharge all such functions, powers, and duties”. (b) Authority of Association.— Subparagraph (C) of section 439(d)(1) of the Act is amended to read as follows: “(C) to buy, sell, hold, insure, underwrite, and otherwise deal in obligations issued for the purpose of financing or refinancing the construction, reconstruction, renovation, improvement, or purchase at institutions of higher education of any of the following facilities (including the underlying property) and materials at an eligible institution of higher education: “(i) educational and training facilities; “(ii) housing for students and faculties; “(iii) library facilities, including the acquisition of library materials at institutions of higher education; and “(iv) related equipment, instrumentation, and furnishings for facilities and materials described in clause (i) or (iii); except that not more than 15 percent of the value of transactions entered into under this subparagraph shall involve transactions of the type described in clause (ii);”. (c) Restrictions on Activities.— Section 439(d)(5) of the Act is amended by striking “third highest rating” and inserting “second highest rating”. (d) Stock of Association.— Subsection (f) of section 439 of the Act is amended to read as follows: “(f) Stock of the Association.— “(1) Voting common stock.— The Association shall have voting common stock having such par value as may be fixed by its Board of Directors from time to time. Each share of voting common stock shall be entitled to one vote with rights of cumulative voting at all elections of directors. “(2) Number of shares; transferability.— The maximum number of shares of voting common stock that the Association may issue and have outstanding at any one time shall be fixed by the Board of Directors from time to time. Any voting common stock issued shall be fully transferable, except that, as to the Association, it shall be transferred only on the books of the Association. “(3) Dividends.— To the extent that net income is earned and realized, subject to subsection (g)(2), dividends may be declared on voting common stock by the Board of Directors. Such dividends as may be declared by the Board of Directors shall be paid to the holders of outstanding shares of voting common stock, except that no such dividends shall be payable with respect to any share which has been called for redemption past the effective date of such call. “(4) Single class of voting common stock.— As of the effective date of the Higher Education Amendments of 1992, all of the previously authorized shares of voting common stock and nonvoting common stock of the Association shall be converted to shares of a single class of voting common stock on a share-for-share basis, without any further action on the part 106 STAT. 556of the Association or any holder. Each outstanding certificate for voting or nonvoting common stock shall evidence ownership of the same number of shares of voting stock into which it is converted. All preexisting rights and obligations with respect to any class of common stock of the Association shall be deemed to be rights and obligations with respect to such converted shares.”. (e) Safety and Soundness of Association.— Section 439 of the Act is amended by adding at the end the following new subsection: “(r) Safety and Soundness of Association.— “(1) Reports by the association.— The Association shall promptly furnish to the Secretary of Education and Secretary of the Treasury copies of all— “(A) periodic financial reports publicly distributed by the Association; and “(B) reports concerning the Association that are received by the Association and prepared by nationally recognized statistical rating organizations. “(2) Audit by secretary of the treasury.— (A) The Secretary of the Treasury may— “(i) appoint auditors to conduct audits of the Association from time to time to determine the condition of the Association for the purpose of assessing its financial safety and soundness; and “(ii) enter into contracts to obtain the services of such technical experts as the Secretary of the Treasury determines necessary and appropriate to provide technical assistance to any auditor appointed under this paragraph. “(B) Each auditor appointed under this paragraph shall conduct an audit of the Association to the extent requested by the Secretary of the Treasury and shall prepare and submit a report to the Secretary of the Treasury concerning the results of such audit. A copy of such report shall be furnished to the Association and the Secretary of Education on the date on which it is delivered to the Secretary of the Treasury. “(C) The Association shall provide full and prompt access to the Secretary of the Treasury to its books and records and other information requested by the Secretary of the Treasury. “(3) Monitoring of safety and soundness.— The Secretary of the Treasury shall conduct such studies as may be necessary to monitor the financial safety and soundness of the Association. In the event that the Secretary of the Treasury determines that the financial safety and soundness of the Association is at risk, the Secretary of the Treasury shall inform the Chairman and ranking minority member of the Committee on Labor and Human Resources of the Senate, the Chairman and ranking minority member of the Committee on Education and Labor of the House of Representatives, and the Secretary of Education of such determination and identify any corrective actions that should be taken to ensure the safety and soundness of the Association. “(4) Capital standard.