Full text of Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

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PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 183

Public Law 101-78
101st Congress
An Act
To reform, recapitalize, and consolidate the Federal deposit insurance system, to
enhance the regulatory and enforcement powers of Federal financial institutions
regulatory agencies, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
„
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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Financial
Institutions
Reform,

(a) SHORT TITLE.—This Act may be cited as the "Financial Institu- iSoSeS**
tions Reform, Recovery, and Enforcement Act of 1989".
Act of 1989.
(b) T A B L E O F C O N T E N T S . —

TITLE I—PURPOSES
Sec. 101. Purposes.
TITLE n—FEDERAL DEPOSrriNSURANCE CORPORATION
Sec. 201. Depository institutions.
Sec. 202. Duties of Federal Deposit Insurance Corporation.
Sec. 203. FDIC Board members.
Sec. 204. Definitions.
Sec. 205. Insured savings associations.
Sec. 206. Application process; insurance fees.
Sec. 207. Insurability factors.
Sec. 208. Assessments.
Sec. 209. Corporate powers of the FDIC.
Sec. 210. Administration of Corporation.
Sec. 211. Insurance funds.
Sec. 212. Conservatorship and receivership powers of the Corporation.
Sec. 213. New banks.
Sec. 214. Bridge banks.
Sec. 215. FSLIC Resolution Fund.
Sec. 216. Amendments to section 12.
Sec. 217. Amendments to section 13.
Sec. 218. FDIC borrowing authority.
Sec. 219. Exemption from taxation; limitation on borrowing.
Sec. 220. Reports.
Sec. 221. R^ulations governing insured depository institutions.
Sec. 222. Activities of savings associations.
Sec. 223. Nondiscrimination.
Sec. 224. Brokered deposits.
Sec. 225. Contracts between depository institutions and persons providing goods,
products, or services.
Sec. 226. Savings association insurance fund industry advisory committee established.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

TITLE in—SAVINGS ASSOOATIONS
301. Amendment to Home Owners' Loan Act of 1933.
302. Savings provisions.
303. Qualified thrift lender test.
304. Transitional rule for certain transactions with affiliates.
305. Transitional rules r^arding certain loans and effective dates.
306. Amendment of additional powers of Director.
307. Amendment to title 31, United States Code.
308. Preserving minority ownership of minority Hnancial institutions.

TITLE IV—TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY
Sec. 401. FSLIC and Federal Home Loan Bank Board abolished.

12 USC l 8 l l

103 STAT. 184
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

PUBLIC LAW 101-73—AUG. 9, 1989
402.
403.
404.
405.
406.
407.

Ck>ntinuation and coordination of certain r^ulations.
Determination of transferred functions and employees.
Rights of employees of abolished agencies.
Division of property and facilities.
Report.
Repeals.
TITLE V—FINANCING FOR THRIFT RESOLUTIONS

Subtitle A—Oversight Board and Resolution Trust Corporation
Sec. 501. Oversight Board and Resolution Trust Corporation established.
Subtitle B—Resolution Funding Corporation
Sec. 511. Resolution Funding Corporation established.
Sec. 512. Financing Corporation.
Sec.
Sec.
Sec.
Sec.

TITLE VI—THRIFT ACQUISITION ENHANCEMENT PROVISIONS
601. Acquisition of thrift institutions by bank holding companies.
602. Technical amendments to the Bank Holding Company Act.
603. Passive investments by companies controlling certain nonbank banks.
604. Purchase of minority interest in undercapitelized savings associations by
holding companies allowed.
TITLE Vn—FEDERAL HOME LOAN BANK SYSTEM REFORMS

Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

701.
702.
703.
704.
705.
706.
707.
708.

Sec.
Sec.
Sec.
Sec.
Sec.

709.
710.
711.
712.
713.

Sec. 714.
Sec. 715.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

716.
717.
718.
719.
720.
721.
722.
723.
724.
725.

Subtitle A—Federal Home Loan Bank Act Amendments
Definitions.
Federal Housing Finance Board established.
Termination of the Federal Home Loan Bank Board.
Eligibility for membership.
Repeal of provision relating to rate of interest on deposits.
Capital stock.
Election of Bank directors.
Repeal of provisions relating to certain powers of the Federal Home Loan
Bank Board.
Powers and duties of Banks.
Eligibility of borrowers to secure advances.
Administrative expenses.
Nonadministrative expenses.
Federal Savings and Loan Insurance Corporation Industry Advisory Committee.
Advances.
Amendments relating to withdrawal from Federal Home Loan Bank membership.
Repeal of provisions relating to lawful contract rate.
Bcmk stock and obligations.
Thrift Advisory Council.
Examination of members.
Liquidity.
Affordable housing.
Transferred employees of Federal Home Loan Banks and joint ofiHces.
Transitional provisions.
Federal Home Loan Bank reserves.
Special account.

Subtitle B—Federal Home Loan Mortgage Corporation
Sec. 731. Federal Home Loan Mortgage Corporation.
Subtitle C—Technical and Conforming Amendments
Sec. 741. Repeal of limitation of obligation for administrative expenses.
Sec. 742. Amendment of title 5, United States Code.
Sec. 743. Amendment of Balanced Budget and Emergency Deficit Control Act
provisions.
Sec. 744. Conforming amendments to financial institution related Acts.
Sec.
Sec.
Sec.
Sec.

801.
802.
803.
804.

TITLE Vra—BANK CONSERVATION ACT AMENDMENTS
Definitions.
Appointment of cq;nservator.
Elxaminations.
Termination of conservatorship.

PUBLIC LAW 101-73—AUG. 9, 1989
Sec.
Sec.
Sec.
Sec.

805.
806.
807.
808.

103 STAT. 185

Ck)n8ervator; powers and duties.
Liability protection.
Rules and regulations.
Repeals.

TITLE IX—REGULATORY ENFORCEMENT AUTHORITY AND CRIMINAL
ENHANCEMENTS
Subtitle A—Expanded Enforcement Powers, Increased Penalties, and Improved
Accountability
Sec. 901. Institution-affiliated parties of a depository institution subject to administrative enforcement orders; substitution of "depository institution" for
"bank" in enforcement provisions.
Sec. 902. Amendments to cease and desist authority with respect to restitution, restrictions on specific activities, grouncls for issuance of a temporary
order, and incomplete or inaccurate records.
Sec. 903. Merger of removal and prohibition authority.
Sec. 904. Industrywide application of removal, suspension, and prohibition orders.
Sec. 905. Enforcement proceedings allowed after separation from service.
Sec. 906. Expansion of removal powers for state criminal proceedings.
Sec. 907. Amendments to expand and increase civil money penalties.
Sec. 908. Clariflcation of criminal penalty provisions for violation of certain orders.
Sec. 909. Supervisory records.
Sec. 910. Increased penalty for participation by convicted individuals.
Sec. 911. Amendments to various provisions of law relating to reports.
Sec. 912. Authority of the FDIC to take enforcement action against savings associations.
Sec. 913. Public disclosure of enforcement actions required.
Sec. 914. Agency disapproval of directors and senior executive ofHcers of certain depository institutions.
Sec. 915. Clarification of NCUA's authority to conduct compliance investigations.
Sec. 916. Improved administrative hearings and procedures.
Sec. 917. Task force study of delegation of enforcement actions.
Sec. 918. Annual report to Congress.
Sec. 919. Credit union audit requirements.
Sec. 920. Technical amendments relating to administrative and judicial review.

\

Subtitle B—Termination of Deposit Insurance
Sec. 926. Revision of procedures for termination of FDIC deposit insurance.
Subtitle C—Improving Early Detection of Misconduct and Encouraging Informants
Sec. 931. Information required to be made available to outside auditors.
Sec. 932. Depository institution employee protection remedy.
Sec. 933. Reward for information leading to recoveries or civil penalties.
Sec.
Sec.
Sec.
Sec.

941.
942.
943.
944.

Subtitle D—Right to Financial Privacy Act Amendments
Definitions.
Additional exceptions.
Prohibition.
Miscellaneous provisions.

Subtitle E—Civil Penalties for Violations Involving Financial Institutions
Sec. 951. Civil penalties.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

961.
962.
963.
964.
965.
966.
967.
968.

Subtitle F—Criminal Law and Procedure
Increased criminal penalties for certain financial institution offenses.
Miscellaneous revisions to title 18.
Civil and criminal forfeiture.
Grand jury secrecy.
Criminal Division Fraud Section regional office.
Department of Justice appropriation authorization.
Authorization of additional appropriations for the judiciary.
Racketeer influenced and corrupt organizations.

TITLE X—STUDIES OF FEDERAL DEPOSIT INSURANCE, BANKING SERVICES, AND THE SAFETY AND SOUNDNESS OF GOVERNMENT-SPONSORED
ENTERPRISES
Sec. 1001. Study of Federal deposit insurance system.

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103 STAT. 186

PUBLIC LAW 101-73—AUG. 9, 1989

Sec. 1002. Survey of bank fees and services.
Sec. 1003. General Accounting Office study.
Sec. 1004. Study regarding capital requirements
enterprises.

for

government-sponsored

TITLE XI—REAL ESTATE APPRAISAL REFORM AMENDMENTS
Sec. 1101. Purpose.
Sec. 1102. Establishment of Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
Sec. 1103. Functions of Appraisal Subcommittee.
Sec. 1104. Chairperson of Appraisal Subcommittee; term of Chairperson; meetings.
Sec. 1105. Officers and staff.
Sec. 1106. Powers of Appraisal Subcommittee.
Sec. 1107. Procedures for establishing appraisal standards and requiring the use of
certified and licensed appraisers.
Sec. 1108. Startup funding.
Sec. 1109. Roster of State certified or licensed appraisers; authority to collect and
transmit fees.
Sec. 1110. Functions of the Federal financial institutions regulatory agencies relating to appraisal standards.
Sec. 1111. Time for proposal and adoption of standards.
Sec. 1112. Functions of the Federal financial institutions regulatory agencies relating to appraiser qualifications.
Sec. 1113. Transactions requiring the services of a State certified appraiser.
Sec. 1114. Transactions requiring the services of a State licensed appraiser.
Sec. 1115. Time for proposal and adoption of rules.
Sec. 1116. Certification and licensing requirements.
Sec. 1117. Establishment of State appraiser certifying and licensing agencies.
Sec. 1118. Monitoring of State appraiser certifying and licensing agencies.
Sec. 1119. Recognition of State certified and licensed appraisers for purposes of this
title.
Sec. 1120. Violations in obtaining and performing appraisals in federally related
transactions.
Sec. 1121. Definitions.
Sec. 1122. Miscellaneous provisions.
._
TITLE XII—MISCELLANEOUS PROVISIONS
GAO study of credit union system.
OCC employment provision.
NCUA emplo3nment provision.
Expansion of use of underutilized minority banks, women's banks, and
low-income credit unions.
Sec. 1205. Credit standards advisory committee.
Sec. 1206. Comparability in compensation schedules.
Sec. 1207. Study by Secretary of the Treasury.
Sec. 1208. Expenditure of taxpayer money only for deposit insurance purposes.
Sec. 1209. Amendment to section 5373 of title 5, United States Code.
Sec. 1210. Farm Credit Administration and Farm Credit System Insurance Corporation employment provision.
Sec. 1211. Fair lending oversight and enforcement.
Sec. 1212. Amendment to the Community Reinvestment Act of 1977.
Sec. 1213. Comptroller General audit and access to records.
Sec. 1214. Amendment related to the Hart-Scott-Rodino Act.
Sec. 1215. Capital and accounting standards.
Sec. 1216. Equal opportunity.
Sec. 1217. NCUA powers as liquidating agent and conservator.
Sec. 1218. Risk management training.
Sec. 1219. Cross-marketing restrictions.
Sec. 1220. Report on loan discrimination.
Sec. 1221. Separability of provisions.
TITLE XIII—PARTICIPATION BY STATE HOUSING FINANCE AUTHORITIES
AND NONPROFIT ENTITIES
Sec. 1301. Definitions.
Sec. 1302. Authorization for State housing finance agencies and nonprofit entities
to purchase mortgage-related assets.
Sec.
Sec.
Sec.
Sec.

1201.
1202.
1203.
1204.

TITLE XrV—TAX PROVISIONS
Sec. 1401. Early termination of special reorganization rules for financial institutions.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 187

Sec. 1402. Tax exemption for Resolution Trust Corporation and Resolution Funding
Corporation.
Sec. 1403. Annual reports on transactions in which Federal financial assistance
provided.
Sec. 1404. Studies of relationship between public debt and activities of Governmentsponsored enterprises.

TITLE I—PURPOSES
SEC. 101. PURPOSES.

The purposes of this Act are as follows:
(1) To promote, through regulatory reform, a safe and stable
system of affordable housing finance.
(2) To improve the supervision of savings associations by
strengthening capital, accounting, and other supervisory
standards.
(3) To curtail investments and other activities of savings
associations that pose unacceptable risks to the Federal deposit
insurance funds.
(4) To promote the independence of the Federal Deposit Insurance Corporation from the institutions the deposits of which it
insures, by providing an independent board of directors, adequate funding, and appropriate powers.
(5) To put the Federal deposit insurance funds on a sound
financial footing.
(6) To establish an Office of Thrift Supervision in the Department of the Treasury, under the general oversight of the Secretary of the Treasury.
(7) To establish a new corporation, to be known as the Resolution Trust Corporation, to contain, manage, and resolve failed
savings associations.
(8) To provide funds from public and private sources to deal
expeditiously with failed depository institutions.
(9) To strengthen the enforcement powers of Federal regulators of depository institutions.
(10) To strengthen the civil sanctions and criminal penalties
for defrauding or otherwise damaging depository institutions
and their depositors.

TITLE II—FEDERAL DEPOSIT INSURANCE
CORPORATION
SEC. 201. DEPOSITORY INSTITUTIONS.
(a) AMENDMENTS TO REFERENCES TO INSURED BANK.—

(1) IN GENERAL.—Except as provided in paragraph (2), the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by striking out "insured bank", "insured banks", and
"insured bank's" each place each term appears in such Act
(except where any such term is preceded by "member" or
"nonmember") and inserting in lieu thereof "insured depository
institution", "insured depository institutions", and "insured
depository institution's", respectively.
(2) EXCEPTIONS.—The terms "insured bank" and "insured
banks" shall not be amended pursuant to paragraph (1) in

12 USC 1811

103 STAT. 188

PUBLIC LAW 101-73—AUG. 9, 1989
sections 3(h), 11(h), ll(i), 13(cXlXB), 13(f), and 18(d) of the Federal Deposit Insurance Act.
(b) AMENDMENTS TO REFERENCES TO FEDERAL HOME LOAN BANK

BOARD.—The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by striking out "Federal Home Loan Bank Board" each
place such term appears and inserting in lieu thereof "Director of
the Office of Thrift Supervision".
SEC. 202. DUTIES OF FEDERAL DEPOSIT INSURANCE CORPORATION.

12 use 1812.

Section 1 of the Federal Deposit Insurance Act (12 U.S.C. 1811) is
amended by inserting "and savings associations" after "banks".
SEC. 203. FDIC BOARD MEMBERS.
(a) IN GENERAL.—Section 2 of the Federal Deposit Insurance Act is
amended to read as follows:
"SEC. 2. MANAGEMENT.
"(a) BOARD OF DIRECTORS.—

"(1) IN GENERAL.—The management of the CJorporation shall
be vested in a Board of Directors consisting of 5 members—
"(A) 1 of whom shall be the (Comptroller of the Currency;
"(B) 1 of whom shall be the Director of the Office of Thrift
Supervision; and
(C) 3 of whom shall be appointed by the President, by
and with the advice and consent of the Senate, from among
individuals who are citizens of the United States.
"(2) POLITICAL AFFIUATION.—After February 28, 1993, not
more than 3 of the members of the Board of Directors may be
members of the same political party.
"(b) (CHAIRPERSON AND VICE CHAIRPERSON.—

"(1) CHAIRPERSON.—1 of the appointed members shall be designated by the President, by and with the advice and consent of
the Senate, to serve as (Chairperson of the Board of Directors for
a term of 5 years.
"(2) VICE CHAIRPERSON.—1 of the appointed members shall be

designated by the President, by and with the advice and consent
of the Senate, to serve as vice Chairperson of the Board of
Directors.
"(3) ACTING CHAIRPERSON.—In the event of a vacancy in the
position of Chairperson of the Board of Directors or during the
absence or disability of the Chairperson, the Vice (Chairperson
shall act as Chairperson.
"(c) TERMS.—
"(1) APPOINTED MEMBERS.—Each appointed member shall be

^

appointed for a term of 6 years.
"(2) INTERIM APPOINTMENTS.—Any member appointed to fill a
vacancy occurring before the expiration of the term for which
such member's predecessor was appointed shall be appointed
only for the remainder of such term.
"(3) CONTINUATION OF SERVICE.—The (Chairperson, Vice (Chairperson, and each appointed member may continue to serve after
the expiration of the term of office to which such member was
appointed until a successor has been appointed £md qualified.
"(d) VACANCY.—

"(1) IN GENERAL.—Any vacancy on the Board of Directors
shall be filled in the manner in which the original appointment
was made.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 189

"(2) ACTING OFFICIALS MAY SERVE.—In the event of a vacancy
in the office of the Comptroller of the Currency or the office of
Director of the Office of Thrift Supervision and pending the
appointment of a successor, or during the absence or disability
of the Comptroller or such Director, the acting Comptroller of
the Currency or the acting Director of the Office of Thrift
Supervision, as the case may be, shall be a member of the Board
of Directors in the place of the Comptroller or Director.
"(e) INELIGIBILITY FOR OTHER OFFICES.—
"(1) POSTSERVICE RESTRICTION.—

"(A) IN GENERAL.—No member of the Board of Directors
may hold any office, position, or employment in any insured
depository institution or any depository institution holding
company during—
"(i) the time such member is in office; and
"(ii) the 2-year period beginning on the date such
member ceases to serve on the Board of Directors.
"(B) EXCEPTION FOR MEMBERS WHO SERVE FULL TERM.—

The limitation contained in subparagraph (A)(ii) shall not
apply to any member who has ceased to serve on the Board
of Directors after serving the full term for which such
member was appointed.
"(2) RESTRICTION DURING SERVICE.—No member of the Board
of Directors may—
"(A) be an officer or director of any insured depository
institution, depository institution holding company. Federal
Reserve bank, or Federal home loan bank; or
"(B) hold stock in any insured depository institution or
depository institution holding company.
"(3) CERTIFICATION.—Upon taking office, each member of the
Board of Directors shall certify under oath that such member
has complied with this subsection and such certification shall be
filed with the secretary of the Board of Directors.",
(b) TRANSITION PROVISION.—

12 u s e 1812

(1) CHAIRPERSON.—Notwithstanding any provision of section 2 note,
of the Federal Deposit Insurance Act, the Chairman of the
Board of Directors of the Federal Deposit Insurance Corporation
on the date of the enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 may continue
to serve as the Chairperson until the end of the term to which
such Chairman was appointed.
(2) MEMBERS.—Notwithstanding any provision of section 2 of
the Federal Deposit Insurance Act, the appointed member of
the Board of Directors of the Federal Deposit Insurance Corporation on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 who is not
the Chairman shall continue to serve in office until the earlier
of—
(A) the end of the term to which such member was
appointed; or
(B) February 28, 1993,
except that such member may continue to serve after the end of
such term until a successor has been appointed and qualified.
(3) APPOINTMENTS BEFORE MARCH i, 1993.—Notwithstanding

any provision of section 2 of the Federal Deposit Insurance Act,
the term of any member appointed to the Board of Directors of
the Federal Deposit Insurance Corporation before February 28,

103 STAT. 190

PUBLIC LAW 101-73—AUG. 9, 1989
1993 (including the term of any Chairperson), shall end on such
date.

SEC. 204. DEFINITIONS.
(a) DEFINITIONS OF BANK AND RELATED TERMS.—Section 3(a) of the

Federal Deposit Insurance Act (12 U.S.C. 1813(a)) is amended to read
as follows:
"(a) DEFINITIONS OF BANK AND RELATED TERMS.—

"(1) BANK.—The term 'bank'—
"(A) means any national bank, State bank, and District
bank, and any Federal branch and insured branch;
"(B) includes any former savings association that—
"(i) has converted from a savings association charter;
and
"(ii) is a Savings Association Insurance Fund
member.
"(2) STATE BANK.—The term 'State bank' means any bank,
banking association, trust company, savings bank, industrial
bank (or similar depository institution which the Board of
Directors finds to be operating substantially in the same
manner as an industrial bank), or other banking institution
which—
"(A) is engaged in the business of receiving deposits,
other than trust funds (as defined in this section); and
"(B) is incorporated under the laws of any State or which
is operating under the Code of Law for the District of
Columbia (except a national bank),
including any cooperative bank or other unincorporated bank
the deposits of which were insured by the Corporation on the
day before the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
"(3) STATE.—The term 'State' means any State of the United
States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern
Mariana Islands.
"(4) DISTRICT BANK.—The term 'District bank' means any
State bank operating under the Code of Law of the District of
Columbia.
(b) DEFINITION OF SAVINGS ASSOCIATIONS AND RELATED TERMS.—

Section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b))
is amended to read as follows:
"(b) DEFINITION OF SAVINGS ASSOCIATIONS AND RELATED TERMS.—
"(1) SAVINGS ASSOCIATION.—The term 'savings association'

means—
"(A) any Federal savings association;
"(B) any State savings association; and
"(C) any corporation (other than a bank) that the Board
of Directors and the Director of the Office of Thrift Supervision jointly determine to be operating in substantially the
same manner as a savings association.
"(2) FEDERAL SAVINGS ASSOCIATION.—The term 'Federal savings association' means any Federal savings association or Federal savings bank which is chartered under section 5 of the
Home Owners' Loan Act.
"(3) STATE SAVINGS ASSOCIATION.—The term 'State savings
association' means—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 191

"(A) any building and loan association, savings and loan
association, or homestead association; or
"(B) any cooperative bank (other than a cooperative bank
which is a State bank £is defined in subsection (aX2)),
which is organized and operating according to the laws of the
State (as defined in subsection (a)(3)) in which it is chartered or
organized.".
(c) DEFINITIONS RELATING TO DEPOSITORY INSTITUTIONS.—Section

3(c) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)) is
amended to read as follows:
"(c) DEFINITIONS RELATING TO DEPOSITORY INSTITUTIONS.—
"(1) DEPOSITORY INSTITUTION.—The term 'depository

institution' means any bank or savings association.
"(2) INSURED DEPOSITORY INSTITUTION.—The term 'insured
depository institution' means any bank or savings association
the deposits of which are insured by the (Corporation pursuant
to this Act.
"(3) INSTITUTIONS INCLUDED FOR CERTAIN PURPOSES.—The term
'insured depository institution' includes any uninsured branch
or Eigency of a foreign bank or a commercial lending company
owned or controlled by a foreign bank for purposes of section 8
of this Act.
"(4) FEDERAL DEPOSITORY INSTITUTION.—The term 'Federal
depository institution' means any nationgil bank, any Federal
savings association, and any Federal branch.
"(5) STATE DEPOSITORY INSTITUTION.—The term 'State depository institution' means any State bank, any State savings
association, and any insured branch which is not a Federal
branch.".

(d) DEFINITIONS RELATING TO MEMBER BANKS.—Section 3(d) of the

Federal Deposit Insurance (12 U.S.C. 1813(d)) is amended to read as
follows:
"(d) DEFINITIONS RELATING TO MEMBER BANKS.—
"(1) NATIONAL MEMBER BANK.—The term 'national

member
bank' means any national bank which is a member of the
Federal Reserve System.
"(2) STATE MEMBER BANK.—The term 'State member bank'
means any State bank which is a member of the Federal
Reserve System.".

(e) DEFINITIONS RELATING TO NONMEMBER BANKS.—Section 3(e) of

the Federal Deposit Insurance Act (12 U.S.C. 1813(e)) is amended to
read as follows:
"(e) DEFINITIONS RELATING TO NONMEMBER BANKS.—
"(1) NATIONAL NONMEMBER BANK.—The term

'national
nonmember bank' means any national bank which—
"(A) is located in any territory of the United States,
Puerto Rico, Guam, American Samoa, the Virgin Islands, or
the Northern Mariana Islands; and
"(B) is not a member of the Federal Reserve System.
"(2) STATE NONMEMBER BANK.—The term 'State nonmember
bank' means any State bank which is not a member of the
Federal Reserve System.".

(f) ADDITIONAL AMENDMENTS TO DEFINITIONS.—Section 3 of

the

Federal Deposit Insurance Act (12 U.S.C. 1813) is amended—
(1) in subsection (j), by inserting "or savings Eissociation" after
"of a bank";
(2) in subsection (1)—

103 STAT. 192

PUBLIC LAW 101-73—AUG. 9, 1989
(A) by inserting "or savings association" after "a bank",
"the bank", "another bank", "receiving bank", and "such
bank" each place such terms appear;
(B) by inserting "or savings association's" after the word
"bank's" each place such term appears;
(C) in paragraph (5), by inserting ", Director of the Office
of Thrift Supervision," after "Comptroller of the Currency";
and
(D) in paragraph (5)(A), by striking out "and the Virgin
Islands" and inserting in lieu thereof "the Virgin Islands,
and the Northern Mariana Islands";
(3) in subsection (m)—
(A) in paragraph (1)—
(i) by striking out "the bank" and inserting in lieu
thereof "the depository institution"; and
(ii) by inserting "of the Northern Mariana Islands,"
after "Virgin Islands,"; and
(B) in paragraph (2), by striking out "ther" sind inserting
in lieu thereof "term";
(4) by striking out subsection (q) and inserting in lieu thereof
the following:
"(q) APPROPRIATE FEDERAL BANKING AGENCY.—The term 'appropriate Federal banking agency' means—
"(1) the Comptroller of the Currency, in the case of any
national banking association, any District bank, or any Federal
branch or agency of a foreign bank;
"(2) the Board of Governors of the Federal Reserve System, in
the case of—
"(A) any State member insured bank (except a District
bank),
"(B) any branch or agency of a foreign bank with respect
to any provision of the Federal Reserve Act which is made
applicable under the International Banking Act of 1978,
"(C) any foreign bank which does not operate an insured
branch,
"(D) any agency or commercial lending company other
than a Federal agency,
"(E) supervisory or regulatory proceedings arising from
the authority given to the Board of Governors under section
7(c)(1) of the International Banking Act of 1978, including
such proceedings under the Depository Institutions Supervisory Act, and
"(F) any bank holding company and any subsidiary of a
bank holding company (other than a bank);
"(3) the Federal Deposit Insurance Corporation in the case of
a State nonmember insured bank (except a District bank), or a
foreign bank having an insured branch; and
"(4) the Director of the Office of Thrift Supervision in the case
of any savings association or any savings and loan holding
company.
Under the rule set forth in this subsection, more than one agency
may be an appropriate Federal banking agency with respect to any
given institution."; and
(5) by striking out subsection (t) and inserting in lieu thereof
the following new subsection:
"(t) INCLUDES, INCLUDING.—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 193

"(1) I N GENERAL.—The terms 'includes' and 'including' shall
not be construed more restrictively than the ordinary usage of
such terms so as to exclude any other thing not referred to or
described.
"(2) RULE OF CONSTRUCTION.—Paragraph (1) shall not be construed as creating any inference that the term 'includes' or
'including' in any other provision of Federal law may be deemed
to exclude any other thing not referred to or described.";
(6) by adding at the end thereof the following new subsections:
"(u) INSTITUTION-AFFIUATED PARTY.—The term 'institution-affiliated party' means—
"(1) any director, officer, employee, or controlling stockholder
(other than a bank holding company) of, or agent for, an insured
depository institution;
(2) any other person who has filed or is required to file a
change-in-control notice with the appropriate Federal banking
agency under section 7(j);
"(3) any shareholder (other than a bank holding company),
consultant, joint venture partner, and any other person as
determined by the appropriate Federal banking agency (by
regulation or case-by-case) who participates in the conduct of
the affairs of an insured depository institution; and
"(4) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates
in—
"(A) any violation of any law or regulation;
"(B) any breach of fiduciary duty; or
"(C) any unsafe or unsound practice,
which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured
depository institution.
"(v) VIOLATION.—The term 'violation' includes any action (alone
or with another or others) for or toward causing, bringing about,
participating in, counseling, or aiding or abetting a violation.

'

"(w) DEFINITIONS RELATING TO HOLDING COMPANIES.—
"(1) DEPOSITORY INSTITUTION HOLDING COMPANY.—The term

'^

'depository institution holding company' means a bank holding
company or a savings and loan holding company.
"(2) BANK HOLDING COMPANY.—The term 'bank holding company' has the meaning given to such term in section 2 of the
Bank Holding Company Act of 1956.
"(3) SAVINGS AND LOAN HOLDING COMPANY.—The term 'savings and loan holding company' has the meaning given to such
term in section 10 of the Home Owners' Loan Act.
"(4) SUBSIDIARY.—The term'subsidiary'—

I

"(A) means any company which is owned or controlled
directly or indirectly by another company; and
"(B) includes any service corporation owned in whole or
in part by an insured depository institution or any subsidiary of such a service corporation.
"(5) CONTROL.—The term 'control' has the meaning given to
such term in section 2 of the Bank Holding Clompany Act of
1956.
"(6) AFFILIATE.—The term 'affiliate' has the meaning given to
such term in section 2(k) of the Bank Holding Company Act of
1956.
"(x) DEFiNmoNS RELATING TO DEFAULT.—

^

103 STAT. 194

,

PUBLIC LAW 101-73—AUG. 9, 1989
"(1) DEFAULT.—The term 'default' means, with respect to an
insured depository institution, any adjudication or other official
determination by any court of competent jurisdiction, the appropriate Federal banking agency, or other public authority pursu' ant to which a conservator, receiver, or other legal custodian is
appointed for an insured depository institution or, in the case of
a foreign bank having an insured branch, for such branch.
"(2) IN DANGER OF DEFAULT.—The term 'in danger of default'
means an insured depository institution with respect to which
(or in the CEise of a foreign bank having an insured branch, with
respect to such insured branch) the appropriate Federal banking agency or State chartering authority has advised the Corporation (or, if the appropriate Federal banking agency is the
Corporation, the Corporation has determined) that—
"(A) in the opinion of such agency or authority—
"(i) the depository institution or insured branch is
not likely to be able to meet the demands of the
institution's or branch's depositors or pay the institution's or branch's obligations in the normal course of
business; and
"(ii) there is no reasonable prospect that the depository institution or insured branch will be able to meet
such demands or pay such obligations without Federal
assistance; or
"(B) in the opinion of such c^ency or authority—
"(i) the depository institution or insured branch has
incurred or is likely to incur losses that will deplete all
or substantially all of its capital; and
"(ii) there is no reasonable prospect that the capital
of the depository institution or insured branch will be
replenished without Federal assistance.".
SEC. 205. INSURED SAVINGS ASSOCIATIONS.

Section 4 of the Federal Deposit Insurance Act (12 U.S.C. 1814) is
amended—
(1) in subsection (a)—
(A) by striking out "(a) Every bank" and inserting in lieu
thereof the following:
"(a) CONTINUATION OF INSURANCE.—

"(1) BANKS.—Each bank"; and
(B) by adding at the end thereof the following new
paragraph:
"(2) SAVINGS ASSOCIATIONS.—Each savings association the accounts of which were insured by the Federal Savings and Loan
Insurance Corporation on the day before the date of the enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, shall be, without application or approval, an insured depository institution.";
(2) in subsection (b)—
(A) by inserting after the 1st sentence the following new
sentences: "Any application or notice for membership or to
commence or resume business shall be promptly provided
by the appropriate Federal banking agency to the Corporation and the Corporation shall have a reasonable period of
time to provide comments on such application or notice.
Any comments submitted by the Corporation to the appro-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 195

priate Federal banking agency shall be considered by such
agency.";
(B) by striking out the penultimate and the last sentences; and
(C) by striking out "(b) Every national bank" and inserting in lieu thereof "(b) CERTIFICATION BY OTHER BANKING
AGENCIES.—Every national bank"; and
(3) by striking out subsection (c) and inserting in lieu thereof
the following new subsections:
"(c) CONTINUATION OF INSURANCE AFTER CONVERSION.—Subject to

section 5(d)—
"(1) any State depository institution which results from the
conversion of any insured Federal depository institution; and
"(2) any Federal depository institution which results from the
conversion of any insured State depository institution,
shall continue as an insured depository institution.
"(d) CONTINUATION OF INSURANCE AFTER MERGER OR CONSOUDA-

TiON.—^y State depository institution or any Federal depository
institution which results from the merger or consolidation of insured depository institutions, or from the merger or consolidation of
a noninsured depository institution with an insured depositorv
institution, shall continue as an insured depository institution.'.
SEC. 206. APPLICATION PROCESS; INSURANCE FEES.

(a) IN GENERAL.—Section 5 of the Federal Deposit Insurance Act
(12 U.S.C. 1815) is amended—
(1) by striking out "(a) Subject to the provisions of this Act,
any" and inserting in lieu thereof the following:
"(a) APPUCATION FOR INSURANCE.—
"(1) NATIONAL AND STATE NONMEMBER BANKS; STATE SAVINGS
ASSOCIATIONS.—Any";

(2) in the 1st sentence of subsection (aXD (as so redesignated
by paragraph (1) of this subsection), by striking out the comma
after "State nonmember bank" and inserting in lieu thereof
"and State savings association,"; and
(3) in the 2nd sentence of subsection (aXD (as so redesignated
by paragraph (1) of this subsection)—
(A) by striking out the comma after "State nonmember
bank" and inserting in lieu thereof "and State savings
association,";
(B) by striking out the comma after "such bank" and
inserting in lieu thereof "or savings association,"; and
(C) by inserting "or savings association, and, in the case of
an application by a State savings association, the Corporation shall notify the Director of the Office of Thrift Supervision of the Corporation's approval of such application"
before the period at the end;
(4) by adding at the end of subsection (a) the following new
paragraphs:
"(2) FEDERAL SAVINGS ASSOCIATIONS.—Any Federal savings

association shall become an insured depository institution
upon—
"(A) application to the Corporation; and
"(B) receipt by the (Corporation of a certificate issued to
the Corporation by the Director which meets the requirements of paragrapn (4),
unless insurance is denied by the Board of Directors.

103 STAT. 196

PUBLIC LAW 101-73—AUG. 9, 1989
'•

"(3) INTERIM FEDERAL SAVINGS ASSOCIATIONS.—In the case of
any interim Federal savings association which is chartered by
the Director of the Office of Thrift Supervision and will not
open for business, such association shall be an insured depository institution upon the issuance of such association's charter
by the Director.
"(4) CERTIFICATE REQUIREMENTS.—Any certificate issued to the

'

Corporation under paragraph (2) shall state that the Federal
savings association is authorized to transact business as a savings association and that consideration has been given to the
factors enumerated in section 6.
"(5) REVIEW REQUIREMENTS.—In reviewing any certificate and
application referred to in paragraph (2), the Board of Directors
shall consider the factors described in paragraphs (1), (2), (3), (4),
and (5) of section 6 in determining whether to deny insurance.
"(6) NOTICE OF DENIAL OF APPUCATION.—If the Board of Directors, after giving due deference to the determination of the
Director of the Office of Thrift Supervision with respect to such
factors, does not concur in the determination of the Director,
the Board of Directors shall promptly notify the Director that
insurance has been denied, giving specific reasons in writing for
the Corporation's determination with reference to the factors
described in paragraphs (1), (2), (3), (4), and (5) of section 6, and
no insurance shall be granted.
"(7) VOTING REQUIREMENTS.—The authority of the Board of
Directors to make any determination to deny insurance under
this subsection may not be delegated by the Board of Directors
and any such determination may be made only upon a vote of %
of all members of the Board of Directors (excluding the Director
of the Office of Thrift Supervision).";
(5) in subsection (bX4), by inserting "and fitness" after character;
(6) in subsection (b)—
(A) by redesignating paragraphs (5), (6), and (7) as paragraphs (6), (7), and (8), respectively; and
(B) by inserting after paragraph (4) the following:
"(5) the risk presented to the Bank Insurance Fund or the
Savings Association Insurance Fund;"; and
(7) by adding at the end thereof the following new subsections:
'(d) INSURANCE FEES.—
"(1) UNINSURED INSTITUTIONS.—

^

"(A) IN GENERAL.—Any institution that becomes insured
by the Corporation, and any noninsured branch that becomes insured by the Corporation, shall pay the Corporation any fee which the Corporation may by regulation
prescribe, after giving due consideration to the need to
establish and maintain reserve ratios in the Bank Insurance Fund and the Savings Association Insurance Fund as
required by section 7.
>•
"(B) FEE CREDITED TO APPROPRIATE FUND.—The fee paid by
the depository institution shall be credited to the Bank
Insurance Fund if the depository institution becomes a
Bank Insurance Fund member, and to the Savings Associa^ K' • tion Insurance Fund if the depository institution becomes a
- • '• Savings Association Insurance Fund member.
"(C) EXCEPTION FOR CERTAIN DEPOSITORY INSTITUTIONS.—

Any depository institution that becomes an insured deposi-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 197

tory institution by operation of section 4(a) shall not pay
any fee.
*(2) CONVERSIONS.—
"(A) I N GENERAL.—
"(i) PRIOR APPROVAL REQUIRED.—No

insured depository institution may participate in a conversion transaction without the prior approval of the Corporation.
"(ii) 5-YEAR MORATORIUM ON CONVERSIONS.—Except a s

provided in subparagraph (C), the Corporation may not
approve any conversion transaction before the end of
the 5-year period beginning on the date of the enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989.
"(B) CONVERSION DEFINED.—For purposes of this paragraph, the term 'conversion transaction' means—
"(i) the change of status of an insured depository
institution from a Bank Insurance Fund member to a
Savings Association Insurance Fund member or from a
Savings Association Insurance Fund member to a Bank
Insurance Fund member;
"(ii) the merger or consolidation of a Bank Insurance
Fund member with a Savings Association Insurance
Fund member;
"(iii) the assumption of any liability by—
"(I) any Bank Insurance Fund member to pay
any deposits of a Savings Association Insurance
Fund member; or
"(II) any Savings Association Insurance Fund
member to pay any deposits of a Bank Insurance
Fund member;
"(iv) the transfer of assets of—
"(I) any Bank Insurance Fund member to any
Savings Association Insurance Fund member in
consideration of the assumption of liabilities for
any portion of the deposits of such Bank Insurance
Fund member; or
"(II) any Savings Association Insurance Fund
member to any Bank Insurance Fund member in
consideration of the assumption of liabilities for
any portion of the deposits of such Savings Association Insurance Fund member.
"(C) APPROVAL DURING MORATORIUM.—The Corporation
may approve a conversion transaction at any time if—
"(i) the conversion transaction affects an insubstantial portion, as determined by the Corporation, of the
total deposits of each depository institution participating in the conversion transaction;
"(ii) the conversion occurs in connection with the
acquisition of a Savings Association Insurance Fund
member in default or in danger of default, and the
Corporation determines that the estimated financial
benefits to the Savings Association Insurance Fund or
Resolution Trust Corporation equal or exceed the Corporation's estimate of loss of assessment income to such
insurance fund over the remaining balance of the 5year period referred to in subparagraph (A), and the

^

103 STAT. 198

PUBLIC LAW 101-73—AUG. 9, 1989
ill

t

' •

--

Resolution Trust Corporation concurs in the Corporation's determination; or
"(iii) the conversion occurs in connection with the
acquisition of a Bank Insurance Fund member in default or in danger of default and the Corporation determines that the estimated financial benefits to the Bank
Insurance Fund equal or exceed the Corporation's estimate of the loss of assessment income to the insurance
fund over the remaining balance of the 5-year period
referred to in subparagraph (A).
"(D)

,r» .
} .. .

_

. * .,

CERTAIN TRANSFERS DEEMED TO AFFECT INSUBSTAN-

TIAL PORTION OF TOTAL DEPOSITS.—For purposes of subparagraph (CXi), any conversion transaction shall be deemed to
affect an insubstantial portion of the total deposits of an
insured depository institution, to the extent the aggregate
amount of the total deposits transferred in such transaction
and in all conversion transactions occurring after the date
of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 does not exceed 35
percent of the lesser of—
"(i) the amount which is equal to the sum of—
"(I) the total deposits of such insured depository
institution on May 1,1989; and
"(II) the total amount of net interest credited to
the depository institution's deposits during the
period beginning on May 1, 1989, and ending on
the date of the transfer of deposits in connection
with such transaction; or
"(ii) the amount which is equal to the total deposits
of such insured depository institution on the date of the
transfer of deposits in connection with such transaction.
"(E) EXIT AND ENTRANCE FEES.—Each insured depository
institution participating in a conversion transaction shall
pay—
"(i) in the case of a conversion transaction in which
the resulting or acquiring depository institution is not
a Savings Association Insurance Fund member, an exit
fee (in an amount to be determined and assessed in
accordance with subparagraph (F)) which—
"(I) shall be deposited in the Savings Association
Insurance Fund; or
V
"(II) shall be paid to the Financing Corporation,
if the Secretary of the Tresisury determines that
the Financing Corporation has exhausted all other
sources of funding for interest pajnnents on the
obligations of the Financing Corporation and
orders that such fees be paid to the Financing
Corporation;
"(ii) in the case of a conversion transaction in which
the resulting or acquiring depository institution is not
a Bank Insurance Fund member, an exit fee in an
amount to be determined by the Corporation (and assessed in accordance with subparagraph (FXii)) which
shall be deposited in the Bank Insurance Fund; and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 199

"(iii) an entrance fee in an amount to be determined
by the Corporation (and eussessed in accordance with
subparagraph (FXii)), except that—
"(I) in the case of a conversion transaction in
which the resulting or acquiring depository institution is a Bank Insurance Fund member, the fee
shall be the approximate amount which the Corporation calculates as necessary to prevent dilution of the Bank Insurance Fund, and shall be paid
to the Bank Insureince Fund; and
"(II) in the case of a conversion transaction in
which the resulting or acquiring depository institution is a Savings Association Insurance Fund
member, the fee shall be the approximate amount
which the Corporation calculates as necessary to
prevent dilution of the Savings Association Insurance Fund, and shall be paid to the Savings
Association Insurance Fund.
"(F) ASSESSMENT OF EXIT AND ENTRANCE FEES.—
"(i) DETERMINATION OF AMOUNT OF EXIT FEES.—
"(I) CONVERSIONS BEFORE JANUARY i, 1997.—In

the case of any exit fee assessed under subparagraph (EXi) for any conversion transaction consummated before January 1, 1997, the amount of
such fee shall be determined jointly by the Corporation and the Secretary of the Treasury.
"(II) ASSESSMENTS AFTER DECEMBER, 31, 1996.—In

the case of any exit fee assessed under subparagraph (EXi) for any conversion transaction consummated after December 31, 1996, the amount of
such fee shall be determined by the Corporation,
"(ii) PROCEDURES.—The Corporation shall prescribe.
by regulation, procedures for assessing any exit or
entrance fee under subparagraph (E).
"(G)

CHARTER

CONVERSION

OF SAIF

MEMBERS.—This

subsection shall not be construed as prohibiting any savings
association which is a Savings Association Insurance Fund
member from converting to a bank charter during the
period described in subparagraph (AXii) if the resulting
bank remains a Savings Association Insurance Fund
member.
"(3) OPTIONAL CONVERSION THROUGH MERGER.—

"(A) I N GENERAL.—Notwithstanding paragraph (2XA),
any bank holding company that controls any savings
association may merge or consolidate the assets and liabilities of such savings association with, or transfer such
assets and liabilities to, any subsidiary bank which is a
Bank Insurance Fund member with the approval of the
appropriate Federal banking agency and the Board of Governors of the Federal Reserve System.
"(B) ASSESSMENTS BY SAIF ON DEPOSITS ATTRIBUTABLE TO
FORMER SAVINGS ASSOCIATION.—That portion of the average

assessment base of any subsidiary bank referred to in
subparagraph (A) for any semiannual period which is equal
to the adjusted attributable deposit amount (determined
under subparagraph (C) with respect to the transaction
described in subparagraph (A)) shall—

Regulations.

103 STAT. 200

PUBLIC LAW 101-73—AUG. 9, 1989
* • v^
i'

;:

"(i) be subject to assessment at the assessment rate
applicable under section 7 for Savings Association
Insurance Fund members;
"(ii) shall not be taken into account for purposes of
any assessment under section 7 for Bank Insurance
Fund members; and
"(iii) shall be treated as deposits which are insured by
the Savings Association Insurance Fund.

f
< t c •'..

"(C) DETERMINATION OF ADJUSTED ATTRIBUTABLE DEPOSIT

AMOUNT.—The adjusted attributable deposit amount which
shall be taken into account by any bank subsidiary referred
, : ,. to in subparagraph (A) for purposes of determining the
«•; J • amount of the assessment under subparagraph (BXi) for any
}f I i? semiannual period is the amount which is equal to the sum
j^.. of—

"(i) the amount of any deposits acquired by such
bank subsidiary in connection with any transaction
described in subparagraph (A) (as determined at the
time of such transaction);
• '• "(ii) the total of the amounts determined under
\
clause (iii) for semiannual periods preceding the semiannual period for which the determination is being
made under this subparagraph; and
• "(iii) the amount by which the sum of the amounts
. " J , V described in clauses (i) and (ii) would have increased
during the preceding semiannual period (other than
any semiannual period beginning before the date of
., ,
such transaction) if such increase occurred at a rate
equal to the greater of—
s
"(I) an annual rate of 7 percent; or
"(II) the annual rate of growth of deposits of such
. ^
% subsidiary bank minus the amount of any deposits
•J V * g. acquired through the acquisition, in whole or in
part, of a Bank Insurance Fund member during
such semiannual period.
'~iip'
"(D) DEPOSIT OF ASSESSMENT.—The amount of the assessment referred to in subparsigraph (BXi) shall be deposited in
the Savings Association Insurance Fund.

i,

. -.. '

"(E) CONDITIONS FOR FEDERAL RESERVE BOARD APPROVAL.—

The Board of Governors of the Federal Reserve System may
not approve any application by any bank holding company
to engage in any transaction described in subparagraph (A)
t K' unless such Board determines that—
,,
"(i) the amount which is equal to the aggregate
. . amount of the total assets of all depository institution
.t subsidiaries of such bank holding company is not less
than the amount which is equal to 200 percent of the
total assets of the savings association (at the time of the
proposed transaction);
"(ii) the bank holding company and all bank subsidif - T- aries of such holding company will meet all applicable
^c
capital standards upon consummation of the proposed
transaction;
"(iii) the transaction is not in substance the acquisii
tion of any Bank Insurance Fund member bank by any
Savings A^ociation Insurance Fund member;
"(iv) in the case of any transaction which occurs—

PUBLIC LAW 101-73—AUG. 9, 1989

-^^-

103 STAT. 201

"(I) during the 1-year period beginning on the
date of the enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989,
the savings association had tangible capital of less
than 4 percent during the preceding quarter; and
"(II) during the 1-year period beginning after the
end of the 1-year period referred to in subclause (I),
the savings association had tangible capital of less
than 5 percent during the preceding quarter; and
"(v) the transaction would comply with the requirements of section 3(d) of the Bank Holding Company Act
of 1956 if, at the time of such transaction, the savings
association were a State bank which the bank holding
company was applying to acquire.
"(F) ALLOCATION OF COSTS IN EVENT OF DEFAULT.—If any

subsidiary bank referred to in subparagraph (A) is in default or danger of default at any time before this paragraph
ceases to apply, any loss incurred by the Corporation shall
be allocated between the Bank Insurance Fund and the
Savings Association Insurance Fund, in amounts reflecting
the amount of insured deposits of such bank subsidiary
(other than the adjusted attributable deposit amount)
which is insured by the Bank Insurance Fund and the
adjusted attributable deposit amount which is insured by
the Savings Association Insurance Fund pursuant to
subparagraph (BXiii).
"(G)

SUBSEQUENT

APPROVAL

OF

CONVERSION

TRANS-

ACTION.—This paragraph shall cease to apply if—
"(i) after the end of the 5-year period referred to in
paragraph (2XA), the Corporation approves an application by the bank described in subparagraph (A) to treat
the transaction described in subparagraph (A) as a
conversion transaction; and
"(ii) such hank pays the amount of any exit and
entrance fee assessed by the Corporation under paragraph (2)(E) with respect to such transaction.
"(e) LLABILTTY OF COMMONLY CONTROLLED DEPOSITORY INSTITUTIONS.—
"(1) I N GENERAL.—
"(A) LIABILITY ESTABUSHED.—Any insured depository

I

institution shall be liable for any loss incurred by the
Corporation, or any loss which the Corporation reasonably
anticipates incurring, after the date of the enactment of the
Financisd Institutions Reform, Recovery, and Enforcement
Act of 1989 in connection with—
"(i) the default of a commonly controlled insured
depository institution; or
'(ii) any assistance provided by the Corporation to
any commonly controlled insured depository institution
in danger of default.
"(B) PAYMENT UPON NOTICE.—An insured depository
institution shall pay the amount of any liability to the
Corporation under subparagraph (A) upon receipt of written notice by the (Corporation in accordance with this
subsection.
"(C) NOTICE REQUIRED TO BE PROVIDED WITHIN 2 YEARS OF

LOSS.—No insured depository institution shall be liable to

103 STAT. 202

PUBLIC LAW 101-73—AUG. 9, 1989
the Corporation under subparagraph (A) if written notice
with respect to such liability is not received by such institution before the end of the 2-year period beginning on the
date the Corporation incurred the loss.
"(2) AMOUNT OF COMPENSATION; PROCEDURES.—

^

"(A) USE OF ESTIMATES.—When an insured depository
institution is in default or requires assistance to prevent
default, the Corporation shall—
"(i) in good faith, estimate the amount of the loss the
Corporation will incur from such default or assistance;
"(ii) if, with respect to such insured depository
institution, there is more than 1 commonly controlled
insured depository institution, estimate the amount of
each such commonly controlled depository institution's
share of such liability; and
"(iii) advise each commonly controlled depository
institution of the Corporation's estimate of the amount
of such institution's liability for such losses.
"(B) PROCEDURES; IMMEDIATE PAYMENT.—The Corporation, after consultation with the appropriate Federal banking agency and the appropriate State chartering agency,
shall—
"(i) on a case-by-case basis, establish the procedures
and schedule under which any insured depository
institution shall reimburse the Corporation for such
institution's liability under paragraph (1) in connection
'
with any commonly controlled insured depository
institution; or
"(ii) require any insured depository institution to
make immediate payment of the amount of such
institution's liability under paragraph (1) in connection
with any commonly controlled insured depository
institution.
"(C) PRIORITY.—The liability of any insured depository
institution under this subsection shall have priority with
respect to other obligations and liabilities as follows:
"(i) SUPERIORITY.—The liability shall be superior to
the following obligations and liabilities of the depository institution:
"(I) Any obligation to shareholders arising as a
result of their status as shareholders (including
any depository institution holding company or any
shareholder or creditor of such company).
"(II) Any obligation or liability owed to any affiliate of the depository institution (including any
' '
other insured depository institution), other than
any secured obligation which was secured as of
; ;
May 1,1989.
"' '
"(ii) SUBORDINATION.—The liability shall be subordinate in right and payment to the following obligations
and liabilities of the depository institution:
"(I) Any deposit liability (which is not a liability
described in clause (iXID).
"(II) Any secured obligation, other than any
obligation owed to any affiliate of the depository
institution (including any other insured depository
institution) which was secured after May 1, 1989.

