CAPITAL INSTRUMENT PURCHASE PROGRAM.

SEC. 405. CAPITAL INSTRUMENT PURCHASE PROGRAM. Section 406(f) of the National Housing Act (12 U.S.C. 1729(f)) is amended by adding at the end thereof the following new paragraph: “(6) Capital Instrument Purchase Program.— “(A) In general.— Notwithstanding any other provision of Federal law (other than subparagraph (C)) and without limitation on any other authority of the Corporation or the Federal Home Loan Bank Board, the Corporation may exercise its authority to purchase capital instruments in the case of any insured institution for which a plan for increasing capital has been approved by the Corporation pursuant to section 416 or by such Board pursuant to section 10 of the Home Owners’ Loan Act of 1933. “(B) Terms and conditions.— Except as provided in subparagraph (C), the purchase of capital instruments under subparagraph (A) shall be subject to such terms and conditions as the Corporation may prescribe. “(C) Warrant requirement.— “(i) In general.— In the case of an insured institution with capital stock, the Corporation shall require such institution to negotiate with the Corporation warrants for the purchase of shares of stock as a condition for the purchase of capital instruments by the Corporation, on such terms and conditions as the Corporation may prescribe. “(ii) Mutual institutions.— If any insured institution— “(I) which is organized on a mutual basis; and “(II) with respect to which the Corporation has purchased capital instruments, converts to a stock charter, such insured institution shall comply with the requirements of clause (i) immediately upon such conversion. “(iii) Maximum amount.— The amount of shares for which warrants are negotiated under subparagraph (A) with respect to any insured institution shall not exceed the total number of shares outstanding at the time such warrants are issued to the Corporation. “(iv) Redemption by insured institution.— Upon the full redemption of the capital instruments by an insured institution, including all accumulated unpaid dividends, the Corporation may, at the discretion of the Corporation, tender the warrants for redemption by the insured institution. “(v) Payment on redemption.— Upon any redemption of warrants under clause (iv), the insured institution shall pay the Corporation the difference between the fair market value of the warrants on the date of redemption and the exercise price of such warrants. 101 STAT. 614 “(vi) Proceeds from redemption of warrants.— The proceeds of any sale or redemption of warrants under clause (iv) shall be deposited in and be considered a part of the primary reserve established under section 404(a). “(D) Dividends.— Capital instruments purchased by the Corporation under subparagraph (A) shall pay dividends at a reasonable rate, as determined by the Corporation, and the rate shall be indexed to obligations issued by the Secretary of the Treasury under subchapter I of chapter 31 of title 31, United States Code. “(E) Priority.— “(i) In general.— In the event of the liquidation or reorganization of any insured institution with respect to which the Corporation holds capital instruments under this paragraph, the Corporation shall have priority over— “(I) any claim, other than a claim described in clause (ii), arising out of any equity interest in such insured institution; and “(II) any right of any holder of an equity interest in such insured institution to participate in future earnings. “(ii) Dividends.— “(I) No other dividends.— No dividends may be paid on any class of equity instruments of any insured institution (other than a capital instrument held by the Corporation) until all dividends, including accumulated unpaid dividends, on the capital instruments are paid. “(II) prohibition ceases if payment redemption payments and dividends are current.— If all payments on capital instruments held by the Corporation with respect to any insured institution, including redemption payments and dividends, are current, dividends on other classes of equity instruments of such insured institution may be paid, notwithstanding subclause (I).”.