— If the capital ratio is less than 2 percent and is greater than or equal to 1.75 percent at the end of the Association’s most recent calendar quarter the Association shall, within 60 days of such occurrence, submit to the Secretary of the Treasury a capital restoration plan, in reasonable detail, that the Association believes is adequate 106 STAT. 557to cause the capital ratio to equal or exceed 2 percent within 36 months. “(5) Capital restoration plan.— “(A) Submission, approval, and implementation.— The Secretary of the Treasury and the Association shall consult with respect to any capital restoration plan submitted pursuant to paragraph (4) and the Secretary of the Treasury shall approve such plan (or a modification thereof accepted by the Association) or disapprove such plan within 30 days after such plan is first submitted to the Secretary of the Treasury by the Association, unless the Association and Secretary of the Treasury mutually agree to a longer consideration period. If the Secretary of the Treasury approves a capital restoration plan (including a modification of a plan accepted by the Association), the Association shall forthwith proceed with diligence to implement such plan to the best of its ability. “(B) Disapproval.— If the Secretary of the Treasury does not approve a capital restoration plan as provided in subparagraph (A), then not later than the earlier of the date the Secretary of the Treasury disapproves of such plan by written notice to the Association or the expiration of the 30-day consideration period referred to in subparagraph (A) (as such period may have been extended by mutual agreement), the Secretary of the Treasury shall submit the Association’s capital restoration plan, in the form most recently proposed to the Secretary of the Treasury by the Association, together with a report on the Secretary of the Treasury’s reasons for disapproval of such plan and an alternative capital restoration plan, to the Chairman and ranking minority member of the Senate Committee on Labor and Human Resources and to the Chairman and ranking minority member of the House Committee on Education and Labor. A copy of such submission simultaneously shall be sent to the Association and the Secretary of Education by the Secretary of the Treasury. “(C) Association implementation and response.— Upon receipt of the submission by the Association, the Association shall forthwith proceed with diligence to implement the most recently proposed capital restoration plan of the Association. The Association, within 30 days after receipt from the Secretary of the Treasury of such submission, shall submit to such Chairmen and ranking minority members a written response to such submission, setting out fully the nature and extent of the Association’s agreement or the disagreement with the Secretary of the Treasury with respect to the capital restoration plan submitted to the Secretary of the Treasury and any findings of the Secretary of the Treasury. “(6) Substantial capital ratio reduction.— “(A) Additional plan required.— If the capital ratio is less than 1.75 percent and is greater than or equal to 1 percent at the end of the Association’s most recent calendar quarter, the Association shall submit to the Secretary of the Treasury within 60 days after such occurrence a capital restoration plan (or an appropriate modification of any plan previously submitted or approved under para-106 STAT. 558graph (4)) to increase promptly its capital ratio to equal or exceed 1.75 percent. The Secretary of the Treasury and the Association shall consult with respect to any plan or modified plan submitted pursuant to this paragraph. The Secretary of the Treasury shall approve such plan or modified plan (or a modification thereof accepted by the Association) or disapprove such plan or modified plan within 30 days after such plan or modified plan is first submitted to the Secretary of the Treasury by the Association, unless the Association and Secretary of the Treasury mutually agree to a longer consideration period. If the Secretary of the Treasury approves a plan or modified plan (including a modification of a plan accepted by the Association), the Association shall forthwith proceed with diligence to implement such plan or modified plan to the best of the Association’s ability. “(B) Disapproval.