PUBLIC LAW 101-73—AUG. 9, 1989
;:, ; ,

103 STAT. 203

"(III) Any other general or senior liability (which
is not a liability described in clause (i)).
"(IV) Any obligation subordinated to depositors
or other general creditors (which is not an obligation described in clause (i)).
"(D) ADJUSTMENT OF ESTIMATED PAYMENT.—

"(i) OVERPAYMENT.—If the amount of compensation
estimated by and paid to the Corporation by 1 or more
such commonly controlled depository institutions is
greater than the actual loss incurred by the (Dorporation, the Corporation shall reimburse each such commonly controlled depository institution its pro rata
share of any overpajonent.
"(ii) UNDERPAYMENT.—If the amount of compensation estimated by and paid to the Corporation by 1 or
more such commonly controlled depository institutions
is less than the actual loss incurred by the Corporation,
the Corporation shall redetermine in its discretion the
liability of each such commonly controlled depository
institution to the Corporation and shall require each
such commonly controlled depository institution to
make payment of any additional liability to the
Corporation.
"(3) REVIEW.—

"(A) JUDICIAL.—Actions of the Corporation shall be
reviewable pursuant to chapter 7 of title 5, United States
Code.
"(B) ADMINISTRATIVE.—The Corporation shall prescribe
regulations and establish administrative procedures which
provide for a hearing on the record for the review of—
"(i) the amount of any loss incurred by the Corporation in connection with any insured depository institution;
"(ii) the liability of individual commonly controlled
depository institutions for the amount of such loss; and
"(iii) the schedule of pajmients to be made by such
commonly controlled depository institutions.
"(4) LIMITATION ON RIGHTS OF PRIVATE PARTIES.—To the extent
the exercise of any right or power of any person would impair
the ability of any insured depository institution to perform such
institution's obligations under this subsection—
"(i) the obligations of such insured depository institution shall supersede such right or power; and
"(ii) no court may give effect to such right or power
with respect to such insured depository institution.
"(5) WAIVER AUTHORITY.—

"(A) IN GENERAL.—The Corporation, in its discretion, may
exempt any insured depository institution from the provisions of this subsection if the Corporation determines that
such exemption is in the best interests of the Bank Insurance Fund or the Savings Association Insurance Fund.
"(B) CONDITION.—During the period any exemption
granted to any insured depository institution under
subparagraph (A) or (C) is in effect, such insured depository
institution and all other insured depository institution
afniiates of such depository institution shall comply fully

Regulations.

(

103 STAT. 204

PUBLIC LAW 101-73—AUG. 9, 1989
' '-'••'^ with the restrictions of sections 23A and 23B of the Federal
Reserve Act without regard to section 23A(dXl).
. 'fyK.,

'''
'

'^

'
^

^'

"(C) L I M I T E D PARTNERSHIPS.—

"(i) I N GENERAL.—The Corporation may, in its discretion, exempt any limited partnership and any affiliate
of any limited partnership (other than any insured
depository institution which is a majority owned
subsidiary of such partnership) from the provisions of
this subsection if such limited partnership or affiliate
has filed a registration statement with the Securities
and Exchange Commission on or before April 10, 1989,
indicating that as of the date of such filing such partnership intended to acquire 1 or more insured depository institutions.
"(ii) REVIEW AND NOTICE.—Within 10 business days
after the date of submission of any request for an
exemption under this subparagraph together with such
information as shall be reasonably requested by the
Corporation, the Corporation shall make a determination on the request and shall so advise the applicant.

"(6) 5-YEAR TRANSITION RULE.—During the 5-year period begin-

ning on the date of the enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989—
"(A) no Savings Association Insurance Fund member
»
shall have any liability to the Corporation under this
subsection arising out of assistance provided by the Corporation or any loss incurred by the C!orporation as a result
of the default of a Bank Insurance Fund member which was
acquired by such Savings Association Insurance Fund
member or any affiliate of such member before the date of
the enactment of such Act; and
"(B) no Bank Insurance Fund member shall have such
liability with respect to assistance provided by or loss incurred by the Corporation as a result of the default of a
Savings Association Insurance Fund member which was
acquired by such Bank Insurance Fund member or any
affiliate of such member before the date of the enactment of
such Act.
"(7) EXCLUSION FOR INSTFTUTIONS ACQUIRED IN DEBT COLLEC-

TIONS.—Any depository institution shall not be treated as
commonly controlled, for purposes of this subsection, during the
5-year period beginning on the date of an acquisition described
in subparagraph (A) or such longer period as the Corporation
may determine after written application by the acquirer, if—
"(A) 1 depository institution controls another by virtue of
ownership of voting shares acquired in securing or collecting a debt previously contracted in good faith; and
"(B) during the period beginning on the date of the
enactment of the Financial Institutions Reform, Recovery,
£md Enforcement Act of 1989 and ending upon the expiration of the exclusion, the controlling bank and all other
insured depository institution affiliates of such controlling
bank comply fully with the restrictions of sections 23A and
23B of the Federal Reserve Act, without regard to section
23A(dXl) of such Act, in transactions with the acquired
insured depository institution.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 205

"(8) EXCEPTION FOR CERTAIN FSUC ASSISTED INSTITUTIONS.—No

;-

depository institution shall have any liability to the Corporation
under this subsection as the result of the default of, or assistance provided with respect to, an insured depository institution
which is an affiliate of such depository institution if—
"(A) such affiliate was receiving cash payments from the
Federal Savings and Loan Insurance Corporation under an
assistance agreement or note entered into before the date of
the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989;
"(B) the Federal Savings and Loan Insurance Corporation, or such other entity which has succeeded to the payment obligations of such Corporation with respect to such
assistance agreement or note, is unable to continue such
'
payments; and
V
"(C) such affiliate—
"(i) is in default or in need of assistance solely as a
result of the failure to meet the payment obligations
referred to in subparagraph (B); and
"(ii) is not otherwise in breach of the terms of any
assistance agreement or note which would authorize
the Federal Savings and Loan Insurance Corporation
or such other successor entity, pursuant to the terms of
such assistance agreement or note, to refuse to make
such pajrments.
"(9) COMMONLY CONTROLLED DEFINED.—For purposes of this
,, subsection, depository institutions are commonly controlled if—
"(A) such institutions are controlled by the same depository institution holding company (including any company
required to file reports pursuant to section 4(fX6) of the
Bank Holding Company Act of 1956); or
"(B) 1 depository institution is controlled by another
depository institution.",
(b) NEWLY INSURED THRIFT PROVISION.—Any insured depository 12 use 1815
institution (as defined in section 3(cX2) of the Federal Deposit Insur- note,
ance Act, as added by section 204(c) of this Act)—
(1) which was an insured institution {as detined in section
401(a) of the National Housing Act, as in effect before the date
of the enactment of this Act) on the day before the date of the
enactment of this Act;
(2) the board of directors of which determined, before April 1,
1987, to terminate such association's status as an insured
institution (as so defined) as evidenced in sworn minutes of the
board of directors meeting held before such date;
(3) had insured deposits of less than $11,000,000 on April 1,
1987; and
(4) was an insured institution (as so defined) for less than 1
year as of April 1,1987,
may cease to be a Savings Association Insurance Fund member and
become a Bank Insurance Fund member at any time during the 2year period beginning on the date of the enactment of this Act
without the approval of the Federal Deposit Insurance (Corporation
under section 5(dX2) of the Federal Deposit Insurance Act (as added
by subsection (a) of this section) and without incurring any liability
•.
for any exit or entrance fee imposed under such section 5(dX2).

103 STAT. 206

PUBLIC LAW 101-73—AUG. 9, 1989
SEC. 207. INSURABILITY FACTORS.

Section 6 of the Federal Deposit Insurance Act (12 U.S.C. 1816) is
amended to read as follows:
"SEC. 6. FACTORS TO BE CONSIDERED.

"The factors that are required, under section 4, to be considered in
connection with, and enumerated in, any certificate issued pursuant
to section 4 and that are required, under section 5, to be considered
by the Board of Directors in connection with any determination by
such Board pursuant to section 5 are the following:
"(1) The financial history and condition of the depository
institution.
"(2) The adequacy of the depository institution's capital structure.
"(3) The future earnings prospects of the depository institur
tion.
"(4) The general character and fitness of the management of
the depository institution.
"(5) The risk presented by such depository institution to the
Bank Insurance Fund or the Savings Association Insurance
'
Fund.
"(6) The convenience and needs of the community to be served
by such depository institution.
"(7) Whether the depository institution's corporate powers are
"'^ consistent with the purposes of this Act.".

^

(

SEC. 208. ASSESSMENTS.

'

'

.

..;.:

: ^

r

-

Section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817) is
amended—
(1) in subsection (a)(2)—
(A) by inserting ", the Director of the Office of Thrift
Supervision, the Federal Housing Finance Board, any
Federal home loan bank," after "Comptroller of the
Currency" each place such term appears (except after
' "Comptroller of the Currency,");
(B) by inserting "the Director of the Office of Thrift
Supervision, the Federal Housing Finance Board, any Federal home loan bank," after "Comptroller of the Cur' i- rency,";
"
:
(C) by striking out "either" in the 1st sentence and
inserting in lieu thereof "any";
'••(D) in the last sentence of subparagraph (A), by inserting
5;
- "or savings associations" after "banks";
*..•
(E) by striking out "State nonmember hank (except a
District bank)" and inserting in lieu thereof "depository
institution"; and
(F) by striking out subparagraph (B) and inserting the
following:
"(B) ADDITIONAL REPORTS.—The Board of Directors may from
time to time require any insured depository institution to file
such additional reports as the Corporation, after Eigreement
with the (DomptroUer of the Currency, the Board of Governors of
the Federal Reserve System, and the Director of the Office of
, Thrift Supervision, as appropriate, may deem advisable for
insurance purposes.";
(2) in subsection (a)(3)—

.

»«

.

. « ^^.^

PUBLIC LAW 101-73—AUG. 9, 1989
(A) by striking out "Each insured State nonmember
bank" and all that follows through "four reports" and
inserting the following: "Each insured depository institution shall make to the appropriate Federal banking agency
4 reports";
(B) by striking out "bank" each place such term appears
in the 2nd, 5th, and 6th sentences and inserting in lieu
thereof "depository institution";
(C) by striking out "insured national, District" and all
that follows through "member bank" in the 7th sentence
and inserting in lieu thereof "insured depository institution"; and
(D) by inserting "or savings associations" after "banks"
in the last sentence;
(3) in subsection (aX4), by striking out "bank", "bank's", and
"banks" each place such terms appear (except in "foreign
bank") and inserting in lieu thereof "depository institution",
"depository institution's", and "depository institutions", respectively;
(4) by striking out paragraphs (1) and (2) of subsection (b) and
inserting the following:

103 STAT. 207

t? * »; «

"(1) ASSESSMENT RATES.—
"(A) ANNUAL ASSESSMENT RATES PRESCRIBED.—

"(i) The Corporation shall set assessment rates for
insured depository institutions annually.
"(ii) The Corporation shall fix the annual assessment
rate of Bank Insurance Fund members independently
from the annual assessment rate for Savings Association Insurance Fund members.
"(iii) The Corporation shall, by September 30 of each
year, announce the assessment rates for the succeeding
calendar year.
"(B) DESIGNATED RESERVE RATIO DEFINED.—

'

"(i) The designated reserve ratio of the Bank Insurance Fund for each year shall be—
"(I) 1.25 percent of estimated insured deposits; or
"(II) such higher percentage of estimated insured
deposits, not exceeding 1.50 percent, as the Board
of Directors determines for that year to be justified
-^
by circumstances that raise a significant risk of
substantial future losses to the Bank Insurance
Fund,
"(ii) The designated reserve ratio of the Savings
Association Insurance Fund for each year shall be—
"(I) 1.25 percent of estimated insured deposits; or
"(II) such higher percentage of estimated insured
deposits, not exceeding 1.50 percent, as the Board
of Directors determines for that year to be justified
by circumstances that raise a significant risk of
substantial future losses to the Savings Association
Insurance Fund,
"(iii) The Board of Directors shall—
"(I) maintain reserves in the Bank Insurance
Fund received pursuant to clause (iXII) as Supplemental Reserves in the Bank Insurance Fund;
"(II) allocate each calendar quarter to an Earn- Securities,
ings Participation Account in the Bank Insurance

103 STAT. 208

PUBLIC LAW 101-73—AUG. 9, 1989
. ^\
^ -.,1
t,,
^|«'

, '

Securities.

Fund the investment income earned by the Bank
. Insurance Fund on such Supplemental Reserves in
the preceding calendar quarter;
,,^
"(III) distribute such Earnings Participation Account at the conclusion of each calendar year to
Bank Insurance Fund members; and
j.j^jj"(IV) distribute such Supplemental Reserves to
Bank Insurance Fund members if and to the extent
. £
., » the C!orporation determines that such Suppler.
^
mental Reserves are not needed to satisfy the projected designated reserve ratio for the next
succeeding calendar year.
.,,
"(iv) The Board of Directors shall—
"(I) maintain reserves in the Savings Association
Insurance Fund received pursuant to clause (iiXH)
C .,
,. as Supplemental Reserves in the Savings Associa. ;K
tion Insurance Fund;
_ ,1^
"(II) allocate each calendar quarter to an Earnings Participation Account in the Savings Associa,J
, r tion Insurance Fund the investment income earned
by the Savings Association Insurance Fund on such
Supplemental Reserves in the preceding calendar
quarter;
"(III) distribute such Earnings Participation Account at the conclusion of each calendar year to
. , -;
Savings Association Insurance Fund members; and
.^J
"(IV) distribute such Supplemental Reserves to
'""- .,; 'l~.
Savings Association Insurance Fund members if
and to the extent the Corporation determines that
such Supplemental Reserves are not needed to
satisfy the projected designated reserve ratio for
the next succeeding calendar year.
"(C) ASSESSMENT RATE FOR BANK INSURANCE FUND MEM-

,,,,

-

BERS.—The annual assessment rate for Bank Insurance
Fund members shall be—
.,
"(i) until December 31,1989, Viz of 1 percent;
"(ii) from January 1, 199(), through December 31,
,.
. . 1990, 0.12 percent;
"(iii) on and after January 1, 1991, 0.15 percent;
^.
"(iv) on January 1 of a calendar year in which the
reserve ratio of the Bank Insurance Fund is expected to
be less than the designated reserve ratio by determina,,
tion of the Board of Directors, such rate determined by
' J ,.
the Board of Directors to be appropriate to restore the
.^
reserve ratio to the designated reserve ratio within a
^^
reasonable period of time, after taking into consideration the expected operating expenses, C£ise resolution
j^." ^
expenditures, and investment income of the Bank
-s •. r
Insurance Fund, and the impact on insured bank earnings and capitalization, except that—
"(I) from the date of the enactment of the Financial Institutions Reform, Recovery, and Enforce,,
ment Act of 1989 until the earlier of January 1,
: '?,•:
1995, or January 1 of the calendar year in which
. .7 ,
the Bank Insurance Fund reserve ratio is expected
^,,- ,,,.
^ .r
to first attain the designated reserve ratio, the rate
;.,
shall be as specified in clauses (i), (ii), and (iii) of

PUBLIC LAW 101-73—AUG. 9, 1989
this subparagraph so long as the Bank Insurance
Fund reserve ratio is increasing on a calendar year
basis;
"(II) the rate shall not exceed 0.325 percent; and
"(III) the increase in the rate in any 1 year shall
not exceed 0.075 percent; and
"(v) sufficient to ensure that for each member in each
year the assessment shall not be less than $1,000.
"(D) ASSESSMENT RATE FOR SAVINGS ASSOCIATION INSURANCE FUND MEMBERS.—The annual sissessment rate for Sav-

ings Association Insurance Fund members shall be—
"(i) until December 31,1990, 0.208 percent;
"(ii) from January 1, 1991, through December 31,
1993, 0.23 percent;
"(iii) from January 1, 1994, through December 31,
1997, 0.18 percent;
"(iv) on and after January 1, 1998, 0.15 percent;
"(v) on January 1 of a calendar year in which the
reserve ratio of the Savings Association Insurance
Fund is expected to be less than the designated reserve
ratio by determination of the Board of Directors, such
rate determined by the Board of Directors to be appropriate to restore the reserve ratio to the designated
reserve ratio within a regisonable period of time, after
taking into consideration the expected expenses and
income of the Savings Association Insurance Fund, and
the effect on insured savings association earnings and
capitalization, except that—
"(I) from the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 through December 31, 1994, the
rate shall be as specified in clauses (i), (ii), and (iii)
above;
"(II) the rate shall not exceed 0.325 percent; and
"(III) the increase in the rate in any one year
shall not exceed 0.075 percent; £ind
"(vi) sufficient to ensure that for each member in each
year the assessment shall not be less than $1,000.
"(E) FINANCING CORPORATION AND FUNDING CORPORATION

ASSESSMENTS.—Notwithstanding any other provision of this
paragraph, amounts assessed by the Financing Corporation
and the Funding Corporation under sections 21 and 21B,
respectively, of the Federal Home Loan Bank Act against
Savings Association Insurance Fund members, shall be subtracted from the amounts authorized to be assessed by the
Corporation under this paragraph.
"(F) SPECIAL RULE TO ALLOW CONTINUING ASSESSMENTS BY
THE FINANCING CORPORATION AND THE FUNDING CORPORATION DURING PREMIUM YEAR ADJUSTMENTS.—In Order tO

ensure that the Financing Corporation and the Resolution
Funding Corporation obtain sufficient funds for interest
payments on obligations of such corporations, the Corporation, in coordination with the Financing Corporation and
the Secretary of the Treasury, may prescribe such
regulations as may be necessary to allow the Financing
Corporation and the Resolution Funding Corporation to
impose assessments against Savings Association Insurance

103 STAT. 209

;

103 STAT. 210

PUBLIC LAW 101-73—AUG. 9, 1989
Fund members pursuant to sections 21 and 21B, respectively, of the Federal Home Loan Bank Act during the
period required to change such members' premium year
from the 1-year period applicable under section 404(b) of the
National Housing Act (as in effect before the date of the
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989) to a calendar year basis,
"(2) ASSESSMENT PROCEDURES.—
"(A) SEMIANNUAL ASSESSMENTS.—Except

—^

as

provided

in

subsection (c)(2)—
"(i) the semiannual assessment due from any Bank Insurance Fund member for any semiannual period shall be
equal to the product of—
"(I) V2 the annual assessment rate applicable to such
Bank Insurance Fund member; and
"(II) such Bank Insurance Fund member's average
r
assessment base for the immediately preceding semiannual period; and
"(ii) the semiannual assessment due from any Savings
Association Insurance Fund member for any semiannual
period shall be equal to the product of—
"(I) Va the annual assessment rate applicable to such
Savings Association Insurance Fund member; and
"(II) such Savings Association Insurance Fund member's average assessment base for the immediately
preceding semiannual period.
"(B) DEFINITION.—For purposes of this section, the term 'semiannual period' means a period beginning on January 1 of any
calendar year and ending on June 30 of the same year, or a
period beginning on July 1 of any calendar year and ending on
December 31 of the same year.";
(5) by amending subsection (d) to read as follows:
"(d) ASSESSMENT CREDITS.—
"(1) I N GENERAL.—

*'

"(A) By September 30 of each calendar year, the (Dorporation shall prescribe and publish the aggregate amount to be
credited to insured depository institutions in the succeeding
calendar year.
"(B) Each insured depository institution shall be notified
by the Corporation of the percentage by which the assessment rate should be reduced in computing its net premium.
"(C) Any outstanding obligations owed to the (Dorporation
by an individuEil insured depository institution shall be
deducted from any assessment credit to be credited to such
depository institution.
"(2) ASSESSMENT CREDIT FOR INSURED BANKS.—
"(A) CREDIT BARRED.—The Board of Directors

shall not
prescribe an assessment credit to Bank Insurance Fund
members if the Board of Directors determines that the
Bank Insurance Fund reserve ratio is expected to be equal
to or less than the designated reserve ratio in the coming
year after taking into consideration such Fund's expected
expenses and income.
(B) CREDIT AUTHORIZED.—If the Board of Directors determines, after taking into consideration the Bank Insurance
Fund's expected operating expenses, case resolution
. expenditures, investment income, and assessment income.

PUBLIC LAW 101-73—AUG. 9, 1989
that the Bank Insurance Fund reserve ratio is expected to
exceed the designated reserve ratio in the succeeding year,
the Board of Directors shall prescribe an assessment credit
to Bank Insurance Fund members in such succeeding calendar year equal to the lesser of^
"(i) the amount necessary to reduce the Bank Insurance Fund reserve ratio to the designated reserve ratio;
or
"(ii) 100 percent of the net assessment income to be
received from Bank Insurance Fund members in such
succeeding year.
"(3) ASSESSMENT CREDIT FOR INSURED SAVINGS ASSOCIATIONS.—
"(A) CREDIT BARRED.—The Board of Directors shall not

prescribe an assessment credit to Savings Association
Insurance Fund members if the Board of Directors determines that the Savings Association Insurance Fund reserve
ratio is expected to be equal to or less than the designated
reserve ratio in the coming year after taking into consideration such Fund's expected expenses and income.
"(B) CREDIT AUTHORIZED.—If the Board of Directors determines, after taking into consideration the Savings Association Insurance Fund's expected expenses and income, that
the Savings Association Insurance Fund reserve ratio is
expected to exceed the designated reserve ratio in the
succeeding year, the Board of Directors shall prescribe an
assessment credit to Savings Association Insurance Fund
members in such succeeding calendar year equal to the
lesser of^
"(i) the amount necessary to reduce the Savings
Association Insurance Fund reserve ratio to the designated reserve ratio; or
"(ii) 100 percent of the net assessment income to be
received from Savings Association Insurance Fund
members in such succeeding year.
"(4) N E T ASSESSMENT INCOME DEFINED.—For purposes of this
subsection—
"(A) I N GENERAL.—The term 'net assessment income'
means—
"(i) with respect to the Bank Insurance Fund, the
Bank Insurance Fund net assessment income (as defined in subparagraph (B)); and
"(ii) with respect to the Savings Association Insurance Fund, the Savings Association Insurance Fund net
assessment income (as defined in subparagraph (C)).
"(B) BANK INSURANCE FUND NET ASSESSMENT INCOME.—

"(i) IN GENERAL.—The term 'Bank Insurance Fund
net assessment income' means—
"(I) the total assessments which become due
during the calendar year with respect to members
of such Fund, minus
"(II) the sum of the amount of the operating
costs and expenses described in clause (ii) and the
amount by which the Bank Insurance Fund's
insurance costs described in clause (iii) exceed its
investment income for the calendar year,
"(ii) OPERATING COST AND EXPENSES.—For the purposes of this subparagraph, the operating costs and

103 STAT. 211

c

103 STAT. 212

^

PUBLIC LAW 101-73—AUG. 9, 1989
expenses to be deducted from assessments include the
operating costs and expenses of—
"(I) the Corporation for the calendar year directly attributable to the Bank Insurance Fund;
and
"(II) the Bank Insurance Fund,
"(iii) INSURANCE COSTS.—For purposes of this
subparagraph, the insurance costs include—
"(I) additions to the Bank Insurance Fund's reserve to provide for insurance losses during the
calendar year, excluding any adjustments to such
reserve which result in a reduction of such reserve;
and
"(II) the insurance losses sustained in such calendar year.
"(C) SAVINGS ASSOCIATION INSURANCE FUND NET ASSESSMENT INCOME.—

"(i) I N GENERAL.—The term 'Savings Association
Insurance Fund net assessment income' means—
"(I) the total assessments which become due
during the calendar year with respect to members
of such Fund, minus
"(II) the sum of the amount of the operating
costs and expenses described in clause (ii) and the
amount by which the Savings Association Insurance Fund's insurance costs described in clause (iii)
exceed its investment income for the calendar
year,
"(ii) OPERATING COST AND EXPENSES.^For purposes of
this subparagraph, the operating costs and expenses to
be deducted from assessments include the operating
costs and expenses of—
"(I) the Corporation for the calendar year directly attributable to the Savings Association
Insurance Fund; and
"(II) the Savings Association Insurance Fund,
"(iii) INSURANCE COSTS.—For the purposes of this
subparagraph, the insurance costs include—
"(I) additions to the Savings Association Insurance Fund's reserve to provide for insurance losses
during the calendar year, excluding any adjustments to such reserve which result in a reduction
of such reserve; and
"(II) the insurance losses sustained in such calendar year.
"(5) INVESTMENT INCOME DEFINED.—For purposes of this
subsection, the term 'investment income' means—
"(A) for the Bank Insurance Fund, interest, dividends,
and net market gains earned on investments of the Bank
Insurance Fund; and
"(B) for the Savings Association Insurance Fund, interest,
dividends, and net market gains earned on investments of
the Savings Association Insurance Fund.".
(6) in paragraphs (3), (4), (5), (6), (7), and (8) of subsection (b), by
striking out "bank", "bank's", and "banks" each place such
term appears (except where "foreign" precedes any of such
terms) and inserting in lieu thereof "depository institution",

PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 213

"depository institution's", and "depository institutions", respectively;
(7) in subsections (c), (e), (f), (g), and (i), by striking out "bank"
each place such term appears and inserting in lieu thereof
"depository institution";
(8) in subsection (jXl), by striking out the last sentence;
(9) in subsection 0X2XA)—
(A) by striking out "failure" and inserting in lieu thereof
"default"; and
(B) by striking out "bank" each place such term appears
and inserting in lieu thereof "depository institution";
(10) in subsection (jX2XD), by inserting unless such agency
determines that an emergency exists," after "shall,";
(11) in subsection 0X7)-—
(A) by striking out "or" at the end of subparagraph (D);
(B) by striking out the period at the end of subparagraph
(E) and inserting in lieu thereof "; or"; and
(C) by adding at the end thereof the following new
subparagraph:
"(F) the appropriate Federal banking agency determines
that the proposed transaction would result in an adverse
effect on the Bank Insurance Fund or the Savings Association Insurance Fund.";
(12) by amending subsection (jX17) to read as follows:
"(17) EXCEPTIONS.—This subsection shall not apply with respect to a transaction which is subject to—
"(A) section 3 of the Bank Holding Company Act of 1956;
"(B) section 18(c) of this Act; or
"(C) section 10 of the Home Owners' Loan Act.";
(13) by adding at the end of subsection (j) the following new
paragraph:
"(18)

APPUCABILITY OF CHANGE IN CONTROL PROVISIONS TO

OTHER INSTITUTIONS.—For purposes of this subsection, the term
'insured depository institution includes—
"(A) any depository institution holding company; and
"(B) any other company which controls an insured depository institution and is not a depository institution holding
company,";
(14) by adding at the end thereof the following new subsection:

'

"(1) DESIGNATION OF FUND MEMBERSHIP FOR NEWLY INSURED
DEPOSITORY INSTITUTIONS; DEFINITIONS.—For purposes of this sec-

tion:
"(1) BANK INSURANCE FUND.—Any institution which—
"(A) becomes sm insured depository institution; and
"(B) does not become a Savings Association Insurance
Fund member pursuant to paragraph (2),
^
shall be a Bank Insurance Fund member.
"(2) SAVINGS ASSOCIATION INSURANCE FUND.—Any savings
association, other than any Federal savings bank chartered
pursuant to section 5(o) of the Home Owners' Loan Act, which
becomes an insured depository institution shall be a Savings
Association Insurance Fund member.

,

-

"(3) TRANSITION PROVISION.—
"(A) BANK INSURANCE FUND.—Any

depository institution
the deposits of which were insured by the Federal Deposit
Insurance Corporation on the day before the date of the

^

103 STAT. 214

PUBLIC LAW 101-73—AUG. 9, 1989
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, including—
'if
"(i) any Federal savings bank chartered pursuant to
'.;.'••'
section 5(o) of the Home Owners'Loan Act; and ^r>
"(ii) any cooperative bank,
•"''
shall be a Bank Insurance Fund member as of such date of
enactment.
Hi.
"(B) SAVINGS ASSOCIATION INSURANCE FUND.—Any savings
association which is an insured depository institution by
t^ > operation of section 4(aX2) shall be a Savings Association
Insurance Fund member as of the date of the enactment of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
"(4) BANK INSURANCE FUND MEMBER.—The term 'Bank Insurance Fund member' means any depository institution the deposits of which are insured by the Bank Insurance Fund.
"(5)

SAVINGS ASSOCIATION INSURANCE FUND MEMBER.—The

term 'Savings Association Insurance Fund member' means any
depository institution the deposits of which are insured by the
Savings Association Insurance Fund.
"(6) BANK INSURANCE FUND RESERVE RATIO.—The term 'Bank
Insurance Fund reserve ratio' means the ratio of the net worth
of the Bank Insurance Fund to the value of the aggregate
estimated insured deposits held in all Bank Insurance Fund
members.
"(7) SAVINGS ASSOCIATION INSURANCE FUND RESERVE RATIO.—

-

The term 'Savings Association Insurance Fund reserve ratio'
means the ratio of the value of the net worth of the Savings
Association Insurance Fund to the value of the aggregate estimated insured deposits held in all Savings Association Insurance Fund members.";
(15) by adding after the subsection added by paragraph (14) of
this section the following new subsections:
"(m) SECONDARY RESERVE OFFSETS AGAINST PREMIUMS.—
"(1) OFFSETS IN CALENDAR YEARS BEGINNING BEFORE I 9 9 3 . —

Subject to the maximum amount limitation contained in paragraph (2) and notwithstanding any other provision of law, any
insured savings association may offset such association's pro
rata share of the statutorily prescribed amount against any
premium assessed against such association under subsection (b)
of this section for any calendar year beginning before 1993.
"(2) ANNUAL MAXIMUM AMOUNT UMITATION.—"The amount of
any offset allowed for any savings association under paragraph
(1) for any calendar year beginning before 1993 shall not exceed
an amount which is equal to 20 percent of such association's pro
rata share of the statutorily prescribed amount (as computed for
such calendar year).
"(3) OFFSETS IN CALENDAR YEARS BEGINNING AFTER I 9 9 2 . —

Notwithstanding any other provision of law, a savings association may offset such association's pro rata share of the statutorily prescribed amount against any premium assessed against
such association under subsection (b) for any calendar year
beginning after 1992.
"(4) TRANSFERABILITY.—No right, title, or interest of any insured depository institution in or with respect to its pro rata
share of the secondary reserve shall be assignable or transferable whether by operation of law or otherwise, except to the

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 215

extent that the Corporation may provide for transfer of such pro
rata share in cases of merger or consolidation, transfer of bulk
assets or assumption of liabilities, and similar transactions, as
defined by the Corporation for purposes of this paragraph.
"(5) PRO RATA DISTRIBUTION ON TERMINATION OF INSURED
STATUS.—If^

"(A) the status of any savings association as an insured
depository institution is terminated pursuant to any provision of section 8 or the insurance of accounts of any savings
association institution is otherwise terminated;
"(B) a receiver or other legal custodian is appointed for
the purpose of liquidation or winding up the affairs of any
savings association; or
"(C) the Corporation makes a determination that for the
purposes of this subsection any savings association has
otherwise gone into liquidation,
the Corporation shall pay in cash to such institution its pro rata
share of the secondary reserve, in accordance with such terms
and conditions as the Corporation may prescribe, or, at the
option of the Corporation, the Corporation may apply the whole
or any part of the amount which would otherwise be paid in
cash toward the payment of any indebtedness or obligation,
whether matured or not, of such institution to the Corporation,
existing or arising before such pa3mient in CEish. Such pajnnent
or such application need not be made to the extent that the
provisions of the exception in paragraph (4) are applicable.
"(6) STATUTORILY PRESCRIBED AMOUNT DEFINED.—For purposes

of this subsection, the term 'statutorily prescribed amount'
means, with respect to any calendar year which ends after the
date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989—
^
"(A) $823,705,000, minus
"(B) the sum of—
"(i) the Eiggregate amount of offsets made before such
date of enactment by all insured institutions under
section 404(eX2) of the National Housing Act (as in
effect before such date of enactment); and
"(ii) the aggregate amount of offsets made by all
savings associations under this subsection before the
beginning of such calendar year.
"(7) SAVINGS ASSOCIATION'S PRO RATA AMOUNT.—For purposes

of this subsection, any savings association's pro rata share of the
statutorily prescribed amount is the percentage which is equal
to such association's share of the secondary reserve as determined under section 404(e) of the National Housing Act on the
day before the date on which Federal Savings and Loan Insurance Corporation ceased to recognize the secondary reserve (as
such Act was in effect on the day before such date).
"(8) YEAR OF ENACTMENT RULE.—With respect to the calendar
year in which the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 is enacted, the Corporation shall make
such adjustments as may be necessary—
"(A) in the computation of the statutorily prescribed
amount which shall be applicable for the remainder of such
calendar year after taking into account the aggregate
amount of offsets by all insured institutions under section
404(eX2) of the National Housing Act (as in effect before the

^
^

103 STAT. 216

PUBLIC LAW 101-73—AUG. 9, 1989
date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989) after the beginning
of such calendar year and before such date of enactment;
and
"(B) in the computation of the maximum amount of any
savings association's offset for such calendar year under
paragraph (1) after taking into account—
"(i) the amount of any offset by such savings association under section 404(eX2) of the National Housing Act
(as in effect before such date of enactment) after the
beginning of such calendar year and before such date of
enactment; and
"(ii) the change of such association's premium year
from the 1-year period applicable under section 404(b)
of the National Housing Act (as in effect before such
date of enactment) to a calendar year basis.
"(n) CoixECTioNS ON BEHALF OF THE DIRECTOR OF THE OFFICE OF
THRIFT SUPERVISION.—When requested by the Director of the Office

of Thrift Supervision, the Corporation shall collect on behalf of the
Director assessments on savings associations levied by the Director
under section 9 of the Home Owners' Loan Act. The Corporation
shall be reimbursed for its actual costs for the collection of such
assessments. Any such assessments by the Director shall be in
addition to any amounts assessed by the Corporation, the Financing
Corporation, and the Resolution Funding Corporation.".
SEC. 209. CORPORATE POWERS OF THE FDIC.

Section 9 of the Federal Deposit Insurance Act (12 U.S.C. 1819) is
amended—
(1) by striking out "bank" and "banks" each place such terms
appear (except in the last sentence of the paragraph designated
the "Fourth") and inserting in lieu thereof "depository institution" and "depository institutions", respectively; and
(2) by striking out "Upon the date" and inserting the following:
"(a) IN GENERAL.—Upon the date";

(3) by amending the paragraph designated the "Fourth" to
read as follows:
"Fourth. To sue and be sued, and complain and defend, in any
court of law or equity. State or Federal."; and
(4) by adding at the end thereof the following new subsection:
, "(b) AGENCY AUTHORITY.—

/

"(1) STATUS.—The Corporation, in any capacity, shall be an
agency of the United States for purposes of section 1345 of title
28, United States Code, without regard to whether the Corporation commenced the action.
"(2) FEDERAL COURT JURISDICTION.—

"(A) IN GENERAL.—Except as provided in subparagraph
(D), all suits of a civil nature at common law or in equity to
which the Corporation, in any capacity, is a party shall be
deemed to arise under the laws of the United States.
"(B) REMOVAL.—Except as provided in subparagraph (D),
the Corporation may, without bond or security, remove any
action, suit, or proceeding from a State court to the appropriate United States district court.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 217

"(C) APPEAL OF REMAND.—The Corporation may appeal
any order of remand entered by any United States district
court.

\

"(D) STATE ACTIONS.—Except as provided in subparagraph

„^,;
*
f^

(E), any action—
"(i) to which t h e Corporation, in the (Dorporation's
capacity as receiver of a State insured depository
institution by the exclusive appointment by State
authorities, is a party other than as a plaintiff;
"(ii) which involves only the preclosing rights against
the State insured depository institution, or obligations
owing to, depositors, creditors, or stocldiolders by the
State insured depository institution; and
"(iii) in which only the interpretation of the law of
such State is necessary,
shall not be deemed to arise under the laws of the United
States.

-

"(E) RULE OF CONSTRUCTION.—Subparagraph (D) shall not

be construed as limiting the right of the Corporation to
invoke the jurisdiction of any United States district court in
any action described in such subparagraph if the institution
of which the Corporation has been appointed receiver could
have invoked the jurisdiction of such court.
"(3) SERVICE OF PROCESS.—The Board of Directors shall designate agents upon whom service of process may be made in any
State, territory, or jurisdiction in which any insured depository
institution is located.
"(4) BONDS OR FEES.—The Corporation shall not be required to
post £iny bond to pursue any appeal and shall not be subject to
payments of any filing fees in United States district courts or
courts of appeal.".
SEC. 210. ADMINISTRATION OF CORPORATION.
(a) EXAMINATION AUTHORITY.—Section 10(b) of the Federal Deposit

Insurance Act (12 U.S.C. 1820(b)) is amended to read as follows:
"(b) EXAMINATIONS.—
"(1) APPOINTMENT OF EXAMINERS AND CLAIMS AGENTS.—The

Board of Directors shall appoint examiners and claim agents.
"(2)

REGULAR

EXAMINATIONS.—Any

examiner

appointed

under paragraph (1) shall have power, on behalf of the (Jorporation, to examine—
"(A) any insured State nonmember bank (except a District bank) or insured State branch of any foreign bank;
-.••£
"(B) any savings association, State nonmember bank, or
State branch of a foreign bank, or other depository institution which files an application with the Corporation to
become an insured depository institution; and
"(C) any insured depository institution in default,
whenever the Board of Directors determines an examination of
any such depository institution is necessary.
"(3)

SPECIAL EXAMINATION OF ANY INSURED DEPOSITORY

INSTITUTION.—In addition to the examinations authorized under
paragraph (2), any examiner appointed under paragraph (1)
shall have power, on behalf of the (Corporation, to make any
special examination of any insured depository institution whenever the Board of Directors determines a special examination of

--a---'

103 STAT. 218

PUBLIC LAW 101-73—AUG. 9, 1989
any such depository institution is necessary to determine the
condition of such depository institution for insurance purposes.

^^

"(4) EXAMINATION OF AFFIUATES.—

'*'^**'
^^
'*

^'

"(A) IN GENERAL.—In making any examination under
paragraph (2) or (3), any examiner appointed under paragraph (1) shall have power, on behalf of the Corporation, to
make such examinations of the affairs of any affiliate of
any insured depository institution as may be necessary to
disclose fully—
"(i) the relationship between such insured depository
institution and any such affiliate; and
"(ii) the effect of such relationship on the insured
depository institution.
"(B) COMMITMENT BY FOREIGN BANKS TO ALLOW EXAMINATIONS OF AFFIUATES.—No branch or depository institution
subsidiary of a foreign bank may become an insured depository institution unless such foreign bank submits a written
binding commitment to the Board of Directors to permit
any examination of any affiliate of such branch or depository institution subsidiary pursuant to subparagraph (A) to
the extent determined by the Board of Directors to be
necessary to carry out the purposes of this Act.
"(5) POWER AND DUTY OF EXAMINERS.—Each examiner ap-

Reports.

pointed under paragraph (1) shall—
"(A) have power to make a thorough examination of any
insured depository institution or affiliate under paragraph
(2), (3), or (4); and
f '
"(B) shall make a full and detailed report of condition of
any insured depository institution or affiliate examined to
the Corporation.
"(6) POWER OF CLAIM AGENTS.—Each claim agent appointed

under paragraph (1) shall have power to investigate and examine all claims for insured deposits.",
(b) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Section 10(c) of the Federal Deposit Insurance Act (12
U.S.C. 1820(c)) is amended by striking out ", State nonmember
banks or other institutions" and inserting in lieu thereof "and
any State nonmember bank, savings association, or other
institution".
(2) Section 10 of the Federal Deposit Insurance Act (12 U.S.C.
1820) is amended by striking out subsection (d).
SEC. 211. INSURANCE FUNDS.

/

,* .

Section 11(a) of the Federal Deposit Insurance Act (12 U.S.C.
1821(a)) is amended—
(1) by striking out paragraph (1) and inserting the following:
"(1) The Corporation shall insure the deposits of all insured
depository institutions as provided in this Act. The maximum
amount of the insured deposit of any depositor shall be $100,000.";
(2) in paragraph (2XB), by striking out "time and savings";
and
(3) by adding at the end the following new paragraphs:
"(4) GENERAL PROVISION RELATING TO FUNDS.—The Bank
Insurance Fund established under paragraph (5) and the Savings Association Insurance Fund established under paragraph
(6) shall each be—
"(A) maintained and administered by the Corporation;

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 219

"(B) maintained separately and not commingled; and
"(C) used by the Corporation to carry out its insurance
purposes in the manner provided in this subsection.
'(5) BANK INSURANCE FUND.—

"(A) EsTABUSHMENT.—There is established a fund to be
known as the Bank Insurance Fund.
"(B) TRANSFER TO FUND.—On the date of the enactment of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Permanent Insurance Fund shall be
dissolved and all assets and liabilities of the Permanent
Insurance Fund shall be transferred to the Bank Insurance
Fund.
"(C) USES.—The Bank Insurance Fund shall be available
to the Corporation for use with respect to Bank Insurance
Fund members.
"(D) DEPOSITS.—All amounts assessed against Bank Insurance Fund members by the Corporation shall be deposited
into the Bank Insurance Fund.
'(6) SAVINGS ASSOCIATION INSURANCE FUND.—

"(A) ESTABLISHMENT.—There is established a fund to be
known as the Savings Association Insurance Fund.
"(B) USES.—The Savings Association Insurance Fund
shall be available to the Corporation for use with respect to
Savings Association Insurance Fund members.
"(C) DEPOSITS.—All amounts assessed against Savings
Association Insurance Fund members which are not required for the Financing Corporation, the Resolution Funding Corporation, or the FSLIC Resolution Fund shall be
deposited in the Savings Association Insurance Fund.
"(D)
AVAILABIUTY
EXPENSES.—

OF

FUNDS

FOR

ADMINISTRATIVE

"(i) IN GENERAL.—The FSLIC Resolution Fund shall
deposit in the Savings Association Insurance Fund such
amounts as the Corporation determines are needed
during the period beginning on the date of the enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 and ending on September
30, 1991, to pay the administrative and supervisory
expenses of such Fund.
(ii) PRIORITY.—The Savings Association Insurance
Fund shall have priority over other obligations of the
FSLIC Resolution Fund with respect to such amounts.
"(E) TREASURY PAYMENTS TO FUND.—TO provide sufficient
funding for the Savings Association Insurance Fund to
carry out the purposes of this Act, the Secretary of the
Treasury shall pay to such Fund, for each of the fiscal years
1992 through 1999, the amount, if any, by which
$2,000,000,000 exceeds the amount deposited in such Fund
(during such fiscal year) pursuant to subparagraph (C).
"(F)

TREASURY PAYMENTS TO MAINTAIN NET WORTH OP

FUND.—The Secretary of the Tresisury shall pay to the
Savings Association Insurance Fund, for each fiscal year
described in the following table, any additional amount
which may be necessary, as determined by the Corporation
and the Secretary of the Treasury to ensure that such Fund
has the minimum net worth referred to in such table
throughout each such fiscal year:

103 STAT. 220

PUBLIC LAW 101-73—AUG. 9, 1989
"For the fiscal year
beginning October 1 of:
1991
1992
1993
1994
1995
1996
1997
1998
1999

The amount of
minimum net worth
(in billions):
0.0
1.0
2.1
3.2
4.3
5.4
6.5
7.6
8.8

"(G) EXCEPTION TO SUBPARAGRAPHS (E) AND (F).—Not-

withstanding subparagraphs (E) and (F), no payment may
be made pursuant to such subparagraphs after the Savings
Association Insurance Fund achieves a reserve ratio of 1.25
percent.
"(H) DISCRETIONARY RTC PAYMENTS.—If amounts available
to the Savings Association Insurance Fund for purposes
other than the payment of administrative expenses are
insufficient for the Savings Association Insurance Fund to
carry out the purposes of this Act, the Corporation may
request the Resolution Trust Corporation to provide, and
the Oversight Board of the Resolution Trust Corporation (in
the discretion of the Oversight Board) may pay, such
amount as may be needed for such purposes.
"(I) BORROWING AUTHORITY.—

,.
'

"(i) IN GENERAL.—The Corporation may borrow from
the Federal home loan banks, with the concurrence of
the Federal Housing Finance Board, such funds as the
Corporation considers necessary for the use of the Savings Association Insurance Fund.
(ii) TERMS AND CONDITIONS.—Any loan from any
Federal home loan bank under clause (i) to the Savings
Association Insurance Fund shall—
"(I) bear a rate of interest of not less than such
bank's current marginal cost of funds, taking into
account the maturities involved;
"(II) be adequately secured, as determined by the
Federal Housing Finance Board;
"(III) be a direct liability of such Fund; and
"(IV) be subject to the limitations of section 15(c).
"(J) AUTHORIZATION OF APPROPRIATIONS.—There are

. '
,^

au-

thorized to be appropriated to the Secretary of the Treasury, such sums as may be necessary to carry out the
provisions of this paragraph, except that—
"(i) the annual amount appropriated under subparagraph (F) shall not exceed $2,000,000,000 in either fiscal
year 1991 or fiscal year 1992; and
"(ii) the cumulative amount appropriated under
subparagraph (F) for fiscal years 1991 through 1999
shall not exceed $16,000,000,000.
"(7) PROVISIONS APPUCABLE TO MAINTENANCE OF ACCOUNTS.—
"(A) CORPORATION'S AUTHORITY.—Any provision of this

Act forbidding the commingling of the Bank Insurance
Fund with the Savings Association Insurance Fund, or
requiring the separate maintenance of the Bank Insurance
Fund and the Savings Association Insurance Fund, is not
intended—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 221

"(i) to limit or impair the authority of the Corporation to use the same facilities and resources in the
course of conducting
supervisory,
regulatory,
conservatorship, receivership, or liquidation functions
with respect to banks and savings associations, or to
integrate such functions; or
"(ii) to limit or impair the Corporation's power to
combine assets or liabilities belonging to banks and
savings associations in conservatorship or receivership
for managerial purposes, or to limit or impair the
Corporation's power to dispose of such assets or liabilities on an aggregate basis.
"(B) ACCOUNTING REQUIREMENTS.—
"(i) ACCOUNTING FOR USE OF FACILITIES AND RE-

SOURCES.—The Corporation shall keep a full and complete accounting of all costs and expenses associated
with the use of any facility or resource used in the
course of any function specified in subpargigraph (AXi)
and shall allocate, in the manner provided in subparagraph (C), any such costs and expenses incurred by the
Corporation—
"(I) with respect to Bank Insurance Fund members to the Bank Insurance Fund; and
"(II) with respect to Savings Association Insurance Fund members to the Savings Association
Insurance Fund,
"(ii) ACCOUNTING FOR HOLDING AND MANAGING ASSETS
AND LIABILITIES.—The Corporation shall keep a full and
complete accounting of all costs and expenses associated with the holding management of any asset or liability specified in subparagraph (AXii).
"(iii) ACCOUNTING FOR DISPOSITION OF ASSETS AND

UABiLiTiES.—The Corporation shall keep a full and
complete accounting of all expenses and receipts
associated with the disposition of any asset or
liability specified in subparagraph (AXii).
"(iv) ALLOCATION OF COST, EXPENSES AND RECEIPTS.—

The Corporation shall allocate any cost, expense, and
receipt described in clause (ii) or clause (iii) which is
associated with any asset or liability belonging to—
"(I) any Bank Insurance Fund member to the
Bank Insurance Fund; and
"(II) any Savings Association Insurance Fund
member to the Savings Association Insurance
Fund.
"(C)

ALLOCATION OF ADMINISTRATIVE

EXPENSES.—Any

personnel, administrative, or other overhead expense of the
Corporation shall be allocated—
"(i) fully to the Bank Insurance Fund, if the expense
was incurred directly as a result of the Corporation's
responsibilities solely with respect to Bank Insurance
Fund members;
"(ii) fully to the Savings Association Insurance Fund,
if the expense was incurred directly as a result of the
Corporation's responsibilities solely with respect to
Savings Association Insurance Fund members;

—

^

103 STAT. 222

PUBLIC LAW 101-73—AUG. 9, 1989
fc: »vi~.

-".I
;/

^;
ll-^if.- •

"(iii) between the Bank Insurance Fund and the
Savings Association Insurance Fund, in amounts
reflecting the relative degree to which the expense was
incurred as a result of the activities of Bank Insurance
Fund and Savings Association Insurance Fund members; or
"(iv) between the Bank Insurance Fund and the Savings Association Insurance Fund, in amounts reflecting
the relative total assets as of the end of the preceding
calendar year of Bank Insurance Fund members and
Savings Association Insurance Fund members, to the
extent that the Board of Directors is unable to make a
determination under clause (i), (ii), or (iii).".

SEC. 212. CONSERVATORSHIP AND RECEIVERSHIP POWERS OF THE
CORPORATION,

(a) BASIC AUTHORITIES.—Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is amended by striking out subsections (c)
through (j) and inserting the following new subsections:
"(c)
APPOINTMENT
RECEIVER.—

OF

CORPORATION

AS

CONSERVATOR

OR

"(1) I N GENERAL.—Notwithstanding any other provision of
Federal law, the law of any State, or the constitution of any
State, the Corporation may accept appointment and act as
conservator or receiver for any insured depository institution
upon appointment in the manner provided in paragraph (2) or
(3).
,

.

"(2) F E D E R A L DEPOSITORY INSTITUTIONS.—
"(A) APPOINTMENT.—

"(i) CONSERVATOR.—The Corporation may, at the
discretion of the supervisory authority, be appointed
conservator of any insured Federal depository institu;
tion or District bank and the Corporation may accept
such appointment.
"(ii) RECEIVER.—The Corporation shall be appointed
receiver, and shall accept such appointment, whenever
,^..
a receiver is appointed for the purpose of liquidation or
winding up the affairs of an insured Federal depository
institution or District bank by the appropriate Federal
banking agency, notwithstanding any other provision
/ .,of Federal law (other than section 21A of the Federal
^^ ^
Home Loan Bank Act) or the code of law for the
District of Columbia.
"(B) ADDITIONAL POWERS.—In addition to and not in derogation of the powers conferred and the duties imposed by
this section on the Corporation as conservator or receiver,
the Corporation, to the extent not inconsistent with such
powers and duties, shall have any other power conferred on
or any duty (which is related to the exercise of such power)
imposed on a conservator or receiver for any Federal
depository institution under any other provision of law.
"(C) CORPORATION NOT SUBJECT TO ANY OTHER AGENCY.—

When acting as conservator or receiver pursuant to an
appointment described in subparagraph (A), the Corporation shall not be subject to the direction or supervision of
any other agency or department of the United States or any

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 223

State in the exercise of the Corporation's rights, powers,
and privileges.
"(D) DEPOSITORY INSTITUTION IN CONSERVATORSHIP SUB-

JECT TO BANKING AGENCY SUPERVISION.—Notwithstanding
subparagraph (C), any Federal depository institution for
which t h e Corporation has been appointed conservator
shall remain subject to the supervision of the appropriate
Federal banking agency.
"(3) INSURED STATE DEPOSITORY INSTITUTIONS—
"(A) APPOINTMENT BY APPROPRIATE STATE SUPERVISOR.—

Whenever the authority having supervision of any insured
State depository institution (other than a District depository institution) appoints a conservator or receiver for such
institution and tenders appointment to the Corporation, the
Corporation may accept such appointment.

.

"(B) ADDITIONAL POWERS.—In addition to the powers con-

/

ferred and the duties related to the exercise of such powers
imposed by State law on any conservator or receiver appointed under the law of such State for an insured State
depository institution, the Corporation, as conservator or
receiver pursuant to an appointment described in subparagraph (A), shall have the powers conferred and the duties
imposed by this section on the Corporation as conservator
or receiver.
"(C) CORPORATION NOT SUBJECT TO ANY OTHER AGENCY.—

When acting as conservator or receiver pursuant to an
appointment described in subparagraph (A), the (Corporation shall not be subject to the direction or supervision of
any other agency or department of the United States or any
State in the exercise of its rights, powers, and privileges.
"(D) DEPOSITORY INSTITUTION IN CONSERVATORSHIP SUBJECT TO BANKING AGENCY SUPERVISION.—Notwithstanding

subparagraph (C), any insured State depository institution
for which the Corporation heis been appointed conservator
shall remain subject to the supervision of the appropriate
State bank or savings association supervisor.
"(4) APPOINTMENT OF CORPORATION BY THE CORPORATION.—

Except as otherwise provided in section 21A of the Federal
Home Loan Bank Act and notwithstanding any other provision
of Federal law, the law of any State, or the constitution of any
State, the Corporation may appoint itself as sole conservator or
receiver of any insured State depository institution if—
"(A) the (Corporation determines—
"(i)that—
"(I) a conservator, receiver, or other legal custodian has been appointed for such institution;
"(II) such institution has been subject to the
appointment of any such conservator, receiver, or
custodian for a period of at least 15 consecutive
davs; and
'(III) 1 or more of the depositors in such institution is unable to withdraw any amount of any
insured deposit; or
"(ii) that such institution has been closed by or under
the laws of any State; and
"(B) the Corporation determines that 1 or more of the
grounds specified in paragraph (5)—

—

103 STAT. 224

PUBLIC LAW 101-73—AUG. 9, 1989

-

"(i) existed with respect to such institution at the
time—
"(I) the conservator, receiver, or other legal
custodian was appointed; or
"(II) such institution was closed; or
"(ii) exist at any time—
"(I) during the appointment of the conservator,
receiver, or other legal custodian; or
"(II) while such institution is closed.

'

^
"(5)

^

'

GROUNDS

FOR

PARAGRAPH

(4)

APPOINTMENT.—The

grounds referred to in paragraph (4XB) for the appointment of
the Corporation as conservator or receiver for any insured State
depository institution are as follows:
"(A) Insolvency in that the assets of the institution are
less than the institution's obligations to its creditors and
others, including members of the institution.
"(B) Substantial dissipation of assets or earnings due to—
"(i) any violation of any law or regulation; or
'
"(ii) any unsafe or unsound practice.
"(C) An unsafe or unsound condition to transact business,
'
including substantially insufficient capital or otherwise.
"(D) Any willful violation of a cease-and-desist order
which has become final.
"(E) Any concealment of books, papers, records, or assets
of the institution or any refusal to submit books, papers,
records, or affairs of the institution for inspection to any
/
examiner or to any lawful agent of the appropriate Federal
banking agency or State bank or savings association supervisor.
"(F) The likelihood that the institution will not be able to
meet the demands of its depositors or pay its obligations in
the normal course of business.
<
"(G) The incurrence or likely incurrence of losses by the
institution that will deplete all or substantially all of its
*
capital with no reasonable prospect for the replenishment
of the capital of the institution without Federal assistance.
"(H) Any violation of any law or regulation, or an unsafe
or unsound practice or condition which is likely to cause
insolvency or substantial dissipation of assets or earnings,
or is likely to weaken the condition of the institution or
otherwise seriously prejudice the interests of its depositors.
"(6) APPOINTMENT BY DIRECTOR OF THE OFFICE OF THRIFT
SUPERVISION.—

^

"(A) CONSERVATOR.—The Corporation or the Resolution
Trust Corporation may, at the discretion of the Director of
the Office of Thrift Supervision, be appointed conservator
and the Clorporation may accept any such appointment.
"(B) RECEIVER.—Whenever the Director of the Office of
Thrift Supervision appoints a receiver under the provisions
of section 5(dX2XC) of the Home Owner's Loan Act for the
purpose of liquidation or winding up any savings association's affairs—
"(i) during the 3-year period beginning on the date of
the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, the Resolution
Trust Corporation shall be appointed; and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 225

"(ii) after the end of the 3-year period referred to in
clause (i), the Corporation shall be appointed.
"(7) JUDICIAL REVIEW.—If the Corporation appoints itself as
conservator or receiver under paragraph (4), the insured State
depository institution may, within 30 days thereafter, bring an
action in the United States district court for the judicial district
in which the home office of such institution is located, or in the
United States District Court for the District of Columbia, for an
order requiring the Corporation to remove itself as such conservator or receiver, and the court shall, upon the merits,
dismiss such action or direct the Corporation to remove itself as
such conservator or receiver.
"(8) REPLACEMENT OF CONSERVATOR OF STATE DEPOSITORY
INSTITUTION.—

"(A) I N GENERAL.—In the case of any insured State
depository institution for which the Corporation appointed
itself as conservator pursuant to paragraph (4), the Corporation may, without any requirement of notice, hearing,
or other action, replace itself as conservator with itself as
receiver of such institution.
J-

,«;*

"(B) REPLACEMENT TREATED AS REMOVAL OF INCUMBENT.—

The replacement of a conservator with a receiver under
subparagraph (A) shall be treated as the removal of the
Corporation as conservator.
"(C)

RIGHT OF REVIEW OF ORIGINAL APPOINTMENT NOT

AFFECTED.—The replacement of a conservator with a receiver under subparagraph (A) shall not affect any right of
the insured State depository institution to obtain review,
iyj
pursuant to paragraph (7), of the original appointment of
the conservator.
"(9) ADDITIONAL POWERS.—In any case in which the Corporation is appointed conservator or receiver pursuant to paragraph
(4)or(6)"(A) the provisions of this section shall be applicable to
the Corporation, as conservator or receiver of any insured
State depository institution in the same manner and to the
same extent as if such institution were a Federal depository
institution for which the Corporation had been appointed
conservator or receiver; and
"(B) the Corporation as receiver of any insured State
depository institution may—
"(i) liquidate such institution in an orderly manner;
and
"(ii) make such other disposition of any matter
concerning such institution as the Corporation determines is in the best interests of the institution, the
depositors of such institution, and the Corporation.
"(d) POWERS AND DUTIES OF CORPORATION AS CONSERVATOR OR
RECEIVER.—
"(1) RULEMAKING AUTHORITY OF CORPORATION.—The (Corpo-

ration may prescribe such regulations as the (Corporation
determines to be appropriate regarding the conduct of
conservatorships or receiverships.
"(2) GENERAL POWERS.—
"(A) SUCCESSOR TO INSTFTUTION.—The

Corporation shall,
as conservator or receiver, and by operation of law, succeed
to—

•

103 STAT. 226

^

PUBLIC LAW 101-73—AUG. 9, 1989
"(i) all rights, titles, powers, and privileges of the
insured depository institution, and of any stockholder,
member, accountholder, depositor, officer, or director of
such institution with respect to the institution and the
assets of the institution; and
"(ii) title to the books, records, and assets of any
'
previous conservator or other legal custodian of such
institution.
-:
"(B) OPERATE THE INSTITUTION.—The Corporation may, as
conservator or receiver—
"(i) take over the assets of and operate the insured
depository institution with all the powers of the mem,''"'-'
bers or shareholders, the directors, and the officers of
the institution and conduct all business of the institution;
»«•;
"(ii) collect all obligations and money due the
institution;
"(iii) perform all functions of the institution in the
- I ^..
name of the institution which is consistent with the
appointment as conservator or receiver; and
"(iv) preserve £md conserve the assets and property of
such institution.
"(C) FUNCTIONS OF INSTITUTION'S OFFICERS, DIRECTORS, AND

SHAREHOLDERS.—The Corporation may, by regulation or
order, provide for the exercise of any function by any
member or stockholder, director, or officer of any insured
depository institution for which the Corporation has been
appointed conservator or receiver.
(D) POWERS AS CONSERVATOR.—The Corporation may, as
conservator, take such action as may be—
"(i) necessary to put the insured depository institution in a sound and solvent condition; and
"(ii) appropriate to carry on the business of the
'«i
institution and preserve and conserve the assets and
property of the institution.
"(E) ADDITIONAL POWERS AS RECEIVER.—The Corporation
may, as receiver, place the insured depository institution in
liquidation and proceed to realize upon the assets of the
institution, having due regard to the conditions of credit in
the locality.

^

>'

"(F) ORGANIZATION OF NEW INSTITUTIONS.—The Corpora-

tion may, as receiver—
"(i) with respect to savings associations and by application to the Director of the Office of Thrift Supervision, organize a new Federal savings association to
take over such assets or such liabilities as the Corporation may determine to be appropriate; and
"(ii) with respect to any insured bank, organize a new
national bank under subsection (m) or a bridge bank
under subsection (n).

•'!'

"(G) MERGER; TRANSFER OF ASSETS AND LIABILITIES.^

.

.

"(i) IN GENERAL.—The Corporation may, as conservator or receiver—
"(I) merge the insured depository institution
with another insured depository institution; or
"(II) subject to clause (ii), transfer any asset or
liability of the institution in default (including

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 227

assets and liabilities £issociated with any trust business) without any approval, assignment, or consent
with respect to such transfer,
"(ii) APPROVAL BY APPROPRIATE FEDERAL BANKING

AGENCY.—No transfer described in clause (iXII) may be
made to another depository institution (other than a
new bank or a bridge bank established pursuant to
subsection (m) or (n)) without the approval of the appropriate Federal banking agency for such institution.
"(H) PAYMENT OF VAUD OBUGATiONS.—The Corporation,
as conservator or receiver, shall pay all valid obligations of
the insured depository institution in accordance with the
prescriptions and limitations of this Act.
"(I) INCIDENTAL POWERS.—The Corporation may, as conservator or receiver—
"(i) exercise all powers and authorities specifically
granted to conservators or receivers, respectively,
under this Act and such incidental powers as shall be
necessary to carry out such powers; and
"(ii) take any action authorized by this Act,
which the Corporation determines is in the best interests of
the depository institution, its depositors, or the Corporation.
"(3) AUTHORITY OF RECEIVER TO DETERMINE CLAIMS.—

"(A) IN GENERAL.—The Corporation may, as receiver,
determine claims in accordance with the requirements of
this subsection and regulations prescribed under paragraph
(4XA).
"(B) NOTICE REQUIREMENTS.—The receiver, in any case
involving the liquidation or winding up of the affairs of a .
closed depository institution, shall—
"(i) promptly publish a notice to the depository
institution's creditors to present their claims, together
with proof, to the receiver by a date specified in the
notice which shall be not less than 90 days after the
publication of such notice; and
"(ii) republish such notice approximately 1 month
and 2 months, respectively, after the publication under
clause (i).
"(C) M A I U N G REQUIRED.—The receiver shall mail a notice
similar to the notice published under subparagraph (BXi) at
the time of such publication to any creditor shown on the
institution's books—
"(i) at the creditor's last address appearing in such
books; or
"(ii) upon discovery of the name and address of a
claimant not appearing on the institution's books
within 30 days after the discovery of such name and
address.
"(4) RULEMAKING AUTHORITY RELATING TO DETERMINATION OF

CLAIMS.—The Corporation may prescribe regulations regarding
the allowance or disallowance of claims by the receiver and
providing for administrative determination of claims and
review of such determination.
"(5) PROCEDURES FOR DETERMINATION OF CLAIMS.—
"(A) DETERMINATION PERIOD.—

"(i) IN GENERAL.—Before the end of the 180-day
period beginning on the date any claim against a

,

103 STAT. 228

PUBLIC LAW 101-73—AUG. 9, 1989
depository institution is filed with the Corporation as
receiver, the Corporation shall determine whether to
allow or disallow the claim and shall notify the claimant of any determination with respect to such claim,
"(ii) EXTENSION OF TIME.—The period described in
clause (i) may be extended by a written agreement
between the claimant and the Corporation.

'

"(iii) M A I U N G OF NOTICE SUFFICIENT.—The require-

/

ments of clause (i) shall be deemed to be satisfied if the
notice of any determination with respect to any claim
is mailed to the last address of the claimant which
appears—
"(I) on the depository institution's books;
"(II) in the claim filed by the claimant; or
"(III) in documents submitted in proof of the
claim.

.

"(iv) CONTENTS OF NOTICE OF E^SALLOWANCE.—If any

claim filed under clause (i) is disallowed, the notice to
the claimant shall contain—
"(I) a statement of each reason for the disallowance; and
"(II) the procedures available for obtaining
agency review of the determination to disallow the
claim or judicial determination of the claim.
"(B) ALLOWANCE OF PROVEN CLAIMS.—The receiver shall
allow any claim received on or before the date specified in
the notice published under paragraph (BXBXi) by the receiver from any claimant which is proved to the satisfaction
of the receiver.
"(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FIUNG
PERIOD.—

"(i) IN GENERAL.—Except as provided in clause (ii),
claims filed after the date specified in the notice published under paragraph (BXBXi) shall be disallowed and
such disallowance shall be final.
"(ii) CERTAIN EXCEPTIONS.—Clause (i) shall not apply
with respect to any claim filed by any claimant after
the date specified in the notice published under paragraph (BXBXi) and such claim may be considered by the
receiver if—
"(I) the claimant did not receive notice of the
appointment of the receiver in time to file such
claim before such date; and
"(II) such claim is filed in time to permit payment of such claim.
"(D) AUTHORITY TO DISALLOW CLAIMS.—The receiver may
disallow any portion of any claim by a creditor or claim of
security, preference, or priority which is not proved to the
satisfaction of the receiver.
"(E) No JUDICIAL REVIEW OF DETERMINATION PURSUANT TO

SUBPARAGRAPH (D).—No court may review the Corporation's
determination pursuant to subparagraph (D) to disallow a
claim.
"(F) LEGAL EFFECT OP FIUNG.—
"(i) STATUTE OF UMITATION TOLLED.—For

^

purposes of
any applicable statute of limitations, the filing of a

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 229

claim with the receiver shall constitute a commencement of an action.
"(ii) N o PREJUDICE TO OTHER ACTIONS.—Subject tO

paragraph (12), the filing of a claim with the receiver
shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver.
"(6) PROVISION FOR AGENCY REVIEW OR JUDICIAL DETERMINATION OF CLAIMS.—

"(A) I N GENERAL.—Before the end of the 60-day period
beginning on the earlier of^
"(i) the end of the period described in paragraph
(5XA)(i) with respect to any claim against a depository
institution for which the Corporation is receiver; or
"(ii) the date of any notice of disallowance of such
claim pursuant to paragraph (5)(A)(i),
the claimant may request administrative review of the
claim in accordance with subparagraph (A) or (B) of paragraph (7) or file suit on such claim (or continue an action
commenced before the appointment of the receiver) in the
district or territorial court of the United States for the
district within which the depository institution's principal
place of business is located or the United States District
Court for the District of Columbia (and such court shall
have jurisdiction to hear such claim).
"(B) STATUTE OF UMiTATiONS.—If any claimant fails to—
"(i) request administrative review of any claim in
accordance with subparagraph (A) or (B) of paragraph
(7); or
"(ii) file suit on such claim (or continue an action
commenced before the appointment of the receiver),
before the end of the 60-day period described in subparagraph (A), the claim shall be deemed to be disallowed (other
than any portion of such claim which was allowed by the
receiver) as of the end of such period, such disallowance
shall be final, and the claimant shall have no further rights
or remedies with respect to such claim.
"(7) REVIEW OF CLAIMS.—
"(A) ADMINISTRATIVE HEARING.—If any claimant requests

review under this subparagraph in lieu of filing or continuing £iny action under paragraph (6) and the Corporation
agrees to such request, the Corporation shall consider the
claim after opportunity for a hearing on the record. The
final determination of the Corporation with respect to such
claim shall be subject to judicial review under chapter 7 of
title 5, United States Code.
"(B) OTHER REVIEW PROCEDURES.—

"(i) I N GENERAL.—The Corporation shall also establish such alternative dispute resolution processes as
may be appropriate for the resolution of claims filed
under paragraph (5XAXi).
"(ii) CRITERIA.—In establishing alternative dispute
resolution processes, the Corporation shall strive for
procedures which are expeditious, fair, independent,
and low cost.
"(iii) VOLUNTARY BINDING OR NONBINDING PROCEDURES.—The Corporation may establish both binding

/

103 STAT. 230

PUBLIC LAW 101-73—AUG. 9, 1989
and nonbinding processes, which may be conducted by
any government or private party, but all parties,
including the claimant and the Corporation, must
agree to the use of the process in a particular case.

^
,

"(iv) CONSIDERATION OP INCENTIVES.—The Corpo-

'

ration shall seek to develop incentives for claimants to
participate in the alternative dispute resolution
process.
"(8) EXPEDITED DETERMINATION OF CLAIMS.—
"(A) ESTABLISHMENT REQUIRED.—The Corporation shall

'

establish a procedure for expedited relief outside of the
routine claims process established under paragraph (5) for
claimants who—
"(i) allege the existence of l^ally valid and enforceable or perfected security interests in assets of any
depository institution for which the Corporation has
been appointed receiver; and
"(ii) sdl^e that irreparable injury will occur if the
routine claims procedure is followed.
"(B) DETERMINATION PERIOD.—Before the end of the 90-

day period beginning on the date any claim is filed in
accordance with the procedures established pursuant to
subparagraph (A), the Corporation shall—
"(i) determine—
"(I) whether to allow or disallow such claim; or
"(II) whether such claim should be determined
pursuant to the procedures established pursuant to
paragraph (5); and
^
"(ii) notify the claimant of the determination, and if
the claim is disallowed, a statement of each reason for
; \
the disallowance and the procedure for obtaining
/,
agency review or judicial determination.
"(C) PERIOD FOR FiuNG OR RENEWING SUIT.—Any claimant
who files a request for expedited relief shall be permitted to
^^. •
file
a suit, or to continue a suit filed before the appointment
of the receiver, seeking a determination of the claimant's
rights with respect to such security interest after the earlier of—
"(i) the end of the 90-day period b^inning on the
.' 1 .
date of the filing of a request for expedited relief; or
"(ii) the date the Corporation denies the claim.
"(D) STATUTE OF UMFTATIONS.—If an action described in
>c
subparagraph (C) is not filed, or the motion to renew a
previously filed suit is not made, before the end of the 30day period b^inning on the date on which such action or
motion may be filed in accordance with subparagraph (B),
the claim shall be deemed to be disallowed as of the end of
such period (other than any portion of such claim which
Hi"
was allowed by the receiver), such disallowance shall be
final, and the claimant shall have no further rights or
remedies with respect to such claim.
1 1
i'
u * t-

>
i

"(E) LEGAL EFFECT OF FiuNG.—
"(i) STATUTE OF UMITATION TOLLED.—For

purposes of
any applicable statute of limitations, the filing of a
claim with the receiver shall constitute a commencement of an action.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 231

"(ii) N o PREJUDICE TO OTHER ACTIONS.—Subject tO

paragraph (12), the filing of a claim with the receiver
shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver.
"(9) AGREEMENT AS BASIS OF CLAIM.—

"(A) REQUIREMENTS.—Except as provided in subparagraph (B), any agreement which does not meet the requirements set forth in section 13(e) shall not form the basis of,
or substantially comprise, a claim against the receiver or
the C!orporation.
"(B)

EXCEPTION

TO

CONTEMPORANEOUS

EXECUTION

REQUIREMENT.—Notwithstanding section 13(eX2), any agreement relating to an extension of credit between a Federal
home loan bank or Federal Reserve bank and any insured
depository institution which was executed before the extension of credit by such bank to such institution shall be
treated as having been executed contemporaneously with
such extension of credit for purposes of subparagraph (A).
"(10) PAYMENT OF CLAIMS.—

"(A) I N GENERAL.—The receiver may, in the receiver's
discretion and to the extent funds are available, pay creditor claims which are allowed by the receiver, approved by
the Corporation pursuant to a final determination pursuant
to paragraph (7) or (8), or determined by the final judgment
of any court of competent jurisdiction in such manner and
amounts as are authorized under this Act.
"(B) PAYMENT OF DIVIDENDS ON CLAIMS.—The receiver
may, in the receiver's sole discretion, pay dividends on
proved claims at any time, and no liability shall attach to
the Corporation (in such Corporation's corporate capacity
or as receiver), by reason of any such payment, for failure
to pay dividends to a claimant whose claim is not proved at
the time of any such payment.
"(11) DISTRIBUTION OF ASSETS.—
"(A) SUBROGATED CLAIMS; CLAIMS OF UNINSURED DEPOSITORS AND OTHER CREDITORS.—The receiver shall—

"(i) retain for the account of the Corporation such
portion of the amounts realized from any liquidation as
the Corporation may be entitled to receive in connection with the subrogation of the claims of depositors;
and
"(ii) pay to depositors and other creditors the net
amounts available for distribution to them.
"(B) DISTRIBUTION TO SHAREHOLDERS OP AMOUNTS REMAINING AFTER PAYMENT OF ALL OTHER CLAIMS AND EXPENSES.—

In any case in which funds remain after all depositors,
creditors, other claimants, and administrative expenses are
paid, the receiver shall distribute such funds to the depository institution's shareholders or members together with
the accounting report required under paragraph (14XC).
"(12) SUSPENSION OF LEGAL ACTIONS.—

"(A) I N GENERAL.—After the appointment of a conservator or receiver for an insured depository institution, the
conservator or receiver may request a stay for a period not
to exceed—
"(i) 45 days, in the case of any conservator; and

^

103 STAT. 232

PUBLIC LAW 101-73—AUG. 9, 1989
\ $ i ^'
"(ii) 90 days, in the case of any receiver,
If.
in any judicial action or proceeding to which such instituV-.
tion is or becomes a party.
ifis....

"(B)

GRANT OF STAY BY ALL COURTS REQUIRED.—Upon

receipt of a request by any conservator or receiver pursuant
to subparagraph (A) for a stay of any judicial action or
proceeding in any court with jurisdiction of such action or
proceeding, the court shall grant such stay as to all parties.
"(13) ADDITIONAL RIGHTS AND DUTIES.—

-li

"(A) PRIOR FINAL ADJUDICATION.—The CJorporation shall

ii
'-r

abide by any final unappealable judgment of any court of
competent jurisdiction which was rendered before the
appointment of the Corporation as conservator or receiver.
"(B)

RIGHTS AND REMEDIES OF CONSERVATOR OR RE-

CEIVER.—In the event of any appealable judgment, the (Corporation as conservator or receiver shall—
t
"(i) have all the rights and remedies available to the
insured depository institution (before the appointment
,'
r,
of such conservator or receiver) and the CJorporation in
its corporate capacity, including removal to Federal
. .; court and all appellate rights; and
t ,
"(ii) not be required to post any bond in order to
pursue such remedies.
: .
"(C) No ATTACHMENT OR EXECUTION.—No attachment or
execution may issue by any court upon assets in the posses'i.^i
sion of the receiver.
"(D) LIMITATION ON JUDICIAL REVIEW.—Except as other-. / '
wise provided in this subsection, no court shall have jurisdiction over—
"(i) any claim or action for payment from, or any
action seeking a determination of rights with respect
to, the assets of any depository institution for which the
• f, ,
CJorporation has been appointed receiver, including
assets which the CJorporation may acquire from itself as
such receiver; or
_
"(ii) any claim relating to any act or omission of such
institution or the CJorporation as receiver,
t

"(14) STATUTE OF UMITATIONS FOR ACTIONS BROUGHT BY CONSERVATOR OR RECEIVER.—

*i^/

^

"(A) I N GENERAL.—Notwithstanding any provision of any
contract, the applicable statute of limitations with regard to
any action brought by the CJorporation as conservator or
receiver shall be—
"(i) in the case of any contract claim, the longer of—
"(I) the 6-year period beginning on the date the
claim accrues; or
"(II) the period applicable under State law; and
"(ii) in the case of any tort claim, the longer of—
"(I) the 3-year period beginning on the date the
claim accrues; or
"(II) the period applicable under State law.
"(B)

^
i

DETERMINATION OF THE DATE ON WHICH A CLAIM

ACCRUES.—For purposes of subparagraph (A), the date on
which the statute of limitation begins to run on any claim
described in such subparagraph shall be the later of—
"(i) the date of the appointment of the CJorporation as
conservator or receiver; or

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 233

"(ii) the date on which the cause of action accrues.
"(15) ACCOUNTING AND RECORDKEEPING REQUIREMENTS.—

"(A) I N GENERAL.—The Corporation as conservator or
receiver shall, consistent with the accounting and reporting
practices and procedures established by the Corporation,
maintain a full accounting of each conservatorship and
receivership or other disposition of institutions in default.
"(B) ANNUAL ACCOUNTING OR REPORT.—With respect to

each conservatorship or receivership to which the Corporation was appointed, the Corporation shall make an annual
accounting or report, as appropriate, available to the Secretary of the Treasury, the Comptroller General of the
United States, and the authority which appointed the
Corporation as conservator or receiver.
"(C) AVAILABILITY OF REPORTS.—Any report

'. \ _ • -

prepared

pursuant to subparagraph (B) shall be made available by
the Corporation upon request to any shareholder of the
depository institution for which the Corporation was appointed conservator or receiver or any other member of the
public.
"(D) RECORDKEEPING REQUIREMENT.—After the end of the

6-year period beginning on the date the Corporation is
appointed as receiver of an insured depository institution,
the Corporation may destroy any records of such institution
which the Corporation, in the Corporation's discretion,
determines to be unnecessary unless directed not to do so by
a court of competent jurisdiction or governmental agency,
or prohibited by law.

'

"(16) CONTRACTS WITH STATE HOUSING FINANCE AUTHORITIES.—

"(A) I N GENERAL.—The Corporation may enter into contracts with any State housing finance authority for the sale
of mortgage-related assets (as such terms are defined in
section 1301 of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989) of any depository institution
in default (including assets and liabilities associated with
any trust business), such contracts to be effective in accordance with their terms without any further approval, assignment, or consent with respect thereto.
"(B) FACTORS TO CONSIDER.—In evaluating the disposition
of mortgage related assets to any State housing finance
authority the Corporation shall consider—
"(i) the State housing finance authority's ability to
acquire and service current, delinquent, and defaulted
mortgage related assets;
"(ii) the State housing finance authority's ability to
further national housing policies;
"(iii) the State housing finance authority's sensitivity
to the impact of the sale of mortgage related assets
upon the State and local communities;
"(iv) the costs to the Federal Government associated
with alternative ownership or dispositions of the mortgage related assets;
"(v) the minimization of future guaranties which
may be required of the Federal Government;
"(vi) the maximization of mortgage related asset
values; and

:

103 STAT. 234

PUBLIC LAW 101-73—AUG. 9, 1989
"(vii) the utilization of institutions currently established in mortgage related asset market activities.

"(e) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BEFORE
APPOINTMENT OF CONSERVATOR OR RECEIVER,—
"(1) AUTHORITY TO REPUDIATE CONTRACTS.—In addition to any

other rights a conservator or receiver may have, the conservator
or receiver for any insured depository institution may disaffirm
or repudiate any contract or lease—
"(A) to which such institution is a party;
"(B) the performance of which the conservator or receiver, in the conservator's or receiver's discretion, determines to be burdensome; and
"
"(C) the disaffirmance or repudiation of which the conservator or receiver determines, in the conservator's or
receiver's discretion, will promote the orderly administration of the institution's affairs.
"(2) TIMING OF REPUDIATION.—The conservator or receiver
appointed for any insured depository institution in accordance
with subsection (c) shall determine whether or not to exercise
the rights of repudiation under this subsection within a reasonable period following such appointment.

\

/

"(3) CLAIMS FOR DAMAGES FOR REPUDIATION.—

"(A) I N GENERAL.—Except as otherwise provided in
subparagraph (C) and paragraphs (4), (5), and (6), the liability of the conservator or receiver for the disaffirmance or
repudiation of any contract pursuant to paragraph (1) shall
be"(i) limited to actual direct compensatory damages;
and
"(ii) determined as of—
"(I) the date of the appointment of the conservator or receiver; or
"(II) in the case of any contract or agreement
referred to in paragraph (8), the date of the
disaffirmance or repudiation of such contract or
agreement.

.- .

"(B) No UABiuTY FOR OTHER DAMAGES.—For purposes of

subparagraph (A), the term 'actual direct compensatory
damages' does not include—
"(i) punitive or exemplary damages;
"(ii) damages for lost profits or opportunity; or
"(iii) damages for pain and suffering.
,..

.

,

"(C) MEASURE OP DAMAGES FOR REPUDIATION OF FINANCIAL

CONTRACTS.—In the case of any qualified financial contract
or agreement to which paragraph (8) applies, compensatory
dam£iges shall be—
"(i) deemed to include normal and reasonable costs of
cover or other reasonable measures of damages utilized
in the industries for such contract and agreement
claims; and
"(ii) paid in accordance with this subsection and
subsection (k) except as otherwise specifically provided
in this section.
"(4) LEASES UNDER WHICH THE INSTITUTION IS THE LESSEE.—

.... ,

"(A) I N GENERAL.—If the conservator or receiver disaffirms or repudiates a lease under which the insured
depository institution was the lessee, the conservator or

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 235

receiver shall not be liable for any damages (other than
damages determined pursuant to subparagraph (B)) for the
disaffirmance or repudiation of such lease.
"(B) PAYMENTS OF RENT.—Notwithstanding subparagraph
(A), the lessor under a lease to which such subparagraph
applies shall—
"(i) be entitled to the contractual rent accruing
before the later of the date—
"(I) the notice of disaffirmance or repudiation is
mailed; or
"(II) the disaffirmance or repudiation becomes
effective,
unless the lessor is in default or breach of the terms of
the lease;
"(ii) have no claim for damages under any accelera- Claims.
tion clause or other penalty provision in the lease; and
"(iii) have a claim for any unpaid rent, subject to all Claims,
appropriate offsets and defenses, due as of the date of
the appointment which shall be paid in accordance
with this subsection and subsection (k).
"(5) LEASES UNDER WHICH THE INSTITUTION IS THE LESSOR.—

"(A) I N GENERAL.—If the conservator or receiver repudiates an unexpired written lease of real property of the
insured depository institution under which the institution
is the lessor and the lessee is not, as of the date of such
repudiation, in default, the lessee under such lease may
either—
"(i) treat the lease as terminated by such repudiation; or
"(ii) remain in possession of the leasehold interest for
the balance of the tiBrm of the lease unless the lessee
defaults under the terms of the lease after the date of
such repudiation.
"(B)

PROVISIONS APPUCABLE TO LESSEE REMAINING IN

POSSESSION.—If any lessee under a lease described in
subparagraph (A) remains in possession of a leasehold interest pursuant to clause (ii) of such subparagraph—
"(i) the lessee—
"(I) shall continue to pay the contractual rent
pursuant to the terms of the lease after the date of
the repudiation of such lease;
"(II) may offset against any rent payment which
accrues after the date of the repudiation of the
lease, any damages which accrue after such date
due to the nonperformance of any obligation of the
insured depository institution under the lease after
such date; and
"(ii) the conservator or receiver shall not be liable to
the lessee for any damages arising after such date as a
result of the repudiation other than the amount of any
offset allowed under clause (iXID"(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.—

"(A) I N GENERAL.—If the conservator or receiver repudiates any contract (which meets the requirements of each
paragraph of section 13(e)) for the sale of real property and
the purchaser of such real property under such contract is

103 STAT. 236

PUBLIC LAW 101-73—AUG. 9, 1989
in possession and is not, as of the date of such repudiation,
in default, such purchaser may either—
"(i) treat the contract as terminated by such repudiation; or
"(ii) remain in possession of such real property.
"(B) PROVISIONS APPUCABLE TO PURCHASER REMAINING IN

s'
i
'

,»

.;;

' ".'
v •'

POSSESSION.—If any purchaser of real property under any
contract described in subparagraph (A) remains in possession of such property pursuant to clause (ii) of such
subparagraph—
"(i) the purchaser—
"(I) shall continue to make all pa3mients due
* under the contract after the date of the repudiation of the contract; and
"(II) may offset against any such payments any
damages which accrue after such date due to the
nonperformance (after such date) of any obligation
of the depository institution under the contract;
.
and
"(ii) the conservator or receiver shall—
"(I) not be liable to the purchaser for any damages arising after such date as a result of the
repudiation other than the amount of any offset
allowed under clause (iXH);
"(II) deliver title to the purchaser in accordance
with the provisions of the contract; and
"(III) have no. obligation under the contract other
than the performance required under subclause
(II).
"(C) ASSIGNMENT AND SALE ALLOWED.—

"(i) IN GENERAL.—No provision of this paragraph
shall be construed as limiting the right of the conservator or receiver to assign the contract described in
subparagraph (A) and sell the property subject to the
contract and the provisions of this paragraph.

,
* ,

"(ii) N o UABIUTY AFTER ASSIGNMENT AND SALE.—If a n

assignment and sale described in clause (i) is consummated, the conservator or receiver shall have no
further liability under the contract described in
subparagraph (A) or with respect to the real property
which was the subject of such contract.
Claims.

. „:, "(7) PROVISIONS APPUCABLE TO SERVICE CONTRACTS.—
'
"(A) SERVICES PERFORMED BEFORE APPOINTMENT.—In t h e

case of any contract for services between any person and
any insured depository institution for which the Corporation has been appointed conservator or receiver, any claim
of such person for services performed before the appointment of the conservator or the receiver shall be—
"(i) a claim to be paid in accordance with subsections
(d) and (i); and
"(ii) deemed to have arisen as of the date the conservator or receiver was appointed.
"(B) SERVICES PERFORMED AFTER APPOINTMENT AND PRIOR

TO REPUDIATION.—If, in the case of any contract for services
described in subparagraph (A), the conservator or receiver
accepts performance by the other person before the conservator or receiver makes any determination to exercise

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 237

the right of repudiation of such contract under this
section—
"(i) the other party shall be paid under the terms of
the contract for the services performed; and
"(ii) the amount of such pajmient shall be treated as
an administrative expense of the conservatorship or
receivership.
"(C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT

REPUDIATION.—The acceptance by any conservator or receiver of services referred to in subparagraph (B) in connection with a contract described in such subparagraph shall
not affect the right of the conservator or receiver to repudiate such contract under this section at any time after such
performance.
*(8) CERTAIN QUAUFiED FINANCIAL CONTRACTS.—
"(A) RIGHTS OF PARTIES TO CONTRACTS.—Subject to paragraph (10) of this subsection and notwithstanding any other
provision of this Act (other than subsections (dX9) and
(iX4XI) of this section and section 13(e)), any other Federal
law, or the law of any State, no person shall be stayed or
prohibited from exercising—
"(i) any right to cause the termination or liquidation
of any qualified financial contract with an insured
depository institution which arises upon the appointment of the Corporation as receiver for such institution
at any time after such appointment;
"(ii) any right under any security arrangement relating to any contract or agreement described in clause (i);
or
"(iii) any right to offset or net out any termination
value, payment amount, or other transfer obligation
arising under or in connection with 1 or more contracts
and agreements described in clause (i), including any
master agreement for such contracts or agreements.
"(B)

APPUCABILITY OF OTHER PROVISIONS.—Subsection

(dX12) shall apply in the case of any judicial action or
proceeding brought against any receiver referred to in
subparagraph (A), or the insured depository institution for
which such receiver w£is appointed, by any party to a
contract or agreement described in subparagraph (AXi) with
such institution.
"(C) CERTAIN TRANSFERS NOT AVOIDABLE.—

"(i) I N GENERAL.—Notwithstanding paragraph (11),
the Corporation, whether acting as such or as conservator or receiver of an insured depository institution, may
not avoid any transfer of money or other property in
connection with any qualified financial contract with
jin insured depository institution.
"(ii) EXCEPTION FOR CERTAIN TRANSFERS.—Clause (i)

'Shall not apply to any transfer of money or other
property in connection with any qualified financial
contract with an insured depository institution if the
Corporation determines that the transferee had actual
intent to hinder, delay, or defraud such institution, the
creditors of such institution, or any conservator or
receiver appointed for such institution.

103 STAT. 238

PUBLIC LAW 101-73—AUG. 9, 1989
"(D) CERTAIN CONTRACTS AND AGREEMENTS DEFINED.—For

:

.'

,

,

w

purposes of this subsection—
"(i) QuAUFiED FINANCIAL CONTRACT.—The term
'qualified financial contract' means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar
agreement that the Corporation determines by regulation to be a qualified financial contract for purposes of
this paragraph.
"(ii) SECURITIES CONTRACT.—The term 'securities
contract'—
"(I) has the meaning given to such term in sec, ,
tion 741(7) of title 11, United States (Dode, except
that the term 'security' (as used in such section)
shall be deemed to include any mortgage loan, any
mortgage-related security (as defined in section
3(aX41) of the Securities Exchange Act of 1934),
and any interest in any mortgage loan or mortgage-related security; and
"(II) does not include any participation in a
commercial mortgage loan unless the CJorporation
determines by regulation, resolution, or order to
include any such participation within the meaning
J, of such term.
"(iii) COMMODITY CONTRACT.—The term 'commodity
contract' has the meaning given to such term in section
761(4) of title 11, United States Code.
"(iv) FORWARD CONTRACT.—The term 'forward contract' has the meaning given to such term in section
101(24) of title 11, United States Code.
"(v) REPURCHASE AGREEMENT.—The term 'repurchase
agreement'—
"(I) has the meaning given to such term in section 101(41) of title 11, the United States Code,
except that the items (as described in such section)
which may be subject to any such agreement shall
be deemed to include mortgage-related securities
(as such term is defined in section 3(aX41) of the
Securities Exchange Act of 1934, any mortgage
loan, and any interest in any mortgage loan; and
"(II) does not include any participation in a
commercial mortg£^e loan unless the dlorporation
determines by r^ulation, resolution, or order to
include any such participation within the meaning
of such term.
"(vi) SWAP AGREEMENT.—The term 'swap agreement'—
"(I) means any agreement, including the terms
and conditions incorporated by reference in any
such agreement, which is a rate swap agreement,
basis swap, commodity swap, forward rate agreement, interest rate future, interest rate option purj.
chased, forward foreign exchange agreement, rate
!^!
cap agreement, rate floor agreement, rate collar
agreement, currency swap agreement, cross-currency rate swap agreement, currency future, or

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 239

currency option purchased or any other similar
agreement, and
"(II) includes any combination of such agreements and any option to enter into any such agreement,
"(vii) TREATMENT OF MASTER AGREEMENT AS i SWAP
AGREEMENT.—Any master agreement for any agreements described in clause (viXD together with all
supplements to such master agreement shall be treated
as 1 swap agreement.
"(viii) TRANSFER.—The term 'transfer' has the meaning given to such term in section 101(50) of title 11,
United States Code.
"(E) CERTAIN PROTECTIONS IN EVENT OF APPOINTMENT OF

CONSERVATOR.—Notwithstanding any other provision of this
Act (other than paragraph (12) of this subsection, subsections (d)(9) a n d (iX4XI) of this section, a n d section 13(e) of
this Act), any other Federal law, or the law of any State, no
person shall be stayed or prohibited from exercising—
"(i) any right such person has to cause the termination, liquidation, or acceleration of any qualified
financial contract with a depository institution in a
conservatorship based upon a default under such financial contract which is enforceable under applicable
noninsolvency law;
"(ii) any right under any security arrangement relating to such qualified financial contracts; or
*(iii) any right to offset or net out any termination
values, payment amounts, or other transfer obligations
arising under or in connection with such qualified
financial contracts.
"(9)

TRANSFER

OF

QUAUFIED

FINANCIAL

CONTRACTS.—In

making any transfer of assets or liabilities of a depository
institution in default which includes any qualified
financial
^^
contract, the conservator or receiver for such depository institution shall either—
"(A) transfer to 1 depository institution (other than a Claims,
depository institution in default)—
"(i) all qualified financial contracts between—
"(I) any person or any affiliate of such person;
and
"(II) the depository institution in default;
"(ii) all claims of such person or any affiliate of such
person against such depository institution under any
such contract (other than any claim which, under the
terms of any such contract, is subordinated to the
claims of general unsecured creditors of such institution);
"(iii) all claims of such depository institution against
such person or any affiliate of such person under any
such contract; and
"(iv) all property securing any claim described in
clause (ii) or (iii) under any such contract; or
"(B) transfer none of the financial contracts, claims, or
property referred to in subparagraph (A) (with respect to
such person and any affiliate of such person).
"(10) NOTIFICATION OF TRANSFER.—

• \.

j.

103 STAT. 240

PUBLIC LAW 101-73—AUG. 9, 1989
^,

^

"(A) IN GENERAL.—If—

"(i) the conservator or receiver for an insured depository institution in default makes any transfer of the
assets and liabilities of such institution; and
"(ii) the transfer includes any qualified financial contract,
the conservator or receiver shall use such conservator's or
receiver's best efforts to notify any person who is a party to
any such contract of such transfer by 12:00, noon (local
time) on the business day following such transfer.
"(B) BUSINESS DAY DEFINED.—For purposes of this paragraph, the term 'business day' means any day other than
any Saturday, Sunday, or any day on which either the New
York Stock Exchange or the Federal Reserve Bank of New
York is closed.
"(11) CERTAIN SECURITY INTERESTS NOT AVOIDABLE.—No provision of this subsection shall be construed as permitting the
avoidance of any legally enforceable or perfected security interest in any of the assets of any depository institution except
where such an interest is taken in contemplation of the institution's insolvency or with the intent to hinder, delay, or defraud
the institution or the creditors of such institution.

.

"(12) AUTHORITY TO ENFORCE CONTRACTS.—

." ,.
,
. .

"(A) IN GENERAL.—The conservator or receiver may enforce any contract, other than a director's or officer's liability insurance contract or a depository institution bond,
entered into by the depository institution notwithstanding
any provision of the contract providing for termination,
default, acceleration, or exercise of rights upon, or solely by
reason of, insolvency or the appointment of a conservator or
receiver.
"(B) CERTAIN RIGHTS NOT AFFECTED.—No provision of this
paragraph may be construed as impairing or affecting any
right of the conservator or receiver to enforce or recover
under a directors or officers liability insurance contract or
depository institution bond under other applicable law.
"(13)

-

EXCEPTION FOR FEDERAL RESERVE AND FEDERAL HOME

LOAN BANKS.—No provision of this subsection shall
respect to—
,^,
"(A) any extension of credit from any Federal
bank or Federal Reserve bank to any insured
institution; or
"(B) any security interest in the assets of the
securing any such extension of credit.
,

apply with
home loan
depository
institution

"(f) PAYMENT OF INSURED DEPOSITS.—

»

"(1) I N GENERAL.—In case of the liquidation of, or other
closing or winding up of the affairs of, any insured depository
institution, payment of the insured deposits in such institution
shall be made by the (Corporation as soon as possible, subject to
^^ the provisions of subsection (g), either by cash or by making
available to each depositor a transferred deposit in a new
insured depository institution in the same community or in
another insured depository institution in an amount equal to
the insured deposit of such depositor, except that—
^ ; ,
"(A) all payments made pursuant to this section on account of a closed Bank Insurance Fund member shall be
made only from the Bank Insurance Fund, and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 241

"(B) all payments made pursuant to this section on account of a closed Savings Association Insurance Fund
member shall be made only from the Savings Association
Insurance Fund.
"(2) PROOF OF CLAIMS.—The Corporation, in its discretion, may

require proof of claims to be filed and may approve or reject
such claims for insured deposits.
"(3) RESOLUTION OF DISPUTES.—
"(A) RESOLUTIONS IN ACCORDANCE TO CORPORATION REGU-

Claims.

LATiONS.—In the case of any disputed claim relating to any
insured deposit or any determination of insurance coverage
with respect to any deposit, the Corporation may resolve
such disputed claim in accordance with regulations prescribed by the Corporation establishing procedures for
resolving such claims.
"(B) ADJUDICATION OF CLAIMS.—If the Corporation has not
prescribed regulations establishing procedures for resolving
disputed claims, the Corporation may require the final
determination of a court of competent jurisdiction before
paying any such claim.
"(4) REVIEW OF CORPORATION'S DETERMINATION.—Final deter- Courts, U.S.
mination made by the Corporation shall be reviewable in
accordance with chapter 7 of title 5, United States Code, by the
United States Court of Appeals for the District of Columbia or
the court of appeals for the Federal judicial circuit where the
principal place of business of the depository institution is
located.
"(5) STATUTE OF LIMITATIONS.—Any request for review of a
final determination by the Corporation shall be filed with the
appropriate circuit court of appeals not later than 60 days after
such determination is ordered.
"(g) SUBROGATION OF CORPORATION.—

"(1) IN GENERAL.—Notwithstanding any other provision of
Federal law, the law of any State, or the constitution of any
State, the Corporation, upon the payment to any depositor as
provided in subsection (f) in connection with any insured depository institution or insured branch described in such subsection
or the assumption of any deposit in such institution or branch
by another insured depository institution pursuant to this section or section 13, shall be subrogated to all rights of the
depositor against such institution or branch to the extent of
such payment or assumption.
"(2) DIVIDENDS ON SUBROGATED AMOUNTS.—The subrogation of Claims.
the Corporation under paragraph (1) with respect to any insured
depository institution shall include the right on the part of the
Corporation to receive the same dividends from the proceeds of
the assets of such institution and recoveries on account of
stockholders' liability as would have been payable to the depositor on a claim for the insured deposit, but such depositor shall
retain such claim for any uninsured or unassumed portion of
the deposit.
"(3) WAIVER OF CERTAIN CLAIMS.—With respect to any bank
which closes after May 25, 1938, the Corporation shall waive, in
favor only of any person against whom stockholders' individual
liability may be asserted, any claim on account of such liability
in excess of the liability, if any, to the bank or its creditors, for
the amount unpaid upon such stock in such bank; but any such

103 STAT. 242

PUBLIC LAW 101-73—AUG. 9, 1989
waiver shall be effected in such manner and on such terms and
conditions as will not increase recoveries or dividends on account of claims to which the Corporation is not subrogated.

^

"(4) APPUCABIUTY OF STATE LAW.—If the Corporation is ap-

pointed pursuant to subsection (cX3), or determines not to
invoke the authority conferred in subsection (cX4), the rights of
depositors and other creditors of any State depository institution shall be determined in accordance with the applicable
provisions of State law.
"(W CONDITIONS APPUCABLE To LIQUIDATION PROCEEDINGS.—
"(1) CONSIDERATION OF LOCAL ECONOMIC IMPACT REQUIRED.—

The Corporation shall fully consider the adverse economic
impact on local communities, including businesses and farms, of
actions to be taken by it during the administration and liquidation of loans of a depository institution in default.
"(2) ACTIONS TO ALLEVIATE ADVERSE ECONOMIC IMPACT TO BE

CONSIDERED.—The actions which the Corporation shall consider
include the release of proceeds from the sale of products and
services for family living and business expenses and shortening
the undue length of the decisionmaking process for the acceptance of offers of settlement contingent upon third party financing.
(3) GUIDELINES REQUIRED.—The Corporation shall adopt and
publish procedures and guidelines to minimize adverse economic effects caused by ite actions on individual debtors in the
community,

• '-

"(i) VALUATION OF CLAIMS IN DEFAULT.—

/

"(1) I N GENERAL.—Notwithstanding any other provision of
Federal law or the law of any State and regardless of the
- method which the Corporation determines to utilize with respect to an insured depository institution in default or in danger
of default, including transactions authorized under subsection
(n) and section 13(c), this subsection shall govern the rights of
the creditors (other than insured depositors) of such institution.
"(2) MAXIMUM UABILTTY.—The maximum liability of the Corporation, acting as receiver or in any other capacity, to any
person having a claim against the recfeiver or the insured
depository institution for which such receivier is appointed shall
equal the amount such claimant would have received if the
Corporation had liquidated the assets and liabilities of such
institution without exercising the Corporation's authority
under subsection (n) of this section or section 13.

\^

"(3) ADDITIONAL PAYMENTS AUTHORIZED.—

''

"(A) IN GENERAL.—The Corporation may, in its discretion
and in the interests of minimizing its losses, use its own
resources to make additional payments or credit additional
amounts to or with respect to or for the account of any
claimant or category of claimants. The Corporation shall
not be obligated, as a result of having made any such
payment or credited any such amount to or with respect to
or for the account of any claimant or category of claimants,
to make payments to any other claimant or category or
claimants.
"(B) SOURCE OF FUNDS.—If the depository institution in
default is a Bank Insurance Fund member, the Corporation
may only make such payments out of funds held in the
Bank Insurance Fund. If the depository institution in de-

PUBLIC LAW 101-73—AUG. 9, 1989
fault is a Savings Association Insurance Fund member, the
Corporation may only make such payments out of funds
held in the Savings Association Insurance Fund,
"(C) MANNER OF PAYMENT.—The Corporation may make
the payments or credit the amounts specified in subparagraphs (A) and (B) directly to the claimants or may make
such payments or credit such amounts to an open insured
depository institution to induce such institution to accept
liability for such claims.
"0) LIMITATION ON COURT ACTION.—Except as provided in this
section, no court may take any action, except at the request of the
Board of Directors by regulation or order, to restrain or affect the
exercise of powers or functions of the Corporation as a conservator
or a receiver.
"(k) LIABILITY OF DIRECTORS AND OFFICERS.—A director or officer of
an insured depository institution may be held personally liable for
monetary damages in any civil action by, on behalf of, or at the
request or direction of the Corporation, which action is prosecuted
wholly or partially for the benefit of the Corporation—
"(1) acting as conservator or receiver of such institution,
"(2) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed by such receiver or conservator, or
"(3) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed in whole or in
part by an insured depository institution or its affiliate in
connection with assistance provided under section 13,
for gross negligence, including any similar conduct or conduct that
demonstrates a greater disregard of a duty of care (than gross
negligence) including intentional tortious conduct, as such terms are
defined and determined under applicable State law. Nothing in this
paragraph shall impair or affect any right of the Corporation under
other applicable law.
"(1) DAMAGES.—In any proceeding related to any claim against an
insured depository institution's director, officer, employee, agent,
attorney, accountant, appraiser, or any other party employed by or
providing services to an insured depository institution, recoverable
damages determined to result from the improvident or otherwise
improper use or investment of any insured depository institution's
assets shall include principal losses and appropriate interest.".

103 STAT. 243

trt - J

-^
'

i

SEC. 213. NEW BANKS.

Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is
amended by inserting after subsection (1) (as added by section 212)
the following new subsection:
"(m) N E W BANKS.—
"(1) ORGANIZATION AUTHORIZED.—As

soon as possible after the
default of an insured bank, the (Dorporation, if it finds that it is
advisable and in the interest of the depositors of the insured
bank in default or the public shall organize a new national bank
in the same community as the bank in default to assume the
insured deposits of such bank in default and otherwise to
perform temporarily the functions hereinafter provided for.
"(2) ARTICLES OF ASSOCIATION.—The articles of association and
the organization certificate of the new bank shall be executed
by representatives designated by the Corporation.

"

103 STAT. 244

PUBLIC LAW 101-73—AUG. 9, 1989
"(3) CAPITAL STOCK.—No capital stock need be paid in by the
Corporation.
"(4) EXECUTIVE OFFICER.—The new bank shall not have a
board of directors, but shall be managed by an executive officer
appointed by the Board of Directors of the Corporation who
shall be subject to its directions.
"(5) SUBJECT TO LAWS RELATING TO NATIONAL BANKS.—In all

'

Taxes.

'

'^ other respects the new bank shall be organized in accordance
with the then existing provisions of law relating to the organization of national banking associations.
"(6) NEW DEPOSITS.—The new bank may, with the approval of
the Corporation, accept new deposits which shall be subject to
withdrawal on demand and which, except where the new bank
, is the only bank in the community, shall not exceed $100,000
from any depositor.
"(7) INSURED STATUS.—The new bank, without application to
or approval by the Corporation, shall be an insured depository
institution and shall maintain on deposit with the Federal
Reserve bank of its district reserves in the amount required by
1 law for member banks, but it shall not be required to subscribe
for stock of the Federal Reserve bank.
"(8) INVESTMENTS.—Funds of the new bank shall be kept on
hand in c£ish, invested in obligations of the United States or
,j obligations guaranteed £is to principal and interest by the
United States, or deposited with the Corporation, any Federal
Reserve bank, or, to the extent of the insurance coverage on any
such deposit, an insured depository institution.
"(9) CONDUCT OF BUSINESS.—The new bank, unless otherwise
authorized by the Comptroller of the Currency, shall transact
business only as authorized by this Act and as may be incidental
to its organization.
"(10) ExEMPT STATUS.—Notwithstanding any other provision
of Federal or State law, the new bank, its franchise, property,
and income shall be exempt from all taxation now or hereafter
,} imposed by the United States, by any territory, dependency, or
i possession thereof, or by any State, county, municipality, or
* local taxing authority.
-£
"(11) TRANSFER OF DEPOSITS.—(A) Upon the organization of a
new bank, the Corporation shall promptly make available to it
an amount equal to the estimated insured deposits of such bank
in default plus the estimated amount of the expenses of operating the new bank, and shall determine as soon as possible the
amount due each depositor for the depositor's insured deposit in
the bank in default, and the total expenses of operation of the
new bank.
"(B) Upon such determination, the amounts so estimated and
made available shall be adjusted to conform to the amounts so
determined.
"(12) EARNINGS.—Earnings of the new bank shall be paid over
or credited to the (Corporation in such adjustment.
"(13) LOSSES.—If any new bank, during the period it continues
its status as such, sustains any losses with respect to which it is
t not effectively protected except by reason of being an insured
i bank, the C!orporation shall furnish to it additional funds in the
amount of such losses.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 245

"(14) PAYMENT OF INSURED DEPOSITS.—(A) The new bank shall
assume as transferred deposits the payment of the insured
deposits of such bank in default to each of its depositors.
"(B) Of the amounts so made available, the Corporation shall
transfer to the new bank, in cash, such sums as may be necessary to enable it to meet its expenses of operation and immediate cash demands on such transferred deposits, and the
remainder of such amounts shall be subject to withdrawal by
the new bank on demand.
"(15) ISSUANCE OF STOCK.—(A) Whenever in the judgment of

the Board of Directors it is desirable to do so, the Corporation
shall cause capital stock of the new bank to be offered for sale
on such terms and conditions as the Board of Directors shall
deem advisable in an amount sufficient, in the opinion of the
Board of Directors, to make possible the conduct of the business
of the new bank on a sound basis, but in no event less than that
required by section 5138 of the Revised Statutes for the
organization of a national bank in the place where such new
bank is located.
"(B) The stockholders of the insured bank in default shall be
given the first opportunity to purchase any shares of common
stock so offered.
"(16) ISSUANCE OF CERTIFICATE.—Upon proof that an adequate Securities.
amount of capital stock in the new bank has been subscribed
and paid for in cash, the Comptroller of the Currency shall
require the articles of association and the organization certificate to be amended to conform to the requirements for the
organization of a national bank, and thereafter, when the
requirements of law with respect to the organization of a national bank have been complied with, the CJomptroUer of the
Currency shall issue to the bank a certificate of authority to
commence business, and thereupon the bank shall cease to have
the status of a new bank, shall be managed by directors elected
by its own shareholders, may exercise all the powers granted by
law, and shall be subject to all provisions of law relating to
national banks. Such bank shall thereafter be an insured national bank, without certification to or approval by the (Corporation.
"(17) TRANSFER TO OTHER INSTITUTION.—If the capital stock of Securities.
the new bank is not offered for sale, or if an adequate amount of
capital for such new bank is not subscribed and paid for, the
Board of Directors may offer to transfer its business to any
insured depository institution in the same community which
will take over its assets, assume its liabilities, and pay to the
Corporation for such business such amount as the Board of
Directors may deem adequate; or the Board of Directors in its
discretion may change the location of the new bank to the office
of the Corporation or to some other place or may at any time
wind up its affairs as herein provided.
"(18) WINDING UP.—Unless the capital stock of the new bank Securities.
is sold or its assets are taken over and its liabilities are assumed
by an insured depository institution £is above provided within 2
years after the date of its organization, the Corporation shall
wind up the affairs of such bank, after giving such notice, if any,
as the Comptroller of the Currency may require, and shall
certify to the (Comptroller of the Currency the termination of

103 STAT. 246

PUBLIC LAW 101-73—AUG. 9, 1989
the new bank. Thereafter the Corporation shall be liable for the
obligations of such bank and shall be the owner of its assets.
"(19) APPUCABIUTY OF CERTAIN LAWS.—The provisions of secr tions 5220 and 5221 of the Revised Statutes shall not apply to a
new bank under this subsection.".