— If the Secretary of the Treasury disapproves a capital restoration plan or modified plan submitted pursuant to subparagraph (A), then, not later than the earlier of the date the Secretary of the Treasury disapproves of such plan or modified plan (by written notice to the Association) or the expiration of the 30-day consideration period described in subparagraph (A) (as such period may have been extended by mutual agreement), the Secretary of the Treasury shall prepare and submit an alternative capital restoration plan, together with a report on his reasons for disapproval of the Association’s plan or modified plan, to the Chairman and ranking minority member of the Committee on Labor and Human Resources of the Senate and to the Chairman and ranking minority member of the Committee on Education and Labor of the House of Representatives. A copy of such submission simultaneously shall be sent to the Association and the Secretary of Education by the Secretary of the Treasury. The Association, within 5 days after receipt from the Secretary of the Treasury of such submission, shall submit to the Chairmen and ranking minority members of such Committees, and the Secretary of the Treasury, a written response to such submission, setting out fully the nature and extent of the Association’s agreement or disagreement with the Secretary of the Treasury with respect to the disapproved plan and the alternative plan of the Secretary of the Treasury and any findings of the Secretary of the Treasury. “(C) Review by congress; association implementation.— Congress shall have 60 legislative days after the date on which Congress receives the alternative plan under subparagraph (B) from the Secretary of the Treasury to review such plan. If Congress does not take statutory action with respect to any such plan within such 60-day period, the Association shall immediately proceed with diligence to implement the alternative capital restoration plan of the Secretary of the Treasury under subparagraph (B). If Congress is out of session when any such alternative plan is received, such 60-day period shall begin on the first day of the next session of Congress. 106 STAT. 559 “(7) Actions by secretary of the treasury.— If the capital ratio of the Association does not equal or exceed 1.75 percent at the end of the Association’s most recent calendar quarter, the Secretary of the Treasury may, until the capital ratio equals or exceeds 1.75 percent, take any one or more of the following actions: “(A) Limit increase in liabilities.— Limit any increase in, or order the reduction of, any liabilities of the Association, except as necessary to fund student loan purchases and warehousing advances. “(B) Restrict growth.— Restrict or eliminate growth of the Association’s assets, other than student loans purchases and warehousing advances. “(C) Restrict distributions.— Restrict the Association from making any capital distribution. “(D) Require issuance of new capital.— Require the Association to issue new capital in any form and in any amount sufficient to restore at least a 1.75 percent capital ratio. “(E) Limit executive compensation.—Prohibit the Association from increasing for any executive officer any compensation including bonuses at a rate exceeding that officer’s average rate of compensation during the previous 12 calendar months and prohibiting the Board from adopting any new employment severance contracts. “(8) Critical capital standard.— (A) If the capital ratio is less than 1 percent at the end of the Association’s most recent calendar quarter and the Association has already submitted a capital restoration plan to the Secretary of the Treasury pursuant to paragraph (4) or (6)(A), the Association shall forthwith proceed with diligence to implement the most recently proposed plan with such modifications as the Secretary of the Treasury determines are necessary to cause the capital ratio to equal or exceed 2 percent within 60 months. “(B) If the capital ratio is less than 1 percent at the end of the Association’s most recent calendar quarter and the Association has not submitted a capital restoration plan to the Secretary of the Treasury pursuant to paragraph (4) or (6)(A), the Association shall— “(i) within 14 days of such occurrence submit a capital restoration plan to the Secretary of the Treasury which the Association believes is adequate to cause the capital ratio to equal or exceed 2 percent within 60 months; and “(ii) forthwith proceed with diligence to implement such plan with such modifications as the Secretary of the Treasury determines are necessary to cause the capital ratio to equal or exceed 2 percent within 60 months. “(C) Immediately upon a determination under subparagraph (A) or (B) to implement a capital restoration plan, the Secretary of the Treasury shall submit the capital restoration plan to be implemented to the Chairman and ranking minority member of the Committee on Labor and Human Resources of the Senate, the Chairman and ranking minority member of the Committee on Education and Labor of the House of Representatives, and the Secretary of Education. “(9) Additional reports to committees.— The Association shall submit a copy of its capital restoration plan, modifications 106 STAT. 560proposed to the Secretary of the Treasury, and proposed modifications received from the Secretary of the Treasury to the Congressional Budget Office and General Accounting Office upon their submission to the Secretary of the Treasury or receipt from the Secretary of the Treasury. Notwithstanding any other provision of law, the Congressional Budget Office and General Accounting Office shall maintain the confidentiality of information received pursuant to the previous sentence. In the event that the Secretary of the Treasury does not approve a capital restoration plan as provided in paragraph (5)(A) or (6)(A), or in the event that a capital restoration plan is modified by the Secretary of the Treasury pursuant to paragraph (6)(B) or (8), the Congressional Budget Office and General Accounting Office shall each submit a