SEC. 214. BRIDGE BANKS.

Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is
amended by inserting after subsection (m) (as added by section 213)
the following new subsection:
>, .
"(n) BRIDGE BANKS.—
"(1) ORGANIZATION.—

•

-

"(A) PURPOSE.—When 1 or more insured banks are in
default, or when the Corporation anticipates that 1 or more
insured banks may become in default, the Corporation may,
in its discretion, organize, and the Office of the Comptroller
of the Currency shall charter, 1 or more national banks
with respect thereto with the powers and attributes of
national banking associations, subject to the provisions of
this subsection, to be referred to as bridge banks.
"(B) AUTHORITIES.—Upon the granting of a charter to a
bridge bank, the bridge bank may—
"(i) assume such deposits of such insured bank or
banks that is or are in default or in danger of default as
the Corporation may, in its discretion, determine to be
appropriate, except that if any insured deposits of a
bank are assumed, all insured deposits of that bank
shall be eissumed by the bridge bank or another insured
depository institution;
(ii) £issume such other liabilities (including liabilities associated with any trust business) of such insured
bank or banks that is or are in default or in danger of
default as the (Corporation may, in its discretion, determine to be appropriate;
"(iii) purchase such assets (including assets associated with any trust business) of such insured bank or
banks that is or are in default or in danger of default as
' the Corporation may, in its discretion, determine to be
appropriate; and
(iv) perform any other temporary function which
the (Corporation may, in its discretion, prescribe in
accordance with this Act.
"(C) ARTICLES OF ASSOCIATION.—The articles of association
and organization certificate of a bridge bank as approved by
the CJorporation shall be executed by 3 representatives
designated by the (Corporation.
"(D) INTERIM DIRECTORS.—A bridge bank shall have an
interim board of directors consisting of not fewer than 5 nor
more than 10 members appointed by the (Corporation.
"(E) NATIONAL BANK.—A bridge bank shsJl be oi^anized
as a national bank.
"(2) (CHARTERING.—

"(A) (CONDITIONS.—A national bank may be chartered by
the (Comptroller of the Currency £is a bridge bank only if
the Board of Directors determines that—
"(i) the amount which is reasonably necessary to
operate such bridge bank will not exceed the amount

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 247

which is reasonably necessary to save the cost of liquidating, including paying the insured accounts of, 1 or
more insured banks in default or in danger of default
with respect to which the bridge bank is chartered;
"(ii) the continued operation of such insured bank or
banks in default or in danger of default with respect to
which the bridge bank is chartered is essential to provide adequate banking services in the community
where each such bank in default or in danger of default
is located; or
"(iii) the continued operation of such insured bank or
banks in default or in danger of default with respect to
which the bridge bank is chartered is in the best interest of the depositors of such bank or banks in default
or in danger of default or the public.
"(B) INSURED NATIONAL BANK.—A bridge bank shall be an
insured bank from the time it is chartered as a national
bank.
"(C)

BRIDGE BANK TREATED AS BEING IN DEFAULT FOR

CERTAIN PURPOSES.—A bridge bank shall be treated as an
insured bank in default at such times and for such purposes
as the Corporation may, in its discretion, determine.
"(D) MANAGEMENT.—A bridge bank, upon the granting of
its charter, shall be under the management of a board of
directors consisting of not fewer than 5 nor more than 10
members appointed by the Corporation.
"(E) BYLAWS.—The board of directors of a bridge bank
shall adopt such bylaws as may be approved by the Corporation.
'(3) TRANSFER OF ASSETS AND UABILITIES.—
"(A) I N GENERAL.—
"(i) TRANSFER UPON GRANT OF CHARTER.—Upon

.

the

granting of a charter to a bridge bank pursuant to this
subsection, the Corporation, as receiver, or any other
receiver appointed with respect to any insured bank in
default with respect to which the bridge bank is chartered may transfer any assets and liabilities of such
bank in default to the bridge bank in accordance with
paragraph (1).
"(ii) SUBSEQUENT TRANSFERS.—At any time after a
charter is granted to a bridge bank, the Corporation, as
receiver, or any other receiver appointed with respect
to an insured bank in default may transfer any assets
and liabilities of such insured bank in default as the
Corporation may, in its discretion, determine to be
appropriate in accordance with paragraph (1).
"(iii) TREATMENT OF TRUST BUSINESS.—For purposes of
this paragraph, the trust business, including fiduciary
appointments, of any insured bank in default is included among its assets and liabilities.
"(iv) EFFECTIVE WITHOUT APPROVAL.—The transfer of
any assets or liabilities, including those associated with
any trust business, of an insured bank in default transferred to a bridge bank shall be effective without any
further approval under Federal or State law, assignment, or consent with respect thereto.

<

^

103 STAT. 248

PUBLIC LAW 101-73—AUG. 9, 1989
"(B) INTENT OF CONGRESS REGARDING CONTINUING OPER-

' ?

, *

*

ATiONS.—It is the intent of the Congress that, in order to
prevent unnecessary hardship or losses to the customers of
any insured bank in default with respect to which a bridge
bank is chartered, especially creditworthy farmers, small
businesses, and households, the Corporation should—
"(i) continue to honor commitments made by the
;
bank in default to creditworthy customers, and
"(ii) not interrupt or terminate adequately secured
loans which are transferred under subparagraph (A)
<
and are being repaid by the debtor in accordance with
the terms of the loan instrument.
"(4) POWERS OF BRIDGE BANKS.—Each bridge bank chartered
under this subsection shall have all corporate powers of, and be
subject to the same provisions of law as, a national bank, except
that—
"(A) the Corporation may—
"(i) remove the interim directors and directors of a
bridge bank;
"(ii) fix the compensation of members of the interim
board of directors and the board of directors and senior
management, £is determined by the Corporation in its
discretion, of a bridge bank; and
"(iii) waive any requirement established under section 5145, 5146, 5147, 5148, or 5149 of the Revised
Statutes (relating to directors of national banks) or
section 31 of the Banking Act of 1933 which would
otherwise be applicable with respect to directors of a
bridge bank by operation of paragraph (2)(B);
"(B) the Corporation may indemnify the representatives
for purposes of paragraph (1)(B) and the interim directors,
directors, officers, employees, and agents of a bridge bank
on such terms as the Corporation determines to be appropriate;
"(C) no requirement under section 5138 of the Revised
Statutes or any other provision of law relating to the
capital of a national bank shall apply with respect to a
bridge bank;
"(D) the Comptroller of the Currency may establish a
f
limitation on the extent to which any person may become
indebted to a bridge bank without regard to the amount of
the bridge bank's capital or surplus;
"(E)(i) the board of directors of a bridge bank shall elect a
chairperson who may also serve in the position of chief
executive officer, except that such person shall not serve
either as chairperson or as chief executive officer without
the prior approval of the Corporation;
"(ii) the board of directors of a bridge bank may appoint a
chief executive officer who is not also the chairperson,
except that such person shall not serve as chief executive
officer without the prior approval of the Corporation;
"(F) a bridge bank shgill not be required to purchase stock
of any Federal Reserve bank;
"(G) the Comptroller of the Currency shall waive any
i requirement for a fidelity bond with respect to a bridge
bank at the request of the Corporation;

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 249

"(H) any judicial action to which a bridge bank becomes a
party by virtue of its acquisition of any assets or assumption of any liabilities of a bank in default shall be stayed
from further proceedings for a period of up to 45 days at the
request of the bridge bank;
"(I) no agreement which tends to diminish or defeat the
right, title or interest of a bridge bank in any asset of an
insured bank in default acquired by it shall be valid against
the bridge bank unless such agreement—
"(i) is in writing,
"(ii) was executed by such insured bank in default
and the person or persons claiming an adverse interest
thereunder, including the obligor, contemporaneously
with the acquisition of the asset by such insured bank
in default,
"(iii) was approved by the board of directors of such
insured bank in default or its loan committee, which
approval shall be reflected in the minutes of said board
or committee, and
"(iv) has been, continuously from the time of its
execution, an official record of such insured bank in
default;
"(J) notwithstanding section 13(eX2), any agreement
relating to an extension of credit between a Federal home
loan bank or Federal Reserve bank and any insured depository institution which was executed before the extension of
credit by such bank to such depository institution shall be
treated as having been executed contemporaneously with
such extension of credit for purposes of subparagraph (I);
and
"(K) except with the prior approval of the Corporation, a
bridge bank may not, in any transaction or series of transactions, issue capital stock or be a party to any merger,
consolidation, disposition of eissets or liabilities, sale or
exchange of capital stock, or similar transaction, or change
its charter.

^

/ -

.

'(5) CAPITAL.—

"(A) No CAPITAL REQUIRED.—The Corporation shall not be Securities.
required to—
"(i) issue any capital stock on behalf of a bridge bank
chartered under this subsection; or
"(ii) purchase any capital stock of a bridge bank,
except that notwithstanding any other provision of
Federal or State law, the Corporation may purchase
and retain capital stock of a bridge bank in such
amounts and on such terms as the Corporation, in its
discretion, determines to be appropriate.
"(B) OPERATING FUNDS IN UEU OF CAPITAL.—Upon the

organization of a bridge bank, and thereafter, as the Board
of Directors may, in its discretion, determine to be necessary or advisable, the Corporation may make available to
the bridge bank, upon such terms and conditions and in
such form and amounts as the Corporation may in its
discretion determine, funds for the operation of the bridge
bank in lieu of capital.

,

"(C) AUTHORITY TO ISSUE CAPITAL STOCK.—Whenever the

Board of Directors determines it is advisable to do so, the

-

PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 250

Corporation shall cause capital stock of a bridge bank to be
issued and offered for sale in such amounts and on such
terms and conditions as the Corporation may, in its discretion, determine.
"(6) N o FEDERAL STATUS.—
"(A) AGENCY STATUS.—A bridge bank is not an agency,

establishment, or instrumentality of the United States.
"(B) EMPLOYEE STATUS.—Representatives for purposes of

paragraph (IXB), interim directors, directors, officers,
employees, or agents of a bridge bank are jiot, solely by
virtue of service in any such capacity, officers or employees
of the United States. Any employee of the Corporation or of
; any Federal instrumentality who serves at the request of
the Corporation as a representative for purposes of paragraph (IXB), interim director, director, officer, employee, or
agent of a bridge bank shall not—
ri;
"(i) solely by virtue of service in any such capacity
lose any existing status as an officer or employee of the
. .
United States for purposes of title 5, United States
Code, or any other provision of law, or
"(ii) receive any salary or benefits for service in any
such capacity with respect to a bridge bank in addition
to such salary or benefits as are obtained through
employment with the Corporation or such Federal
instrumentality.

Wages.

"(7) ASSISTANCE AUTHORIZED.—The Corporation may, in its

discretion, provide assistance under section 13(c) to facilitate
any transaction described in clause (i), (ii), or (iii) of paragraph
(lOXA) with respect to any bridge bank in the same manner and
to the same extent as such assistance may be provided under
such section with respect to an insured bank in default, or to
facilitate a bridge bank's acquisition of any assets or the
assumption of any liabilities of an insured bank in default.
.

"(8) ACQUISITION.—

.

Securities.

"(A) I N GENERAL.—The responsible agency shall notify
the Attorney General of any transaction involving the
merger or sale of a bridge bank requiring approval under
section 18(c) and if a report on competitive factors is requested within 10 days, such transaction may not be consummated before the 5th calendar day after the date of
approval by the responsible agency with respect thereto. If
the responsible agency has found that it must act immediately to prevent the probable failure of 1 of the banks
involved, the preceding sentence does not apply and the
transaction may be consummated immediately upon approval by the agency.
"(B) BY OUT-OF-STATE HOLDING COMPANY.—Any depository
institution, including an out-of-State depository institution,
or any out-of-State depository institution holding company
may acquire and retain the capital stock or assets of, or
otherwise acquire and retain a bridge bank if the bridge
bank at any time had assets aggregating $500,000,000 or
more, as determined by the Corporation on the basis of the
bridge bank's reports of condition or on the basis of the last
available reports of condition of any insured bank in default, which institution has been acquired, or whose assets
have been acquired, by the bridge bank. The acquiring

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 251

entity may acquire the bridge bank only in the same
manner and to the same extent as such entity may acquire
an insured bank in default under section 13(fX2).
"(9) DURATION OF BRIDGE BANK.—Subject to paragraphs (11)
and (13), the status of a bridge bank as such shall terminate at
the end of the 2-year period following the date it was granted a
charter. The Board of Directors may, in its discretion, extend
the status of the bridge bank as such for 3 additional 1-year
periods.
"(10) TERMINATION OF BRIDGE BANK STATUS.—The status of

any bridge bank as such shall terminate upon the earliest of—
"(A) the merger or consolidation of the bridge bank with
a depository institution that is not a bridge bank;
"(B) at the election of the Corporation, the sale of a
majority of the capital stock of the bridge bank to an entity
other than the Corporation and other than another bridge
bank;
"(C) the sale of 80 percent, or more, of the capital stock of
the bridge bank to an entity other than the Corporation and
other than another bridge bank;
"(D) at the election of the Corporation, either the assumption of all or substantially all of the deposits and other
liabilities of the bridge bank by a depository institution
holding company or a depository institution that is not a
bridge bank, or the acquisition of all or substantially all of
the assets of the bridge bank by a depository institution
holding company, a depository institution that is not a
bridge bank, or other entity as permitted under applicable
law; and
"(E) the expiration of the period provided in paragraph
(9), or the earlier dissolution of the bridge bank as provided
in paragraph (12).
"(11) EFFECT OF TERMINATION EVENTS.—
"(A) MERGER OR CONSOUDATION.—A bridge bank that

participates in a merger or consolidation £is provided in
paragraph (lOXA) shall be for all purposes a national bank
with all the rights, powers, and privileges thereof, and such
merger or consolidation shall be conducted in accordance
with, and shall have the effect provided in, the provisions of
applicable law.
(B) CHARTER CONVERSION.—Following the sale of a
majority of the capital stock of the bridge bank as provided
in paragraph (lOXB), the Corporation may amend the charter of the bridge bank to reflect the termination of the
status of the bridge bsuik as such, whereupon the bank shall
remain a national hank, with all of the rights, powers, and
privileges thereof, subject to all laws and regulations applicable thereto.
"(C) SALE OF STOCK.—Following the sale of 80 percent or
more of the capital stock of a bridge bank as provided in
paragraph (lOXC), the bank shall remain a national bank,
with all of the rights, powers, and privileges thereof, subject
to all laws and regulations applicable thereto.
"(D)

ASSUMPTION OF UABIUTIES AND SALE OF ASSETS.—

Following the assumption of all or substantially all of the
liabilities of the bridge bank, or the sale of all or substantially all of the assets of the bridge bank, as provided in

103 STAT. 252

PUBLIC LAW 101-73—AUG. 9,1989
paragraph (lOXD), at the election of the Corporation the
bridge bank may retain its status as such for the period
provided in paragraph (8).
"(E) EFFECT ON HOLDING COMPANIES.—A depository
institution holding company acquiring a bridge bank under
section 13(f), paragraph (8XB) (or any predecessor provision), or both provisions, shall not be impaired or adversely
affected by the termination of the status of a bridge bank as
a result of subparagraph (A), (B), (C), or (D) of paragraph
(10), and shall be entitled to the rights and privileges
provided in section 13(f).
"(F) AMENDMENTS TO CHARTER.—Following the consummation of a transaction described in subparagraph (A),
(B), (C), or (D) of paragraph (10), the charter of the resulting
institution shall be amended to reflect the termination of
bridge bank status, if appropriate.

;,. '

I,

"(12) DISSOLUTION OF BRIDGE BANK.—

''

^
:r'\

"(A) I N GENERAL.—Notwithstanding any other provision
of State or Federal law, if the bridge bank's status as such
has not previously been terminated by the occurrence of an
event specified in subparagraphs (A), (B), (C), or (D) of
paragraph (10)—
"(i) the Board of Directors may, in its discretion,
dissolve a bridge bank in accordance with this paragraph at any time; and
"(ii) the Board of Directors shall promptly commence
dissolution proceedings in accordance with this paragraph upon the expiration of the 2-year period following the date the bridge bank was chartered, or any
extension thereof, as provided in paragraph (9).
"(B) PROCEDURES.—The Comptroller of the Currency shall
appoint the Corporation receiver for a bridge bank upon
certification by the Board of Directors to the Comptroller of
the Currency of its determination to dissolve the bridge
bank. The Corporation as such receiver shall wind up the
affairs of the bridge bank in conformity with the provisions
of law relating to the liquidation of closed national banks.
With respect to any such bridge bank, the Corporation as
such receiver shall have all the rights, powers, and privileges and shall perform the duties related to the exercise of
such rights, powers, or privileges granted by law to a
receiver of any insured depository institution and notwithstanding any other provision of law in the exercise of such
rights, powers, and privileges the Corporation shall not be
subject to the direction or supervision of any State agency
or other Federal agency.
"(13) MULTIPLE BRIDGE BANKS.—Subject to paragraph (IXBXi),

the Corporation may, in the Corporation's discretion, organize 2
or more bridge banks under this subsection to assume any
deposits of, assume any other liabilities of, and purchase any
assets of a single b£Uik in default.".
SEC. 215. FSLIC RESOLUTION FUND.

The Federal Deposit Insurance Act is amended by inserting after
section 11 the following:

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 253

"SEC. 11 A. FSLIC RESOLUTION FUND.

12 USC 1821a.

"(a) ESTABLISHED.—

"(1) IN GENERAL.—There is established a separate fund to be
designated as the FSLIC Resolution Fund which shall be managed by the Corporation and separately maintained and not
commingled.
"(2) TRANSFER OF FSLIC ASSETS AND LIABILITIES.—

"(A) IN GENERAL.—Except as provided in section 21A of
the Federal Home Loan Bank Act, all assets and liabilities
of the Federal Savings and Loan Insurance Corporation on
the day before the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989 shall be transferred to the FSLIC Resolution Fund.
"(B) ADDITIONAL CLAIMS ON ASSETS.—The FSLIC Resolution Fund shall pay to the Savings Association Insurance
Fund such amounts as are needed for administrative and
supervisory expenses from the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 through September 30,1991.
"(3) SEPARATE HOLDING.—Assets and liabilities transferred to
the FSLIC Resolution Fund shall be the assets and liabilities of
the Fund and not of the Corporation and shall not be consolidated with the assets and liabilities of the Bank Insurance
Fund, the Savings Association Insurance Fund, or the Corporation for accounting, reporting, or any other purpose.
"(b) SOURCE OF FUNDS.—The FSLIC Resolution Fund shall be
funded from the following sources to the extent funds are needed in
the listed priority:
"(1) Income earned on assets of the FSLIC Resolution Fund.
"(2) Liquidating dividends and payments made on claims
received by the FSLIC Resolution Fund from receiverships to
the extent such funds are not required by the Resolution Funding Corporation pursuant to section 21B of the Federal Home
Loan Bank Act or the Financing Corporation pursuant to section 21 of such Act.
"(3) Amounts borrowed by the Financing Corporation pursuant to section 21 of the Federal Home Loan Bank Act.
"(4) During the period beginning on the date of the enactment
of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and ending on December 31, 1991, amounts
Eissessed against Savings Association Insurance Fund members
by the Corporation pursuant to section 7 which are not required
by the Financing Corporation pursuant to section 21 of the
Federal Home Loan Bank Act or by the Resolution Funding
Corporation pursuant to section 21B of the Federal Home Loan
Bank Act.
"(c) TREASURY BACKUP.—

"(1) IN GENERAL.—If the funds described in subsections (a) and
(b) are insufficient to satisfy the liabilities of the FSLIC Resolution Fund, the Secretary of the Treasury shall pay to the Fund
such amounts as may be necessary, as determined by the Corporation and the Secretary, for FSLIC Resolution Fund purposes.
"(2)

AUTHORIZATION OF

APPROPRIATIONS.—There

are

au-

thorized to be appropriated to the Secretary of the Treasury,

^

103 STAT. 254

PUBLIC LAW 101-73—AUG. 9, 1989

without fiscal year limitation, such sums as may be necessary to
carry out this section.
"(d) LEGAL PROCEEDINGS.—Any judgment resulting from a
proceeding to which the Federal Savings and Loan Insurance Corporation was a party prior to its dissolution or which is initiated
against the Corporation with respect to the Federal Savings and
Loan Insurance Corporation or with respect to the FSLIC Resolution
Fund shall be limited to the assets of the FSLIC Resolution Fund.
"(e) TRANSFER OF NET PROCEEDS FROM SALE OF R T C ASSETS.—The

FSLIC Resolution Fund shall transfer to the Resolution Funding
Corporation any net proceeds from the sale of assets acquired from
the Resolution Trust Corporation upon the termination of such
Corporation pursuant to section 21A of the Federal Home Loan
Bank Act.
"(f) DISSOLUTION.—The FSLIC Resolution Fund shall be dissolved
upon satisfaction of all debts and liabilities and sale of all assets.
Upon dissolution any remaining funds shall be paid into the Treasury. Any administrative facilities and supplies, including offices and
office supplies, shall be transferred to the Corporation for use by and
to be held as assets of the Savings Association Insurance Fund.".
SEC. 216. AMENDMENTS TO SECTION 12.

?

Section 12 of the Federal Deposit Insurance Act (12 U.S.C. 1822) is
amended—
(1) by striking out "closed bank" each place it appears and
inserting in lieu thereof "depository institution in default";
(2) by striking out subsection (a) and inserting the following:
"(a) BOND NOT REQUIRED; AGENTS; FEE.—The Corporation as receiver of an insured depository institution or branch of a foreign
bank shall not be required to furnish bond and may appoint an
agent or agents to assist it in its duties as such receiver. All fees,
compensation, and expenses of liquidation and administration shall
be fixed by the Corporation, and may be paid by it out of funds
coming into its possession as such receiver."; and
(3) in subsection (d)—
(A) by striking out "as a stockholder of the depository
institution in default, or of any liability of such depositor";
and
(B) by striking out "such bank" and inserting in lieu
thereof "such depository institution".
SEC. 217. AMENDMENTS TO SECTION 13.

Section 13 of the Federal Deposit Insurance Act (12 U.S.C. 1823) is
amended—
(1) by striking out subsection (a) and inserting the following:
"(a) INVESTMENT OF CORPORATION'S FUNDS.—

"(1) AUTHORITY.—Funds held in the Bank Insurance Fund,
the Savings Association Insurance Fund, or the FSLIC Resolution Fund, that are 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.
"(2) LIMITATION.—The Corporation shall not sell or purchase
any obligations described in paragraph (1) for its own account,
at any one time aggregating in excess of $100,000, without the
approval of the Secretary of the Treasury. The Secretary may
approve a transaction or class of transactions subject to the

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 255

provisions of this paragraph under such conditions as the Secretary may determine.";
(2) in subsection (b)—
(A) by striking out "banking and checking" and "banking
or checking" each place such terms appear and inserting in
lieu thereof "depository";
(B) by striking out "bank" (except "Federal Reserve
bank") each place such term appears and inserting in lieu
thereof "depository institution";
(3) in subsection (c)—
(A) by striking out "closing" or "closed" each place sUch
terms appear and inserting in lieu thereof "default" or "in
default";
(B) by striking out "an" before "closed insured bank"
each place such terms appear and inserting in lieu thereof
"a";
(C) by striking out "in default insured depository institution" each place such term appears and inserting in lieu
thereof "insured depository institution in default";
(D) in paragraph (2XA)—
(i) by striking out "such insured institution" and "an
insured depository institution" and inserting in lieu
thereof "such other insured depository institution" and
"another insured depository institution", respectively;
(ii) by inserting "any or all of the" after "the sale of;
and
(iii) by striking out "and the assumption" and inserting in lieu thereof "or the assumption of any or all";
(E) by adding at the end of paragraph (2) the following:
"(C) Any action to which the Corporation is or becomes a
party by acquiring any asset or exercising any other authority
set forth in this section shall be stayed for a period of 60 days at
the request of the Corporation.";
(F) in paragraph (3), by striking out "section 13(0 of this
Act" and inserting in lieu thereof "subsection (0 or (k) of
this section";
(G) in paragraph (4)—
(i) by striking out "banking" and inserting in lieu
thereof "depository"; and
(ii) by inserting at the end of subparagraph (A) the
following: "In calculating the cost of assistance, the
Corporation shall include (i) the immediate and longterm obligations of the C]!orporation with respect to
such assistance, including contingent liabilities, and (ii)
the Federal tax revenues foregone by the Government,
to the extent reasonably ascertainable."; and
(H) by striking out paragraph (8);
(I) by redesignating paragraphs (6) and (7) as paragraphs
(7) and (8), respectively; and
(J) by inserting after paragraph (5) the following:
"(6) The transfer of any assets or liabilities associated with any
trust business of an insured depository institution in default under
subparagraph (2XA) shall be effective without any State or Federal
approval, assignment, or consent with respect thereto."; and
(K) by adding at the end the following:
"(9) Payments made under this subsection shall be made—

103 STAT. 256

PUBLIC LAW 101-73—AUG. 9, 1989
"(A) from the Bank Insurance Fund in the case of payments
to or on behalf of a member of such Fund; or
"(B) from the Savings Association Insurance Fund or from
funds made available by the Resolution Trust Corporation in
the case of payments to or on behalf of any Savings Association
Insurance Fund member.";
(4) by striking out subsections (d) and (e) and inserting the
following:
"(d) SALE OF ASSETS TO CORPORATION.—

Loans.

"(1) IN GENERAL.-Any conservator, receiver, or liquidator appointed for any insured depository institution in default, including the Corporation acting in such capacity, shall be entitled to
offer the assets of such depository institutions for sale to the
Corporation or as security for loans from the Corporation.
"(2) PROCEEDS.—The proceeds of every sale or loan of assets to
the Corporation shall be utilized for the same purposes and in
the same manner as other funds realized from the liquidation of
the assets of such depository institutions.
"(3) RIGHTS AND POWERS OF CORPORATION.—

"(A) I N GENERAL.—With respect to any asset acquired or
liability assumed pursuant to this section, the Corporation
shall have all of the rights, powers, privileges, and authori"*
ties of the Corporation afe receiver under sections 11 and
• "
15(b).
"(B) RULE OF CONSTRUCTION.—Such rights, powers, privileges, and authorities shall be in addition to and not in
derogation of any rights, powers, privileges, and authorities
otherwise applicable to the Corporation.
"(C) FIDUCIARY RESPONSIBIUTY.—In exercising any right,
power, privilege, or authority described in subparagraph
(A), the Corporation shall continue to be subject to the
fiduciary duties and obligations of the Corporation as receiver to claimants against the insured depository institution in receivership.
"(4) LOANS.—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 an insured depository institution which
is now or may hereafter be in default.
"(e) AGREEMENTS AGAINST INTERESTS OF CORPORATION.—No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 11,
either as security for a loan or by purchase or as receiver of any
insured depository institution, shall be valid against the Corporation
unless such agreement—
„.
^
"(1) is in writing,
"(2) was executed by the depository institution and any
person claiming an adverse interest thereunder, including the
obligor, contemporaneously with the acquisition of the asset by
the depository institution,
"(3) was approved by the board of directors of the depository
institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and
"(4) has been, continuously, from the time of its execution, an
official record of the depository institution.";
(5) in subsection (f)—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 257

(A) by striking out "closed" and "closing" each place such
terms appear (except in "closed bank") and inserting in lieu
thereof "in default" or "default", respectively;
(B) by striking out "closed bank" and inserting in lieu
thereof "bank in default";
(C) in paragraph (1), by inserting "savings association"
after "out-of-state bank";
(D) in paragraph (2XB)(iii), by striking out "a unanimous
vote" and inserting in lieu thereof "a vote of 75 percent of;
(E) by striking out "the constitution of any State,";
(F) in paragraph (6XA), by inserting "the offeror which
made the initial lowest acceptable offer and" after "the
C!orporation shall permit";
(G) by adding at the end of paragraph (7) the following:
"(C) if in the opinion of the Corporation the acquisition
threatens the safety and soundness of the acquirer or does not
result in the future viability of the resulting depository institution.";
(H) in paragraph (8), by striking out subparagraphs (A),
(B), and (D) and redesignating paragraphs (C), (E), (F), and
(G) as subparagraphs (A), (B), (C), and (D), respectively;
(I) in paragraph (9)—
(i) in the paragraph heading, by striking out
"NONBANK" and inserting in lieu thereof "CERTAIN";
(ii) in paragraph (9XA), by inserting ", other than a
subsidiary that is an insured depository institution,"
after "subsidiary" and by striking out "which is not an
insured bank"; and
(iii) in paragraph (9XB), by inserting "or an affiliate
of an insured depository institution" after "intermediate holding company"; and
(J) by adding at the end thereof the following new paragraph:

,

"(12) ACQUISITION OF MINORITY BANK BY MINORITY BANK HOUDING COMPANY WITHOUT REGARD TO ASSET SIZE.—

"(A) IN GENERAL.—For the purpose of ensuring continued
minority control of a minority-controlled bank, paragraphs
(2) and (3) shall apply with respect to the acquisition of a
minority-controlled bank by an out-of-State minority-controlled depository institution or depository institution holding company without regard to the fact that the total assets
of such minority-controlled bank is less than $500,000,000.
"(B) DEFINITIONS.—For purposes of this paragraph:
"(i) MINORITY BANK.—The term 'minority bank'
means any depository institution described in clause (i),
(ii), or (iii) of section 19(bXlXA) of the Federal Reserve
Act—
"(I) more than 50 percent of the ownership or
control of which is held by one or more minority
individuals; and
"(II) more than 50 percent of the net profit or
loss of which accrues to minority individuals,
"(ii) MINORITY.—The term 'minority' means any
Black American, Native American, Hispanic American, or Asian American.";

,

103 STAT. 258

PUBLIC LAW 101-73—AUG. 9, 1989
"'"
^

•
r
H

(6) in subsection (h), by striking out "a closed insured depository institution", "closing", and "insurance fund" and inserting
in lieu thereof "an insured depository institution in default',
"default", and "Bank Insurance Fund , respectively;
(7) in subsection (i)—
(A) by inserting "depository" before "institution" each
place such term appears;
(B) in paragraph (IXC)—
(i) by striking out "corporation" and inserting in lieu
thereof "Corporation";
(ii) by striking out "chartered bank" and inserting in
lieu thereof "chartered depository institution";
(iii) by inserting ", a savings association," after
J
"State member bank"; and
(iv) by inserting "or the Director of the Office of
.
Thrift Supervision" after "Federal Reserve System";
(C) in paragraph (2), by striking out "or insured or
guaranteed under State law"; and
(D) by striking out paragraphs (10) and (12); and
(8) by adding at the end thereof the following:

"(k) EMERGENCY ACQUISITIONS.—
"(1) I N GENERAL.—
"(A) ACQUISITIONS AUTHORIZED.—
ii^.
"(i) TRANSACTIONS DESCRIBED.—Notwithstanding any

{.
V

^

,

,

provision of State law, upon determining that severe
financial conditions threaten the stability of a significant number of savings associations, or of savings
associations possessing significant financial resources,
the Corporation, in its discretion and if it determines
such authorization would lessen the risk to the Corporation, may authorize—
"(I) a savings association that is eligible for
.
assistance pursuant to subsection (c) to merge or
consolidate with, or to transfer its assets and liabilities to, any other savings association or any insured bank,
"(II) any other savings association to acquire
control of such savings association, or
"(III) any company to acquire control of such
savings association or to acquire the assets or
assume the liabilities thereof.
The Corporation may not authorize any transaction
under this subsection unless the Corporation determines that the authorization will not present a
substantial risk to the safety or soundness of the savings association to be acquired or any acquiring entity,
(ii) TERMS OF TRANSACTIONS.—Mergers, consolida-

tions, transfers, and acquisitions under this subsection
shall be on such terms as the Corporation shall provide,
"(iii) APPROVAL BY APPROPRIATE AGENCY.—Where
otherwise required by law, transactions under this
subsection must be approved by the appropriate Federal banking agency of every party thereto.
"(iv)

ACQUISITIONS BY SAVINGS ASSOCIATIONS.—Any

Federal savings association that acquires another savings association pursuant to clause (i) may, with the
concurrence of the Director of the Office of Thrift

^
r, ;

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 259

Supervision, hold that savings sissociation as a subsidiary notwithstanding the percentage limitations of sec- .
tion 5(cX4XB) of the Home Owners' Loan Act.
"(v) DUAL SERVICE.—Dual service by a management

official that would otherwise be prohibited under the
Depository Institution Management Interlocks Act
may, with the approval of the Corporation, continue for
up to 10 years.
"(vi) CONTINUED APPLICABILITY OF CERTAIN STATE

RESTRICTIONS.—Nothing in this subsection overrides or
supersedes State laws restricting or limiting the activities of a savings association on behalf of another entity. •
"(B) CONSULTATION WITH STATE OFFICIAL.—
"(i) CONSULTATION REQUIRED.—Before

making

a

determination to take any action under subparagraph
(A), the Corporation shall consult the State official
having jurisdiction of the acquired institution.
"(ii) PERIOD FOR STATE RESPONSE.—The official shall
be given a reasonable opportunity, and in no event less
than 48 hours, to object to the use of the provisions of
this paragraph. Such notice may be provided by the
Corporation prior to its appointment as receiver, but in
anticipation of an impending appointment.
"(iii) APPROVAL OVER OBJECTION OF STATE OFFICIAL.—
If the official objects during such period, the Corporation may use the authority of this paragraph only by a
vote of 75 percent or more of the voting members of the
Board of Directors. The Corporation shall provide to
the official, as soon as practicable, a written certification of its determination.
"(2) SOUCITATION OF OFFERS.—
"(A) IN GENERAL.—In considering authorizations under
this subsection, the Corporation may solicit such offers or
proposals as are practicable from any prospective purchasers or merger partners it determines, in its sole discretion, are both qualified and capable of acquiring the assets
and liabilities of the savings association.
"(B) MINORITY-CONTROLLED INSTITUTIONS.—In the case of
a minority-controlled depository institution, the Corporation shall seek an offer from other minority-controlled
depository institutions before seeking an offer from other
persons or entities.
"(3) DETERMINATION OF COSTS.—In determining the cost of
offers under this subsection, the Corporation's calculations and
estimations shall be determinative. The Corporation may set
reasonable time limits on offers.
"(4) BRANCHING PROVISIONS.—

"(A) IN GENERAL.—If a merger, consolidation, transfer, or
acquisition under this subsection involves a savings association eligible for assistance and a bank or bank holding
company, a savings association may retain and operate any
existing branch or branches or any other existing facilities.
If the savings association continues to exist as a separate
entity, it may establish and operate new branches to the
same extent £is any savings association that is not affiliated
with a bank holding company and the home office of which
is located in the same State.

^
^

103 STAT. 260

PUBLIC LAW 101-73—AUG. 9,1989

. ^^^;.;.

"(B) RESTRICTIONS.—

••• ' • ^

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^

..

"(i) IN GENERAL.—Notwithstanding subparagraph
(A), i f "(I) a savings association described in such
subparagraph does not have its home office in the
State of the bank holding company bank subsidiary, and
"(II) such association does not qualify as a domestic building and loan association under section
7701(aX19) of the Internal Revenue Code of 1986, or
does not meet the asset composition test imposed
by subparagraph (C) of that section on institutions
seeking so to qualify,
gmjjj savings association shall be subject to the conditions upon which a bank may retain, operate, and
establish branches in the State in which the Savings
Association Insurance Fund member is located.
"(ii) TRANSITION PERIOD.—The Corporation, for good
cause shown, may allow a savings association up to 2
years to comply with the requirements of clause (i).

"(5) ASSISTANCE BEFORE APPOINTMENT OF CONSERVATOR OR RECEIVER.—
"(A) ASSISTANCE PROPOSALS.—The Corporation shall con-

sider proposals by Savings Association Insurance Fund
members for assistance pursuant to subsection (c) before
grounds exist for appointment of a conservator or receiver
for such member under the following circumstances:
"(i) TROUBLED CONDITION CRITERIA.—The Corporation
'
determines—
"(I) that grounds for appointment of a conservator or receiver exist or likely will exist in the
future unless the member's tangible capital is in•'
creased;
"(II) that it is unlikely that the member can
achieve positive tangible capital without assistance; and
"(III) that providing assistance pursuant to the
member's proposal would be likely to lessen the
risk to the Corporation.
^
"(ii) OTHER CRITERIA.—The member meets the following criteria:
"(I) Before enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of
"
1989, the member was solvent under applicable
regulatory accounting principles but had negative
tangible capital.
"(II) The member's negative tangible capital
' ^ ''
position is substantially attributable to its participation in acquisition and merger transactions that
were instituted by the Federal Home Loan Bank
Board or the Federal Savings and Loan Insurance
Corporation for supervisory reasons.
"(Ill) The member is a qualified thrift lender (as
defined in section 10(m) of the Home Owners' Loan
Act) or would be a qualified thrift lender if
commercial real estate owned and nonperforming
commercial loans acquired in acquisition and

PUBLIC LAW 101-73—AUG. 9, 1989
merger transactions that were instituted by the
Federal Home Loan Bank Board or the Federal
Savings and Loan Insurance Corporation for supervisory reasons were excluded from the member's
total assets.
"(IV) The appropriate Federal banking agency
has determined that the member's management is
competent and has complied with applicable laws,
rules, and supervisory directives and orders.
"(V) The member's management did not engage
in insider dealing or speculative practices or other
activities that jeopardized the member's safety and
soundness or contributed to its impaired capital
position.
"(VI) The member's offices are located in an
economically depressed region.
"(B)

CORPORATION CONSIDERATION OF ASSISTANCE PRO-

POSAL.—If a member meets the requirements of clauses (i)
and (ii) of subparagraph (A), the Corporation shall consider
providing direct financial assistance.
"(C) ECONOMICALLY DEPRESSED REGION DEFINED.—For purposes of this paragraph, the term 'economically depressed
region' means any geographical region which the Corporation determines by regulation to be a region within which
real estate values have suffered serious decline due to
severe economic conditions, such as a decline in energy or
agricultural values or prices.".
SEC. 218. FDIC BORROWING AUTHORITY.

Section 14 of the Federal Deposit Insurance Act (12 U.S.C. 1824) is
amended—
(1) by striking out "$3,000,000,000 outstanding at any one
time" and inserting in lieu thereof "$5,000,000,000 outstanding
at any one time, subject to the approval of the Secretary of the
Treasury"; and
(2) by adding at the end the following: "The Corporation may
employ such funds for purposes of the Bank Insurance Fund or
the Savings Association Insurance Fund and the borrowing
shall become a liability of each such fund to the extent funds
are employed therefor. There are hereby appropriated to the
Secretary, for fiscal year 1989 and each fiscal year thereafter,
such sums as may be necessary to carry out this section."; and
(3) by striking out "the current average rate on outstanding
marketable and nonmarketable obligations of the United States
as of the last day of the month preceding the making of such
loan" and inserting in lieu thereof the following: "an amount
determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable
obligations of the United States of comparable maturities".
SEC. 219. EXEMPTION FROM TAXATION; LIMITATION ON BORROWING.

Section 15 of the Federal Deposit Insurance Act (12 U.S.C. 1825) is
amended—
(1) by inserting "(a) GENERAL RULE.—" before "AH"; and
(2) by adding at the end the following new subsections:
"(b) OTHER EXEMPTIONS.—When acting as a receiver, the following
provisions shall apply with respect to the Corporation:

103 STAT. 261

'

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103 STAT. 262

PUBLIC LAW 101-73—AUG. 9, 1989
f

Taxes.

"(1) The Corporation including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all
. taxation imposed by any State, county, municipality, or local
' taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or
local taxation to the same extent according to its value as other
real property is taxed, except that, notwithstanding the failure
" of any person to challenge an assessment under State law of
such property's value, such value, and the tax thereon, shall be
^.: determined as of the period for which such tax is imposed.
"(2) No property of the Corporation shall be subject to levy,
attachment, garnishment, foreclosure, or sale without the consent of the Corporation, nor shall any involuntary lien attach to
the property of the Corporation.
"(3) The Corporation shall not be liable for any amounts in
the nature of penalties or fines, including those arising from the
failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees
when due.
This subsection shall not apply with respect to any tax imposed (or
other amount arising) under the Internal Revenue Code of 1986.
'•(c) LIMITATION ON BORROWING.—
"(1) COST ESTIMATE FOR OUTSTANDING OBUGATIONS UABIL-

ITIES.—As soon as practicable after the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act
of 1989, the Corporation shall estimate the aggregate cost to the
Corporation for all outstanding obligations and guarantees of
the Corporation which were issued, and all outstanding liabilities which were incurred, by the Corporation before such date.
"(2) ESTIMATE OF NOTES AND OTHER OBUGATIONS REQUIRED.—

Before issuing an obligation or making a guarantee, the Corporation shall estimate the cost of such obligations or guarantees.
"(3) INCLUSION OF ESTIMATES IN FINANCIAL STATEMENTS.—The

Corporation shall—
f.
"(A) reflect in its financial statements the estimates
made by the Corporation under paragraphs (1) and (2) of the
/ rr
aggregate amount of the costs to the Corporation for
outstanding obligations and other liabilities, and
^ '
"(B) make such adjustments as are appropriate in the
>?
estimate of such aggregate amount not less frequently than
• ;_
quarterly.
"(4) ESTIMATE OF OTHER ASSETS REQUIRED.—The Corporation
shall—
"(A) estimate the market value of assets held by it £is a
result of case resolution activities, with a reduction for
expenses expected to be incurred by the Corporation in
connection with the management and sale of such assets;
"(B) reflect the amounts so estimated in its financial
statements; and
"(C) make such adjustments as are appropriate of such
•5 i
market value not less than quarterly.
"(5) MINIMUM NET WORTH REQUIRED.—The Corporation may
not issue any note or similar obligation, and may not incur any
liability under a guarantee or similar obligation, with respect to
either the Bank Insurance Fund or the Savings Association
Insurance Fund if, after reduction for the estimated cost of the

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 263

obligation or guarantee, the net worth of the affected insurance
fund would be less than 10 percent of assets,
"(6) EXCEPTION.—With the prior approval of the Secretary of
the Treasury, the Corporation may issue or incur up to
$5,000,000,000 in the aggregate of additional liabilities in excess
of the limitations of paragraph (5). The amount which the
Corporation may borrow from the Treasury under section 14 of
this Act shall be reduced by the amount of additional liabilities
issued or incurred under this paragraph.
"(7) N E T WORTH AND ASSET VALUATION.—For the purpose of

paragraph (5)—
"(A) the assets of the Bank Insurance Fund or the Savings Association Insurance Fund shall be calculated based
on the most recent audit of such Fund by the Comptroller
General of the United States, subject to any adjustments
described in paragraph (3) or (4) and taking into account
any subsequent transactions; and
"(B) the net worth of the Bank Insurance Fund or the
Savings Association Insurance Fund shall be calculated
based on the most recent audit of such Fund by the
Comptroller General of the United States, subject to any
adjustments described in paragraphs (3) and (4) and taking
into account any subsequent transactions.
"(d) FULL FAITH AND CREDIT.—The full faith and credit of the
United States is pledged to the payment of any obligation issued
after the date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 by the Corporation, with
respect to both principal and interest, if—
"(1) the principal amount of such obligation is steted in the
obligation; and
"(2) the term to maturity or the date of maturity of such
obligation is steted in the obligation.".
SEC. 220. REPORTS.

(a) IN GENERAL.—Section 17 of the Federal Deposit Insurance Act
(12 US.C. 1827) is amended—
(1) by striking out subsection (a) and inserting the following:
"(a) ANNUAL REPORTS ON B I F , S A I F , AND THE F S L I C RESOLUTION
FUND.—

"(1) I N GENERAL.—The Corporation shall annually submit a
full report of its operations, activities, budget, receipts, and
expenditures for the preceding 12-month period. The report
shall include, with respect to the Bank Insurance Fund, the
Savings Association Insurance Fund, and the FSLIC Resolution
Fund, an analysis by the Corporation of—
"(A) the current financial condition of each such fund;
"(B) the purpose, effect, and estimated cost of each resolution action token for an insured depository institution
during the preceding year;
"(C) the extent to which the actual costs of assistence
provided to, or for the benefit of, an insured depository
institution during the preceding year exceeded the estimated costs of such assistence reported in a previous year
under paragraph (A);
"(D) the exposure of each insurance fund to changes in
those economic factors most likely to affect the condition of
that fund;

_.

v
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103 STAT. 264

PUBLIC LAW 101-73—AUG. 9, 1989
•}ppf^'f' "(E) a current estimate of the resources needed for the
Bank Insurance Fund, the Savings Association Insurance
Fund, or the FSLIC Resolution Fund to achieve the purposes of this Act; and
"(F) any findings, conclusions, and recommendations for
legislative and administrative actions considered appropriate to future resolution activities by the Corporation.
"(2) MANNER OF SUBMISSION.—Such report shall be submitted
to the President of the Senate and the Speaker of the House of
Representatives, who shall cause the same to be printed for the
information of Congress, and the President as soon as practicable after the first day of January each year.";
(2) by redesignating subsections (b), (c), and (d) as (e), (0, and
(g), respectively; and
(3) by inserting after subsection (a) the following new subsections:
"(b) QUARTERLY REPORTS TO TREASURY.—
"(1) FINANCIAL OPERATING PLANS AND FORECASTS.—Before the

f-

beginning of each fiscal quarter, the Corporation shall provide
to the Secretary of the Treasury a copy of the Corporation's
financial operating plans and forecasts.
"(2) FINANCIAL CONDITION AND REPORTS OF OPERATIONS.—AS

soon £is practicable after the end of each fiscal quarter, the
Corporation shall submit to the Secretary of the Treasury a
copy of the report of the Corporation's financial condition as of
the end of such fiscal quarter and the results of the (Corporation's operations during such fiscal quarter.
"(3) ITEMS TO BE INCLUDED.—The plans, forecasts, and reports
required under this subsection shall reflect the estimates required to be made under section 15(b) of the liabilities and
obligations of the Corporation described in such section.
"(4) RULE OF CONSTRUCTION.—The requirement to provide

;

plans, forecasts, and reports to the Secretary of the Treasury
under this subsection may not be construed as implying any
obligation on the part of the C!orporation to obtain the consent
or approval of such Secretary with respect to such plans, forecasts, and reports.
"(c) REPORTS TO O M B . —
"(1) FINANCIAL INFORMATION.—The

.

(Dorporation shall continue to provide to the Director of the Office of Management
and Budget financial information consistent with that contained in the reports that were being provided to the Director
immediately prior to the effective date of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
"(2) FINANCIAL OPERATING PLANS AND FORECASTS.—The (Corporation shall also provide to the Director copies of the (Corporation's financial operating plans and forecasts as prepared by the
(Corporation in the ordinary course of its operations, and copies
of the quarterly reports of the (Corporation s financial condition
and results of operations as prepared by the Corporation in the
ordinary course of its operations.
"(3) RULE OF CONSTRUCTION.—This subsection may not be

construed as implying any obligation on the part of the (Corporation to consult with or obtain the consent or approval of the
Director with respect to any reports, plans, forecasts, or other
information referred to in paragraph (1) or (2) or any jurisdic-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 265

tion or oversight over the affairs or operations of the Corporation.
"(d) AUDIT.—

"(1) AUDIT REQUIRED.—The Comptroller General shall audit
annually the financial transactions of the Corporation, the
Bank Insurance Fund, the Savings Association Insurance Fund,
and the FSLIC Resolution Fund in accordance with generally
accepted government auditing standards.
"(2) ACCESS TO BOOKS AND RECORDS.—All books, records, ac-

counts, reports, files, and property belonging to or used by the
Corporation, the Bank Insurance Fund, the Savings Association
Insurance Fund, and the FSLIC Resolution Fund, or by an
independent certified public accountant retained to audit the
Fund's financial statements, shall be made available to the
Comptroller (Jeneral.".
(b) SPECIFIC REPORTS.—
(1) RISK-BASED ASSESSMENTS.—
(A) REPORT REQUIRED.—The

12 u s e 1827

Federal Deposit Insurance note.
Corporation shall study the establishment of premium
assessment categories related to tjrpes of risk to the insurance funds and shall report its recommendations to the
Congress not later than January 1, 1991. If the Corporation
should recommend the establishment of such a risk-based
assessment plan, it shall also provide a timetable and plan
for implementation.
(B) CONGRESSIONAL RESPONSE.—Not later than 180 days
after receipt by the Congress of the report required under
subparagraph (A) and the accompanying plan and timetable, the Congress shall make a recommendation to the
Chairperson of the Board of Directors regarding the disposi"
tion of such plan and timetable.
(2) STUDY OF DEPOSIT INSURANCE PASS-THROUGH.—Not later
than 6 months after the date of enactment of this Act, the
Federal Deposit Insurance Corporation shall transmit to the
Congress a report containing its findings and recommendations
relating to the pass-through of deposit insurance either to
individual investors in unit investment trust funds or to individual participants in pension or to profit sharing plans qualified
under section 401 of the Internal Revenue Code of 1986. Such
report shall also contain the Corporation's assessment of the
potential effects of broadening deposit insurance coverage on
the safety of the insurance funds and the operation of capital
markets.
(3) REPORT ON DIRECTORS' AND OFFICERS' UABILTTY INSURANCE.—

(A) STUDY.—The Federal Deposit Insurance Corporation
shall, together with the Secretary of the Treasury and the
Attorney General, conduct a comprehensive study of directors' and officers' liability insurance and depository institution bonds, and the availability of such insurance for
directors and officers of insured depository institutions. The
study shall include—
(i) consideration of State laws limiting liability for
directors and officers;
(ii) the effect of contractual provisions limiting insur^ ., , J 4 ance coverage when an institution is placed in receivership or conservatorship;

103 STAT. 266

PUBLIC LAW 101-73—AUG. 9, 1989
*

*

(iii) provisions limiting coverage when a claim is
made by the Federal Deposit Insurance Corporation;
and
(iv) provisions limiting claims made by one insured
against another insured.
In addition, the study shall consider the need for such
insurance or bonds and the effect any change in any of the
V above noted conditions or terms may have on the future
availability of such insurance, and the ability of depository
institutions to attract qualified officers and directors.
(B) REPORT.—Not later than 6 months after the date of
enactment of the Financial Institutions Reform, Recovery,
- and Enforcement Act of 1989, the Federal Deposit Insurance Corporation, together with the Secretary of the Treasury and the Attorney General, shall report the findings
from the study under subparagraph (A) to the Congress,
., J,
together with legislative recommendations, if appropriate.
SEC. 221. REGULATIONS GOVERNING INSURED DEPOSITORY INSTITUTIONS.

Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is
amended—
(1) by striking out "(a)" and the 1st 2 sentences of subsection
(a) and inserting the following:
^^

^

-^

"(a) INSURANCE LOGO.—
"(1) INSURED SAVINGS ASSOCIATIONS.—Each insured savings

association shall display at each place of business maintained by
such association a sign containing only the following items:
"(A) A statement that insured deposits are backed by the
full faith and credit of the United States Government.
"(B) A statement that deposits are federally insured to
$100,000.
"(C) The symbol of an eagle.
The sign shall not contain any reference to a Government
agency and shall accord each item substantially equal prominence.
"(2) INSURED BANKS.—Not later than 30 days after the date of
enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, each insured bank shall display at
each place of business maintained by such bank one of the
following:
"(A) The sign required to be displayed by insured banks
under regulations prescribed by the Corporation in effect
on January 1,1989.
"(B) The sign prescribed under paragraph (1).
"(3) REGULATIONS.—The (Corporation shall prescribe regulations to carry out the purposes of this subsection, including
regulations governing the manner of display or use of such
signs, except that the size of the sign prescribed under paragraph (1) shall be similar to that prescribed under paragraph
(2XA). Initial regulations under this subsection shall be prescribed on the date of enactment of the Financial Institutions
Recovery, Reform, and Enforcement Act of 1989.";
(2) in subsection (c)—
(A) in paragraph (2), by striking out subparagraph (C) and
inserting the following:

PUBLIC LAW 101-73—AUG. 9, 1989

^
*

103 STAT. 267

"(C) the Corporation if the acquiring, assuming, or resulting
bank is to be a State nonmember insured bank (except a District
bank or a savings bank supervised by the Director of the Office
of Thrift Supervision); and
"(D) the Director of the Office of Thrift Supervision if the
acquiring, assuming, or resulting institution is to be a savings
association.";
(B) by striking out paragraph (12);
(C) in paragraphs (3), (4), (6), (7), and (9), by inserting after
the word "bank" or "banks" each time it appears, the
words "or savings association" or "or savings associations",
respectively; and
(D) in paragraph (3), by striking out "failure" and inserting in lieu thereof "default";
(3) in subsection (iX2)—
(A) by striking out "insured bank" and inserting in lieu
thereof "insured Federal depository institution";
(B) by striking out "insured State bank" and inserting in
lieu thereof "insured State depository institution";
(C) by striking out the period at the end of subpargraph
(C) and inserting in lieu thereof "; and";
(D) by inserting after subparagraph (C) the following new
subparagraph:
"(D) the Director of the Office of Thrift Supervision if the
resulting institution is to be an insured State savings
association.";
(E) in paragraph (4XD), by inserting "and fitness" after
"character"; and
(F) by striking out paragraph (5); and
(4) by adding at the end the following:

"(m) ACTIVITIES OF SAVINGS ASSOCIATIONS AND THEIR SUBSIDIARIES.—

i

4

"(1) PROCEDURES.—When an insured savings association
establishes or acquires a subsidiary or when an insured savings
association elects to conduct any new activity through a subsidiary that the insured savings association controls, the insured
savings association—
"(A) shall notify the Corporation and the Director of the
Office of Thrift Supervision not less than 30 days prior to
the establishment, or acquisition, of any such subsidiary,
and not less than 30 days prior to the commencement of
any such activity, and in either case shall provide at that
time such information as each such agency may, by regulation, require; and
"(B) shall conduct the activities of the subsidiary in
accordance with regulations and orders of the Director of
the Office of Thrift Supervision.
"(2) ENFORCEMENT POWERS.—With respect to any subsidiary of
an insured savings association:
"(A) the Corporation and the Director of the Office of
Thrift Supervision shall each have, with respect to such
subsidiary, the respective powers that each has with respect
to the insured savings association pursuant to this section
or section 8; and
"(B) the Director of the Office of Thrift Supervision may
determine, after notice and opportunity for hearing, that
the continuation by the insured savings association of its

_

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103 STAT. 268

PUBLIC LAW 101-73—AUG. 9, 1989

*' = '
. "

'

'

ownership or control of, or its relationship to, the" subsidiary—
"(i) constitutes a serious risk to the safety, soundness,
or stability of the insured savings association, or
"(ii) is inconsistent with sound banking principles or
with the purposes of this Act.
Upon making any such determination, the Corporation or
the Director of the Office of Thrift Supervision shall have
authority to order the insured savings association to divest
itself of control of the subsidiary. The Director of the Office
of Thrift Supervision may take any other corrective measures with respect to the subsidiary, including the authority
to require the subsidiary to terminate the activities or
operations posing such risks, as the Director may deem
appropriate.
"(3) ACTIVITIES INCOMPATIBLE WITH DEPOSIT INSURANCE.—

J ,

*

c

"(A) I N GENERAL.—The Corporation may determine by
regulation or order that any specific activity poses a serious
threat to the Savings Association Insurance Fund. Prior to
adopting any such regulation, the Corporation shall consult
with the Director of the Office of Thrift Supervision and
shall provide appropriate State supervisors the opportunity
o comment thereon, and the Corporation shall specifically
ake such comments into consideration. Any such regulaion shall be issued in accordance with section 553 of title 5,
Jnited States Code. If the Board of Directors makes such a
ietermination with respect to an activity, the Corporation
shall have authority to order that no Savings Association
Insurance Fund member may engage in the activity directly.
"(B) AUTHORITY OF DIRECTOR.—This section does not limit
the authority of the Office of Thrift Supervision to issue
regulations to promote safety and soundness or to enforce
compliance with other applicable laws.
"(C) ADDITIONAL AUTHORITY OF FDIC TO PREVENT SERIOUS

RISKS TO INSURANCE FUND.—Notwithstanding subparagraph
(A), the Corporation may prescribe and enforce such regulations and issue such orders as the Corporation determines
to be necessary to prevent actions or practices of savings
associations that pose a serious threat to the Savings
Association Insurance Fund or the Bank Insurance Fund.
"(4) 'SUBSIDIARY' DEFINED.—As used in this subsection, t h e
term 'subsidiary' does not include an insured depository institution.

^

'

"(5) APPUCABILITY TO CERTAIN SAVINGS BANKS.—Subpara-

graphs (A) and (B) of paragraph (1) of this subsection do not
apply to—
"(A) any Federal savings bank that w£is chartered prior
to October 15, 1982, as a savings bank under State law, or
"(B) a savings association that acquired its principal
assets from an institution that was chartered prior to October 15,1982, as a savings bank under State law.
"(n) CALCULATION OF CAPITAL.—No appropriate Federal banking

^

.

agency shall allow any insured depository institution to include an
unidentifiable intangible asset in its calculation of compliance with
the appropriate capital standard, if such unidentifiable intangible

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 269

asset was acquired after April 12, 1989, except to the extent permitted under section 5(t) of the Home Owners'Loan Act."
SEC. 222. ACTIVITIES OF SAVINGS ASSOCIATIONS.

The Federal Deposit Insurance Act is amended by adding at the
end the following new section:
"SEC. 28. ACTIVITIES OF SAVINGS ASSOCIATIONS.

"(a) I N GENERAL.—On and after January 1, 1990, a savings
association chartered under State law may not engage as principal
in any type of activity, or in any activity in an amount, that is not
permissible for a Federal savings association unless—
"(1) the Corporation has determined that the activity would
pose no significant risk to the affected deposit insurance fund;
and
"(2) the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed
under section 5(t) of the Home Owners'Loan Act.
"0>) DIFFERENCES OF MAGNITUDE BETWEEN STATE AND FEDERAL

POWERS.—Notwithstanding subsection (aXD, if an activity (other
than an activity described in section 5(cX2XB) of the Home Owners'
Loan Act) is permissible for a Federal savings association, a savings
association chartered under State law may engage as principal in
that activity in an amount greater than the amount permissible for
a Federal savings association if—
"(1) the Corporation has not determined that engaging in that
amount of the activity poses any significant risk to the affected
deposit insurance fund; and
(2) the savings association chartered under State law is and
continues to be in compliance with the fully phased-in capital
standards prescribed under section 5(t) of the Home Owners'
Loan Act.
"(c) EQUITY INVESTMENTS BY STATE SAVINGS ASSOCIATIONS.—

"(1) I N GENERAL.—Notwithstending subsections (a) and (b), a
savings association chartered under State law may not directly
acquire or retain any equity investment of a tjrpe or in an
amount that is not permissible for a Federal savings association.
"(2)

EXCEPTION FOR SERVICE CORPORATIONS.—Paragraph (1)

does not prohibit a savings association from acquiring or retaining shares of one or more service corporations if—
"(A) the Corporation has determined that no significant
risk to the affected deposit insurance fund is posed by—
"(i) the amount that the association proposes to
acquire or retain, or
"(ii) the activities in which the service corporation
engages; and
"(B) the savings association is and continues to be in
compliance with the fully phased-in capital standards prescribed under section 5(t) of the Home Owners' Loan Act.
"(3) TRANSITION RULE.—

"(A) I N GENERAL.—The Corporation shall require any
savings association to divest any equity investment the
retention of which is not permissible under paragraph (1) or
(2) as quickly as can be prudently done, and in any event
not later than July 1,1994.

12 USC 1831e.

/

^

103 STAT. 270

PUBLIC LAW 101-73—AUG. 9, 1989
.,

••••I

J ,
*^

"(B)

TREATMENT OF NONCOMPLIANCE DURING DIVEST-

MENT.—With respect to any equity investment held by any
savings association on May 1, 1989, the savings association
shall be deemed not to be in violation of the prohibition in
paragraph (1) or (2) on retaining such investment so long as
the savings association complies with any applicable
requirement established by the Corporation pursuant to
subparagraph (A) for divesting such investments.

"(d) CORPORATE DEBT SECURITIES NOT OF INVESTMENT GRADE.—

"(1) IN GENERAL.—No savings association may, directly or
through a subsidiary, acquire or retain any corporate debt
security not of investment grade.
"(2) EXCEPTION FOR SECURITIES HELD BY QUAUFiED AFFIUATE.—

Paragraph (1) shall not apply with respect to any corporate debt
security not of investment grade which is acquired and retained
by any qualified affiliate of a savings association.
"(3) TRANSITION RULE.—

: ;, ,

"(A) I N GENERAL.—The Corporation shall require any
savings association or any subsidiary of any savings association to divest any corporate debt security not of investment
grade the retention of which is not permissible under paragraph (1) as quickly as can be prudently done, and in any
event not later than July 1,1994.
"(B)

'

?

3

TREATMENT OF NONCOMPUANCE

DURING DIVEST-

MENT.—With respect to any corporate debt security not of
investment grade held by any savings association or
subsidiary on the date of enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989, the savings association or subsidiary shall be deemed
not to be in violation of the prohibition in paragraph (1) on
> retaining such investment so long as the association or
subsidiary complies with any applicable requirement established by the Corporation pursuant to subparagraph (A) for
divesting such securities.
"(4) DEFINITIONS.—For purposes of this section—
"(A) INVESTMENT GRADE.—Any corporate debt security is
not of 'investment grade' unless that security, when acquired by the savings association or subsidiary, was rated in
one of the 4 highest rating categories by at least one
nationally recognized statistical rating organization.
"(B) QUAUFIED AFFIUATE.—The term 'qualified affiliate'
means—
jfj^^..
"(i) in the case of a stock savings association, an
affiliate other than a subsidiary or an insured depositorv institution; and
' (ii) in the case of a' mutual savings association, a
,.
subsidiary other than an insured depository institution,
so long as all of the savings association's investments in
and extensions of credit to the subsidiary are deducted
. -'t
from the savings association's capital.
"(C) CERTAIN SECURITIES NOT INCLUDED.—The term 'corporate debt security not of investment grade' does not
include any obligation issued or guaranteed by a corporation that may be held by a Federal savings association
without limitation as to percentage of assets under subparagraphs (D), (E), or (F) of section 5(cXl) of the Home Owners'
Loan Act.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 271

"(e) TRANSFER OF CORPORATE DEBT SECURITY NOT OF INVESTMENT
GRADE IN EXCHANGE FOR A QUAUFIED NOTE.—

"(1) ACQUISITION OF NOTE.—Notwithstanding subsections (a),

(b), and (c) of section 5 of the Home Owners' Loan Act and any
other provision of Federal or State law governing extensions of
credit by savings associations, any insured savings association,
and any subsidiary of any insured savings association, that, on
the date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, holds any corporate
debt security not of investment grade may acquire a qualified
note in exchange for the trsuisfer of such security to—
"(A) any holding company which controls 80 percent or
more of the shares of such insured savings association; or
"(B) any company other than an insured savings association, or any subsidiary of any insured savings association,
80 percent or more of the shares of which are controlled by
such holding company,
if the conditions of paragraph (2) are met.
"(2) CONDITIONS FOR EXCHANGE OF SECURITY FOR QUAUFIED

NOTE.—The conditions of this paragraph are met if—
"(A) the insured savings association was in compliance
with applicable capital requirements on December 31,1988,
and the insured savings association after such date—
"(i) remains in compliance with applicable capital
requirements; or
"(ii) adopts and complies with a capital plan acceptable to the Director of the Office of Thrift Supervision;
"(Bj the company to which the corporate debt security
not of investment grade is transferred is not a bank holding
company, an insured savings association, or a direct or
indirect subsidiary of such holding company or insured
savings association;
"(C) before the end of the 90-day period beginning on the
date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, the insured savings
association notifies the Director of the Office of Thrift
Supervision of such association's intention to transfer the
corporate debt security not of investment grade to the
savings and loan holding company or the subsidiary of such
holding company;
"(D) the transfer of the corporate debt security not of
investment grade is completed—
"(i) before the end of the 1-year period b a n n i n g on
the date of the enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, in the
case of an insured savings association that, as of such
date, is controlled by a savings and loan holding company; or
"(ii) before the end of the 2-year period beginning on
such date, in the case of a savings association that is
not, as of such date, a subsidiary of a savings and loan
holding company;
"(E) the insured sa\'ings association receives in exchange
for the corporate debt security not of investment grade the
fair market value of such security;
"(F) the Director of the Office of Thrift Supervision has—
"(i) approved the transaction; and

^

103 STAT. 272

PUBLIC LAW 101-73—AUG. 9,1989

v^,.
*
,
.

'

_.

..,

"(ii) determined that the transfer represents a complete and effective divestiture of the corporate debt
security not of investment grade and is in compliance
with the provisions of this subsection; and
"(G) any gain on the sale of the corporate debt security
not of investment grade is recognized, and included for
applicable regulatory capital requirements, by the insured
savings association only at such time and to the extent that
the insured savings association receives payment of principal on the note in cash in excess of the fair market value
of the transferred corporate debt security not of investment
^
grade as carried on the accounts of the insured savings
association immediately prior to the transfer.
"(3) QuAUFiED NOTE DEFINED,—The term 'qualified note'
means any note t h a t ^
"(A) is at all times fully secured by the corporate debt
security not of investment grade transferred in exchange
for the note, or by other collateral of at least equivalent
value that is acceptable to the Director of the Office of
Thrift Supervision;
"(B) contains provisions acceptable to the Director of the
Office of Thrift Supervision that would—
"(i) prevent any action to encumber or impair the
value of the collateral referred to in subparagraph (A);
" •
,
'•

^^^^^
'^ ['

"(ii) allow the sale of the corporate debt security not
of investment grade if the proceeds of the sale are
reinvested in assets of equivalent value;
"(C) is on market terms, including interest rate, which
must in all cases be above the insured savings association's
borrowing rate for similar term funds;
'>~'
"(D) is fully repayable over a period of time not to exceed
5 years from the date of transfer;
' '
"(E) is repaid with annual principal pajonents at least as
large as would be necessary to repay the note within 5
years if it were on a level payment amortization schedule
and the interest rate for the first year of repayment were
fixed throughout the amortization period;
"(F) is fully guaranteed by each holding company of the
insured savings association that acquires such note; and
., ,
"(G) is repaid in full in cash in accordance with its terms
'''
and this subsection.
"(4) FAILURE TO REPAY ON SCHEDULE.—The exemption provided by this subsection from subsections (a), (b), and (c) of
section 11 of the Home Owners' Loan Act any other applicable
provision of Federal or State law shall terminate immediately if
the insured savings association or any affiliate of such association fails to comply with the terms of the qualified note or this
subsection.
"(f) DETERMINATIONS.—The Corporation shall make determinations under this section by regulation or order.
"(g) ACTIVITY DEFINED.—For purposes of subsections (a) and (b)—
"(1) IN GENERAL.—The term 'activity' includes acquiring or
retaining any investment.
"(2) DIVESTITURE OF CERTAIN ASSETS.— Notwithstanding paragraph (1), subsections (a) and (b) shall not be construed to
require a savings association to divest itself of any assets ac-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 273

quired before the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
"(h) DISCLOSURES BY UNINSURED SAVINGS ASSOCIATIONS.—

"(1) I N GENERAL.—Any savings association the deposits of
which are not insured by the Corporation under this Act shall
disclose clearly and conspicuously in periodic statements of
account and in all advertising that the savings association's
deposits are 'not federally insured'.
"(2) MANNER AND CONTENT.—The Corporation may, by regulation or order, prescribe the manner and content of the disclosure.
"(3) ENFORCEMENT.—Compliance with the requirements of
this subsection, and any regulation prescribed or order issued
under this subsection, shall be enforced under section 8 in the
same manner and to the same extent as if the savings association were an insured State nonmember bank,
"(i) OTHER AUTHORITY NOT AFFECTED.—This section may not be
construed as limiting—
"(1) any other authority of the Corporation; or
"(2) any authority of the Director of the Office of Thrift
Supervision or of a State to impose more stringent restrictions.".

-r

SEC. 223. NONDISCRIMINATION.

Section 22 of the Federal Deposit Insurance Act (12 U.S.C. 1830) is
amended to read as follows:
"SEC. 22. NONDISCRIMINATION.

"It is not the purpose of this Act to discriminate in any manner
against State nonmember banks or State savings associations and in
favor of national or member banks or Federal savings associations,
respectively. It is the purpose of this Act to provide all banks and
savings associations with the same opportunity to obtain and enjoy
the benefits of this Act.".
SEC. 224. BROKERED DEPOSITS.

(a) I N GENERAL.—The Federal Deposit Insurance Act is amended
by inserting after section 28 (as added by section 222 of this title) the
following new section:
"SEC. 29. BROKERED DEPOSITS.

12 USC 1831f.

"(a) IN GENERAL.—A troubled institution may not accept funds
obtained, directly or indirectly, by or through any deposit broker for
deposit into 1 or more deposit accounts.
(b)

RENEWALS AND ROLLOVERS TREATED AS ACCEPTANCE OF

FUNDS.—Any renewal of an account in any troubled institution and
any rollover of any amount on deposit in any such account shall be
treated as an acceptance of funds by such troubled institution for
purposes of subsection (a).
"(c) WAIVER AUTHORITY.—The Corporation may, on a case-by-case
basis and upon application by an insured depository institution,
waive the applicability of subsection (a) upon a finding that the
acceptance of such deposits does not constitute an unsafe or unsound
practice with respect to such institution,
"(d) LIMITED EXCEPTION FOR CERTAIN CONSERVATORSHIPS.—In the

case of any insured depository institution for which the Ck)rporation
has been appointed as conservator, subsection (a) shall not apply to

^

103 STAT. 274

PUBLIC LAW 101-73—AUG. 9, 1989

the acceptance of deposits (described in such subsection) by such
institution if the Corporation determines that the acceptance of
such deposits—
"(1) is not an unsafe or unsound practice; and
"(2) either—
"(A) is necessary to enable the institution to meet the
demands of its depositors or pay its obligations in the
ordinary course of business; or
"(B) is consistent with the conservator's fiduciary duty to
minimize the losses of the institution.
"(e) ADDITIONAL RESTRICTIONS.—The Corporation may impose, by

regulation or order, such additional restrictions on the acceptance of
brokered deposits by any troubled institution £is the Corporation
may determine to be appropriate.
"(f) DEFINITIONS RELATING TO DEPOSIT BROKER.—
"(1) DEPOSIT BROKER.—The term 'deposit

/

^

^

broker' means—
"(A) any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third
parties with insured depository institutions or the business
'.
of placing deposits with insured depository institutions for
the purpose of selling interests in those deposits to third
parties; and
"(B) an £Lgent or trustee who establishes a deposit account
to facilitate a business arrangement with an insured deposiT
tory institution to use the proceeds of the account to fund a
prearranged loan.
"(2) EXCLUSIONS.—The term 'deposit broker' does not
include—
"(A) an insured depository institution, with respect to
funds placed with that depository institution;
"(B) an employee of an insured depository institution,
with respect to funds placed with the employing depository
institution;
"(C) a trust department of an insured depository institution, if the trust in question has not been established for the
/
primary purpose of placing funds with insured depository
>
institutions;
"(D) the trustee of a pension or other employee benefit
plan, with respect to funds of the plan;
"(E) a person acting £is a plan administrator or an investment adviser in connection with a pension plan or other
employee benefit plan provided that that person is performing managerial functions with respect to the plan;
"(F) the trustee of a testamentary account;
'^"- "(G) the trustee of an irrevocable trust (other than one
described in paragraph (IXB)), as long as the trust in question has not been established for the primary purpose of
placing funds with insured depository institutions;
"(H) a trustee or custodian of a pension or profitsharing
plan qualified under section 401(d) or 403(a) of the Internal
Revenue (Dode of 1986; or
"(I) an agent or nominee whose primary purpose is not
the placement of funds with depository institutions.
"(3) INCLUSION OF DEPOSITORY INSTITUTIONS ENGAGING IN CERTAIN ACTIVITIES.—Notwithstanding paragraph (2), the term 'de-

posit broker' includes any insured depository institution, and
any employee of any insured depository institution, which en-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 275

gages, directly or indirectly, in the solicitation of deposits by
offering rates of interest (with respect to such deposits) which
are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository institutions having
the same t3^pe of charter in such depository institution's normsd
market area.
"(4) EMPLOYEE.—For purposes of this subsection, the term
'employee' means any employee—
(A) who is employed exclusively by the insured depositorv institution;
(B) whose compensation is primarily in the form of a
salary;
"(C) who does not share such employee's compensation
with a deposit broker; and
"(D) whose office space or place of business is used exclusively for the benefit of the insured depository institution
which employs such individual.
"(g) TROUBLED INSTITUTION DEFINED.—The term 'troubled institution means any insured depository institution which does not meet
the minimum capital requiremente applicable with respect to such
institution.".
(b) EFFECTIVE DATE.—The Eunendment made by subsection (a) 12 u s e 1831f
shall apply to deposits accepted after the end of the 120-day period note.
beginning on the date of the enactment of this Act.
SEC. 225. CONTRACTS BETWEEN DEPOSITORY INSTITUTIONS AND PERSONS PROVIDING GOODS, PRODUCTS, OR SERVICES.

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 29 (as added by section 224 of this
title) the following new section:
"SEC. 30. CONTRACTS BETWEEN DEPOSITORY INSTITUTIONS AND PERSONS PROVIDING GOODS, PRODUCTS, OR SERVICES.

"(a) I N GENERAL.—An insured depository institution may not
enter into a written or oral contract with any person to provide
goods, products, or services to or for the benefit of such depository
institution if the performance of such contract would adversely
affect the safety or soundness of the institution.
"(b) RULEMAKING.—The Corporation shall prescribe such regulations and issue such orders, including definitions consistent with
this section, as may be necessary to administer and carry out the
purposes of, and prevent evasions of, this section.
"(c) ENFORCEMENT.—Any action taken by any appropriate Federal
banking agency under section 8 to enforce compliance on the part of
any insured depository institution with the requirements of this
section may include a requirement that such institution properly
reflect the transaction on its books and records.
"(d) No PRIVATE RIGHT OF ACTION.—This section may

not

be

construed as creating any private right of action.
"(e) STUDY.—

"(1) I N GENERAL.—The Attorney General and the Comptroller
General of the United States shall jointly conduct a study on
the extent to which—
"(A) insured depository institutions are entering into contracts with vendors under which venders agree to purchase
stock or assets from insured depository institutions or to
invest capital in or make deposits in such institutions; and

12 u s e 1831g.

Regulations.

103 STAT. 276

PUBLIC LAW 101-73—AUG. 9, 1989
?i

^

ij

"(B) if such practices occur, the extent to which such
practices are having an anticompetitive effect and should
be prohibited.
"(2) REPORT TO CONGREI^.—Before the end of the 1-year period

beginning on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the
Attorney General and the Comptroller General shall submit a
report to the Congress on the results of the study conducted
pursuant to paragraph (1).".

12 use 1831h.

H

•

SEC. 226. SAVINGS ASSOCIATION INSURANCE FUND INDUSTRY ADVISORY
COMMITTEE ESTABLISHED.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by inserting after section 30 (as added by section 225 of this
title) the foUospog new section:
"SEC. 31. SAVINGS ASSOCIATION INSURANCE FUND INDUSTRY ADVISORY
COMMITTEE.
"(a) EIsTABUSHMENT.—There is hereby established the Savings
Association Insurance Fund Industry Advisory Committee (hereinafter referred to in this section as the 'Committee').
"(b) MEMBERSHIP.—The Committee shall consist of 18 members,
appointed as follows:
"(1) 1 member elected from each Federal home loan bank
district (by the members of the Board of Directors of each such
bank who were elected by the members of such bank) from
among individuals residing therein who are officers of insured
depository institutions that are Savings Association Insurance
Fund members.
"(2) 6 members appointed by the Corporation from among
individuals who shall represent the public interest.
"(c) VACANCIES.—Any vacancy on the Committee shall be filled in
the same manner in which the original appointment was made.
"(d) PAY AND EXPENSES.—Members of the Committee shall serve
without pay, but each member shall be reimbursed, in such manner
as the Corporation shall prescribe by regulation, for expenses incurred in connection with attendance of such members at meetings
of the Committee.
"(e) TERMS.—Members shall be appointed or elected for terms of 1
year.
"(f) AUTHORITY OF THE COMMITTEE.—The Committee may select its
Chairperson, Vice Chairperson, and Secretary, and adopt methods of
procedure, and shall have power—
"(1) to confer with the Board of Directors on general and
special business conditions and regulatory and other matters
affecting insured financial institutions that are members of the
Savings Association Insurance Fund; and
"(2) to request information, and to make recommendations,
with respect to matters within the jurisdiction of the Corporation.
"(g) MEETINGS.—The Committee shall meet 4 times each year, and
more frequently if requested by the Corporation.
"(h) REPORTS.—The Committee shall submit a semiannual written
report to the Committee on Banking, Finance and Urban Affairs of
the House and to the Committee on Banking, Housing, and Urban
Affairs of the Senate. Such report shall describe the activities of the

PUBLIC LAW 1 0 1 - 7 3 ~ A U G . 9, 1989

103 STAT. 277

Committee for such semiannual period and contain such recommendations as the Committee considers appropriate.
"(i) PROVISION OF STAFF AND OTHER RESOURCES.—The Corporation

shall provide the Committee with the use of such resources, including staff, as the Committee reasonably shall require to carry out its
duties, including the preparation and submission of reports to Congress, under this section.
"(j) FEDERAL ADVISORY COMMITTEE ACT DOES NOT APPLY.—The

Federal Advisory Committee Act shall not apply to the Committee.
"(k) SUNSET.—The Committee shall cease to exist 10 years after
the enactment of this s^tion.".

i^

TITLE III—SAVINGS ASSOCIATIONS
SEC. 301. AMENDMENT TO HOME OWNERS* LOAN ACT OF 1933.

The Home Owners' Loan Act of 1933 is amended to read as
follows:
"SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

12 USC 1461.

"This Act may be cited as the 'Home Owners' Loan Act'.
"TABLE OF CONTENTS
1. Short title and table of contents.
2. Deflnitions.
3. Director of the Office of Thrift Supervision.
4. Supervision of savings associations.
5. Federal savings associations.
6. Liquid asset requirements.
7. Applicability.
8. District associations.
9. Examination fees.
10. Regulation of holding companies.
11. Transactions with affiliates; extensions of credit to executive officers, directors, and principal shareholders.
"Sec. 12. Advertising.
"Sec. 13. Powers of examiners.
"Sec. 14. Separability provision.

"Sec.
"Sec.
"Sec.
"Sec.
"Sec.
"Sec.
"Sec.
"Sec.
"Sec.
"Sec.
"Sec.

"SEC. 2. DEFINITIONS.

"For purposes of this Act—
"(1) DIRECTOR.—The term 'Director' means the Director of the
Office of Thrift Supervision.
"(2) CORPORATION.—The term 'Corporation' means the Federal Deposit Insurance Corporation.
"(3) OFFICE.—The term 'Office' means the Office of Thrift
Supervision.
"(4) SAVINGS ASSOCIATION.—The term 'savings association'
means a savings association, as defined in section 3 of the
Federal Deposit Insurance Act, the deposits of which are insured by the Corporation.
"(5) FEDERAL SAVINGS ASSOCIATION.—The term 'Federal savings association' means a Federal savings association or a Federal savings bank chartered under section 5 of this Act.
"(6) NATIONAL BANK.—The term 'national bank' has the same
meaning as in section 3 of the Federal Deposit Insurance Act.
"(7) FEDERAL BANKING AGENCIES.—The term 'Federal banking
, agencies' means the Office of the Comptroller of the Currency,
the Board of Grovernors of the Federsil Reserve System, and the
Federal Deposit Insurance Corporation.

—^

,

12 USC 1462.

^

103 STAT. 278

PUBLIC LAW 101-73—AUG. 9, 1989

.

"(8) STATE.—The term 'State' has the same meaning as in
section 3 of the Federal Deposit Insurance Act.
"(9) AFFIUATE.—The term 'affiliate' means any person that
controls, is controlled by, or is under common control with, a
savings association, except as provided in section 10.

^
12 u s e 1462a.

"SEC. 3. DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION.

'

*^

"(a) ESTABLISHMENT OF OFFICE.—There is established the Office of
Thrift Supervision, which shall be an office in the Department of the
Treasury.
"(b) ESTABLISHMENT OF POSITION OF DIRECTOR.—

^

^

*

"(1) I N GENERAL.—There is established the position of the
Director of the Office of Thrift Supervision, who shall be the
head of the Office of Thrift Supervision and shall be subject to
the general oversight of the Secretary of the Treasury.
"(2) AUTHORITY TO PRESCRIBE REGULATIONS.—The Director
may prescribe such regulations and issue such orders as the
Director may determine to be necessary for carrying out this
Act and all other laws within the Director's jurisdiction.
"(3) AUTONOMY OF DIRECTOR.—The Secretary of the Treasury

may not intervene in any matter or proceeding before the
Director unless otherwise provided by law.
"(c) APPOINTMENT; TERM.—

'

^
'

'••

^

_y.

"(1) APPOINTMENT.—The Director shall be appointed by the
President, by and with the advice and consent of the Senate,
from among individuals who are citizens of the United States.
"(2) TERM.—The Director shall be appointed for a term of 5
years.
"(3) VACANCY.—A vacancy in the position of Director which
occurs before the expiration of the term for which a Director
was appointed shall be filled in the manner established in
paragraph (1) and the Director appointed to fill such vacancy
shall be appointed only for the remainder of such term.
"(4) SERVICE AFTER END OP TERM.—An individual may serve as
Director after the expiration of the term for which appointed
until a successor Director has been appointed.
"(5) TRANSITIONAL PROVISION.—Notwithstanding paragraphs
(1) and (2), the Chairman of the Federal Home Loan Bank Board
on the date of enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, shall be the Director
until the date on which that individual's term as Chairman of
the Federal Home Loan Bank Board would have expired.
"(d) PROHIBITION ON FINANCIAL INTERESTS.—The Director shall
not have a direct or indirect financial interest in any insured
depository institution, as defined in section 3 of the Federal Deposit
Insurance Act.
"(e) POWERS OF THE DIRECTOR.—The Director shall have all powers
which—
"(1) were vested in the Federal Home Loan Bank Board (in
the Board's capacity as such) or the Chairman of such Board on
the day before the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989;
and
"(2) were not—
"(A) transferred to the Federal Deposit Insurance Corporation, the Federal Housing Finance Board, the Resolution Trust Corporation, or the Federal Home Loan Mort-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 279

gage Corporation pursuant to any amendment made by
such Act; or
"(B) established under any provision of law repealed by
such Act.
"(f) ANNUAL REPORT REQUIRED.—The Director shall make an
annual report to the Congress. Such report shall include—
"(1) a description of any changes the Director has made or is
considering making in the district offices of the Office, including
a description of the geographic allocation of the Office's resources and personnel used to carry out examination and supervision functions; and
"(2) a description of actions taken to carry out section 308 of
the Financial Institutions Reform, Recovery, and Enforcement
Actofl989.
"(g) STAFF.—
"(1) APPOINTMENT AND COMPENSATION.—The Director shall fix

the compensation and number of, and appoint and direct, all
employees of the Office of Thrift Supervision notwithstanding
section 301(fXi) of title 31, United States Code. Such compensation shall be paid without regard to the provisions of other laws
applicable to officers or employees of the United States.
"(2) RATES OF BASIC PAY.—Rates of basic pay for employees of

the Office may be set and adjusted by the Director without
regard to the provisions of chapter 51 or subchapter III of
chapter 53 of title 5, United States Code.
"(3) ADDITIONAL COMPENSATION AND BENEFITS.—The Director

V

may provide additional compensation and benefits to employees
of the Office if the same type of compensation or benefits are
then being provided by any Federal banking agency or, if not
then being provided, could be provided by such an agency under
applicable provisions of law, rule, or regulation. In setting and
adjusting the total amount of compensation and benefits for
employees of the Office, the Director shall consult, and seek to
maintain comparability with, the Federal banking agencies.
"(4) DELEGATION AUTHORITY.—

"(A) IN GENERAL.—The Director may—
"(i) designate who shall act as Director in the Director's absence; and
"(ii) delegate to any employee, representative, or
agent any power of the Director.
"(B) LIMITATIONS.—Notwithstanding subparagraph (AXii),
the Director shall not, directly or indirectly—
"(i) after October 10, 1989, delegate to any Federal
home loan bank or to any officer, director, or employee
of a Federal home loan bank, any power involving
examining, supervising, taking enforcement action
with respect to, or otherwise regulating any savings
association, savings and loan holding company, or other
person subject to regulation by the Director; or
"(ii) delegate the Director's authority to serve as a
member of the Corporation's Board of Directors.
"(h) FUNDING THROUGH ASSESSMENTS.—The compensation of the
Director and other employees of the Office and all other expenses
thereof may be paid from assessments levied under this Act.
"(i) GAO AUDIT.—The Director shall make available to the
Comptroller General of the United States all books and records

/

<^

103 STAT. 280

12 use 1463.

PUBLIC LAW 101-73—AUG. 9, 1989

necessary to audit all of the activities of the Office of Thrift Supervision.
"SEC. 4. SUPERVISION OP SAVINGS ASSOCIATIONS.
\^i
"(a) FEDERAL SAVINGS ASSOCIATIONS.—

>

"(1) IN GENERAL.—The Director shall provide for the examination, safe and sound operation, and regulation of savings
associations.
"(2) REGULATIONS.—The Director may issue such regulations
as the Director determines to be appropriate to carry out the
responsibilities of the Director or the Office.
"(3) SAFE AND SOUND HOUSING CREDIT TO BE ENCOURAGED.—

The Director shall exercise all powers granted to the Director
under this Act so as to encourage savings gissociations to provide
credit for housing safely and soundly.
^
"(b) ACCOUNTING AND DISCLOSURE.—

^

"(1) IN GENERAL.—The Director shall, by regulation, prescribe
uniform accounting and disclosure standards for savings
associations, to be used in determining savings associations'
compliance with all applicable regulations.
"(2) SPECIFIC REQUIREMENTS FOR ACCOUNTING STANDARDS.—

Subject to section 5(t), the uniform accounting standards prescribed under paragraph (1) shall—
"(A) incorporate generally accepted accounting principles
to the same degree that such principles are used to determine compliance with regulations prescribed by the Federal banking agencies;
"(B) allow for no deviation from full compliance with
such standards as are in effect after December 31,1993; and
"(C) prior to January 1, 1994, require full compliance by
savings associations with accounting standards in effect at
any time before such date not later than provided under the
schedule in section 563.23-3 of title 12, Code of Federal
Regulations (as in effect on May 1,1989).
"(3) AUTHORITY TO PRESCRIBE MORE STRINGENT ACCOUNTING

STANDARDS.—The Director may at any time prescribe accounting standards more stringent than required under paragraph (2)
if the Director determines that the more stringent standards
are necessary to ensure the safe and sound operation of savings
associations.
"(c) STRINGENCY OF STANDARDS.—All regulations and policies of

the Director governing the safe and sound operation of savings
associations, including regulations and policies governing asset
classification and appraisals, shall be no less stringent than those
established by the Comptroller of the Currency for national banks.
"(d) INVESTMENT OF CERTAIN FUNDS IN ACCOUNTS OF SAVINGS

ASSOCIATIONS.—The savings accounts and share accounts of savings
associations insured by the Corporation shall be lawful investments
and may be accepted as security for all public funds of the United
States, fiduciary and trust funds under the authority or control of
the United States or any officer thereof, and for the funds of all
corporations organized under the laws of the United States (subject
to any regulatory authority otherwise applicable), regardless of any
limitation of law upon the investment of any such funds or upon the
acceptance of security for the investment or deposit of any of such
funds.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 281

"(e) PARTICIPATION BY SAVINGS ASSOCIATIONS IN LOTTERIES AND
RELATED ACTIVITIES.—
"(1) PARTICIPATION PROHIBITED.—No savings association

may—
"(A) deal in lottery tickets;
"(B) deal in bets used as a means or substitute for participation in a lottery;
"(C) announce, advertise, or publicize the existence of any
lottery; or
"(D) announce, advertise, or publicize the existence or
identity of any participant or winner, as such, in a lottery.

^

"(2) U S E OF FACILITIES PROHIBITED.—No savings association

may permit—
"(A) the use of any part of any of its own offices by any
person for any purpose forbidden to the institution under
paragraph (1); or
"(B) direct access by the public from any of its own offices
to any premises used by any person for any purpose forbidden to the institution under paragraph (1).
"(3) DEFINITIONS.—For purposes of this subsection—
"(A) DEAL IN.—The term 'deal in' includes making,
taking, buying, selling, redeeming, or collecting.
"(B) LOTTERY.—The term 'lottery' includes any arrangement under which—
"(i) 3 or more persons (hereafter in this subparagraph
referred to as the 'participants') advance money or
credit to another in exchange for the possibility or
expectation that 1 or more but not all of the particiRij
pants (hereafter in this paragraph referred to as the
'winners') will receive by reason of those participants'
advances more than the amounts those participants
have advanced; and
"(ii) the identity of the winners is determined by any
means which includes—
"(I) a random selection;
"(II) a game, race, or contest; or
^'
"(III) any record or tabulation of the result of 1
or more events in which any participant has no
interest except for the bearing that event has on
the possibility that the participant may become a
winner.
"(C) LOTTERY TICKET.—The term 'lottery ticket' includes
any right, privilege, or possibility (and any ticket, receipt,
record, or other evidence of any such right, privilege, or
possibility) of becoming a winner in a lottery.

,

- • ,;-

•

"(4) EXCEPTION FOR STATE LOTTERIES.—Paragraphs (1) and (2)

shall not apply with respect to any savings association accepting
funds from, or performing any lawful services for, any State
operating a lottery, or any officer or employee of such a State
who is charged with administering the lottery.
"(5) REGULATIONS.—The Director shall prescribe such regulations as may be necessary to provide for enforcement of this
subsection and to prevent any evasion of any provision of this
subsection.
"(f) FEDERALLY RELATED MORTGAGE LOAN DISCLOSURES.—A savings association may not make a federally related mortgage loan to
an agent, trustee, nominee, or other person acting in a fiduciary

^

^

103 STAT. 282

Reports.

PUBLIC LAW 101-73—AUG. 9, 1989

capacity without requiring that the identity of the person receiving
the beneficial interest of such loan shall at all times be revealed to
the savings association. At the request of the Director, the savings
association shall report to the Director the identity of such person
and the nature and amount of the loan.
"(g) PREEMPTION OF STATE USURY LAWS.—(1) Notwithstanding any

State law, a savings association may charge interest on any extension of credit a t a rate of not more than 1 percent in excess of the
discount rate on 90-day commercial paper in effect at the Federal
Reserve bank in the Federal Reserve district in which such savings
association is located or at the rate allowed by the laws of the State
in which such savings association is located, whichever is greater.
"(2) If the rate prescribed in paragraph (1) exceeds the rate such
savings association would be permitted to charge in the absence of
this subsection, the receiving or charging a greater rate of interest
than that prescribed by paragraph (1), when knowingly done, shall
be deemed a forfeiture of the entire interest which the extension of
credit carries with it, or which has been agreed to be paid thereon. If
such greater rate of interest has been paid, the person who paid it
may recover, in a civil action commenced in a court of appropriate
jurisdiction not later than 2 years after the date of such payment, an
amount equal to twice the amount of the interest paid from the
savings association taking or receiving such interest.
"(h) FORM AND MATURITY OF SECURITIES.—No savings association
shall—
"(1) issue securities which guarantee a definite maturity
except with the specific approval of the Director, or
"(2) issue any securities the form of which has not been
approved by the Director.
12 u s e 1464.

"SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.

Housing.

"(a) IN GENERAL.—In order to provide thrift institutions for the
deposit of funds and for the extension of credit for homes and other
goods and services, the Director is authorized, under such regulations as the Director may prescribe—
"(1) to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as
Federal savings associations (including Federal savings banks),
and
"(2) to issue charters therefor,
giving primary consideration of the best practices of thrift institutions in the United States. The lending and investment po>yers
conferred by this section are intended to encourage such institutions
to provide credit for housing safely and soundly.

< -^

"(b) DEPOSITS AND RELATED POWERS.—
"(1) DEPOSIT ACCOUNTS.—

J?

f
.

"(A) Subject to the terms of its charter and regulations of
the Director, a Federal savings association may—
"(i) raise funds through such deposit, share, or other
accounts, including demand deposit accounts (hereafter
in this section referred to as 'accounts'); and
"(ii) issue peissbooks, certificates, or other evidence of
accounts.
"(B) A Federal savings association may not—
"(i) pay interest on a demand account; or
"(ii) permit any overdraft (including an intraday
overdraft) on behalf of an affiliate, or incur any such

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 283

overdraft in such savings association's account at a
Federal reserve bank or Federal home loan bank on
behalf of an affiliate.
All savings accounts and demand accounts shall have the
same priority upon liquidation. Holders of accounts and
obligors of a Federal savings association shall, to such
extent as may be provided by its charter or by regulations
of the Director, be members of the savings association, and
shall have such voting rights and such other rights as are
thereby provided.
"(C) A Federal savings association may require not less
than 14 days notice prior to payment of savings accounts if
the charter of the savings association or the regulations of
the Director so provide.
"(D) If a Federal savings association does not pay all
withdrawals in full (subject to the right of the gissociation,
where applicable, to require notice), the payment of
withdrawals from accounts shall be subject to such rules
and procedures as may be prescribed by the savings eissociation's charter or by regulation of the Director. Except as
authorized in writing by the Director, any Federal savings
association that fails to make full payment of any withdrawal when due shall be deemed to be in an unsafe or
unsound condition.
"(E) Accounts may be subject to check or to withdrawal
or transfer on negotiable or transferable or other order or
authorization to the Federal savings association, £is the
Director may by regulation provide.
"(F) A Federal savings association may establish remote
service units for the purpose of crediting savings or demand
accounts, debiting such accounts, crediting payments on
loans, and the disposition of related financial transactions,
as provided in regulations prescribed by the Director.
"(2) OTHER UABIUTIES.—To such extent as the Director may
authorize in writing, a Federal savings association may borrow,
may give security, may be surety as defined by the Director and
may issue such notes, bonds, debentures, or other obligations, or
other securities, including capital stock.

• J-

-

.

"(3) LOANS FROM STATE HOUSING FINANCE AGENCIES.—

"(A) I N GENERAL.—Subject to regulation by the Director
but without regard to any other provision of this subsection,
any Federal savings sissociation that is in compliance with
the capital standards in effect under subsection (t) may
borrow funds from a State mortgage finance agency of the
State in which the head office of such savings association is
situated to the same extent as State law authorizes a
savings association organized under the laws of such State
to borrow from the State mortgage finance agency.
"(B) INTEREST RATE.—A Federal savings association may
not make any loan of funds borrowed under subparagraph
(A) at an interest rate which exceeds by more than 1%
percent per annum the interest rate paid to the State
mortgage finance agency on the obligations issued to obtain
the funds so borrowed.
"(4) CREDIT CARDS.—Subject to regulations of the Director, a
Federal savings association may issue credit cards, extend credit

/

103 STAT. 284

PUBLIC LAW 101-73—AUG. 9, 1989

in connection therewith, and otherwise engage in or participate
in credit card operations.
"(5) MUTUAL CAPITAL CERTIFICATES.—In accordance with regulations issued by the Director, mutual capital certificates may
be issued and sold directly to subscribers or through underwriters. Such certificates may be included in calculating capital
for the purpose of subsection (t) to the extent permitted by the
Director. The issuance of certificates under this paragraph does
not constitute a change of control or ownership under this Act
or any other law unless there is in fact a change in control or
reorganization. Regulations relating to the issuance and sale of
mutual capital certificates shall provide that such certificates—
"(A) are subordinate to all savings accounts, savings certificates, and debt obligations;
"(B) constitute a claim in liquidation on the general
reserves, surplus, and undivided profits of the Federal savings association remaining after the payment in full of all
savings accounts, savings certificates, and debt obligations;
"(C) are entitled to the payment of dividends; and
"(D) may have a fixed or variable dividend rate.
"(c) LOANS AND INVESTMENTS.—To the extent specified in regulations of the Director, a Federal savings association may invest in,
sell, or otherwise deal in the following loans and other investments:
"(1) LOANS OR INVESTMENTS WITHOUT PERCENTAGE OF ASSETS

UMiTATiON.—Without limitation as a percentage of assets, the
following are permitted:
"(A) ACCOUNT LOANS.—Loans on the security of its savings accounts and loans specifically related to transaction
accounts.
"(B) RESIDENTIAL REAL PROPERTY LOANS.—Loans on

the

security of liens upon residential real property.
"(C)

UNITED STATES GOVERNMENT SECURITIES.—Invest-

ments in obligations of, or fully guaranteed as to principal
and interest by, the United States.
"(D) FEDERAL HOME LOAN BANK AND FEDERAL NATIONAL

MORTGAGE ASSOCIATION SECURITIES.—Investments in the
stock or bonds of a Federal home loan bank or in the stock
of the Federal National Mortgage Association.
"(E) FEDERAL HOME LOAN MORTGAGE CORPORATION IN-

STRUMENTS.—Investments in mortgages, obligations, or
other securities which are or have been sold by the Federal
Home Loan Mortgage Corporation pursuant to section 305
or 306 of the Federal Home Loan Mortgage Corporation
Act.

\

"(F)

-^

,.. .

OTHER GOVERNMENT SECURITIES.—Investments

in

obligations, participations, securities, or other instruments
issued by, or fully guaranteed as to principal and interest
by, the Federal National Mortgage Association, the Student
Loan Marketing Association, the Government National
Mortgage Association, or any agency of the United States.
A savings association may issue and sell securities which
are guaranteed pursuant to section 306(g) of the National
Housing Act.
"(G) DEPOSITS.—Investments in accounts of any insured
depository institution, as defined in section 3 of the Federal
Deposit Insurance Act.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 285

"(H) STATE SECURITIES.—Investments in obligations issued
by any State or political subdivision thereof (including any
agency, corporation, or instrumentality of a State or political subdivision). A Federal savings association may not
invest more than 10 percent of its capital in obligations of
any one issuer, exclusive of investments in general obligations of any issuer.
"(I) PURCHASE OF INSURED LOANS.—Purchase of loans secured by liens on improved real estate which are insured or
guaranteed under the National Housing Act, the Servicemen's Readjustment Act of 1944, or chapter 37 of title 38,
United States Code.
"(J)

HOME

IMPROVEMENT

AND MANUFACTURED

HOME

LOANS.—Loans made to repair, equip, alter, or improve any
residential real property, and loans made for manufactured
home financing.
"(K) INSURED LOANS TO FINANCE THE PURCHASE OF FEE

Real property,
^

SIMPLE.—Loans insured under section 240 of the National
Housing Act.
"(L) LOANS TO FINANCIAL INSTITUTIONS, BROKERS, AND

DEALERS.—Loans to—
"(i) financial institutions with respect to which the
United States or an agency or instrumentality thereof
has any function of examination or supervision, or
"(ii) any broker or dealer registered with the Securities and Exchange Commission,
which are secured by loans, obligations, or investments in
which the Federal savings association has the statutory
authority to invest directly.
"(M) LIQUIDITY INVESTMENTS.—Investments which, when
made, are of a type that may be used to satisfy any liquidity
requirement imposed by the Director pursuant to section 6.
"(N) INVESTMENT IN THE NATIONAL HOUSING PARTNERSHIP
CORPORATION, PARTNERSHIPS, AND JOINT VENTURES.—Invest-

ments in shares of stock issued by a corporation authorized
to be created pursuant to title IX of the Housing and Urban
Development Act of 1968, and investments in any partnership, limited partnership, or joint venture formed pursuant
to section 907(a) or 907(c) of such Act.
"(O)

CERTAIN

HUD INSURED OR GUARANTEED INVEST-

MENTS.—Loans that are secured by mortgages—
"(i) insured under title X of the National Housing
Act, or
"(ii) guaranteed under title IV of the Housing and
Urban Development Act of 1968, under part B of the
National Urban Policy and New Community Development Act of 1970, or under section 802 of the Housing
and (Community Development Act of 1974.
"(P) STATE HOUSING CORPORATION INVESTMENTS.—Obligations of and loans to any State housing corporation, if—
"(i) such obligations or loans are secured directly, or
indirectly through an agent or fiduciary, by a first lien
on improved real estate which is insured under the
provisions of the National Housing Act, and
"(ii) in the event of default, the holder of the obligations or loans has the right directly, or indirectly
through an agent or fiduciary, to cause to be subject to

,
*

103 STAT. 286

PUBLIC LAW 101-73—AUG. 9, 1989
the satisfaction of such obligations or loans the real
estate described in the first lien or the insurance proceeds under the National Housing Act.

* ,
, JJ

"(Q) INVESTMENT COMPANIES.—A F e d e r a l savings associa-

j .
,". J

tion may invest in, redeem, or hold shares or certificates
issued by any open-end management investment company
which—
_ ^„,
"(i) is registered with the Securities and Exchange
, !-,.
Commission under the Investment Company Act of
1940, and
;/ ,
"(ii) the portfolio of which is restricted by such
management company's investment policy (changeable
5
only if authorized by shareholder vote) solely to investments that a Federal savings association by law or
regulation may, without limitation as to percentage of
assets, invest in, sell, redeem, hold, or otherwise deal
in.
"(R) MORTGAGE-BACKED SECURITIES.—Investments in securities that—
"(i) are offered and sold pursuant to section 4(5) of
the Securities Act of 1933; or
"(ii) are mortgage related securities (as defined in
section 3(aX41) of the Securities Exchange Act of 1934),
subject to such regulations as the Director may prescribe,
including regulations prescribing minimum size of the issue
(at the time of initial distribution) or minimum aggregate
sales price, or both.

^

^ ..

"(2) LOANS OR INVESTMENTS UMITED TO A PERCENTAGE OF
ASSETS OR CAPITAL.—The following loans or investments are

permitted, but only to the extent specified:
"(A) COMMERCIAL AND OTHER LOANS.—Secured or

un-

secured loans for commercial, corporate, business, or agricultural purposes. The aggregate amount of loans under
this paragraph shall not exceed 10 percent of the assets of
the Federal savings association.
"(B) NONRESIDENTIAL REAL PROPERTY LOANS.—

'

•

f^
i,^

,

"(i) IN GENERAL.—Loans on the security of liens upon
nonresidential real property. Except as provided in
clause (ii), the aggregate amount of such loans shall not
exceed 400 percent of the Federal savings association's
capital, as determined under subsection (t).
(ii) EXCEPTION.—The Director may permit a savings
association to exceed the limitation set forth in clause
(i) if the Director determines that the increased authority"(I) poses no significant risk to the safe and
/
sound operation of the association, and
"(II) is consistent with prudent operating practices,
"(iii) MONITORING.—If the Director permits any increased authority pursuant to clause (ii), the Director
shall closely monitor the Federal savings association's
condition and lending activities to ensure that the
savings association carries out all authority under this
paragraph in a safe and sound manner and complies
with this subparagraph and all relevant laws and regulations

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 287

"(C) INVESTMENTS IN PERSONAL PROPERTY.—Investments

in tangible personal property, including, vehicles, manufactured homes, machmery, equipment, or furniture, for
rental or sale. Investments under this subparagraph may
not exceed 10 percent of the assets of the Federal savings
association.
"(D) (DoNSUMER LOANS AND CERTAIN SECURITIES.—A Federal savings association may make loans for personal,
family, or household purposes, including loans reasonably
incident to providing such credit, and may invest in, sell, or
hold commercial paper and corporate debt securities, as
defined and approved by the Director. Loans and other
investments under this subparagraph may not exceed 30
percent of the assets of the Federal savings association.