report within 30 days of the Secretary of the Treasury’s submission to the Chairmen and ranking minority members as required in paragraphs (5)(B), (6)(B), and (8)(C) to such Chairmen and ranking members— “(A) analyzing the financial condition of the Association; “(B) analyzing the capital restoration plan and reasons for disapproval of the plan contained in the Secretary of the Treasury’s submission made pursuant to paragraph (5)(B), or the capital restoration plan proposed by the Association and the modifications made by the Secretary of the Treasury pursuant to paragraph (6)(B) or (8); “(C) analyzing the impact of the capital restoration plan and reasons for disapproval of the plan contained in the Secretary of the Treasury’s submission made pursuant to paragraph (5)(B), or the impact of the capital restoration plan proposed by the Association and the modifications made by the Secretary of the Treasury pursuant to paragraph (6)(B) or (8), and analyzing the impact of the recommendations made pursuant to subparagraph (D) of this paragraph, on— “(i) the ability of the Association to fulfill its purpose and authorized activities as provided in this section, and “(ii) the operation of the student loan programs; and “(D) recommending steps which the Association should take to increase its capital ratio without impairing its ability to perform its purpose and authorized activities as provided in this section. “(10) Review by secretary of education.— The Secretary of Education shall review the Secretary of the Treasury’s submission required pursuant to paragraph (5)(B), (6)(B), or (8) and shall submit a report within 30 days to the Chairman and ranking minority member of the Senate Committee on Labor and Human Resources and to the Chairman and ranking minority member of the House Committee on Education and Labor— “(A) describing any administrative or legislative provisions governing the student loan programs which contributed to the decline in the Association’s capital ratio; and “(B) recommending administrative and legislative changes in the student loan programs to maintain the orderly operation of such programs and to enable the Association to fulfill its purpose and authorized activities 106 STAT. 561consistent with the capital ratio specified in paragraph (4). “(11) Safe harbor.— The Association shall be deemed in compliance with the capital ratios described in paragraphs (4) and (6)(A) if the Association is rated in 1 of the 2 highest full rating categories (such categories to be determined without regard to designations within categories) by 2 nationally recognized statistical rating organizations, determined without regard to the Associations status as a federally chartered corporation. “(12) Treatment of confidential information.— Notwithstanding any other provision of law, the Secretary of the Treasury, the Secretary of Education, the Congressional Budget Office, and the General Accounting Office shall not disclose any information treated as confidential by the Association and obtained pursuant to this subsection. Nothing in this paragraph shall authorize the Secretary of the Treasury, the Secretary of Education, the Congressional Budget Office, and the General Accounting Office to withhold information from Congress, or prevent the Secretary of Education, the Congressional Budget Office, and the General Accounting Office from complying with a request for information from any other Federal department or agency requesting the information for purposes within the scope of its jurisdiction, or complying with an order of a court of the United States in an action brought by the United States. For purposes of section 522 of title 5, United States Code, this paragraph shall be considered a statute described in subsection (b)(3) of such section 552. “(13) Definitions.— As used in this subsection: “(A) The term ‘nationally recognized statistical rating organization’ means any entity recognized as such by the Securities and Exchange Commission. “(B) The term ‘capital ratio’ means the ratio of total stockholders’ equity, as shown on the Association’s most recent quarterly consolidated balance sheet prepared in the ordinary course of its business, to the sum of— “(i) the total assets of the Association, as shown on the balance sheet prepared in the ordinary course of its business; and “(ii) 50 percent of the credit equivalent amount of the following off-balance sheet items of the Association as of the date of such balance sheet— “(I) all financial standby letters of credit and other irrevocable guarantees of the repayment of financial obligations of others; and “(II) all interest rate contracts and exchange rate contracts, including interest exchange agreements, floor, cap, and collar agreements and similar arrangements. For purposes of this subparagraph, the calculation of the credit equivalent amount of the items set forth in clause (ii) of this subparagraph, the netting of such items and eliminations for the purpose of avoidance of double-counting of such items shall be made in accordance with the measures for computing credit conversion factors for off-balance 106 STAT. 562Reserve Board, but without regard to any risk weighting provisions in such measures. “(C) The term ‘legislative days’ means only days on which either House of Congress is in session.”.