-^

n i »

,

"(3) LOANS OR INVESTMENTS UMITED TO 5 PERCENT OF ASSETS.—

The following loans or investments are permitted, but not to
exceed 5 percent of assets of a Federal savings association for
each subparagraph:
"(A) EDUCATION LOANS.—Loans made for the pa3mient of
educational expenses.
"(B) COMMUNITY DEVELOPMENT INVESTMENTS.—Invest- Real property. S
ments in real property and obligations secured by liens on
real property located within a geographic area or neighborhood receiving concentrated development assistance by a
local government under title I of the Housing and (Community Development Act of 1974. No investment under this
subparagraph in such real property may exceed an aggregate of 2 percent of the assets of the Federal savings
association.
"(C) NONCONFORMING LOANS.—Loans upon the security of Real property.
or respecting real property or interests therein used for
primarily residential or farm purposes that do not comply
with the limitations of this subsection.
"(D) CONSTRUCTION LOANS WITHOUT SECURITY.—Loans—

"(i) the principal purpose of which is to provide
financing with respect to what is or is expected to
become primarily residential real estate; and
"(ii) with respect to which the association—
"(I) relies substantially on the borrower's general
credit standing and projected future income for
repa)mient, without other security; or
'(II) relies on other assurances for repa)mient,
including a guarantee or similar obligation of a
third party.
The aggregate amount of such investments shall not exceed
the greater of the Federal savings association's capital or 5
percent of its assets.
"(4) OTHER LOANS AND INVESTMENTS.—The following addi-

tional loans and other investments to the extent authorized
below:
"(A)

BUSINESS DEVELOPMENT CREDIT CORPORATIONS.—A

Federal savings association that is in compliance with the
capital standards prescribed under subsection (t) may invest
in, lend to, or to commit itself to lend to, any business
development credit corporation incorporated in the State in
which the home office of the association is located in the
same manner and to the same extent as savings associa-

103 STAT. 288

PUBLIC LAW 101-73—AUG. 9, 1989
tions chartered by such State are authorized. The aggregate
amount of such investments, loans, and commitments of
any such Federal savings association shall not exceed onehalf of 1 percent of the association's total outstanding loans
or $250,000, whichever is less.

Securities.

"(B) SERVICE CORPORATIONS.—Investments in the capital

stock, obligations, or other securities of any corporation
organized under the laws of the State in which the Federal
savings association's home office is located, if such corporation's entire capital stock is available for purchase only by
savings associations of such State and by Federal associations having their home offices in such State. No Federal
savings association may make any investment under this
subparagraph if the association's aggregate outstanding
investment under this subparagraph would exceed 3 percent of the association's assets. Not less than one-half of the
investment permitted under this subparagraph which exceeds 1 percent of the association's assets shall be used
primarily for community, inner-city, and community development purposes.
Housing.

"(C) FOREIGN ASSISTANCE INVESTMENTS.—Investments in

housing project loans having the benefit of any guaranty
under section 221 of the Foreign Assistance Act of 1961 or
loans having the benefit of any guarantee under section 224
of such Act, or any commitment or agreement with respect
to such loans made pursuant to either of such sections and
in the share capital and capital reserve of the Inter-American Savings and Loan Bank. This authority extends to the
acquisition, holding, and disposition of loans guaranteed
under section 221 or 222 of such Act. Investments under
this subparagraph shall not exceed 1 percent of the Federal
savings association's assets.
"(D) SMALL BUSINESS INVESTMENT COMPANIES.—A Federal
savings association may invest in stock, obligations, or
other securities of any small business investment company
formed pursuant to section 301(d) of the Small Business
Investment Act of 1958 for the purpose of aiding members
of a Federal home loan bank. A Federal savings association
may not make any investment under this subparagraph if
its aggregate outstanding investment under this subparagraph would exceed 1 percent of the assets of such savings
association.
"(5) DEFINITIONS.—As used in this subsection—
*
"(A) RESIDENTIAL PROPERTY.—The terms 'residential real
property' or 'residential real estate' mean leaseholds,
homes (including condominiums and cooperatives, except
that in connection with loans on individual cooperative
units, such loans shall be adequately secured as defined by
the Director) and, combinations of homes or dwelling units
and business property, involving only minor or incidental
business use, or property to be improved by construction of
such structures.
"(B) LOANS.—The term 'loans' includes obligations and
extensions or advances of credit; and any reference to a
loan or investment includes an interest in such a loan or
investment.

"(d) REGULATORY AUTHORITY.—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 289

'(1) IN GENERAL.—

"(A) ENFORCEMENT.—The Director shall have power to
enforce this section, section 8 of the Federal Deposit Insurance Act, and regulations prescribed hereunder. In enforcing any provision of this section, regulations prescribed
under this section, or any other law or regulation, or in any
other action, suit, or proceeding to which the Director is a
party or in which the Director is interested, and in the
administration of conservatorships and receiverships, the
Director may act in the Director's own name and through
the Director's own attorneys. Except as otherwise provided, C!ourts, U.S.
the Director shall be subject to suit (other than suits on
claims for money damages) by any Federal savings associahj ,
tion or director or officer thereof with respect to any matter
under this section or any other applicable law, or regulation thereunder, in the United States district court for the
judicial district in which the savings association's home
office is located, or in the United States District Court for
the District of Columbia, and the Director may be served
with process in the manner prescribed by the Federal Rules
of Civil Procedure.
"(B) ANCILLARY PROVISIONS.—(i) In making examinations
of savings associations, examiners appointed by the DirecH
tor shall have power to make such examinations of the
affairs of all affiliates of such savings £issociations as shall
be necessary to disclose fully the relations between such
savings associations and their affiliates and the effect of
such relations upon such savings associations. For purposes
'
of this subsection, the term 'affiliate' has the same meaning
as in section 2(b) of the Banking Act of 1933, except that the
term 'member bank' in section 2(b) shall be deemed to refer
to a savings association.
"(ii) In the course of any examination of any savings
association, upon request by the Director, prompt and complete access shall be given to all savings association officers,
directors, employees, and agents, and to all relevant books,
records, or documents of any type.
:
"(iii) Upon request made in the course of supervision or
oversight of any savings association, for the purpose of
acting on any application or determining the condition of
any savings sissociation, including whether operations are
being conducted safely, soundly, or in compliance with
charters, laws, regulations, directives, written agreements,
or conditions imposed in writing in connection with the
granting of an application or other request, the Director
shall be given prompt and complete access to all savings
association officers, directors, employees, and agents, and to
all relevant books, records, or documents of any type.
"(iv) If prompt and complete access upon request is not Courts, U.S.
given as required in this subsection, the Director may apply
to the United States district court for the judicial district
(or the United States court in any territory) in which the
principal office of the institution is located, or in which the
person denying such access resides or carries on business,
for an order requiring that such information be promptly
provided.

103 STAT. 290

Courts, U.S.

Ck)urts, U.S.

PUBLIC LAW 101-73—AUG. 9, 1989
"(v) In connection with examinations of savings associations and affiliates thereof, the Director may—
"(I) administer oaths and affirmations and examine
and to take and preserve testimony under oath as to
any matter in respect of the affairs or ownership of any
such savings association or affiliate, and
"(II) issue subpenas and, for the enforcement thereof,
apply to the United States district court for the judicial
district (or the United States court in any territory) in
which the principal office of the savings association or
affiliate is located, or in which the witness resides or
carries on business.
Such courts shall have jurisdiction and power to order and
require compliance with any such subpena.
' (vi) In any proceeding under this section, the Director
may administer oaths and affirmations, take depositions,
and issue subpenas. The Director may prescribe regulations
with respect to any such proceedings. The attendance of
witnesses and the production of documents provided for in
this subsection may be required from any place in any State
or in any territory at any designated place where such
proceeding is being conducted.
"(vii) Any party to a proceeding under this section may
apply to the United States District Court for the District of
Columbia, or the United States district court for the judicial
district (or the United States court in any territory) in
which such proceeding is being conducted, or where the
witness resides or carries on business, for enforcement of
any subpena issued pursuant to this subsection or section
10(c) of the Federal Deposit Insurance Act, and such courts
shall have jurisdiction and power to order and require
compliance therewith. Witnesses subpenaed under this section shall be paid the same fees and mileage that are paid
witnesses in the district courts of the United States. All
expenses of the Director in connection with this section
shall be considered as nonadministrative expenses. Any
court having jurisdiction of any proceeding instituted under
this section by a savings association, or a director or officer
thereof, may allow to any such party reasonable expenses
and attorneys' fees. Such expenses and fees shall be paid by
the savings association.
*(2) CONSERVATORSHIPS AND RECEIVERSHIPS.—
"(A)

GROUNDS FOR APPOINTMENT FOR FEDERAL SAVINGS

ASSOCIATIONS.—A conservator or receiver may be appointed
for a Federal savings association if one or more of the
following conditions exist:
"(i) insolvency in that the assets of the association
are less than its obligations to its creditors and others,
including its members;
"(ii) substantial dissipation of assets or earnings due
to any violation or violations of law or regulations, or to
any unsafe or unsound practice or practices;
(iii) an unsafe or unsound condition to transact
business, including having substantially insufficient
capital or otherwise;
(iv) willful violation of a cease-and-desist order
which has become final;

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 291

"(v) concealment of books, papers, records, or assets
of the savings association or refusal to submit books,
papers, records, or affairs of the association for inspection to any examiner or to any lawful agent of the
Director;
"(vi) the association is not likely to be able to meet
the demands of its depositors or pay its obligations in
the normal course of business;
"(viiXD the association has incurred or is likely to
incur losses that will deplete all or substantially all of
its capital, and (II) there is no reasonable prospect for
the replenishment of the capital of the association
without Federal assistance; or
"(viii) there is a violation or violations of laws or
regulations, or an unsafe or unsound practice or condition which is likely to cause insolvency or substantial
dissipation of assets or earnings, or is likely to weaken
the condition of the association or otherwise seriously
prejudice the interests of its depositors.
"(B) ADDITIONAL GROUNDS FOR APPOINTMENT OF FEDERAL

ASSOCIATIONS.—In addition to the foregoing provisions, the
Director may, without any requirement of notice, hearing,
or other action, appoint a conservator or receiver for a
Federal savings association if^
"(i) the association, by resolution of its board of
directors or of its members, consents to such appointment, or
"(ii) the association is removed from membership in
any Federal home loan bank, or its status as an institution the accounts of which are insured by the Corporation is terminated.
"(C)

GROUNDS FOR APPOINTMENT FOR STATE ASSOCIA-

TIONS.—Notwithstanding any other provision of law, the
Director shall have power and jurisdiction to appoint a
conservator or receiver for an insured State savings association, if the Director determines that any of the following
grounds for the appointment of a conservator or receiver
exists:
"(i) insolvency in that the assets of the savings
association are less than its obligations to its creditors
and others, including its members;
"(ii) substantial dissipation of assets or earnings due
to any violation or violations of law or regulations, or to
any unsafe or unsound practice or practices;
'(iii) an unsafe or unsound condition to transact
business, including having substantially insufficient
capital or otherwise;
*(iv) the association is not likely to be able to meet
the demands of its depositors or pay its obligations in
the normal course of business;
"(vXD the savings association has incurred or is likely
to incur losses that will deplete all or substantially all
of its capital, and (II) there is no reasonable prospect
for the savings association's capital to be replenished
without Federal assistance; or
"(vi) there is a violation or violations of laws or
regulations, or an unsafe or unsound practice or condi-

''

103 STAT. 292

PUBLIC LAW 101-73—AUG. 9, 1989
tion which is likely to cause insolvency or substantial
dissipation of assets or earnings, or is likely to weaken
the condition of the association or otherwise seriously
prejudice the interests of its depositors.
"(D) APPROVAL OF STATE OFFICIAL.—(i) The authority conferred by subparagraph (C) shall not be exercised without
the written approval of the State official having jurisdiction
over the insured State savings association that one or more
of the grounds specified for such exercise exist.
"(ii) If such approval has not been received within 30 days
of receipt of notice to the State that the Director has
determined such grounds exist, and the Director has responded in writing to the State's written reasons, if any, for
withholding approval, then the Director may proceed without State approval.
"(E)

Ck)urts, U.S.

POWER OF APPOINTMENT; JUDICIAL REVIEW.—The

Director shall have exclusive power and jurisdiction to
appoint a conservator or receiver for a Federal savings
association. If, in the opinion of the Director, a ground for
the appointment of a conservator or receiver for a savings
association exists, the Director is authorized to appoint ex
parte and without notice a conservator or receiver for the
savings association. In the event of such appointment, the
association may, within 30 days thereafter, bring an action
in the United States district court for the judicial district in
which the home office of such association is located, or in
the United States District Court for the District of Columbia, for an order requiring the Director to remove such
conservator or receiver, and the court shall upon the merits
dismiss such action or direct the Director to remove such
conservator or receiver. Upon the commencement of such
an action, the court having jurisdiction of any other action
or proceeding authorized under this subsection to which the
association is a party shall stay such action or proceeding
during the pendency of the action for removal of the conservator or receiver.
"(F) REPLACEMENT.—The Director may, without any prior
notice, hearing, or other action, replace a conservator with
another conservator or with a receiver, but such replacement shall not affect any right which the association may
have to obtain judicial review of the original appointment,
except that any removal under this subparagraph shall be
removal of the conservator or receiver in office at the time
of such removal.
"(G) COURT ACTION.—Except as otherwise provided in this
subsection, no court may take any action for or toward the
removal of any conservator or receiver or, except at the
request of the Director, to restrain or affect the exercise of
powers or functions of a conservator or receiver.
"(H) POWERS.—

"(i) IN GENERAL.—A conservator shall have all the
powers of the members, the stockholders, the directors,
and the officers of the association and shall be authorized to operate the association in its own name or
to conserve its assets in the manner and to the extent
' "•' •- authorized by the Director.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 293

"(ii) F D I C OR RTC AS CONSERVATOR OR RECEIVER.—

Except as provided in section 21A of the Federal Home
Loan Bank Act, the Director, at the Director's discretion, may appoint the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation, as
appropriate, as conservator for a savings association.
The Director shall appoint only the Federal Deposit
Insurance Corporation or the Resolution Trust Corporation, as appropriate, as receiver for a savings
association for the purpose of liquidation or winding up
the affairs of such savings association. The conservator
or receiver so appointed shall, as such, have power to
buy at its own sale. The Federal Deposit Insurance
Corporation, as such conservator or receiver, shall have
all the powers of a conservator or receiver, as appropriate, granted under the Federal Deposit Insurance
Act, and (when not inconsistent therewith) any other
rights, powers, and privileges possessed by conservators
or receivers, as appropriate, of savings associations
under this Act and any other provisions of law.
"(I)

DISCLOSURE REQUIREMENT FOR THOSE ACTING ON

BEHALF OF CONSERVATOR.—A conscrvator shall require that
any independent contractor, consultant, or counsel employed by the conservator in connection with the
conservatorship of a savings association pursuant to this
section shall fully disclose to all parties with which such
contractor, consultant, or counsel is negotiating, any limitation on the authoritv of such contractor, consultant, or
counsel to make legally binding representations on behalf
of the conservator.

^

"(8) REGULATIONS.—

"(A) I N GENERAL.—The Director may prescribe regulations for the reorganization, consolidation, liquidation, and
dissolution of savings associations, for the merger of insured savings associations with insured savings associations, for savings associations in conservatorship and
receivership, and for the conduct of conservatorships and
receiverships. The Director may, by regulation or otherwise, provide for the exercise of functions by members,
stockholders, directors, or officers of a savings association
during conservatorship and receivership.
"(B) FDIC OR RTC AS CONSERVATOR OR RECEIVER.—In any
case where the Federal Deposit Insurance Corporation or
the Resolution Trust Corporation is the conservator or
receiver, any regulations prescribed by the Director shall be
consistent with any regulations prescribed by the Federal
Deposit Insurance Corporation pursuant to the Federal
Deposit Insurance Act.
"(4) REFUSAL TO COMPLY WITH DEMAND.—Whenever a Lawenforceconservator or receiver appointed by the Director demands ment and crime,
possession of the property, business, and assets of any savings
association, or of any part thereof, the refusal by any director,
officer, employee, or agent of such association to comply with
the demand shall be punishable by a fine of not more than
i
$5,000 or imprisonment for not more than one year, or both.
"(5) DEFINITIONS.—As used in this subsection, the term 'savings association' includes any savings association or former

29-194 O—91—Part 1

11 : QL 3

103 STAT. 294

PUBLIC LAW 101-73—AUG. 9, 1989
savings association that retains deposits insured by the Corporation, notwithstanding termination of its status as an institution
insured by the Corporation.
"(6) COMPLIANCE WITH MONETARY
KEEPING AND REPORT REQUIREMENTS.—

Regulations.

TRANSACTION

RECORD-

"(A) CoMPUANCE PROCEDURES REQUIRED.—The Director
shall prescribe regulations requiring savings associations to
establish and maintain procedures reasonably designed to
assure and monitor the compliance of such associations
with the requirements of subchapter II of chapter 53 of title
31, United States Code.

s
vf

"(B) EXAMINATIONS OF SAVINGS ASSOCIATIONS TO INCLUDE
REVIEW OF COMPUANCE PROCEDURES.—

. . -

"(i) I N GENERAL.—Each examination of a savings
association by the Director shall include a review of the
procedures required to be established and maintained
under subparagraph (A).
"(ii) EXAM

REPORT REQUIREMENT.—The

report

of

examination shall describe any problem with the procedures maintained by the association.
"(C) ORDER TO COMPLY WITH REQUIREMENTS.—If the Direc-

tor determines that a savings association—
"(i) has failed to establish and maintain the proce. dures described in subparagraph (A); or
"(ii) has failed to correct any problem with the procedures maintained by such association which was previously reported to the association by the Director,
the Director shall issue an order under section 8 of the
Federal Deposit Insurance Act requiring such association to
cease and desist from its violation of this paragraph or
regulations prescribed under this paragraph.
"(e) CHARACTER AND RESPONSIBILITY.—A charter may be granted
only—
"(1) to persons of good character and responsibility,
"(2) if in the judgment of the Director a necessity exists for
such an institution in the community to be served,
"(3) if there is a reasonable probability of its usefulness and
success, and
"(4) if the association can be established without undue injury
to properly conducted existing local thrift and home financing
institutions,
"(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—Each Federal savings association, upon receiving its charter, shall become automatically a member of the Federal home loan bank of the district in
which it is located, or if convenience requires and the Director
approves, shall become a member of a Federal home loan bank of an
adjoining district. Such associations shall qualify for such membership in the manner provided in the Federal Home Loan Bank Act
with respect to other members.

p

•

jM ij

"(g) PREFERRED SHARES.—[Repealed.]
"(h) DISCRIMINATORY STATE AND LOCAL TAXATION PROHIBITED.—

No State, county, municipal, or local taxing authority may impose
any tax on Federal savings associations or their franchise, capital,
reserves, surplus, loans, or income greater than that imposed by
such authority on other similar local mutual or cooperative thrift
and home financing institutions,
"(i) CONVERSIONS.—

?

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 295

(1) I N GENERAL.—Any savings association which is, or is eligible to become, a member of a Federal home loan bank may
convert into a Federal savings association (and in so doing may
change directly from the mutual form to the stock form, or from
the stock form to the mutual form). Such conversion shall be Regulations.
subject to such regulations as the Director shall prescribe.
Thereafter such Federal savings association shall be entitled to
all the benefits of this section and shall be subject to examination and regulation to the same extent as other associations
incorporated pursusmt to this Act.
"(2) AUTHORITY OF DIRECTOR.—(A) No savings association may
'
^
convert from the mutual to the stock form, or from the stock
form to the mutual form, except in accordance with the regulations of the Director.
"(B) Any aggrieved person may obtain review of a final action
of the Director which approves or disapproves a plan of conversion pursuant to this subsection only by complying with the
provisions of section 100") of this Act within the time limit and
in the manner therein prescribed, which provisions shall apply
in all respects as if such final action were an order the review of
which is therein provided for, except that such time limit shall
commence upon publication of notice of such final action in the
Federal Register or upon the giving of such general notice of
such final action as is required by or approved under regulations of the Director, whichever is later.
"(C) Any Federal savings association may change its designation from a Federal savings association to a Federal savings
bank, or the reverse.
"(3) CONVERSION TO STATE ASSOCIATION.—(A) Any Federal savings association may convert itself into a savings association or
\
savings bank organized pursuant to the laws of the State in
which the principal office of such Federal savings association is
located if—
"(i) the State permits the conversion of any savings
association or savings bank of such State into a Federal
savings association;
"(ii) such conversion of a Federal savings association into
such a State savings association is determined—
"(I) upon the vote in favor of such conversion cast in
person or by proxy at a special meeting of members or
stockholders called to consider such action, specified by
the law of the State in which the home office of the
,
Federal savings association is located, as required by
such law for a State-chartered institution to convert
itself into a Federal savings association, but in no event
upon a vote of less than 51 percent of all the votes cast
at such meeting, and
"(II) upon compliance with other requirements reciprocally equivalent to the requirements of such State
law for the conversion of a State-chartered institution
into a Federal savings association;
"(iii) notice of the meeting to vote on conversion shall be
given as herein provided and no other notice thereof shall
be necessary; the notice shall expressly state that such
meeting is called to vote thereon, as well as the time and
place thereof; and such notice shall be mailed, postage
prepaid, at least 30 and not more than 60 days prior to the

103 STAT. 296

;
/
'^

PUBLIC LAW 101-73—AUG. 9, 1989

date of the meeting, to the Director and to each member or
stockholder of record of the Federal savings association at
the member's or stockholder's last address as shown on the
books of the Federal savings association;
"(iv) when a mutual savings association is dissolved after
conversion, the members or shareholders of the savings
association will share on a mutual basis in the assets of the
association in exact proportion to their relative share or
account credits;
"(v) when a stock savings association is dissolved after
conversion, the stockholders will share on an equitable
basis in the assets of the association; and
"(vi) such conversion shall be effective upon the date that
all the provisions of this Act shall have been fully complied
with and upon the issuance of a new charter by the State
wherein the savings association is located.
"(BXi) The act of conversion constitutes consent by the institution to be bound by all the requirements that the Director may
impose under this Act.
* (ii) The savings association shall upon conversion and thereafter be authorized to issue securities in any form currently
approved at the time of issue by the Director for issuance by
similar savings associations in such State.
I
"(iii) If the insurance of accounts is terminated in connection
with such conversion, the notice and other action shall be taken
"i»< as provided by law and regulations for the termination of
ai«: insurance of accounts.
"(4) SAVINGS BANK ACTIVITIES.—(A) To the extent authorized
by the Director, but subject to section 18(mX3) of the Federal
-* Deposit Insurance Act—
"(i) any Federal savings bank chartered as such prior to
October 15, 1982, may continue to make any investment or
engage in any activity not otherwise authorized under this
section, to the degree it was permitted to do so as a Federal
• •- '"i savings bank prior to October 15,1982; and
"(ii) any Federal savings bank in existence on the date of
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 and formerly orjganized as a
mutual savings bank under State law may continue to make
any investment or engage in any activity not otherwise
authorized under this section, to the degree it was authorized to do so as a mutual savings bank under State law.
"(B) The authority conferred by this paragraph may be utilized by any Federal savings association that acquires, by
merger or consolidation, a Federal savings bank enjoying grandfather rights hereunder.
"(j) SUBSCRIPTION FOR SHARES.—[Repealed.]
"(k) DEPOSITORY OF P U B U C MONEY.—When designated for that

R^ulations.

purpose by the Secretary of the Treasury, a savings association the
deposits of which are insured by the Corporation shall be a depository of public money and may be employed as fiscal agent of the
Government under such regulations as may be prescribed by the
Secretary and shall perform all such reasonable duties as fiscal
agent of the Government as may be required of it. A savings
association the deposits of which are insured by the Corporation
may act as agent for any other instrumentality of the United States
when designated for that purpose by such instrumentality, including services in connection with the collection of taxes and other

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 297

obligations owed the United States, and the Secretary of the Treasury may deposit public money in any such savings association, and
shall prescribe such regulations as may be necessary to carry out
the purposes of this subsection.
"(1) RETIREMENT ACCOUNTS.—A Federal savings association is authorized to act as trustee of any trust created or organized in the
United States and forming part of a stock bonus, pension, or profitsharing plan which qualifies or qualified for specific tax treatment
under section 401(d) of the Internal Revenue Code of 1986 and to act
as trustee or custodian of an individual retirement account within
the meaning of section 408 of such Code if the funds of such trust or
account are invested only in savings accounts or deposits in such
Federal savings association or in obligations or securities issued by
such Federal savings association. All funds held in such fiduciary Records.
capacity by any Federal savings association may be commingled for
appropriate purposes of investment, but individual records shall be
kept by the fiduciary for each participant and shall show in proper
detail all transactions engaged in under this paragraph.
"(m) BRANCHING.—
"(1) I N GENERAL.—

District of

"(A) No savings association incorporated under the laws Ck>lumbia.
of the District of Columbia or organized in the District or
doing business in the District shall establish any branch or
move its principal office or any branch without the Director's prior written approval.
"(B) No savings association shall establish any branch in
the District of Columbia or move its principal office or any
branch in the District without the Director's prior written
approval.
"(2) DEFINITION.—For purposes of this subsection the term
'branch' means any office, place of business, or facility, other
than the principal office as defined by the Director, of a savings
association at which accounts are opened or payments are
received or withdrawals are made, or any other office, place of
business, or facility of a savings association defined by the
Director as a branch within the meaning of such sentence.
"(n) TRUSTS.—

"(1) PERMITS.—The Director may grant by special permit to a
Federal savings association applying therefor the right to act as
trustee, executor, administrator, guardian, or in any other fiduciary capacity in which State banks, trust companies, or other
corporations which compete with Federal savings associations
are permitted to act under the laws of the State in which the
Federal savings association is located. Subject to the regulations Securities
of the Director, service corporations may invest in State or
federally chartered corporations which are located in the State
in which the home office of the Federal savings association is
located and which are engaged in trust activities.
"(2) SEGREGATION OF ASSETS.—A Federal savings association Records,
exercising any or all of the powers enumerated in this section
shall segregate all assets held in any fiduciary capacity from the
general assets of the association and shall keep a separate set of
books and records showing in proper detail all transactions
engaged in under this subsection. The State banking authority
involved may have access to reports of examination made by the
Director insofar as such reports relate to the trust department
of such association but nothing in this subsection shall be

103 STAT. 298

Law
enforcement
and crime.

PUBLIC LAW 101-73—AUG. 9, 1989
construed as authorizing such State banking authority to examine the books, records, and assets of such associations.
"(3) PROHIBITIONS.—No Federal savings association shall receive in its trust department deposits of current funds subject to
check or the deposit of checks, drafts, bills of exchange, or other
items for collection or exchange purposes. Funds deposited or
held in trust by the association awaiting investment shall be
carried in a separate account and shall not be used by the
association in the conduct of its business unless it shall first set
aside in the trust department United States bonds or other
securities approved by the Director.
"(4) SEPARATE UEN.—In the event of the failure of a Federal
savings association, the owners of the funds held in trust for
investment shall have a lien on the bonds or other securities so
set apart in addition to their claim against the estate of the
association.
"(5) DEPOSITS.—Whenever the laws of a State require corporations acting in a fiduciary capacity to deposit securities with the
State authorities for the protection of private or court trusts,
Federal savings associations so acting shall be required to make
similar deposits. Securities so deposited shall be held for the
protection of private or court trusts, as provided by the State
law. Federal savings associations in such cases shall not be
required to execute the bond usually required of individuals if
State corporations under similar circumstances are exempt
from this requirement. Federal savings associations shall have
power to execute such bond when so required by the laws of the
State involved.
"(6) OATHS AND AFFIDAVITS.—In any case in which the laws of
a State require that a corporation acting as trustee, executor,
administrator, or in any capacity specified in this section, shall
take an oath or make an affidavit, the president, vice president,
cashier, or trust officer of such association may take the necessary oath or execute the necessary affidavit.
"(7) CERTAIN LOANS PROHIBITED.—It shall be unlawful for any
Federal savings association to lend any officer, director, or
employee any funds held in trust under the powers conferred by
this section. Any officer, director, or employee making such
loan, or to whom such loan is made, may be fined not more than
$50,000 or twice the amount of that person's gain from the loan,
whichever is greater, or may be imprisoned not more than 5
years, or may be both fined and imprisoned, in the discretion of
the court.
"(8) FACTORS TO BE CONSIDERED.—In reviewing applications for
permission to exercise the powers enumerated in this section,
the Director may consider—
"(A) the amount of capital of the appljdng Federal savings association,
"(B) whether or not such capital is sufficient under the
circumstances of the case,
"(C) the needs of the community to be served, and
"(D) any other facts and circumstances that seem to it
proper.
The Director may grant or refuse the application accordingly,
except that no permit shall be issued to any association having
capital less than the capital required by State law of State

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 299

banks, trust companies, and corporations exercising such
powers.
"(9) SURRENDER OF CHARTER.—(A) Any Federal savings
association may surrender its right to exercise the powers
granted under this subsection, and have returned to it any
securities which it may have deposited with the State authorities, by filing with the Director a certified copy of a resolution of
its board of directors indicating its intention to surrender its
right.
"(B) Upon receipt of such resolution, the Director, if satisfied
that such Federal savings association has been relieved in
accordance with State law of all duties as trustee, executor,
administrator, guardian or other fiduciary, may in the Director's discretion, issue to such association a certificate that such
association is no longer authorized to exercise the powers
granted by this subsection.
"(C) Upon the issuance of such a certificate by the Director,
such Federal savings association (i) shall no longer be subject to
the provisions of this section or the regulations of the Director
made pursuant thereto, (ii) shall be entitled to have returned to
it any securities which it may have deposited with State
authorities, and (iii) shall not exercise thereafter any of the
powers granted by this section without first applying for and
obtaining a new permit to exercise such powers pursuant to the
provisions of this section.
"(D) The Director may prescribe regulations necessary to
enforce compliance with the provisions of this subsection.
"(10) REVOCATION.—(A) In addition to the authority conferred
by other law, if, in the opinion of the Director, a Federal savings
association is unlawfully or unsoundly exercising, or has unlawfully or unsoundly exercised, or has failed for a period of 5
consecutive years to exercise, the powers granted by this subsection or otherwise fails or has failed to comply with the requirements of this subsection, the Director may issue and serve upon
the association a notice of intent to revoke the authority of the
association to exercise the powers granted by this subsection.
The notice shall contain a statement of the facts constituting
the alleged unlawful or unsound exercise of powers, or failure to
exercise powers, or failure to comply, and shall fix a time and
place at which a hearing will be held to determine whether an
order revoking authority to exercise such powers should issue
against the association.
"(B) Such hearing shall be conducted in accordance with the
provisions of subsection (dXlXB), and subject to judicial review
as therein provided, and shall be fixed for a date not earlier
than 30 days and not later than 60 days after service of such
notice unless the Director sets an earlier or later date at the
request of any Federal savings association so served.
' (C) Unless the Federal savings association so served shall
appear at the hearing by a duly authorized representative, it
shall be deemed to have consented to the issuance of the
revocation order. In the event of such consent, or if upon the
record made at any such hearing, the Director shall find that
£uiy allegation specified in the notice of charges has been established, the Director may issue and serve upon the eissociation an
order prohibiting it from accepting any new or additional trust
accounts and revoking authority to exercise any and all powers

103 STAT. 300

PUBLIC LAW 101-73—AUG. 9, 1989
granted by this subsection, except that such order shall permit
the association to continue to service all previously accepted
trust accounts pending their expeditious divestiture or termination.
"(D) A revocation order shall become effective not earlier
than the expiration of 30 days after service of such order upon
the £issociation so served (except in the case of a revocation
order issued upon consent, which shall become effective at the
time specified therein), and shall remain effective and enforceable, except to such extent as it is stayed, modified, terminated,
or set aside by action of the Director or a reviewing court,
"(o) CONVERSION OF STATE SAVINGS BANKS.—(1) Subject to

the

provisions of this subsection and under regulations of the Director,
the Director may authorize the conversion of a State-chartered
savings bank that is a Bank Insurance Fund member into a Federsd
savings bank, if such conversion is not in contravention of State law,
and provide for the organization, incorporation, operation, examination, and regulation of such institution.
"(2)(A) Any Federal savings bank chartered pursuant to this
subsection shall continue to be a Bank Insurance Fund member
until such time as it changes its status to a Savings Association
Insurance Fund member.
"(B) The Director shgdl notify the Corporation of any application
under this Act for conversion to a Federal charter by an institution
insured by the Corporation, shall consult with the Corporation
before disposing of the application, and shall notify the Corporation
of the Director's determination with respect to such application.
"(C) Notwithstanding any other provision of law, if the Corporation determines that conversion into a Federal stock savings bank or
the chartering of a Federal stock savings bank is necessary to
prevent the default of a savings bank it insures or to reopen a
savings bank in default that it insured, or if the Corporation determines, with the concurrence of the Director, that severe financial
conditions exist that threaten the stability of a savings bank insured
by the Corporation and that such a conversion or charter is likely to
improve the financial condition of such savings bank, the Corporation shall provide the Director with a certificate of such determination, the reasons therefor in conformance with the requirements of
this Act, and the bank shall be converted or chartered by the
Director, pursuant to the regulations thereof, from the time the
Corporation issues the certificate.
"(D) A bank may be converted under subparagraph (C) only if the
board of trustees of the bank—
"(i) has specified in writing that the bank is in danger of
closing or is closed, or that severe financial conditions exist that
threaten the stability of the bank and a conversion is likely to
improve the financial condition of the bank; and
(ii) has requested in writing that the Corporation use the
authority of subparagraph (C).
"(EXi) Before making a determination under subparagraph (D),
the Corporation shall consult the State bank supervisor of the State
in which the bank in danger of closing is chartered. The State bank
supervisor shall be given a reasonable opportunity, and in no event
less than 48 hours, to object to the use of the provisions of subparagraph (D).
"(ii) If the State supervisor objects during such period, the Corporation may use the authority of subparagraph (D) only by an

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

103 STAT. 301

affirmative vote of three-fourths of the Board of Directors. The
Board of Directors shall provide the State supervisor, as soon as
practicable, with a written certification of its determination.
^
"(3) A Federal savings bank chartered under this subsection shall
have the same authority with respect to investments, operations,
and activities, and shall be subject to the same restrictions, including those applicable to branching and discrimination, as would
apply to it if it were chartered as a Federal savings bank under any
other provision of this Act.
"(p) CONVERSIONS.—(1) Notwithstanding any other provision of
law, and consistent with the purposes of this Act, the Director may
authorize (or in the case of a Federal savings association, require)
the conversion of any mutual savings association or Federal mutual
savings bank that is insured by the Corporation into a Federal stock
savings association or Federal stock savings bank, or charter a
Federal stock savings association or Federal stock savings bank to
acquire the assets of, or merge with such a mutual institution under
the regulations of the Director.
"(2) Authorizations under this subsection may be made only—
"(A) if the Director has determined that severe financial
conditions exist which threaten the stability of an association
and that such authorization is likely to improve the financial
condition of the association,
"(B) when the Corporation has contracted to provide assistv
ance to such association under section 13 of the Federal Deposit
Insurance Act, or
"(C) to assist an institution in receivership.
"(3) A Federal savings bank chartered under this subsection shall Securities,
have the same authority with respect to investments, operations and
activities, and shall be subject to the same restrictions, including
those applicable to branching and discrimination, as would apply to
it if it were chartered as a Federal savings bank under any other
;
provision of this Act, and may engage in any investment, activity, or
operation that the institution it acquired was engaged in if that
institution was a Federal savings bank, or would have been authorized to engage in had that institution converted to a Federal
charter.
"(q) TYING ARRANGEMENTS.—(1) A savings association may not in

any manner extend credit, lease, or sell property of any kind, or
furnish any service, or fix or vary the consideration for any of the
foregoing, on the condition or requirement—
"(A) that the customer shall obtain additional credit, property, or service from such savings association, or from any
service corporation or affiliate of such association, other than a
loan, discount, deposit, or trust service;
"(B) that the customer provide additional credit, property, or
service to such association, or to any service corporation or
affiliate of such association, other than those related to and
usually provided in connection with a similar loan, discount,
deposit, or trust service; and
"(C) that the customer shall not obtain some other credit,
property, or service from a competitor of such association, or
from a competitor of any service corporation or affiliate of such
association, other than a condition or requirement that such
association shall reasonably impose in connection with credit
transactions to assure the soundness of credit.

^

^

103 STAT. 302

Courts, U.S.

^

PUBLIC LAW 101-73—AUG. 9, 1989

"(2XA) Any person may sue for and have injunctive relief, in any
court of the United States having jurisdiction over the parties,
against threatened loss or damage by reason of a violation of
paragraph (1), under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage
is granted by courts of equity and under the rules governing such
proceedings.
"(B) Upon the execution of proper bond against damages for an
injunction improvidently granted and a showing that the danger of
irreparable loss or damage is immediate, a preliminary injunction
may issue.
"(3) Any person injured by a violation of paragraph (1) may bring
an action in any district court of the United States in which the
defendant resides or is found or has an agent, without regard to the
amount in controversy, or in any other court of competent jurisdiction, and shall be entitled to recover three times the amount of the
damages sustained, and the cost of suit, including a reasonable
attorney's fee. Any such action shall be brought within 4 years from
the date of the occurrence of the violation.
"(4) Nothing contained in this subsection affects in any manner
the right of the United States or any other party to bring an action
under any other law of the United States or of any State, including
any right which may exist in addition to specific statutory authority,
challenging the legality of any act or practice which may be proscribed by this subsection. No regulation or order issued by the
Director under this subsection shall in any manner constitute a
defense to such action.
"(5) For purposes of this subsection, the term 'loan' includes
obligations and extensions or advances of credit.
"(r) OUT-OF-STATE BRANCHES.—(1) No Federal savings association
may establish, retain, or operate a branch outside the State in which .
the Federal savings association has its home office, unless the
association qualifies as a domestic building and loan association
under section 7701(aX19) of the Internal Revenue CJode of 1986 or
meets the asset composition test imposed by subparagraph (c) of that
section on institutions seeking so to qualify. No out-of-State branch
so established shall be retained or operated unless the total assets of
the Federal savings association attributable to all branches of the
Federal savings association in that State would qualify the branches
as a whole, were they otherwise eligible, for treatment as a domestic
building and loan association under section 7701(aX19).
"(2) The limitations of paragraph (1) shall not apply if—
"(A) the branch results from a transaction authorized under
section 13(k) of the Federal Deposit Insurance Act;
"(B) the branch was authorized for the Federal savings
association prior to October 15,1982;
"(C) the law of the State where the branch would be located
would permit the branch to be established if the branch were a
Federal savings association chartered by the State in which its
home office is located; or
"(D) the branch was operated lawfully as a branch under
State law prior to the £issociation's conversion to a Federal
charter.
"(3) The Director, for good cause shown, may sdlow Federal savings associations up to 2 years to comply with the requirements of
this subsection,
"(s) MINIMUM CAPITAL REQUIREMENTS.—

?

PUBLIC LAW 101-73—AUG. 9, 1989
"(1) I N GENERAL.—Consistent with the purposes of section 908
of the International Lending Supervision Act of 1983 and the
capital requirements established pursuant to such section by
the appropriate Federal banking agencies (as defined in section
903(1) of such Act), the Director shall require all savings associations to achieve and maintain adequate capital by—
"(A) establishing minimum levels of capital for savings
associations; and
"(B) using such other methods as the Director determines
to be appropriate.

103 STAT. 303

7

,

"(2) MINIMUM CAPITAL LEVELS MAY BE DETERMINED BY DIREC-

TOR CASE-BY-CASE.—The Director may, consistent with subsection (t), establish the minimum level of capital for a savings
association at such amount or at such ratio of capital-to-assets
as the Director determines to be necessary or appropriate for
such association in light of the particular circumstances of the
association.
"(3) UNSAFE OR UNSOUND PRACTICE.—In the Director's discretion, the Director may treat the failure of any savings association to maintain capital at or above the minimum level required
by the Director under this subsection or subsection (t) as an
unsafe or unsound practice.

*

"(4) DIRECTIVE TO INCREASE CAPITAL.—

"(A) PLAN MAY BE REQUIRED.—In addition to any other

action authorized by law, including paragraph (3), the
Director may issue a directive requiring any savings
association which fails to maintain capital at or above the
minimum level required by the Director to submit and
adhere to a plan for increasing capital which is acceptable
to the Director.
"(B) ENFORCEMENT OF PLAN.—Any directive issued and
plan approved under subparagraph (A) shall be enforceable
under section 8 of the Federal Deposit Insurance Act to the
same extent and in the same manner as an outstanding
order which w£is issued under section 8 of the Federal
Deposit Insurance Act and has become final.
"(5) PLAN TAKEN INTO ACCOUNT IN OTHER PROCEEDINGS.—The

Director may—
"(A) consider a savings association's progress in adhering
to any plan required under paragraph (4) whenever such
association or any affiliate of such association (including
any company which controls such association) seeks the
Director's approval for any proposal which would have the
effect of diverting earnings, diminishing capital, or otherwise impeding such association's progress in meeting the
minimum level of capital required by the Director; and
"(B) disapprove any proposal referred to in subparagraph
(A) if the Director determines that the proposal would
adversely affect the ability of the association to comply with
such plan.
'(t) CAPITAL STANDARDS.—
"(1) I N GENERAL.—
"(A) REQUIREMENT FOR STANDARDS TO BE PRESCRIBED.—

The Director shall, by regulation, prescribe and maintain
uniformly applicable capital standards for savings associations. Those standards shall include—
"(i) a leverage limit;

•

103 STAT. 304

PUBLIC LAW 101-73—AUG. 9, 1989

'
•

'*

J ,

"(ii) a tangible capital requirement; and ^ '
"(iii) a risk-based capital requirement.
"(B) CoMPUANCE.—A savings association is not in compliance with capital standards for purposes of this subsection
unless it complies with all capital standards prescribed
under this paragraph.
"(C) STRINGENCY.—The standards prescribed under this
paragraph shall be no less stringent than the capital standards applicable to national banl^.
"(D) DEADUNE FOR REGULATIONS.—The Director shall
promulgate final regulations under this paragraph not
later than 90 days after the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement
Act of 1989, and those regulations shall become effective
not later than 120 days after the date of enactment.
' '(2) CONTENT OF STANDARDS.—
"(A) LEVERAGE UMIT.—The leverage limit

'•':%:

prescribed
under paragraph (1) shall require a savings association to
maintain core capital in an amount not less than 3 percent
of the savings association's total Eissets.
"(B) TANGIBLE CAPITAL REQUIREMENT.—The tangible capital requirement prescribed under paragraph (1) shall require a savings association to maintain tangible capital in
an amount not less than 1.5 percent of the savings association's total assets.
"(C) RISK-BASED CAPITAL REQUIREMENT.—Notwithstanding

ii
^

t

^ •

paragraph (IXC), the risk-based capital requirement prescribed under paragraph (1) may deviate from the riskbased capital standards applicable to national banks to
reflect interest-rate risk or other risks, but such deviations
shall not, in the aggregate, result in materially lower levels
of capital being required of savings associations under the
risk-based capital requirement than would be required
under the risk-based capital standards applicable to national banks.
"(3) TRANSITION RULE.—
"(A) CERTAIN QUALIFYING SUPERVISORY GOODWILL INCLUDED IN CALCULATING CORE CAPITAL.—Notwithstanding

paragraph (9XA), an eligible savings association may include qualifying supervisory goodwill in calculating core
capital. The amount of qualifying supervisory goodwill that
may be included may not exceed the applicable percentage
of total assets set forth in the following table:
V

.'

"For the following
period:
Prior to January 1, 1992
January 1, 1992-December 31, 1992
January 1, 1993-December 31, 1993
January 1, 1994-December 31, 1994
Thereafter

The applicable
percentage is:
1.500 percent
1.000 percent
0.750 percent
0.375 percent
0 percent

"(B) EuGiBLE SAVINGS ASSOCIATIONS.—For purposes of
subparagraph (A), a savings association is an eligible savings association so long as the Director determines that—
"(i) the savings association's management is competent;

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 305

"(ii) the savings association is in substantial compliance with all applicable statutes, regulations, orders,
and supervisory agreements and directives; and
"(iii) the savings association's management has not
engaged in insider dealing, speculative practices, or
any other activities that have jeopardized the association's safety and soundness or contributed to impairing
the association's capital.
"(4) SPECIAL RULES FOR PURCHASED MORTGAGE SERVICING
RIGHTS.—

"(A) I N GENERAL.—Notwithstanding paragraphs (1)(C)
and (9), the standards prescribed under paragraph (1) may
permit a savings association to include in calculating capital for the purpose of the leverage limit and risk-based
capital requirement prescribed under paragraph (1), on
terms no less stringent than under both the capital standards applicable to State nonmember banks and (except as to
the amount that may be included in calculating capital) the
capital standards applicable to national banks, 90 percent
of the fair market value of readily marketable purchased
mortgage servicing rights.
"(B) TANGIBLE CAPITAL REQUIREMENT.—Notwithstanding

paragraphs (IXC) and (9XC), the standards prescribed under
paragraph (1) may permit a savings association to include
in calculating capital for the purpose of the tangible capital
requirement prescribed under paragraph (1), on terms no
less stringent than under both the capital standards applicable to State nonmember banks and (except as to the
amount that may be included in calculating capital) the
capital standards applicable to national banks, 90 percent
of the fair market value of readily marketable purchased
mortgage servicing rights.
"(C) PERCENTAGE UMITATION PRESCRIBED BY FDIC.—Not-

withstanding paragraph (1)(C) and subparagraphs (A) and
(B) of this paragraph—
"(i) for the purpose of subparagraph (A), the maximum £imount of purchased mortgage servicing rights
that may be included in calculating capital under the
leverage limit and the risk-based capital requirement
prescribed under paragraph (1) may not exceed the
amount that could be included if the savings association were an insured State nonmember bank; and
"(ii) for the purpose of subparagraph (B), the Corporation shall prescribe a maximum percentage of the
tangible capital requirement that savings associations
may satisfy by including purchased mortgage servicing
rights in calculating such capital.
"(D) QUARTERLY VALUATION.—The fair market value of
purchased mortgage servicing rights shall be determined
not less often than quarterly.
"(5) SEPARATE CAPITAUZATION REQUIRED FOR CERTAIN SUBSIDIARIES.—

"(A) I N GENERAL.—In determining compliance with capital standards prescribed under paragraph (1), all of a
savings association's investments in and extensions of
credit to any subsidiary engaged in activities not permis-

103 STAT. 306

PUBLIC LAW 101-73—AUG. 9, 1989
sible for a national bank shall be deducted from the savings
association's capital.
"(B) EXCEPTION FOR AGENCY ACTIVITIES.—Subparagraph

(A) shall not apply with respect to a subsidiary engaged,
solely as agent for its customers, in activities not permissible for a national bank unless the Corporation, in its sole
discretion, determines that, in the interests of safety and
soundness, this subparagraph should cease to apply to that
subsidiary.
"(C) OTHER EXCEPTIONS.—Subparagraph (A) shall

not

apply with respect to any of the following:
"(i) MORTGAGE BANKING SUBSIDIARIES.—A savings
association's investments in and extensions of credit to
a subsidiary engaged solely in mortgage-banking activities.
"(ii) SUBSIDIARY INSURED DEPOSITORY INSTITUTIONS.—

A savings association's investments in and extensions
of credit to a subsidiary—
"(I) that is itself an insured depository institution or a company the sole investment of which is
an insured depository institution, and
"(II) that was acquired by the parent insured
depository institution prior to May 1,1989.
"(iii) CERTAIN FEDERAL SAVINGS BANKS.—Any Federal
savings association existing as a Federal savings
association on the date of enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989—
"(I) that was chartered prior to October 15, 1982,
as a savings bank or a cooperative bank under
State law; or
"(II) that acquired its principal assets from an
association that was chartered prior to October 15,
1982, as a savings bank or a cooperative bank
under State law.
"(D) TRANSITION RULE.—

"(i)

INCLUSION

IN

CAPITAL.—Notwithstanding

subparagraph (A), if a savings association's subsidiary
was, as of April 12, 1989, engaged in activities not
permissible for a national bank, the savings association
may include in calculating capital the applicable
percentage (set forth in clause (ii)) of the lesser of—
"(I) the savings association's investments in and
extensions of credit to the subsidiary on April 12,
1989; or
"(II) the savings association's investments in and
extensions of credit to the subsidiary on the date as
of which the savings association's capital is being
determined.
"(ii) APPLICABLE PERCENTAGE.—For purposes of clause

(i), the applicable percentage is as follows:
"For the following
period:
Prior to July 1, 1990
July 1, 1990-June 30, 1991
July 1, 1991-June 30, 1992
July 1, 1992-June 30, 1993
July 1, 1993-June 30, 1994
Thereafter

The applicable
percentage is:
100 percent
90 percent
75 percent
60 percent
40 percent
0 percent

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 307

"(iii) FDIC'S DISCRETION TO PRESCRIBE LESSER PERCENTAGE.—The Corporation may prescribe by order, with
respect to a particular savings association, an applicable percentage less than that provided in clause (ii)
if the Corporation determines, in its sole discretion,
that the use of a greater percentage would, under the
circumstances, constitute an unsafe or unsound practice or be likely to result in the association's being in
an unsafe or unsound condition.
"(E)

CONSOLIDATION

OF SUBSIDIARIES

NOT SEPARATELY

CAPiTAUZED.—In determining compliance with capital
standards prescribed under paragraph (1), the assets and
liabilities of each of a savings association's subsidiaries
(other than any subsidiary described in subparagraph
(C)(ii)) shgdl be consolidated with the savings association's
assets and liabilities, unless all of the savings association's
investments in and extensions of credit to the subsidiary
are deducted from the savings association's capital pursuant to subparagraph (A).
"(6) CONSEQUENCES OF FAILING TO COMPLY WITH CAPITAL
STANDARDS.—
"(A) PRIOR TO JANUARY i, I99i.—Prior to January 1,1991,

the Director—
"(i) may restrict the asset growth of any savings
association not in compliance with capital standards;
and
"(ii) shall, beginning 60 days following the promulgation of final regulations under this subsection, require
any savings association not in compliance with capital
standards to submit a plan under subsection (s)(4XA)
that—
"(I) addresses the savings association's need for
increased capital;
"(II) describes the manner in which the savings
association will increase its capital so as to achieve
compliance with capital standards;
"(III) specifies the types and levels of activities in
which the savings association will engage;
"(IV) requires any increase in assets to be accompanied by an increase in tangible capital not less in
percentage amount than the leverage limit then
applicable;
"(V) requires any increase in assets to be accompanied by an increase in capital not less in percentage amount than required under the risk-based
capital standard then applicable; and
"(VI) is acceptable to the Director.
"(B) O N OR AFTER JANUARY i, 1991.—On or after January 1,1991, the Director—
"(i) shall prohibit any asset growth by any savings
association not in compliance with capital standards,
except as provided in subparagraph (C); and
"(ii) shall require any savings association not in
compliance with capital standards to comply with a
capital directive issued by the Director (which may

103 STAT. 308

PUBLIC LAW 101-73—AUG. 9, 1989
include such restrictions, including restrictions on the
payment of dividends and on compensation, as the
Director determines to be appropriate).
"(C) LIMITED GROWTH EXCEPTION.—The Director

may

permit any savings association that is subject to subparagraph (B) to increase its assets in an amount not exceeding
the amount of net interest credited to the savings association's deposit liabilities if—
"(i) the savings association obtains the Director's
prior approval;
"(ii) any increase in assets is accompanied by an
increase in tangible capital in an amount not less than
6 percent of the increase in assets (or, in the Director's
discretion if the leverage limit then applicable is less
than 6 percent, in an amount equal to the increase in
assets multiplied by the percentage amount of the
leverage limit);
"(iii) any increase in assets is accompanied by an
increase in capital not less in percentage amount than
required under the risk-based capital standard then
applicable;
"(iv) any increase in assets is invested in low-risk
assets, such as first mortgage loans secured by 1- to 4family residences and fully secured consumer loans;
and
"(v) the savings association's ratio of core capital to
total assets is not less than the ratio existing on January 1, 1991.
"(D) ADDITIONAL RESTRICTIONS IN CASE OF EXCESSIVE RISKS

OR RATES.—The Director may restrict the asset growth of
any savings association that the Director determines is
taking excessive risks or paying excessive rates for deposits.
"(E) FAILURE TO COMPLY WITH PLAN, REGULATION, OR

ORDER.—The Director shall treat as an unsafe and unsound
practice any material failure by a savings association to
comply with any plan, regulation, or order under this paragraph.
"(F) EFFECT ON OTHER REGULATORY AUTHORITY.—This

paragraph does not limit any authority of the Director
under other provisions of law.
"(7) EXEMPTION FROM CERTAIN SANCTIONS.—
"(A) APPLICATION FOR EXEMPTION.—Any savings associa-

tion not in compliance with the capital standards prescribed under paragraph (1) may apply to the Director for
an exemption from any applicable sanction or penalty for
noncompliance which the Director may impose.
"(B) EFFECT OF GRANT OF EXEMPTION.—If the Director

approves any savings association's application under
subparagraph (A), the only sanction or penalty to be imposed by the Director for the savings association's failure to
comply with the capital standards prescribed under paragraph (1) is the growth limitation contained in paragraph
(6)(B) or paragraph (6)(C), whichever is applicable.
"(C) STANDARDS FOR APPROVAL OR DISAPPROVAL.—

"(i) APPROVAL.—The Director may approve an application for an exemption if the Director determines
that—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 309

"(I) such exemption would pose no significant
risk to the affected deposit insurance fund;
"(II) the savings association's management is
competent;
"(III) the savings association is in substantial
compliance with all applicable statutes, regulations, orders, and supervisory agreements and
directives; and
"(IV) the savings association's management has
not engaged in insider dealing, speculative practices, or any other activities that have jeopardized
the association's safety and soundness or contributed to impairing the association's capital.
"(ii)

DENIAL

OR REVOCATION

OF APPROVAL.—The

Director shall deny any application submitted under
clause (i) and revoke any prior approval granted with
respect to any such application if the Director determines that the association's failure to meet any capital
standards prescribed under paragraph (1) is accompanied by—
"(I) a pattern of consistent losses;
"(II) substantial dissipation of assets;
"(III) evidence of imprudent management or
business behavior;
"(IV) a material violation of any Federal law,
any law of any State to which such association is
subject, or any applicable regulation; or
"(V) any other unsafe or unsound condition or
activity, other than the failure to meet such capital
standards.
"(D) SUBMISSION OF PLAN REQUIRED.—Any application

submitted under subparagraph (A) shall be accompanied by
a plan which—
"(i) meets the requirements of paragraph (6)(A)(ii);
and
"(ii) is acceptable to the Director.
"(E) FAILURE TO COMPLY WITH PLAN.—The Director shall
treat as an unsafe and unsound practice any material
failure by any savings association which has been granted
an exemption under this paragraph to comply with the
provisions of any plan submitted by such association under
subparagraph (D).
"(F) EXEMPTION NOT AVAILABLE WITH RESPECT TO UNSAFE

OR UNSOUND PRACTICES.—This paragraph does not limit any
authority of the Director under any other provision of law,
including section 8 of the Federal Deposit Insurance Act, to
take any appropriate action with respect to any unsafe or
unsound practice or condition of any savings association,
other than the failure of such savings association to comply
with the capital standards prescribed under paragraph (1).
"(8) TEMPORARY AUTHORITY TO MAKE EXCEPTIONS FOR ELIGIBLE
SAVINGS ASSOCIATIONS.—

"(A) I N GENERAL.—Notwithstanding paragraph (1)(C), the
Director may, by order, make exceptions to the capital
standards prescribed under paragraph (1) for eligible savings associations. No exception under this paragraph shall
be effective after January 1,1991.

103 STAT. 310

PUBLIC LAW 101-73—AUG. 9, 1989
"(B) STANDARDS FOR APPROVAL OR DISAPPROVAL.—In determining whether to grant an exception under subparagraph
(A), the Director shall apply the same standards as apply to
determinations under paragraph (7)(C).
"(9) DEFINITIONS.—For purposes of this subsection—
"(A) CORE CAPITAL.—Unless the Director prescribes a

more stringent definition, the term 'core capital' means
core capital as defined by the Comptroller of the Currency
for national banks, less any unidentifiable intangible
assets, plus any purchased mortgage servicing rights excluded from the Comptroller's definition of capital but included in calculating the core capital of savings associations
pursuant to paragraph (4).
"(B) QuAUFYiNG SUPERVISORY GOODWILL.—The term
'qualifying supervisory goodwill' means supervisory goodwill existing on April 12, 1989, amortized on a straightline
basis over the shorter of—
"(i) 20 years, or
"(ii) the remaining period for amortization in effect
on April 12,1989.
"(C) TANGIBLE CAPITAL.—The term 'tangible capital'
means core capital minus any intangible assets (as intangible assets are defined by the Comptroller of the Currency
for national banks).
"(D) TOTAL ASSETS.—The term 'total assets' means total
assets (as total assets are defined by the Comptroller of the
Currency for national banks) adjusted in the same manner
as total assets would be adjusted in determining compliance
with the leverage limit applicable to national banks if the
savings association were a national bank.
"(10) USE OF COMPTROLLER'S DEFINITIONS.—

(A) I N GENERAL.—The standards prescribed under paragraph (1) shall include all relevant substantive definitions
established by the Comptroller of the Currency for national
banks.
"(B) SPECIAL RULE.—If the Comptroller of the Currency
has not made effective regulations defining core capital or
establishing a risk-based capital standard, the Director
shall use the definition and standard contained in the
Comptroller's most recently published final regulations,
"(u) LIMITS ON LOANS TO ONE BORROWER.—

"(1) I N GENERAL.—Section 5200 of the Revised Statutes shall
apply to savings associations in the same manner and to the
same extent as it applies to national banks.
"(2) SPECIAL RULES.—

"(A) Notwithstanding paragraph (1), a savings association
may make loans to one borrower under one of the following
clauses:
"(i) for any purpose, not to exceed $500,000; or
"(ii) to develop domestic residential housing units,
not to exceed the lesser of $30,000,000 or 30 percent of
the savings association's unimpaired capital and
unimpaired surplus, if—
"(I) the purchase price of each single family
dwelling unit the development of which is financed
under this clause does not exceed $500,000;

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 311

"(II) the savings association is and continues to
be in compliance with the fully phased-in capital
standards prescribed under subsection (t);
"(III) the Director, by order, permits the savings
association to avail itself of the higher limit provided by this clause;
"(IV) loans made under this clause to all borrowers do not, in aggregate, exceed 150 percent of the
savings association's unimpaired capital and
unimpaired surplus; and
"(V) such loans comply with all applicable loanto-value requirements.
"(B) A savings association's loans to one borrower to Real property,
finance the sale of real property acquired in satisfaction of
debts previously contracted in good faith shall not exceed 50
percent of the savings association's unimpaired capital and
unimpaired surplus.
"(3) AUTHORITY TO IMPOSE MORE STRINGENT RESTRICTIONS.—

The Director may impose more stringent restrictions on a savings association's loans to one borrower if the Director determines that such restrictions are necessary to protect the safety
and soundness of the savings association.
'(v) REPORTS OF CONDITION.—

"(1) IN GENERAL.—Each association shall make reports of
conditions to the Director which shall be in a form prescribed by
the Director and shall contain—
"(A) information sufficient to allow the identification of
potential interest rate and credit risk;
"(B) a description of any assistance being received by the
association, including the type and monetary value of such
assistance;
"(C) the identity of all subsidiaries and affiliates of the
association;
"(D) the identity, value, type, and sector of investment of
all equity investments of the associations and subsidiaries;
and
"(E) other information that the Director may prescribe.
"(2) PUBLIC DISCLOSURE.—

"(A) Reports required under paragraph (1) and all
information contained therein shall be available to the
public upon request, unless the Director determines—
"(i) that a particular item or classification of Classified
information should not be made public in order to information.
protect the safety or soundness of the institution concerned or institutions concerned, the Savings Association Insurance Fund; or
"(ii) that public disclosure would not otherwise be in
the public interest.
"(B) Any determination made by the Director under
subparagraph (A) not to permit the public disclosure of
information shall be made in writing, and if the Director
restricts any item of information for savings institutions
generally, the Director shall disclose the reason in detail in
the Federal Register.
"(C) The Director's determinations under subparagraph
(A) shall not be subject to judicial review.
"(3) ACCESS BY CERTAIN PARTIES.—

103 STAT. 312

PUBLIC LAW 101-73—AUG. 9, 1989
"(A) Notwithstanding paragraph (2), the persons described in subparagraph (B) shall not be denied access to
any information contained in a report of condition, subject
to reasonable requirements of confidentiality. Those
requirements shall not prevent such information from
being transmitted to the Comptroller General of the United
States for analysis.
"(B) The following persons are described in this subparagraph for purposes of subparagraph (A):
"(i) the Chairman and ranking minority member of
the Committee on Banking, Housing, and Urban Affairs of the Senate and their designees; and
"(ii) the Chairman and ranking minority member of
the Committee on Banking, Finance and Urban Affairs
of the House of Representatives and their designees.
"(4) FIRST TIER PENALTIES.—Any savings association which—

"(A) maintains procedures reasonably adapted to avoid
any inadvertent and unintentional error and, as a result of
such an error—
"(i) fails to submit or publish any report or information required by the Director under paragraph (1) or (2),
within the period of time specified by the Director; or
"(ii) submits or publishes any false or misleading
report or information; or
"(B) inadvertently transmits or publishes any report
which is minimally late,
shall be subject to a penalty of not more than $2,000 for each
day during which such failure continues or such false or misleading information is not corrected. The savings association
shall have the burden of proving by a preponderence of the
evidence that an error was inadvertent and unintentional and
that a report was inadvertently transmitted or published late.
"(5) SECOND TIER PENALTIES.—Any savings association
which—
"(A) fails to submit or publish any report or information
required by the Director under paragraph (1) or (2), within
the period of time specified by the Director; or
"(B) submits or publishes any false or misleading report
or information,
in a manner not described in paragraph (4) shall be subject to a
penalty of not more than $20,000 for each day during which
such failure continues or such false or misleading information is
not corrected.
"(6) THIRD TIER PENALTIES.—If any savings association know-

ingly or with reckless disregard for the accuracy of any information or report described in paragraph (5) submits or publishes
any false or misleading report or information, the Director may
assess a penalty of not more than $1,000,000 or 1 percent of total
assets, whichever is less, per day for each day during which
such failure continues or such false or misleading information is
not corrected.
"(7) ASSESSMENT.—Any penalty imposed under paragraph (4),
(5), or (6) shall be assessed and collected by the Director in the
manner provided in subparagraphs (E), (F), (G), and (I) of section
8(i)(2) of the Federal Deposit Insurance Act (for penalties imposed under such section), and any such £issessment (including

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 313

the determination of the amount of the penalty) shall be subject
to the provisions of such subsection.
"(8) HEARING.—Any savings association against which any
penalty is assessed under this subsection shall be afforded a
hearing if such savings association submits a request for such
hearing within 20 days after the issuance of the notice of
assessment. Section 8(h) of the Federal Deposit Insurance Act
shall apply to any proceeding under this subsection.
'"SEC. 6. LIQUID ASSET REQUIREMENTS.

_.

12 USC 1465.

r

"(a) IN GENERAL.—The purpose of this section is to provide a
means for creating effective and flexible liquidity in savings associations which can be increased when mortgage money is plentiful,
maintained in easily liquidated instruments, and reduced to add to
the flow of funds to the mortgage market in periods of credit
stringency. More flexible liquidity will help support sound mortgage
credit and a more stable supply of such credit.
"(b) MAINTENANCE OF ACCOUNT.—

"(1) IN GENERAL.—Every savings association shall maintain
the aggregate amount of its assets of the following types at not
less than such amount as, in the opinion of the Director, is
appropriate:
"(A) cash;
"(B) balances maintained in a Federal reserve bank or passed
through a Federal home loan bank or another depository
institution to a Federal reserve bank pursuant to the Federal
Reserve Act; and
"(C) to such extent as the Director may approve for the Securities,
purposes of this section—
"(i) time and savings deposits in Federal home loan
banks, institutions which are, or are eligible to become,
members thereof, and commercial banks;
"(ii) such obligations, including such special obligations,
'
of the United States, a State, any territory or possession of
the United States, or a political subdivision, agency, or
instrumentality of any one or more of the foregoing, and
bankers' acceptances, as the Director may approve;
"(iii) shares or certificates of any open-end management
investment company which is registered with the Securities
and Exchange Commission under the Investment Company
Act of 1940 and the portfolio of which is restricted by such
investment company's investment policy, changeable only
if authorized by shareholder vote, solely to any of the
obligations or other investments enumerated in subparagraph (A) and in clauses (i), (ii), (iv), (v), (vi), and (vii) of this
subparagraph;
"(iv) liquid, highly rated corporate debt obligations with 3
years or less remaining until maturity;
"(v) highly rated commercial paper with 270 days or less
remaining until maturity;
"(vi) mortgage related securities (as that term is defined
^
in section 3(a)(41) of the Securities Exchange Act of 1934)—
^^
"(I) that have one year or less remaining until maturity; or
,
"(II) that are subject to an agreement (including a
repurchase agreement, put option, right of redemption,
or takeout commitment) that requires another person

103 STAT. 314

Loans.
Real property.

Regulations.

.

PUBLIC LAW 101-73—AUG. 9, 1989
to purchase the securities within a period that does not
exceed one year, and that person is an insured depository institution (as defined in section 3 of the Federal
Deposit Insurance Act) that is in compliance with applicable capital standards, a primary dealer in United
States Government securities, or a broker or dealer
registered under the Securities Exchange Act of 1934;
and
"(vii) mortgage loans on the security of a first lien on
residential real property, if the mortgage loans qualify as
backing for mortgage-backed securities issued by the Federal National Mortgage Association or the Federal Home
Loan Mortgage Association or guaranteed by the Government National Mortgage Association, and either—
"(I) the mortgage loans have one year or less remaining until maturity, or
"(II) the mortgage loans are subject to an agreement
(including a repurchase agreement, put option, right of
!
redemption, or takeout commitment) that requires another person to purchase the loans within a period that
does not exceed one year, and that person is an insured
depository institution (as defined in section 3 of the
Federal Deposit Insurance Act) that is in compliance
with applicable capital standards, a primary dealer in
United States Government securities, or a broker or
dealer registered under the Securities Exchange Act of
1934.
"(2) LIMITATION.—The requirement prescribed by the Director
pursuant to this subsection (hereafter in this section referred to
as the 'liquidity requirement') may not be less than 4 percent or
more than 10 percent of the obligation of the institution on
withdrawable accounts and borrowings payable on demand or
with unexpired maturities of one year or less. The Director shall
prescribe regulations to implement the provisions of this subsection.
"(c) CALCULATION.—The amount of any savings association's
liquidity requirement, and any deficiency in compliance therewith,
shall be calculated as the Director shall prescribe. The Director may
prescribe different liquidity requirements, within the limitations
specified herein, for different classes of savings associations, and for
such purposes the Director is authorized to clsissify savings associations according to type, size, location, rate of withdrawals, or on
such other basis or bases of differentiation as the Director may deem
to be reasonably necessary or appropriate for the purposes of this
section.
"(d) DEFICIENCY ASSESSMENTS.—For any deficiency in compliance
with the liquidity requirements, the Director may, in the Director's
discretion, assess a penalty consisting of the payment by the institution of such sum as may be assessed by the Director but not in
excess of a rate equal to the highest rate on Federal home loan bank
advances of one year or less, plus 2 percent per year, on the amount
of the deficiency for the period with respect to which the deficiency
existed. Any penalty assessed under this subsection against a savings association shall be paid to the Director. The Director may
authorize or require that, at any time before collection thereof, and
whether before or after the bringing of any action or other legal
proceeding, the obtaining of any judgment or other recovery, or the

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 315

issuance or levy of any execution or other legal process therefor, and
with or without consideration, any such penalty or recovery be
compromised, remitted, or mitigated in whole or part. The penalties
authorized under this subsection are in addition to all remedies and
sanctions otherwise available.
"(e) REDUCTION OR SUSPENSION.—Whenever the Director deems it
advisable in order to enable a savings association to meet withdrawals or to pay obligations, the Director may, to such extent and
subject to such conditions as the Director may prescribe, permit the
savings association to reduce its liquidity below the minimum
amount. Whenever the Director determines that conditions of national emergency or unusual economic stress exist, the Director may
suspend any part or all of the liquidity requirements hereunder for
such period as the Director may prescribe. Any such suspension,
unless sooner terminated by its terms or by the Director, shall
terminate at the expiration of 90 days next after its commencement.
The preceding sentence does not prevent the Director from again
exercising, before, at, or after any such termination, the authority
conferred by this subsection.
"(f) REGULATING AUTHORITY.—The Director is authorized to issue
such regulations, including definitions of terms used in this section,
to make such examinations, and to conduct such investigations as
the Director deems necessary or appropriate to effectuate the purposes of this section. The reasonable cost of any such examination or
investigation, as determined by the Director, shall be paid by the
association.
"SEC. 7. APPLICABILITY.

"The provisions of this Act shall apply to the United States and to
Puerto Rico, Guam, and the Virgin Islands.
"SEC. 8. DISTRICT ASSOCIATIONS.

"(a) IN GENERAL.—The Director shall, with respect to all incorporated or unincorporated building, building or loan, building and
loan, or homestead associations, and similar institutions, of or
transacting or doing business in the District of Columbia, or
maintaining any office in the District of Columbia (other than
Federal savings associations), have the same powers and functions
as to examination, operation, and regulation as the Director has
with respect to Federal savings associations.
"(b) ADDITIONAL POWERS.—Any such association or institution
incorporated under the laws of, or organized in, the District of
Columbia shall have in addition to any existing statutory authority
such statutory authority as is vested in Federal savings associations.
"(c) CHARTER AMENDMENTS.—Charters, certificates of incorporation, articles of incorporation, constitutions, bylaws, or other organic
documents of associations or institutions referred to in subsection (b)
of this section may, without regard to anjrthing contained therein or
otherwise, be amended in such manner and to such extent and upon
such votes if any as the Director may by regulation or otherwise
provide.
"(d) LIMITATION.—Nothing in this section shall cause, or permit
the Director to cause. District of Columbia associations to be or
become Federal savings associations, or require the Director to
impose on District of Columbia associations the same regulations as
are imposed on Federal savings associations.

Territories, U.S.
12 u s e 1466.

District of
Columbia.
12 u s e 1466a.

103 STAT. 316
12 use 1467.

PUBLIC LAW 101-73—AUG. 9, 1989
"SEC. 9. EXAMINATION FEES.

' "«:

' ..':

"(a) EXAMINATION OF SAVINGS ASSOCIATIONS.—Thecostof conduct-

ing examinations of savings associations pursuant to section 5(d) of
this Act shall be assessed by the Director against each such savings
association in proportion to the assets or resources of the savings
association.
"(b) EXAMINATION OF AFFIUATES.—The cost of conducting
examinations of affiliates of savings associations pursuant to this
Act may be assessed by the Director against each affiliate which is
examined in proportion to the assets or resources held by the
affiliate on the date of any such examination.
"(c) ASSESSMENT AGAINST ASSOCIATION IN CASE OF AFFIUATE'S
REFUSAL To PAY.—

-;_;,
''

"(1) I N GENERAL.—Subject to paragraph (2), if any affiliate of
any savings association—
"(A) refuses to pay any assessment under subsection (b);
or
"(B) fails to pay any such assessment before the end of
the 60-day period beginning on the date of the assessment,
the Director may assess such cost against, and collect such cost
from, such savings association.
"(2) AFFIUATE OF MORE THAN 1 SAVINGS ASSOCIATION.—If any
affiliate referred to in paragraph (1) is an affiliate of more than
1 savings association, the assessment with respect to the affiliate agEiinst, and collected from, any affiliated savings association in such proportions as the Director may prescribe.

"(d) CIVIL
COOPERATE.—

MONEY

PENALTY

FOR AFFIUATE'S

REFUSAL T O

"(1) PENALTY IMPOSED.—If any affiliate of any savings association—
"(A) refuses to permit any examiner appointed by the
Director to make an examination; or
"(B) refuses to provide any information required to be
disclosed in the course of any examination,
the savings association shall forfeit and pay a civil penalty of
not more than $5,000 for each day that any such refusal continues.
"(2) ASSESSMENT AND COLLECTION.—Any penalty

y.

^

imposed

under paragraph (1) shall be assessed and collected by the
Director, in the manner provided in section 8(iX2) of the Federal
Deposit Insurance Act.
"(e) REGULATIONS.—Only the Director may prescribe regulations
with respect to—
"(1) the computation of, and the assessment for, the cost of
conducting examinations pursuant to this section; and
"(2) the collection and use of such assessments and any fees
under this section.
Such regulations may establish formulas to determine a fee or
schedule of fees to cover the costs of examinations and also to cover
the cost of processing applications, filings, notices, and requests for
approvals by the Director or the Director's designee.
"(f) CJoLLECTiON THROUGH F D I C OR FEDERAL HOME LOAN BANKS.—
The Corporation or the Federal home loan banks shall, upon request
of and by agreement with the Director, collect fees and assessments
on behalf of the Director and be reimbursed for the actual cost of
collection.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 317

"(g) COSTS OF OTHER EXAMINATIONS.—
"(1) EXAMINATION OF FIDUCIARY ACTIVITIES.—In

addition to
any assessment imposed pursuant to subsection (a), the cost of
conducting examinations of fiduciary activities of savings
associations which exercise fiduciary powers (including savings
associations or similar institutions in the District of Columbia)
shall be assessed by the Director against such savings eissociations (or similar institutions).
"(2) EXAMINATIONS IN EXCESS OF 2 PER CALENDAR YEAR.—If

any savings association or affiliate of a savings association is
examined by the Director, or the Corporation, as the c£ise may
be, more than 2 times in any calendar year, the cost of conducting such additional examinations shall be assessed, in addition
to any assessment imposed pursuant to subsection (a), by the
Director or the Corporation, as the case may be, against such
savings association or affiliate.
"(h) ADDITIONAL INFORMATION.—Any savings association and any

affiliate of any savings association shall provide the Director with
access to any information or report with respect to any examination
made by any public regulatory authority and furnish any additional
information with respect thereto as the Director may require.
"(i) TREATMENT OF EXAMINATION ASSESSMENTS.—

"(1) DEPOSITS.—Amounts received by the Director from assessments under this section (other than an assessment under
subsection (d)(2)) or section 10(b)(4) may be deposited in the
manner provided in section 5234 of the Revised Statutes with
respect to assessments by the (Domptroller of the Currency.
"(2) ASSESSMENTS ARE NOT GOVERNMENT FUNDS.—The amounts

received by the Director from any assessment under this section
shall not be construed to be Government or public funds or
appropriated money.
'(3) ASSESSMENTS ARE NOT SUBJECT TO APPORTIONMENT OF

FUNDS.—Notwithstanding any other provision of law, the
amounts received by the Director from any assessment under
this section shall not be subject to apportionment for the purpose of chapter 15 of title 31, United States Code, or under any
other authority,
"(j) PROCESSING FEE.—The Director may, in the Director's sole
discretion, assess against any person that submits to the Director an
application, filing, notice, or request a fee to cover the cost of
processing such submission.
"(k) FEES FOR EXAMINATIONS AND SUPERVISORY ACTIVITIES.—The

Director may assess sigainst institutions for which the Director is
the appropriate Federal banking agency, within the meaning of
section 3 of the Federal Deposit Insurance Act, fees to fund the
direct and indirect expenses of the Office. Such fees shall be imposed
in proportion of the assets or resources of the institutions. The fees
may be imposed more frequently than annually at the discretion of
the Director. The annual rate of such fees shall be the same for all
institutions subject to such fees.
"(1) WORKING CAPITAL.—The Director is authorized to impose fees
and assessments pursuant to subsections (a), (b), (e), and (k) of this
section, in excess of actual expenses for any given year, to permit
the Director to maintain a working capital fund. The Director shall
remit to the payors of such fees and assessments any funds collected
in excess of what he deems necessary to maintain such working
capital fund.

103 STAT. 318

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

"(m) USE OF FUNDS.—The Director is authorized to use the combined resources retained through fees and assessments imposed
pursuant to this section to pay all direct and indirect salary and
administrative expenses of the Office, including contracts and purchases of property and services, and the direct and indirect expenses
of the examinations and supervisory activities of the Office.
12 u s e 1467a.

"SEC. 10. REGULATION OF HOLDING COMPANIES.
"(a) D E F I N I T I O N S . —

"(1) I N GENERAL.—As used in this section, unless the context
otherwise requires—
"(A) SAVINGS ASSOCIATION.—The term 'savings association' includes a savings bank or cooperative bank which is
deemed by the Director to be a savings association under
subsection (1).
"(B) UNINSURED INSTITUTION.—The term 'uninsured
institution' means any depository institution the deposits of
which are not insured by the Federal Deposit Insurance
Corporation.
"(C) COMPANY.—The term 'company' means any corporation, partnership, trust, joint-stock company, or similar
organization, but does not include the Federal Deposit
Insurance Corporation, the Resolution Trust Corporation,
any Federal home loan bank, or any company the majority
of the shares of which is owned by the United States or any
State, or by an instrumentality of the United States or any
State.
"(D) SAVINGS AND LOAN HOLDING COMPANY.—The term
'savings and loan holding company' means any company
which directly or indirectly controls a savings association or
controls any other company which is a savings and loan
holding company.
"(E) MULTIPLE SAVINGS AND LOAN HOLDING COMPANY.—

The term 'multiple savings and loan holding company'
means any savings and loan holding company which directly or indirectly controls 2 or more savings associations.
"(F) DIVERSIFIED SAVINGS AND LOAN HOLDING COMPANY.—

The term 'diversified savings and loan holding company'
means any savings and loan holding company whose
subsidiary savings association and related activities as permitted under paragraph (2) of subsection (c) of this section
represented, on either an actual or a pro forma basis, less
than 50 percent of its consolidated net worth at the close of
its preceding fiscal year and of its consolidated net earnings
for such fiscal year, as determined in accordance with
regulations issued by the Director.
"(G) SUBSIDIARY.—The term 'subsidiary' has the same
meaning as in section 3 of the Federal Deposit Insurance
Act.
"(H) AFFILIATE.—The term 'affiliate' of a savings association means any person which controls, is controlled by, or is
under common control with, such savings association.
"(I) BANK HOLDING COMPANY.—The terms 'bank holding
company' and 'bank' have the meanings given to such
terms in section 2 of the Bank Holding Company Act of
1956.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 319

*'(J) ACQUIRE.—The term 'acquire' has the meaning given
to such term in section 13(fX8) of the Federal Deposit
Insurance Act.
"(2) CONTROL.—For purposes of this section, a person shall be
deemed to have control of—
"(A) a savings association if the person directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, or
holds with power to vote, or holds proxies representing,
more than 25 percent of the voting shares of such savings
association, or controls in any manner the election of a
majority of the directors of such association;
(B) any other company if the person directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, or
holds with power to vote, or holds proxies representing,
more than 25 percent of the voting shares or rights of such
other company, or controls in any manner the election or
appointment of a majority of the directors or trustees of
such other company, or is a general partner in or has
contributed more than 25 percent of the capital of such
other company;
"(C) a trust if the person is a trustee thereof; or
"(D) a savings association or any other company if the
Director determines, after reasonable notice and opportunity for hearing, that such person directly or indirectly
exercises a controlling influence over the management or
policies of such association or other company.
"(3) EXCLUSIONS.—Notwithstanding any other provision of
this subsection, the term 'savings and loan holding company'
does not include—
"(A) any company by virtue of its ownership or control of
voting shares of a savings association or a savings and loan
holding company acquired in connection with the underwriting of securities if such shares are held only for such
period of time (not exceeding 120 days unless extended by
the Director) as will permit the sale thereof on a reasonable
basis; and
"(B) any trust (other than a pension, profit-sharing,
shareholders', voting, or business trust) which controls a
savings association or a savings and loan holding company
if such trust by its terms must terminate within 25 years or
not later than 21 years and 10 months after the death of
individuals living on the effective date of the trust, and is (i)
in existence on June 26, 1967, or (ii) a testamentary trust
created on or after June 26,1967.
"(4) SPECIAL RULE RELATING TO QUAUFIED STOCK ISSUANCE.—

No savings and loan holding company shall be deemed to
control a savings association solely by reason of the purchsise by
such savings and loan holding company of shares issued by such
savings £issociation, or issued by any savings and loan holding
company (other than a bank holding company) which controls
such savings association, in connection with a qualified stock
issuance if such purchase is approved by the Director under
subsection (qXlXD), unless the acquiring savings and loan holding company, directly or indirectly, or acting in concert with 1
or more other persons, or through 1 or more subsidiaries, owns,

103 STAT. 320

PUBLIC LAW 101-73—AUG. 9, 1989
controls, or holds with power to vote, or holds proxies representing, more than 15 percent of the voting shares of such savings
association or holding company.
"(b) REGISTRATION AND EXAMINATION.—

"(1) IN GENERAL.—Within 90 days after becoming a savings
and loan holding company, each savings and loan holding company shall register with the Director on forms prescribed by the
Director, which shall include such information, under oath or
otherwise, with respect to the financial condition, ownership,
operations, management, and intercompany relationships of
such holding company and its subsidiaries, and related matters,
as the Director may deem necessary or appropriate to carry out
the purposes of this section. Upon application, the Director may
extend the time within which a savings and loan holding company shall register and file the requisite information.
"(2) REPORTS.—Each savings and loan holding company and
each subsidiary thereof, other than a savings association, shall
file with the Director, and the regional office of the Director of
the district in which its principal office is located, such reports
as may be required by the Director. Such reports shall be made
under oath or otherwise, and shall be in such form and for such
periods, as the Director may prescribe. Each report shall contain such information concerning the operations of such savings
and loan holding company and its subsidiaries as the Director
may require.
"(3) BOOKS AND RECORDS.—Each savings and loan holding
company shall maintain such books and records as may be
prescribed by the Director.
"(4) EXAMINATIONS.—Each savings and loan holding company
and each subsidiary thereof (other than a bank) shall be subject
to such examinations as the Director may prescribe. The cost of
such examinations shall be assessed against and paid by such
holding company. Examination and other reports may be furnished by the Director to the appropriate State supervisory
authority. The Director shall, to the extent deemed feasible, use
for the purposes of this subsection reports filed with or
examinations made by other Federal agencies or the appropriate State supervisory authority.
"(5) AGENT FOR SERVICE OF PROCESS.—The Director may re-

quire any savings and loan holding company, or persons connected therewith if it is not a corporation, to execute and file a
prescribed form of irrevocable appointment of agent for service
of process.
"(6) RELEASE FROM REGISTRATION.—The Director may at any

time, upon the Director's own motion or upon application,
release a registered savings and loan holding company from any
registration theretofore made by such company, if the Director
determines that such company no longer has control of any
savings association.
"(c) HOLDING COMPANY ACTIVITIES.—
"(1) PROHIBITED ACTIVITIES.—Except as otherwise provided in

this subsection, no savings and loan holding company and no
subsidiary which is not a savings association shall—
"(A) engage in any activity or render any service for or on
behalf of a savings association subsidiary for the purpose or
with the effect of evading any law or regulation applicable
to such savings association;

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

103 STAT. 321

"(B) commence any business activity, other than the
activities described in paragraph (2); or
"(C) continue any business activity, other than the activities described in paragraph (2), after the end of the 2-year
period beginning on the date on which such company received approval under subsection (e) of this section to
become a savings and loan holding company subject to the
limitations contained in this subparagraph.
"(2) EXEMPT ACTIVITIES.—The prohibitions of subparagraphs
(B) and (C) of parsigraph (1) shall not apply to the following
business activities of any savings and loan holding company or
any subsidiary (of such company) which is not a savings association:
"(A) Furnishing or performing management services for a
savings association subsidiary of such company.
"(B) Conducting an insurance agency or escrow business.
"(C) Holding, managing, or liquidating assets owned or
acquired from a savings association subsidiary of such company.
"(D) Holding or managing properties used or occupied by
a savings association subsidiary of such company.
"(E) Acting as trustee under deed of trust.
"(F) Any other activity—
"(i) which the Board of Governors of the Federal
Reserve System, by regulation, has determined to be
permissible for bank holding companies under section
4(c) of the Bank Holding Company Act of 1956, unless
the Director, by regulation, prohibits or limits any such
activity for savings and loan holding companies; or _
"(ii) in which multiple savings and loan holding
companies were authorized (by regulation) to directly
engage on March 5,1987.
"(G) In the case of a savings and loan holding company,
purchasing, holding, or disposing of stock acquired in
connection with a qualified stock issuance if the purchase of
such stock by such savings and loan holding company is
approved by the Director pursuant to subsection (qXlXD).
"(3) CERTAIN LIMITATIONS ON ACTIVITIES NOT APPUCABLE TO

CERTAIN HOLDING COMPANIES.—Notwithstanding paragraphs (4) ^
and (6) of this subsection, the limitations contained in subparagraphs (B) and (C) of paragraph (1) shall not apply to any
savings and loan holding company (or any subsidiary of such
company) which controls—
"(A) only 1 savings association, if the savings association
subsidiary of such company is a qualified thrift lender (as
determined under subsection (m)); or
"(B) more than 1 savings association, if—
"(i) all, or all but 1, of the savings association subsidiaries of such company were initially acquired by the
company or by an individual who would be deemed to
control such company if such individual were a company—
"(I) pursuant to an acquisition under section
13(c) or 13(k) of the Federal Deposit Insurance Act
or section 408(m) of the National Housing Act; or
"(II) pursuant to an acquisition in which assistance was continued to a savings eissociation under

^

103 STAT. 322

PUBLIC LAW 101-73—AUG. 9, 1989
'

section 13(i) of the Federal Deposit Insurance Act;
and
"(ii) all of the savings association subsidiaries of such
company are qualified thrift lenders (as determined
under subsection (m)).

"(4) PRIOR APPROVAL OF CERTAIN NEW ACTIVITIES REQUIRED.—

^

' ''

"(A) I N GENERAL.—No savings and loan holding company
and no subsidiary which is not a savings association shall
commence, either de novo or by an acquisition (in whole or
in part) of a going concern, any activity described in paragraph (2)(F)(i) of this subsection without the prior approval
of the Director.
"(B) FACTORS TO BE CONSIDERED BY DIRECTOR.—In consider-

. ' • ' ' ' • ing any application under subparagraph (A) by any savings
and loan holding company or any subsidiary of any such
company which is not a savings association, the Director
shall consider—
"(i) whether the performance of the activity described in such application by the company or the
• '-^ .
subsidiary can reasonably be expected to produce benefits to the public (such as greater convenience,
increased competition, or gains in efficiency) that outweigh possible adverse effects of such activity (such as
undue concentration of resources, decreased or unfair
/ '
competition, conflicts of interest, or unsound financial
practices);
"(ii) the managerial resources of the companies involved; and
"(iii) the adequacy of the financial resources, including capital, of the companies involved.
•

'

"(C) DIRECTOR MAY DIFFERENTIATE BETWEEN NEW AND
ONGOING ACTIVITIES.—In prescribing any regulation or

considering any application under this paragraph, the
Director may differentiate between activities commenced
de novo and activities commenced by the acquisition, in
whole or in part, of a going concern.
"(D) APPROVAL OR DISAPPROVAL BY ORDER.—The approval

or disapproval of any application under this paragraph by
the Director shall be made in an order issued by the
Director containing the reasons for such approval or disapproval.
"(5) GRACE PERIOD TO ACHIEVE COMPLIANCE.—If any savings

association referred to in paragraph (3) fails to maintain the
status of such association as a qualified thrift lender, the Director may allow, for good cause shown, any company that controls
such association (or any subsidiary of such company which is
not a savings association) up to 3 years to comply with the
limitations contained in paragraph (1)(C).

^

"(6) SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
AFFECTED BY 1987 AMENDMENTS.—
"(A) EXCEPTION TO 2-YEAR GRACE PERIOD FOR ACHIEVING

''- •

COMPLIANCE.—Notwithstanding paragraph (1)(C), any company which received approval under subsection (e) of this
section to acquire control of a savings association between
March 5, 1987, and August 10, 1987, shall not continue any
business activity other than an activity described in paragraph (2) after August 10,1987.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 323

"(B) EXEMPTION FOR ACTIVITIES LAWFULLY ENGAGED IN

BEFORE MARCH 5, 1987.—Notwithstanding paragraph (IXQ
and subject to subpargigraphs (C) and (D), any savings and
loan holding company which received approval, before
March 5,1987, under subsection (e) of this section to acquire
control of a savings association may engage, directly or
through any subsidiary (other than a savings association
subsidiary of such company), in any activity in which such
company or such subsidiary was lawfully engaged on such
date.

,

"(C) TERMINATION OF SUBPARAGRAPH (B) EXEMPTION.—

The exemption provided under subparagraph (B) for activities engaged in by any savings and loan holding company or
a subsidiary of such company (which is not a savings
association) which would otherwise be prohibited under
paragraph (IXC) shall terminate with respect to such activities of such company or subsidiary upon the occurrence
(after August 10,1987) of any of the following:
"(i) The savings and loan holding company acquires
control of a bank or an additional savings association
(other than a savings association acquired pursuant to
section 13(c) or 13(k) of the Federal Deposit Insurance
Act or section 406(f) or 408(m) of the National Housing
Act).
"(ii) Any savings association subsidiary of the savings
and loan holding company fails to qualify as a domestic
building and loan association under section 7701(aX19)
of the Internal Revenue (Dode of 1986.
"(iii) The savings and loan holding company engages
in any business activity—
"(I) which is not described in paragraph (2); and
"(II) in which it was not engaged on March 5,
1987.
"(iv) Any savings association subsidiary of the savings and loan holding company increases the number of
locations from which such savings association conducts
business after March 5, 1987 (other than an increase
which occurs in connection with a transaction under
section 13(c) or (k) of the Federal Deposit Insurance Act
or section 408(m) of the National Housing Act.
"(v) Any savings association subsidiary of the savings
and loan holding company permits any overdraft
(including an intraday overdraft), or incurs any such
overdraft in its account at a Federal Reserve bank, on
behalf of an affiliate, unless such overdraft is the result
of an inadvertent computer or accounting error that is
beyond the control of both the savings association
subsidiary and the affiliate.
"(D) ORDER BY DIRECTOR TO TERMINATE SUBPARAGRAPH (B)

ACTIVITY.—Any activity described in subparagraph (B) may
also be terminated by the Director, after opportunity for
hearing, if the Director determines, having due regard for
the purposes of this title, that such action is necessary to
prevent conflicts of interest or unsound practices or is in
the public interest.
"(7) FOREIGN SAVINGS AND LOAN HOLDING COMPANY.—Notwith-

standing any other provision of this section, any savings and

^

103 STAT. 324

PUBLIC LAW 101-73—AUG. 9, 1989
loan holding company organized under the laws of a foreign
country as of June 1, 1984 (including any subsidiary thereof
which is not a savings association), which controls a single
savings association on August 10, 1987, shall not be subject to
this subsection with respect to any activities of such holding
company which are conducted exclusively in a foreign country.
"(8) EXEMPTION FOR BANK HOLDING COMPANIES.—Except for

paragraph (1)(A), this subsection shall not apply to any company
* that is treated as a bank holding company for purposes of
section 4 of the Bank Holding Company Act of 1956, or any of its
subsidiaries.
"(d) TRANSACTIONS WITH AFFILIATES.—Transactions between any

subsidiary savings association of a savings and loan holding company and any affiliate (of such savings association subsidiary) shall
be subject to the limitations and prohibitions specified in section 11
of this Act.

\
\

"(e) ACQUISITIONS.—

\

"(1) IN GENERAL.—It shall be unlawful for—
"(A) any savings and loan holding company directly or
indirectly, or through one or more subsidiaries or through
one or more transactions—
"(i) to acquire, except with the prior written approval
• I'
^
of the Director, the control of a savings association or a
savings and loan holding company, or to retain the
' control of such an association or holding company acquired or retained in violation of this section as heretofore or hereafter in effect;
"(ii) to acquire, except with the prior written ap(•*;'• , \
proval of the Director, by the process of merger,
consolidation, or purchase of assets, another savings
association or a savings and loan holding company, or
all or substantially all of the assets of any such association or holding company;
"(iii) to acquire, by purchase or otherwise, or to
retain more than 5 percent of the voting shares of a
savings association not a subsidiary, or of a savings and
loan holding company not a subsidiary, or in the case of
•
a multiple savings and loan holding company (other
'•'•-- •'•-••
than a company described in subsection (c)(8)), to so
acquire or retain more than 5 percent of the voting
shares of any company not a subsidiary which is engaged in any business activity other than the activities
specified in subsection (c)(2). This clause shall not apply
to shares of a savings association or of a savings and
loan holding company—
"(I) held as a bona fide fiduciary (whether with
_^ '
or without the sole discretion to vote such shares);
"(II) held temporarily pursuant to an underwriting commitment in the normal course of an under%
writing business;
"(III) held in an account solely for trading purposes;
"(IV) over which no control is held other than
control of voting rights acquired in the normal
course of a proxy solicitation;
'^* ^r
' ' '
"(V) acquired in securing or collecting a debt
^,.*' ' '
previously contracted in good faith, during the 2\

^

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 325

year period beginning on the date of such acquisition or for such additional time (not exceeding 3
years) as the Director may permit if the Director
determines that such an extension will not be
detrimental to the public interest;
"(VI) acquired under section 408(m) of the National Housing Act or section 13(k) of the Federal
Deposit Insurance Act;
(VII) held by any insurance company, as defined in section 2(a)(17) of the Investment Company
Act of 1940, except £is provided in paragraph (6);
"(VIII) acquired pursuant to a qualified stock
issuance if such purchase is approved by the Director under subsection (q)(l)(D);
except that the aggregate amount of shares held under
this clause (other than under subclauses (I), (II), (III),
(IV), and (VI)) may not exceed 15 percent of all
outstanding shares or of the voting power of a savings
association or savings and loan holding company; or
"(iv) to acquire the control of an uninsured institution, or to retain for more than one year after February
14, 1968, or from the date on which such control was
acquired, whichever is later, except that the Director
may upon application by such company extend such
one-year period from year to year, for an additional
period not exceeding 3 years, if the Director finds such
extension is warranted and is not detrimental to the
public interest;
"(B) any other company, without the prior written approval of the Director, directly or indirectly, or through one
or more subsidiaries or through one or more transactions,
to acquire the control of one or more savings associations,
except that such approval shall not be required in connection with the control of a savings association, (i) acquired by
devise under the terms of a will creating a trust which is
excluded from the definition of 'savings and loan holding
company' under subsection (a) of this section, or (ii) acquired in connection with a reorganization in which a
person or group of persons, having had control of a savings
association for more than 3 years, vests control of that
association in a newly formed holding company subject to
the control of the same person or group of persons. The
Director shall approve an acquisition of a savings association under this subparagraph unless the Director finds the
financial and managerial resources and future prospects of
the company and association involved to be such that the
acquisition would be detrimental to the association or the
insurance risk of the Savings Association Insurance Fund
or Bank Insurance Fund, and shall render a decision within
90 days after submission to the Director of the complete
record on the application.
"(2) FACTORS TO BE CONSIDERED.—The Director shall not approve any acquisition under subparagraph (A)(i) or (A)(ii), or of
more than one savings association under subparagraph (B) of
paragraph (1) of this subsection, any acquisition of stock in
connection with a qualified stock issuance, any acquisition
under paragraph (4XA), or any transaction under section 13(k)

:

^

f

v

v

103 STAT. 326

^

PUBLIC LAW 101-73—AUG. 9, 1989
of the Federal Deposit Insurance Act, except in accordance with
this paragraph. In every case, the Director shall take into
consideration the financial and managerial resources and
future prospects of the company and association involved, the
effect of the acquisition on the association, the insurance risk to
; the Savings Association Insurance Fund or the Bank Insurance
Fund, and the convenience and needs of the community to be
served, and shall render a decision within 90 days after submission to the Director of the complete record on the application.
Before approving any such acquisition, except a transaction
under section 13(k) of the Federal Deposit Insurance Act, the
Director shall request from the Attorney General and consider
any report rendered within 30 da3rs on the competitive factors
involved. The Director shall not approve any proposed acquisition—
"(A) which would result in a monopoly, or which would be
in furtherance of any combination or conspiracy to monopos^
lize or to attempt to monopolize the savings and loan
business in any part of the United States, or
"(B) the effect of which in any section of the country may
be substantially to lessen competition, or tend to create a
monopoly, or which in any other manner would be in
restraint of trade, unless it finds that the anticompetitive
effects of the proposed acquisition are clearly outweighed in
the public interest by the probable effect of the acquisition
in meeting the convenience and needs of the community to
be served.
"(3) INTERSTATE ACQUISITIONS.—No acquisition shall be approved by the Director under this subsection which will result
in the formation by any company, through one or more subsidiaries or through one or more transactions, of a multiple savings
and loan holding company controlling savings associations in
more than one State, unless—
"(A) such company, or a savings association subsidiaiy of
such company, is authorized to acquire control of a savings
association subsidiary, or to operate a home or branch
office, in the additional State or States pursuant to section
13(k) of the Federal Deposit Insurance Act;
"(B) such company controls a savings association subsidiary which operated a home or branch office in the additional State or States as of March 5,1987; or
"(C) the statutes of the State in which the savings association to be acquired is located permit a savings association
chartered by such State to be acquired by a savings association chartered by the State where the acquiring savings
association or savings and loan holding company is located
or by a holding company that controls such a State chartered savings association, and such statutes specifically
authorize such an acquisition by language to that effect and
not merely by implication.
"(4) ACQUISITIONS BY CERTAIN INDIVIDUALS.—

"(A) IN GENERAL.—Notwithstanding subsection (hX2), any
director or officer of a savings and loan holding company, or
any individual who owns, controls, or holds with power to
vote (or holds proxies representing) more than 25 percent of
the voting shares of such holding company, may acquire
control of any savings association not a subsidiary of such

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 327

savings and loan holding company with the prior written
approval of the Director.
"(B) T R E A T M E N T OF CERTAIN HOLDING COMPANIES.—If a n y

individual referred to in subparagraph (A) controls more
than 1 savings and loan holding company or more than 1
savings association, any savings and loan holding company
controlled by such individual shall be subject to the activities limitations contained in subsection (c) to the same
extent such limitations apply to multiple savings and loan
holding companies, unless all or all but 1 of the savings
associations (including any institution deemed to be a savings association under subsection (1) of this section) controlled directly or indirectly by such individual was acquired pursuant to an acquisition described in subclause (I)
or (II) of subsection (c)(3)(B)(i).

fc;o:

"(5) ACQUISITIONS PURSUANT TO CERTAIN SECURITY INTERESTS.—

This subsection and subsection (c)(2) of this section do not apply
to any savings and loan holding company which acquired the
control of a savings association or of a savings and loan holding
company pursuant to a pledge or hypothecation to secure a
loan, or in connection with the liquidation of a loan, made in the
ordinary course of business. It shall be unlawful for any such
company to retain such control for more than one year after
February 14, 1968, or from the date on which such control was
acquired, whichever is later, except that the Director may upon
application by such company extend such one-year period from
year to year, for an additional period not exceeding 3 years, if
the Director finds such extension is warranted and would not be
detrimental to the public interest.

.

jCr

"(6) SHARES HELD BY INSURANCE AFFILIATES.—Shares described

in clause (iii)(VII) of paragraph (1)(A) shall not be excluded for
purposes of clause (iii) of such paragraph if—
"(A) all shares held under such clause (iii)(Vn) by all
insurance company affiliates of such savings association or
savings and loan holding company in the aggregate exceed
5 percent of all outstanding shares or of the voting power of
the savings association or savings and loan holding company; or
"(B) such shares are acquired or retained with a view to
acquiring, exercising, or transferring control of the savings
association or savings and loan holding company.
"(f) DECLARATION OF DIVIDEND.—Every subsidiary savings association of a savings and loan holding company shall give the Director
not less than 30 days' advance notice of the proposed declaration by
its directors of any dividend on its guaranty, permanent, or other
nonwithdrawable stock. Such notice period shall commence to run
from the date of receipt of such notice by the Director. Any such
dividend declared within such period, or without the giving of such
notice to the Director, shall be invalid and shall confer no rights or
benefits upon the holder of any such stock.
"(g) ADMINISTRATION AND E N F O R C E M E N T . —

"(1) I N GENERAL.—The Director is authorized to issue such
regulations and orders as the Director deems necessary or appropriate to enable the Director to administer and carry out the
purposes of this section, and to require compliance therewith and
prevent evasions thereof.

'

103 STAT. 328

Records.

District of
Columbia.

PUBLIC LAW 101-73—AUG. 9, 1989
"(2) INVESTIGATIONS.—The Director may make such investigations as the Director deems necessary or appropriate to determine whether the provisions of this section, and regulations and
orders thereunder, are being and have been complied with by
savings and loan holding companies and subsidiaries and affiliates thereof. For the purpose of any investigation under this
section, the Director may administer oaths and affirmations,
issue subpenas, take evidence, and require the production of any
books, papers, correspondence, memorandums, or other records
which may be relevant or material to the inquiry. The attendance of witnesses and the production of any such records may be
required from any place in any State. The Director may apply to
the United States district court for the judicial district (or the
United States court in any territory) in which any witness or
company subpenaed resides or carries on business, for enforcement of any subpena issued pursuant to this paragraph, and
such courts shall have jurisdiction and power to order and
require compliance.
"(3) PROCEEDINGS.—(A) In any proceeding under subsection
(a)(2)(D) or under paragraph (5) of this section, the Director may
administer oaths and affirmations, take or cause to be taken
depositions, and issue subpenas. The Director may make regulations with respect to any such proceedings. The attendance of
witnesses and the production of documents provided for in this
paragraph may be required from any place in any State or in
any territory at any designated place where such proceeding is
being conducted. Any party to such proceedings may apply to
the United States District Court for the District of Columbia, or
the United States district court for the judicial district or the
United States court in any territory in which such proceeding is
being conducted, or where the witness resides or carries on
business, for enforcement of any subpena issued pursuant to
this paragraph, and such courts shall have jurisdiction and
power to order and require compliance therewith. Witnesses
subpenaed under this section shall be paid the same fees and
mileage that are paid witnesses in the district courts of the
United States.
"(B) Any hearing provided for in subsection (a)(2)(D) or under
paragraph (5) of this section shall be held in the Federal judicial
district or in the territory in which the principal office of the
association or other company is located unless the party afforded the hearing consents to another place, and shall be
conducted in accordance with the provisions of chapter 5 of title
5, United States Code.
"(4) INJUNCTIONS.—Whenever it appears to the Director that
any person is engaged or has engaged or is about to engage in
any acts or practices which constitute or will constitute a
violation of the provisions of this section or of any regulation or
order thereunder, the Director may bring an action in the
proper United States district court, or the United States court of
any territory or other place subject to the jurisdiction of the
United States, to enjoin such acts or practices, to enforce
compliance with this section or any regulation or order, or to
require the divestiture of any acquisition in violation of this
section, or for any combination of the foregoing, and such courts
shall have jurisdiction of such actions. Upon a proper showing

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 329

an injunction, decree, restraining order, order of divestiture, or
other appropriate order shall be granted without bond.
"(5) CEASE AND DESIST ORDERS.—(A) Notwithstanding

any

other provision of this section, the Director may, whenever the
Director has reasonable cause to believe that the continuation
by a savings and loan holding company of any activity or of
ownership or control of any of its noninsured subsidiaries constitutes a serious risk to the financial safety, soundness, or
stability of a savings and loan holding company's subsidiary
savings association and is inconsistent with the sound operation
of a savings association or with the purposes of this section or
section 8 of the Federal Deposit Insurance Act, order the savings and loan holding company or any of its subsidiaries, after
due notice and opportunity for hearing, to terminate such
activities or to terminate (within 120 days or such longer period
as the Director directs in unusual circumstances) its ownership
or control of any such noninsured subsidiary either by sale or by
distribution of the shares of the subsidiary to the shareholders
of the savings and loan holding company. Such distribution
shall be pro rata with respect to all of the shareholders of the
distributing savings and loan holding company, and the holding
company shall not make any charge to its shareholders arising
out of such a distribution.
"(B) The Director may in the Director's discretion apply to the
United States district court within the jurisdiction of which the
principal office of the company is located, for the enforcement of
any effective and outstanding order issued under this section,
and such court shall have jurisdiction and power to order and
require compliance therewith. Except as provided in subsection
(j), no court shall have jurisdiction to affect by injunction or
otherwise the issuance or enforcement of any notice or order
under this section, or to review, modify, suspend, terminate, or
set aside any such notice or order.
"(h) PROHIBITED ACTS.—It shall be unlawful for—
"(1) any savings and loan holding company or subsidiary
thereof, or any director, officer, employee, or person owning,
controlling, or holding with power to vote, or holding proxies
representing, more than 25 percent of the voting shares, of such
holding company or subsidiary, to hold, solicit, or exercise any
proxies in respect of any voting rights in a savings association
which is a mutual association;
"(2) any director or officer of a savings and loan holding
company, or any individual who owns, controls, or holds with
power to vote (or holds proxies representing) more than 25
percent of the voting shares of such holding company, to acquire
control of any savings association not a subsidiary of such
savings and loan holding company, unless such acquisition is
approved by the Director pursuant to subsection (e)(4); or
"(3) any individual, except with the prior approval of the
Director, to serve or act as a director, officer, or trustee of, or
become a partner in, any savings and loan holding company
after having been convicted of any criminal offense involving
dishonesty or breach of trust,
"(i) PENALTIES.—
"(1) CRIMINAL PENALTIES.—(A) Whoever knowingly violates

any provision of this section, and any company which violates
any regulation or order issued by the Director pursuant thereto.

103 STAT. 330

PUBLIC LAW 101-73—AUG. 9, 1989
shall be fined not more than $100,000 per day for each day
during which the violation continues,
"(B) Any individual who knowingly violates any provision of
this section shall be fined not more than $100,000 per day for
each day during which the violation continues, imprisoned not
more than 1 year, or both.
"(C) Whoever knowingly violates any provision of this section
with intent to deceive, to defraud, or to profit significantly shall
be fined not more than $1,000,000 per day for each day during
which the violation continues, imprisoned not more than 5
years, or both.
"(2) FALSE ENTRIES.—Every director, officer, partner, trustee,
agent, or employee of a savings and loan holding company shall
be subject to the same penalties for false entries in any book,
report, or statement of such savings and loan holding company
as are applicable to officers, agents, and employees of a savings
association the accounts of which are insured by the Corporation for false entries in any books, reports, or statements of such
association under section 1006 of title 18, United States Code.
"(3) CIVIL MONEY PENALTY.—

"(A) PENALTY.—Any company which violates, and any
person who participates in a violation of, any provision of
this section, or any regulation or order issued pursuant
thereto, shall forfeit and pay a civil penalty of not more
than $25,000 for each day during which such violation
continues.
"(B) ASSESSMENT.—Any penalty imposed under subparagraph (A) may be assessed and collected by the Director in
the manner provided in subparagraphs (E), (F), (G), and (I)
of section 8(i)(2) of the Federal Deposit Insurance Act for
penalties imposed (under such section) and any such assessment shall be subject to the provisions of such section.
"(C) HEARING.—The company or other person against
whom any civil penalty is assessed under this paragraph
shall be afforded a hearing if such company or person
submits a request for such hearing within 20 days after the
issuance of the notice of assessment. Section 8(h) of the
Federal Deposit Insurance Act shall apply to any proceeding under this paragraph.
"(D) DISBURSEMENT.—All penalties collected under
authority of this paragraph shall be deposited into the
Treasury.
"(E) VIOLATE DEFINED.—For purposes of this section, the
term 'violate' includes any action (alone or with another or
others) for or toward causing, bringing about, participating
in, counseling, or aiding or abetting a violation.
"(F) REGULATIONS.—The Director shall prescribe regulations establishing such procedures as may be necessary to
carry out this paragraph.
"(4) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (within the
meaning of section 3(u) of the Federal Deposit Insurance Act)
with respect to a savings and loan holding company or subsidiary thereof (including a separation caused by the deregistration
of such a company or such a subsidiary) shall not affect the
jurisdiction and authority of the Director to issue any notice

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 331

and proceed under this section against any such party, if such
notice is served before the end of the 6-year period beginning on
the date such party ceased to be such a party with respect to
such holding company or its subsidiary (whether such date
occurs before, on, or after the date of the enactment of this
paragraph).
"(j) JUDICIAL REVIEW.—Any party aggrieved by an order of the District of
Director under this section may obtain a review of such order by Columbia.
fiUng in the court of appeals of the United States for the circuit in
which the principal office of such party is located, or in the United
States Court of Appeals for the District of Columbia Circuit, within
30 days after the date of service of such order, a written petition
praying that the order of the Director be modified, terminated, or
set aside. A copy of the petition shall be forthwith transmitted by
the clerk of the court to the Director, and thereupon the Director
shall file in the court the record in the proceeding, as provided in
section 2112 of title 28, United States Code. Upon the filing of such
petition, such court shall have jurisdiction, which upon the filing of
the record shall be exclusive, to affirm, modify, terminate, or set
aside, in whole or in part, the order of the Director. Review of such
proceedings shall be had as provided in chapter 7 of title 5, United
States Code. The judgment and decree of the court shall be final,
except that the same shall be subject to review by the Supreme
Court upon certiorari as provided in section 1254 of title 28, United
States Code.
"(k) SAVINGS CLAUSE.—Nothing contained in this section, other
than any transaction approved under subsection (e)(2) of this section
or section 13 of the Federal Deposit Insurance Act, shall be interpreted or construed as approving any act, action, or conduct which is
or has been or may be in violation of existing law, nor shall
anything herein contained constitute a defense to any action, suit,
or proceeding pending or hereafter instituted on account of any act,'
action, or conduct in violation of the antitrust laws.
"(1) TREATMENT OF F D I C INSURED STATE SAVINGS BANKS AND
COOPERATIVE BANKS AS SAVINGS ASSOCIATIONS.—

"(1) I N GENERAL.—Notwithstanding any other provision of
law, a savings bank (as defined in section 3(g) of the Federal
Deposit Insurance Act) and a cooperative bank that is an insured bank (as defined in section 3(h) of the Federal Deposit
Insurance Act) upon application shall be deemed to be a savings
association for the purpose of this section, if the Director determines that such bank is a qualified thrift lender (as determined
under subsection (m)).
"(2) FAILURE TO MAINTAIN QUALIFIED THRIFT LENDER STATUS.—

If any savings bank which is deemed to be a savings association
under paragraph (1) subsequently fails to maintain its status as
a qualified thrift lender, as determined by the Director, such
bank may not thereafter be a qualified thrift lender for a period
of 5 years,
"(m) QUALIFIED THRIFT LENDER TEST.—

"(1) I N GENERAL.—Except as provided in paragraphs (2) and
(6), any savings association shall have the status of a qualified
thrift lender if—
"(A) the qualified thrift investments of such savings
association equal or exceed 60 percent of the total tangible
assets of such association; and

103 STAT. 332

PUBLIC LAW 101-73—AUG. 9, 1989
"(B) the qualified thrift investments of such savings
association continue to equal or exceed 60 percent of the
total tangible assets of such association on an average basis
in 3 out of every 4 quarters and 2 out of every 3 years.
"(2)

EXCEPTIONS GRANTED BY DIRECTOR.—Notwithstanding

paragraph (1), the Director may grant such temporary and
limited exceptions from the minimum actual thrift investment
percentage requirement contained in such paragraph as the
Director deems necessary if—
"(A) the Director determines that extraordinary circumstances exist, such as when the effects of high interest
rates reduce mortgage demand to such a degree that an
insufficient opportunity exists for a savings association to
meet such investment requirements; or
"(B) the Director determines that—
"(i) the grant of any such exception will significantly
facilitate an acquisition under section 13(c) or 13(k) of
the Federal Deposit Insurance Act;
"(ii) the acquired association will comply with the
transition requirements of paragraph (6)(B), as if the
date of the exemption were the starting date for the
transition period described in that paragraph; and
"(iii) the Director determines that the exemption will
not have an undue adverse effect on competing savings
associations in the relevant market and will further
the purposes of this subsection.
"(3) FAILURE TO BECOME AND REMAIN A QUALIFIED THRIFT
LENDER.—

"(A) I N GENERAL.—Except as provided in subparagraph
(D), a savings association that fails to become or remain a
qualified thrift lender shall either become one or more
banks (other than a savings bank), or be subject to subparagraph (B).
"(B) RESTRICTIONS APPUCABLE TO SAVINGS ASSOCIATIONS
THAT ARE NOT QUALIFIED THRIFT LENDERS.—
"(i) RESTRICTIONS EFFECTIVE IMMEDIATELY.—The fol-

lowing restrictions shall apply immediately to a savings association after the date on which the savings
association should have become or ceases to be a qualified thrift lender:
"(I) ACTIVITIES.—The savings association shall
not make any new investment (including an investment in a subsidiary) or engage, directly or indirectly, in any other new activity unless that
investment or activity would be permissible for the
savings association if it were a national bank, and
is also permissible for the savings association as a
savings association.
"(II) BRANCHING.—The savings association shall
not establish any new branch office at any location
at which a national bank located in the savings
£issociation's home State may not establish a
branch office. For purposes of this subclause, a
savings association's home State is the State in
which the savings association's total deposits were
largest on the date on which the savings associa-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 333

tion should have become or ceased to be a qualified
thrift lender.
"(Ill) ADVANCES.—The savings association shall
not be eligible to obtain new advances from any
Federal home loan bank.
"(IV) DIVIDENDS.—The savings association shall
be subject to all statutes and regulations governing
the payment of dividends by a national bank in the
same manner and to the same extent as if the
savings association were a national bank,
"(ii) ADDITIONAL RESTRICTIONS EFFECTIVE AFTER THREE

YEARS.—The following additional restrictions shall
apply to a savings association beginning 3 years after
the date on which the savings association should have
become or ceases to be a qualified thrift lender:
"(I) ACTIVITIES.—The savings association shall
not retain any investment (including an investment in any subsidiary) or engage, directly or indirectly, in any activity unless that investment or
activity would be permissible for the savings
association if it were a national bank, and is also
permissible for the savings association as a savings
association.
"(II) ADVANCES.—The savings association shall
repay any outstanding advances from any Federal
home loan bank as promptly as can be prudently
done consistent with the safe and sound operation
of the savings association.
"(C) HOLDING COMPANY REGULATION.—Any company that
controls a savings association that is subject to any provision of s u b p a r s ^ a p h (B) shall, within one year after the
date on which the savings association should have become
or ceases to be a qualified thrift lender, register as and be
deemed to be a bank holding company subject to all of the
provisions of the Bank Holding Company Act of 1956, section 8 of the Federal Deposit Insurance Act, and other
statutes applicable to bank holding companies, in the same
manner and to the same extent as if the company were a
bank holding company and the savings association were a
bank, as those terms are defined in the Bank Holding
Company Act of 1956.
"(D) REQUALIFICATION.—A savings association that should
have become or ceases to be a qualified thrift lender shall
not be subject to subparagraph (B) or (C) if the savings
association becomes a qualified thrift lender by meeting the
qualified thrift lender requirement in paragraph (1) on an
average basis in 3 out of every 4 quarters and 2 out of every
3 years and thereafter remains a qualified thrift lender. If
the savings association (or any savings association that
acquired all or substantially all of its assets from that
savings association) at any time thereafter ceases to be a
qualified thrift lender, it shall immediately be subject to all
provisions of subparagraphs (B) and (C) as if all the periods
described in subparagraphs (BXii) and (C) had expired.
"(E) DEPOSIT INSURANCE ASSESSMENTS.—Any bank chartered as a result of the requirements of this section shall be
obligated until December 31, 1993, to pay to the Savings

^

^

103 STAT. 334

PUBLIC LAW 101-73—AUG. 9, 1989

"^ ^

Association Insurance Fund the assessments assessed on
savings associations under the Federal Deposit Insurance
Act. Such association shall also be assessed, on the date of
its change of status from a Savings Association Insurance
Fund member, the exit fee and entrance fee provided in
section 5(d) of the Federal Deposit Insurance Act. Such
institution shall not be obligated to pay the assessments
assessed on banks under the Federal Deposit Insurance Act
until—
"(i) December 31,1993, or
"(ii) the institution's change of status from a Savings
Association Insurance fund member to a Bank Insurance Fund member,
whichever is later.
"(F) SPECIAL RULE.—This paragraph shall not apply to
savings associations headquartered and operating primarily
in Puerto Rico or the Virgin Islands.
"(G) EXEMPTION FOR CERTAIN FEDERAL SAVINGS ASSOCIA-

'
, " '

TIONS.—This paragraph shall not apply to any Federal savings association in existence as a Federal savings
association on the date of enactment of the Financial Institutions Reform Recovery, and Enforcement Act of 1989—
"(i) that was chartered before October 15, 1982, as a
savings bank or a cooperative bank under State law; or
"(ii) that acquired its principal assets from an association that was chartered before October 15, 1982, as a
savings bank or a cooperative bank under State law.
"(H) No CIRCUMVENTION OF EXIT MORATORIUM.—Subpara-

J

•
~•

graph (A) of this paragraph shall not be construed as
permitting any insured depository institution to engage in
any conversion transaction prohibited under section 5(d) of
the Federal Deposit Insurance Act.
"(I) EFFECTIVE DATE.—This paragraph shall take effect
upon the expiration of 1 year after the date of enactment of
the Fingmcial Institutions Reform, Recovery, and Enforcement Act of 1989.
"(4) DEFINITIONS.—For purposes of this subsection—
"(A) ACTUAL THRIFT INVESTMENT PERCENTAGE.—The term
'actual thrift investment percentage' means the percentage
determined by dividing—
"(i) the amount of the qualified thrift investments of
a savings association, by
"(ii) the total amount of tangible assets of such savings association.
"(B) QUAUFIED THRIFT INVESTMENTS.—The term 'qualified
thrift investments' means, with respect to any savings
association, the sum of—
"(i) the aggregate amount of loans, equity positions,
or securities held by the savings association (or any
/
subsidiary of such association) which are related to
domestic residential real estate or manufactured housing;
"(ii) the value of property used by such association or
subsidiary in the conduct of the business of such
association or subsidiary;
"(iii) subject to paragraph (5), the liquid assets of the
type required to be maintained under this Act; and
"(iv) subject to paragraph (5), 50 percent of the dollar
amount of the residential mortgage loans originated by
such savings association or subsidiary and sold within
90 days of origination.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 335

"(5) LIMITATION ON TREATMENT OF CERTAIN ASSETS AS THRIFT

INVESTMENTS.—The aggregate amount of the assets described in
clauses (iii) and (iv) of paragraph (4)(B) which may be taken into
account in determining the amount of the qualified thrift
investments of any savings association shall not exceed the
amount which is equal to 10 percent of the tangible assets of
such association.
"(6) TRANSITIONAL RULE FOR CERTAIN SAVINGS ASSOCIATIONS.—
"(A) IN GENERAL.—If any Federal savings association in
existence as a Federal savings association on the date of
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989—
"(i) that was chartered as a savings bank or a cooperative bank under State law before October 15,
1982; or
"(ii) that acquired its principal assets from an
association that was chartered before October 15, 1982,
as a savings bank or a cooperative bank under State
law,
meets the requirements of subparagraph (B), such savings
association shall be treated as a qualified thrift lender
during the 6-year period beginning on August 10, 1989.
"(B)

SUBPARAGRAPH

(B)

REQUIREMENTS.—A

savings

association meets the requirements of this subparagraph if,
in the determination of the Director—
"(i) the actual thrift investment percentage of such
association does not, after the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, decrease below the actual thrift
investment percentage of such association on July 15,
1989; and
"(ii) the amount by which—
"(I) the actual thrift investment percentage of
such association at the end of each period described
in the following table, exceeds
"(II) the actual thrift investment percentage of
such association on July 15,1989,
is equal to or greater than the applicable percentage (as
determined under the following table) of the amount by
which 70 percent exceeds the actual thrift investment
percentage of such association on such date of enactment:
"For the following
peried:
Prior to July 1, 1991
July 1, 1991-December 31, 1992
January 1, 1993-June 30, 1994
Thereafter

^

The applicable
percentage is:
25 percent
50 percent
75 percent
100 percent

"(C) For purposes of this paragraph, the actual thrift
investment percenteige of an association on July 15, 1989,
shall be determined by applying the definition of 'actual '
thrift investment percentage that takes effect on July 1,
1991.
"(n) TYING RESTRICTIONS.—A savings and loan holding company
and any of its affiliates shall be subject to section 5(q) and regulations prescribed under such section, in connection with transactions
involving the products or services of such company or affiliate and
those of an affiliated savings association as if such company or
affiliate were a savings association.
"(o) MUTUAL HOLDING COMPANIES.—

"(1) IN GENERAL.—A savings association operating in mutual
form may reorganize so as to become a holding company by—

'

103 STAT. 336

PUBLIC LAW 101-73—AUG. 9, 1989
5,*-,',
Jj
,

"(A) chartering an interim savings association, the stock
of which is to be wholly owned, except as otherwise provided in this section, by the mutual association; and
"(B) transferring the substantial part of its assets and
liabilities, including all of its insured liabilities, to the
interim savings association.

"(2) DIRECTORS AND CERTAIN ACCOUNT HOLDERS' APPROVAL OF

.

PLAN REQUIRED.—A reorganization is not authorized under this
subsection unless—
;
"(A) a plan providing for such reorganization has been
approved by a majority of the board of directors of the
mutual savings association; and
"(B) in the case of an association in which holders of
accounts and obligors exercise voting rights, such plan has
been submitted to and approved by a majority of such
,.^,
individuals at a meeting held at the call of the directors in
accordance with the procedures prescribed by the association's charter and bylaws.
.,,.,,

, .

"(3) NOTICE TO THE DIRECTOR; DISAPPROVAL PERIOD.—
"(A) NOTICE REQUIRED.—At least 60 days prior

to taking
any action described in paragraph (1), a savings association
seeking to establish a mutual holding company shall provide written notice to the Director. The notice shall contain
such relevant information as the Director shall require by
regulation or by specific request in connection with any
particular notice.
"(B) TRANSACTION ALLOWED IF NOT DISAPPROVED.—Unless

/

the Director within such 60-day notice period disapproves
.,
the proposed holding company formation, or extends for
another 30 days the period during which such disapproval
'
may be issued, the savings association providing such notice
may proceed with the transaction, if the requirements of
paragraph (2) have been met.
"(C) GROUNDS FOR DISAPPROVAL.—The Director may disapprove any proposed holding company formation only if—
"(i) such disapproval is necessary to prevent unsafe
or unsound practices;
"(ii) the financial or management resources of the
savings association involved warrant disapproval;
"(iii) the savings association fails to furnish the
,
information required under subparagraph (A); or
' '^
"(iv) the savings association fails to comply with the
requirement of paragraph (2).
"(D) RETENTION OF CAPITAL ASSETS.—In connection with
the transaction described in paragraph (1), a savings
association may, subject to the approval of the Director,
retain capital assets at the holding company level to the
extent that such capital exceeds the association's capital
requirement established by the Director pursuant to sections 5 (s) and (t) of this Act.
;
"(4) OWNERSHIP.—

"(A) I N GENERAL.—Persons having ownership rights in
the mutual association pursuant to section 5(b)(1)(B) of this
Act or State law shall have the same ownership rights with
respect to the mutual holding company.
,.'

"(B) HOLDERS OF CERTAIN ACCOUNTS.—Holders of savings,

.

demand or other accounts of—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 337

"(i) a savings association chartered as part of a transaction described in paragraph (1); or
"(ii) a mutual savings association acquired pursuant
to paragraph (5)(B),
shall have the same ownership rights with respect to the
mutual holding company as persons described in subparagraph (A) of this paragraph.
"(5) PERMITTED ACTIVITIES.—A mutual holding company may
engage only in the following activities:
"(A) Investing in the stock of a savings association.
"(B) Acquiring a mutual association through the merger
of such Eissociation into a savings association subsidiary of
such holding company or an interim savings association
subsidiary of such holding company.
"(C) Subject to paragraph (6), merging with or acquiring
another holding company, one of whose subsidiaries is a
savings association.
"(D) Investing in a corporation the capital stock of which
is available for purchase by a savings association under
Federal law or under the law of any State where the
subsidiary savings association or associations have their
home offices.
"(E) Engaging in the activities described in subsection
(c)(2), except subparagraph (B).
"(6) LIMITATIONS ON CERTAIN ACTIVITIES OF ACQUIRED HOLDING
COMPANIES.—

"(A) NEW ACTIVITIES.—If a mutual holding company acquires or merges with another holding company under
paragraph (5)(C), the holding company acquired or the holding company resulting from such merger or acquisition may
only invest in assets and engage in activities which are
authorized under paragraph (5).
"(B) GRACE PERIOD FOR DIVESTING PROHIBITED ASSETS OR

DISCONTINUING PROHIBITED ACTIVITIES.—Not later than 2
years following a merger or acquisition described in paragraph (5)(C), the acquired holding company or the holding
company resulting from such merger or acquisition shall—
"(i) dispose of any Eisset which is an asset in which a
mutual holding company may not invest under paragraph (5); and
"(ii) cease any activity which is an activity in which a
mutual holding company may not engage under paragraph (5).
"(7) REGULATION.—A mutual holding company shall be chartered by the Director and shall be subject to such regulations as
the Director may prescribe. Unless the context otherwise requires, a mutual holding company shall be subject to the other
requirements of this section regarding regulation of holding
companies.
"(8) CAPITAL IMPROVEMENT.—
"(A) PLEDGE OF STOCK OF SAVINGS ASSOCIATION SUBSIDI-

ARY.—This section shall not prohibit a mutual holding
company from pledging all or a portion of the stock of a
savings association chartered as part of a transaction described in paragraph (1) to raise capital for such savings
association.

103 STAT. 338

PUBLIC LAW 101-73—AUG. 9, 1989
"(B) ISSUANCE OF NONVOTING SHARES.—This section shall
not prohibit a savings association chartered as part of a
transaction described in paragraph (1) from issuing any
nonvoting shares or less than 50 percent of the voting
shares of such association to any person other than the
mutual holding company.
"(9) INSOLVENCY AND UQUIDATION.—

"(A) I N GENERAL.—Notwithstanding any provision of law,
upon—
"(i) the default of any savings association—
"(I) the stock of which is owned by any mutual
holding company; and
"(II) which was chartered in a transaction described in paragraph (1);
"(ii) the default of a mutual holding company; or
"(iii) a foreclosure on a pledge by a mutual holding
company described in paragraph (8)(A),
a trustee shall be appointed receiver of such mutual holding
company and such trustee shall have the authority to
liquidate the Eissets of, and satisfy the liabilities of, such
mutual holding company pursuant to title 11, United States
Code.
"(B) DISTRIBUTION OF NET PROCEEDS.—Except as provided

in subparagraph (C), the net proceeds of any liquidation of
any mutual holding company pursuant to subparagraph (A)
shall be transferred to persons who hold ownership interests in such mutual holding company.
"(C) RECOVERY BY CORPORATION.—If the Corporation
incurs a loss as a result of the default of any savings
association subsidiary of a mutual holding company which
is liquidated pursuant to subparagraph (A), the Corporation
shall succeed to the ownership interests of the depositors of
such savings association in the mutual holding company, to
the extent of the Corporation's loss.
"(10) DEFINITIONS.—For purposes of this subsection—
"(A) MUTUAL HOLDING COMPANY.—The term 'mutual
holding company' means a corporation organized as a holding company under this subsection.
"(B) MUTUAL ASSOCIATION.—The term 'mutual association' means a savings association which is operating in
mutual form.
"(C) DEFAULT.—The term 'default' means an adiudication
or other official determination of a court of competent
jurisdiction or other public authority pursuant to which a
conservator, receiver, or other legal custodian is appointed.
"(p) HOLDING COMPANY ACTIVITIES CONSTITUTING SERIOUS RISK TO
SUBSIDIARY SAVINGS ASSOCIATION.—
"(1) DETERMINATION AND IMPOSITION OF RESTRICTIONS.—If the

Director determines that there is reasonable cause to believe
that the continuation by a savings and loan holding company of
any activity constitutes a serious risk to the financial safety,
soundness, or stability of a savings and loan holding company's
subsidiary savings association, the Director may impose such
restrictions as the Director determines to be necessary to address such risk. Such restrictions shall be issued in the form of a
directive to the holding company and any of its subsidiaries,
limiting—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 339

"(A) the payment of dividends by the savings association;
"(B) transactions between the savings association, the
holding company, and the subsidiaries or affiliates of either;
and
"(C) any activities of the savings association that might
create a serious risk that the liabilities of the holding
company and its other affiliates may be imposed on the
savings association.
Such directive shall be effective as a cease and desist order that
has become final.
"(2) REVIEW OF DIRECTIVE.—
"(A) ADMINISTRATIVE REVIEW.—After a directive referred

to in paragraph (1) is issued, the savings and loan holding
company, or any subsidiary of such holding company subject to the directive, may object and present in writing its
reasons why the directive should be modified or rescinded.
Unless within 10 days after receipt of such response the
Director affirms, modifies, or rescinds the directive, such
directive shall automatically lapse.
"(B) JUDICIAL REVIEW.—If the Director affirms or modi- District of
fies a directive pursuant to subparagraph (A), any affected Columbia,
party may immediately thereafter petition the United
States district court for the district in which the savings
and loan holding company has its main office or in the
United States District Court for the District of Columbia to
stay, modify, terminate or set aside the directive. Upon a
showing of extraordinary cause, the savings and loan holding company, or any subsidiary of such holding company
subject to a directive, may petition a United States district
court for relief without first pursuing or exhausting the
administrative remedies set forth in this paragraph.
"(q) QUALIFIED STOCK ISSUANCE BY UNDERCAPITALIZED SAVINGS
ASSOCIATIONS OR HOLDING COMPANIES.—

"(1) I N GENERAL.—For purposes of this section, any issue of
shares of stock shall be treated as a qualified stock issuance if
the following conditions are met:
"(A) The shares of stock are issued by—
"(i) an undercapitalized savings association; or
"(ii) a savings and loan holding company which is not
a bank holding company but which controls an
undercapitalized savings association if, at the time of
issuance, the savings and loan holding company is
legally obligated to contribute the net proceeds from
the issuance of such stock to the capital of an
undercapitalized savings association subsidiary of such
holding company.
"(B) All shares of stock issued consist of previously
unissued stock or treasury shares.
"(C) All shares of stock issued are purchased by a savings
and loan holding company that is registered, as of the date
of purchase, with the Director in accordance with the provisions of subsection (b)(1) of this section.
"(D) Subject to paragraph (2), the Director approved the
purchase of the shares of stock by the acquiring savings and
loan holding company.
»«r.
"(E) The entire consideration for the stock issued is paid
in cash by the acquiring savings and loan holding company.

103 STAT. 340

PUBLIC LAW 101-73—AUG. 9, 1989
"(F) At the time of the stock issuance, each savings
association subsidiary of the acquiring savings and loan
holding company (other than an association acquired in a
transaction pursuant to subsection (c) or (k) of section 13 of
the Federal Deposit Insurance Act or section 408(m) of the
National Housing Act) has capital (after deducting any
subordinated debt, intangible assets, and deferred,
unamortized gains or losses) of not less than 6V2 percent of
the total assets of such savings association.
"(G) Immediately after the stock issuance, the acquiring
savings and loan holding company holds not more than 15
percent of the outstanding voting stock of the issuing
undercapitalized savings association or savings and loan
holding company.
"(H) Not more than one of the directors of the issuing
association or company is an officer, director, employee, or
other representative of the acquiring company or any of its
affiliates.
"(I) Transactions between the savings association or savings and loan holding company that issues the shares
pursuant to this section and the acquiring company and
any of its affiliates shall be subject to the provisions of
section 11.
"(2) APPROVAL OF ACQUISITIONS.—
"(A) ADDITIONAL CAPITAL COMMITMENTS NOT REQUIRED.—

The Director shall not disapprove any application for the
purchase of stock in connection with a qualified stock issuance on the grounds that the acquiring savings and loan
holding company has failed to undertake to make subsequent additional capital contributions to maintain the capital of the undercapitalized savings association at or above
the minimum level required by the Director or any other
Federal agency having jurisdiction.
"(B)

OTHER

CONDITIONS.—Notwithstanding

subsection

(a)(4), the Director may impose such conditions on any
approval of an application for the purchase of stock in
connection with a qualified stock issuance as the Director
determines to be appropriate, including—
"(i) a requirement that any savings association
subsidiary of the acquiring savings and loan holding
company limit dividends paid to such holding company
for such period of time as the Director may require; and
"(ii) such other conditions as the Director deems
necessary or appropriate to prevent evasions of this
section.
"(C) APPLICATION DEEMED APPROVED IF NOT DISAPPROVED

WITHIN 90 DAYS.—An application for approval of a purchase
of stock in connection with a qualified stock issuance shall
be deemed to have been approved by the Director if such
application has not been disapproved by the Director before
the end of the 90-day period beginning on the date such
application has been deemed sufficient under regulations
issued by the Director.
"(3) No LIMITATION ON CLASS OF STOCK ISSUED.—The shares of
stock issued in connection with a qualified stock issuance may
be shares of any class.

PUBLIC LAW 101-73—AUG. 9, 1989
"(4)

103 STAT. 341

UNDERCAPITALIZED SAVINGS ASSOCIATION DEFINED.—For

purposes of this subsection, the term 'undercapitaHzed savings
association' means any savings association—
"(A) the assets of which exceed the Habilities of such
association; and
"(B) which does not comply with one or more of the
capital standards in effect under section 5(t).
"(r) PENALTY FOR FAILURE TO PROVIDE TIMELY AND ACCURATE
REPORTS.—
"(1) FIRST TIER.—Any savings and loan holding company, and

any subsidiary of such holding company, which—
"(A) maintains procedures reasonably adapted to avoid
any inadvertent and unintentional error and, as a result of
such an error—
"(i) fails to submit or publish any report or information required under this section or regulations
prescribed by the Director, within the period of time
specified by the Director; or
"(ii) submits or publishes any false or misleading
report or information; or
"(B) inadvertently transmits or publishes any report
which is minimally late,
shall be subject to a penalty of not more than $2,000 for each
day during which such failure continues or such false or misleading information is not corrected. Such holding company or
subsidiary shall have the burden of proving by a preponderence
of the evidence that an error was inadvertent and unintentional
and that a report was inadvertently transmitted or published
late.
"(2) SECOND TIER.—Any savings and loan holding company,
and any subsidiary of such holding company, which—
"(A) fails to submit or publish any report or information
required under this section or under regulations prescribed
by the Director, within the period of time specified by the
Director; or
"(B) submits or publishes any false or misleading report
or information,
in a manner not described in paragraph (1) shall be subject to a
penalty of not more than $20,000 for each day during which
such failure continues or such false or misleading information is
not corrected.
"(3) THIRD TIER.—If any savings and loan holding company or
any subsidiary of such a holding company knowingly or with
reckless disregard for the accuracy of any information or report
described in paragraph (2) submits or publishes any false or
misleading report or information, the Director may assess a
penalty of not more than $1,000,000 or 1 percent of total assets
of such company or subsidiary, whichever is less, per day for
each day during which such failure continues or such false or
misleading information is not corrected.
"(4) ASSESSMENT.—Any penalty imposed under paragraph (1),
(2), or (3) shall be assessed and collected by the Director in the
manner provided in subparagraphs (E), (F), (G), and (I) of section
8(i)(2) of the Federal Deposit Insurance Act (for penalties imposed under such section) and any such assessment (including
the determination of the amount of the penalty) shall be subject
to the provisions of such subsection.

103 STAT. 342

PUBLIC LAW 101-73—AUG. 9, 1989
"(5) HEARING.—Any savings and loan holding company or any
subsidiary of such a holding company against which any penalty is assessed under this subsection shall be afforded a hearing
if such savings and loan holding company or such subsidiary, as
the case may be, submits a request for such hearing within 20
days after the issuance of the notice of assessment. Section 8(h)
of the Federal Deposit Insurance Act shall apply to any proceeding under this subsection.

12 u s e 1468.

"SEC. 11. TRANSACTIONS WITH AFFILIATES; EXTENSIONS OF CREDIT TO
EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS.
"(a) AFFILIATE TRANSACTIONS.—

"(1) I N GENERAL.—Sections 23A and 23B of the Federal Reserve Act shall apply to every savings association in the same
manner and to the same extent as if the savings association
were a member bank (as defined in such Act), except that—
"(A) no loan or other extension of credit may be made to
any affiliate unless that affiliate is engaged only in activities described in section 10(c)(2)(F)(i); and
"(B) no savings association may enter into any transaction described in section 23A03)(7)(B) of the Federal Reserve Act with any affiliate other than with respect to
shares of a subsidiary.
"(2) SISTER BANK EXEMPTION MADE AVAILABLE TO SAVINGS
ASSOCIATIONS.—
"(A) SAVINGS ASSOCIATIONS CONTROLLED BY BANK HOLDING

COMPANIES.—Every savings association more than 80 percent of the voting stock of which is owned by a company
described in section 10(c)(8) shall be treated as a bank for
purposes of section 23A(d)(l) and section 23B of the Federal
Reserve Act, if every savings association and bank controlled by such company complies with all applicable capital
requirements on a fully phased-in basis and without reliance on goodwill.
"(B) SAVINGS ASSOCIATIONS GENERALLY.—Effective on and

after January 1, 1995, every savings association shall be
treated as a bank for purposes of section 23A(d)(l) and
section 23B of the Federal Reserve Act.
"(3) AFFILIATES DESCRIBED.—Any company that would be an
affiliate (as defined in sections 23A and 23B of the Federal
Reserve Act) of any savings association if such savings association were a member bank (as such term is defined in such Act)
shall be deemed to be an affiliate of such savings association for
purposes of paragraph (1).
"(4)

ADDITIONAL RESTRICTIONS AUTHORIZED.—The

Director

may impose such additional restrictions on any transaction
between any savings association and any affiliate of such savings association as the Director determines to be necessary to
protect the safety and soundness of the savings association.
"Ot)) EXTENSIONS OF CREDIT TO EXECUTIVE OFFICERS, DIRECTORS,
AND P R I N C I P A L SHAREHOLDERS.—

"(1) I N GENERAL.—Section 22(h) of the Federal Reserve Act
shall apply to every savings association in the same manner and
to the same extent as if the savings association were a member
bank (as defined in such Act).

PUBLIC LAW 101-73—AUG. 9, 1989
"(2)

ADDITIONAL RESTRICTIONS AUTHORIZED.—The

103 STAT. 343
Director

may impose such additional restrictions on loans or extensions
of credit to any director or executive officer of any savings
association, or any person who directly or indirectly owns,
controls, or has the power to vote more than 10 percent of any
class of voting securities of a savings association, as the Director
determines to be necessary to protect the safety and soundness
of the savings association.
"(c) ADMINISTRATIVE ENFORCEMENT.—The Director may take
enforcement action with respect to violations of this section pursuant to section 8 or 18(j) of the Federal Deposit Insurance Act, as
appropriate.
"SEC. 12. ADVERTISING.

12 USC 1468a.

"No savings association shall carry on any sale, plan, or practices,
or any advertising, in violation of regulations promulgated by the
Director.
"SEC. 13. POWERS OF EXAMINERS.

12 USC 1468b.

"For the purposes of this Act, examiners appointed by the Director shall—
"(1) be subject to the same requirements, responsibilities, and
penalties as are applicable to examiners under the Federal
Reserve Act and title LXII of the Revised Statutes; and
"(2) have, in the exercise of functions under this Act, the same
powers and privileges as are vested in such examiners by law.
"SEC. 14. SEPARABILITY PROVISION.

12 USC 1468c.

"If any provision of this Act, or the application thereof to any
person or circumstances, is held invalid, the remainder of the Act,
and the application of such provision to other persons or circumstances, shall not be affected thereby.".
SEC. 302. SAVINGS PROVISIONS.

Notwithstanding the amendment made by this title to section 10
of the Home Owners' Loan Act and the repeal of section 416 of the
National Housing Act—
(1) any plan approved by the Federal Home Loan Bank Board
under such section 10 for any Federal savings association shall
continue in effect as long as such association adheres to the plan
and continues to submit to the Director of the Office of Thrift
Supervision regular and complete reports on the association's
progress in meeting the association's goals under the plan; and
(2) any plan approved by the Federal Savings and Loan
Insurance Corporation under such section 416 for any State
savings association shall continue in effect as long as such
association adheres to the plan and continues to submit to the
Federal Deposit Insurance Corporation regular and complete
reports on the association's progress in meeting the savings
association's goals under the plan.
SEC. 303. QUALIFIED THRIFT LENDER TEST.

(a) IN GENERAL.—Section 10(m) of the Home Owners' Loan Act is
amended to read as follows:
"(m) QUALIFIED THRIFT LENDER TEST.—

"(1) IN GENERAL.—Except as provided in paragraphs (2) and
(7), any savings association is a qualified thrift lender if—

12 USC 1467a
note.

12 USC 1467a.

103 STAT. 344

PUBLIC LAW 101-73—AUG. 9, 1989
"(A) the savings association's qualified thrift investments
equal or exceed 70 percent of the savings association's
portfolio assets; and
"(B) the savings association's qualified thrift investments
continue to equal or exceed 70 percent of the savings
association's portfolio assets, as measured by a daily or
weekly average of such qualified thrift investments and
such portfolio assets, for the 2-year period beginning on
July 1,1991, and for each 2-year period thereafter.
"(2)

EXCEPTIONS GRANTED BY DIRECTOR.—Notwithstanding

paragraph (1), the Director may grant such temporary and
limited exceptions from the minimum actual thrift investment
percentage requirement contained in such paragraph as the
Director deems necessary if—
"(A) the Director determines that extraordinary circumstances exist, such as when the effects of high interest
rates reduce mortgage demand to such a degree that an
insufficient opportunity exists for a savings association to
meet such investment requirements; or
"(B) the Director determines that—
"(i) the grant of any such exception will significantly
facilitate an acquisition under section 13(c) or 13(k) of
the Federal Deposit Insurance Act;
"(ii) the acquired association will comply with the
transition requirements of paragraph (7XB), as if the
date of the exemption were the starting date for the
transition period described in that paragraph; and
"(iii) the Director determines that the exemption will
not have an undue adverse effect on competing savings
associations in the relevant market and will further
the purposes of this subsection.
"(3) FAILURE TO BECOME AND REMAIN A QUALIFIED THRIFT
LENDER.—

"(A) I N GENERAL.—A savings association that fails to
become or remain a qualified thrift lender shsdl either
become one or more banks (other than a savings bank) or be
subject to subparagraph (B), except as provided in subparagraph (D).
"(B) RESTRICTIONS APPUCABLE TO SAVINGS ASSOCIATIONS
THAT ARE NOT QUAUFIED THRIFT LENDERS.—
"(i) RESTRICTIONS EFFECTIVE IMMEDIATELY.—The fol-

lowing restrictions sh£ill apply to a savings association
beginning on the date on which the savings association
should have become or ceases to be a qualified thrift
lender:
"(I) ACTIVITIES.—The savings association shall
not make any new investment (including an investment in a subsidiary) or engage, directly or indirectly, in any other new activity unless that
investment or activity would be permissible for the
savings association if it were a national bank, and
is also permissible for the savings association as a
savings association.
"(II) BRANCHING.—The savings association shall
not establish any new branch office at any location
at which a national bank located in the savings
association's home State may not establish a

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 345

branch office. For purposes of this subclause, a
savings association's home State is the State in
which the savings association's total deposits were
largest on the date on which the savings association should have become or ceased to be a qualified
thrift lender.
"(Ill) ADVANCES.—The savings association shall
not be eligible to obtain new advances from any
Federal home loan bank.
"(IV) DIVIDENDS.—The savings association shall
be subject to all statutes and regulations governing
the payment of dividends by a national bank in the
same manner and to the same extent as if the
savings association were a national bank.
"(ii) ADDITIONAL RESTRICTIONS EFFECTIVE AFTER THREE

YEARS.—The following additional restrictions shall
apply to a savings association beginning 3 years after
the date on which the savings association should have
become or ceases to be a qualified thrift lender:
"(I) ACTIVITIES.—The savings association shall
not retain any investment (including an investment in any subsidiary) or engage, directly or indirectly, in any activity unless that investment or
activity would be permissible for the savings
association if it were a national bank, and is also
permissible for the savings association as a savings
association.
"(II) ADVANCES.—The savings association shall
repay any outstanding advances from any Federal
home loan bank as promptly as can be prudently
done consistent with the safe and sound operation
of the savings association.
"(C) HOLDING COMPANY REGULATION.—Any company that
controls a savings association that is subject to any provision of subparagraph (B) shall, within one year after the
date on which the savings association should have become
or ceases to be a qualified thrift lender, register as and be
deemed to be a bank holding company subject to all of the
provisions of the Bank Holding Company Act of 1956, section 8 of the Federal Deposit Insurance Act, and other
statutes applicable to bank holding companies, in the same
manner and to the same extent as if the company were a
bank holding company and the savings association were a
bank, as those terms are defined in the Bank Holding
Company Act of 1956.
"(D) REQUAUFICATION.—A savings association that should
have become or ceases to be a qualified thrift lender shall
not be subject to subparagraph (B) or (C) if the savings
association becomes a qualified thrift lender by meeting the
qualifted thrift lender requirement in paragraph (1) for the
preceding 2-year period and remains a qualified thrift
lender. If the savings association (or any savings association
that acquired all or substantially all of its assets from that
savings association) at any time thereafter ceases to be a
qualified thrift lender, it shall immediately be subject to all
provisions of subparagraphs (B) and (C) as if all the periods
described in subparagraphs (B)(ii) and (C) had expired.

\

103 STAT. 346

PUBLIC LAW 101-73—AUG. 9, 1989

. ;. -

"(E) DEPOSIT INSURANCE ASSESSMENTS.—Any bank chartered as a result of the requirements of this section shall be
obligated until December 31, 1993, to pay to the Savings
Association Insurance Fund the assessments £issessed on
savings associations under the Federal Deposit Insurance
Act. Such association shall also be assessed, on the date of
its change of status from a Savings Association Insurance
Fund member, the exit fee and entrance fee provided in
section 5(d) of the Federal Deposit Insurance Act. Such
institution shall not be obligated to pay the assessments
assessed on banks under the Federal Deposit Insurance Act
until—
t "(i) December 31,1993, or
"(ii) the institution's change of status from a Savings
Association Insurance Fund member to a Bank Insurance Fund member,
whichever is later.
"(F) EXEMPTION FOR SPECIALIZED SAVINGS ASSOCIATION
SERVING TRANSIENT MILITARY PERSONNEL.—Subparagraph

(A) shall not apply to a savings association subsidiary of a
savings and loan holding company if—
"(i) the savings and loan holding company is a reciprocal interinsurance exchange that acquired control of
the insured institution before January 1, 1984; and
"(ii) at least 90 percent of the customers of the
savings and loan holding company and its subsidiaries
and affiliates are active or former officers in the United
States military services or the widows, widowers, divorced spouses, or current or former dependents of
such officers.
"(G) EXEMPTION FOR CERTAIN FEDERAL SAVINGS ASSOCIA-

^

TIONS.—This paragraph shall not apply to any Federal
savings association in existence as a Federal savings
association on the date of enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989—
"(i) that was chartered before October 15, 1982, as a
savings bank or a cooperative bank under State law; or
"(ii) that acquired its principal assets from an
association that was chartered before October 15, 1982,
as a savings bank or a cooperative bank under State
law.
"(H) No CIRCUMVENTION OF EXIT MORATORIUM.—Subparagraph (A) of this paragraph shall not be construed as
permitting any insured depository institution to engage in
any conversion transaction prohibited under section 5(d) of
the Federal Deposit Insurance Act.
"(4) DEFINITIONS.—For purposes of this subsection—
"(A) ACTUAL THRIFT INVESTMENT PERCENTAGE.—The term
'actual thrift investment percentage' means the percentage
determined by dividing—
"(i) the amount of a savings association's qualified
thrift investments, by
"(ii) the amount of the savings association's portfolio
assets.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 347

"(B) PoRTFOUO ASSETS.—The term 'portfolio assets'
means, with respect to any savings association, the total
assets of the savings association, minus the sum of—
"(i) goodwill Euid other intangible assets;
"(ii) the value of property used by the savings association to conduct its business; and
"(iii) liquid assets of the type required to be maintained under section 6 of the Home Owners' Loan Act,
in an amount not exceeding the amount equal to 10
percent of the savings association's total eissets.
"(C) QUAUFIED THRIFT INVESTMENTS.—

"(i) I N GENERAL.—The term 'qualified thrift investments' means, with respect to any savings association,
the assets of the savings association that are described
in clauses (ii) and (iii).
"(ii) ASSETS INCLUDIBLE WITHOUT UMIT.—The follow-

ing assets are described in this clause for purposes of
claused):
"(I) The aggregate amount of loans held by the
savings association that were made to purchase,
refinance, construct, improve, or repair domestic
residential housing or manufactured housing.
"(II) Home-equity loans.
"(Ill) Securities backed by or representing an
interest in mortgages on domestic residential housing or manufactured housing.
(IV)

EXISTING OBUGATIONS OF DEPOSIT INSUR-

ANCE AGENCIES.—Direct or indirect obligations of
the Federal Deposit Insurance Ck)rporation or the
Federal Savings and Loan Insurance Corporation
issued in accordance with the terms of agreements
entered into prior to July 1, 1989, for the 10-year
period beginning on the date of issuance of such
obligations.
"(V)

N E W OBUGATIONS OF DEPOSIT INSURANCE

AGENCIES.—Obligations of the Federal Deposit
Insurance Corporation, the Federal Savings and
Loan Insurance Corporation, the FSLIC Resolution
Fund, and the Resolution Trust (Corporation issued
in accordance with the terms of agreements entered into on or after July 1, 1989, for the 5-year
period beginning on the date of issuance of such
obligations,
"(iii) ASSETS INCLUDIBLE SUBJECT TO PERCENTAGE
RESTRICTION.—The following assets are described in this
clause for purposes of clause (i):
"(I) 50 percent of the dollar amount of the residential mortgage loans originated by such savings
association and sold within 90 days of origination.
"(II) Investments in the capital stock or obligations of, and any other security issued by, any
service corporation if such service corporation derives at least 80 percent of its annual gross revenues from activities directly related to purchasing,
refinancing, constructing, improving, or repairing
domestic residential real estate or manufactured
housing.

103 STAT. 348

PUBLIC LAW 101-73—AUG. 9, 1989

. u'

:'•- •
'
•^

"(III) 200 percent of the dollar amount of loans
and investments made to acquire, develop, and
construct 1- to 4-family residences the purchase
price of which is or is guaranteed to be not greater
than 60 percent of the median value of comparable
newly constructed 1- to 4-family residences within
the local community in which such real estate is
located, except that not more than 25 percent of
the amount included under this subclause may
consist of commercial properties related to the
development if those properties are directly related
to providing services to residents of the development.
"(IV) 200 percent of the dollar amount of loans
for the acquisition or improvement of residential
real property, churches, schools, and nursing
homes located within, and loans for any other
purpose to any small businesses located within any
area which has been identified by the Director, in
connection with any review or examination of
community reinvestment practices, as a geographic
area or neighborhood in which the credit needs of
the low- and moderate-income residents of such
area or neighborhood are not being adequately
met.
"(V) Loans for the purchase or construction of
churches, schools, nursing homes, and hospitals,
other than those qualifying under clause (IV), and
loans for the improvement and upkeep of such
properties.
"(VI) Loans for personal, family, household, or
educational purposes, but the dollar amount treated as qualified thrift investments under this
subclause may not exceed the amount which is
equal to 5 percent of the savings association's portfolio assets.
"(iv) PERCENTAGE RESTRICTION APPLICABLE TO CERTAIN

'

-

•

•^

'

ASSETS.—The aggregate amount of the Eissets described
in clause (iii) which may be taken into account in
determining the amount of the qualified thrift investments of any savings association shall not exceed the
amount which is equal to 15 percent of a savings
association's portfolio assets.
"(v) The term 'qualified thrift investments' exeludes—
"(I) except for home equity loans, that portion of
any loan or investment that is used for any purpose other than those expressly qualifying under
any subparagraph of clause (ii) or (iii); or
"(II) goodwill or any other intangible asset.
"(5) CONSISTENT ACCOUNTING REQUIRED.—

"(A) In determining the amount of a savings association's
portfolio assets, the assets of any subsidiary of the savings
association shall be consolidated with the assets of the
savings association if—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 349

"(i) Assets of the subsidiary are consolidated with the
assets of the savings association in determining the
savings association's qiiaUfied thrift investments; or
"(ii) Residential mortgage loans originated by the
subsidiary are included pursuant to paragraph
(4)(C)(iii)(I) in determining the savings association's
qualified thrift investments.
"(B) In determining the amount of a savings association's
portfolio assets and qualified thrift investments, consistent
accounting principles shall be applied.
"(6) SPECIAL RULES FOR PUERTO RICO A N D VIRGIN ISLANDS SAVINGS ASSOCIATIONS.—
"(A) PUERTO RICO SAVINGS ASSOCIATIONS.—With respect to

any savings association headquartered and operating primarily in Puerto Rico—
"(i) the term 'qualified thrift investments' includes,
in addition to the items specified in paragraph (4)—
"(I) the aggregate amount of loans for personal,
family, educational, or household purposes made to
persons residing or domiciled in the Commonwealth of Puerto Rico; and
"(II) the aggregate amount of loans for the acquisition or improvement of churches, schools, or
nursing homes, and of loans to small businesses,
located within the Commonwealth of Puerto Rico;
and
"(ii) the aggregate amount of loans related to the
purchase, acquisition, development and construction of
1- to 4-family residential real estate—
"(I) which is located within the Commonwealth
of Puerto Rico; and
"(II) the value of which (at the time of acquisition or upon completion of the development and
construction) is below the median value of newly
constructed 1- to 4-family residences in the
Commonwealth of Puerto Rico, which may be
taken into account in determining the amount of
the qualified thrift investments and of such savings association shall be doubled.
"(B) VIRGIN ISLANDS SAVINGS ASSOCIATIONS.—With respect

to any savings association headquartered and operating
primarily in the Virgin Islands—
"(i) the term 'qualified thrift investments' includes,
in addition to the items specified in paragraph (4)—
"(I) the aggregate amount of loans for personal,
family, educational, or household purposes made to
persons residing or domiciled in the Virgin Islands;
and
"(II) the aggregate amount of loans for the acquisition or improvement of churches, schools, or
nursing homes, and of loans to small businesses,
located within the Virgin Islands; and
"(ii) the aggregate amount of loans related to the
purchase, acquisition, development and construction of
1- to 4-family residential real estate—
"(I) which is located within the Virgin Islands;
and

103 STAT. 350

PUBLIC LAW 101-73—AUG. 9, 1989
"(11) the value of which (at the time of acquisition or upon completion of the development and
construction) is below the median value of newly
constructed 1- to 4-family residences in the Virgin
Islands, which may be taken into account in determining the amount of the qualified thrift investments and of such savings association shall be
doubled.
"(7) TRANSITIONAL RULE FOR CERTAIN SAVINGS ASSOCIATIONS.—

"(A) IN GENERAL.—If any Federal savings association in
existence as a Federal savings association on the date of
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989—
"(i) that was chartered as a savings bank or a cooperative bank under State law before October 15,
1982; or
"(ii) that acquired its principal assets from an
association that was chartered before October 15, 1982,
as a savings bank or a cooperative bank under State
law,
meets the requirements of subparagraph (B), such savings
association shall be treated as a qualified thrift lender
during period ending on September 30,1995.
"(B)

SUBPARAGRAPH

(B)

REQUIREMENTS.—A

savings

association meets the requirements of this subparagraph if,
in the determination of the Director—
"(i) the actual thrift investment percentage of such
association does not, after the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, decrease below the actual thrift
investment percentage of such association on July 15,
1989; and
"(ii) the amount by which—
"(I) the actual thrift investment percentage of
such association at the end of each period described
in the following table, exceeds
"(II) the actual thrift investment percentage of
such association on July 15,1989,
is equal to or greater than the applicable percentage (as
determined under the following table) of the amount by
which 70 percent exceeds the actual thrift investment
percentage of such association on such date of enactment:
"For the following
period:
July 1, 1991-September 30, 1992
October 1, 1992-March 31, 1994
April 1, 1994-September 30, 1995
Thereafter

12 use 1467a
"°^-

The applicable
percentage is:
25 percent
50 percent
75 percent
100 percent

"(C) For purposes of this paragraph, the actual thrift
investment percentage of an association on July 15, 1989,
shall be determined by applying the definition of 'actual
thrift investment percentage' that takes effect on July 1,
1991.".
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on July 1, 1991.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 351

(c) ASSOCIATIONS THAT HAVE PREVIOUSLY FAILED TO REMAIN 12 use I467a
QuAUFiED THRIFT LENDERS.—If, as of June 30, 1991, any savings "°^association is subject to any provision of section 10(m)(3) of the
Home Owners' Loan Act as in effect on that date, the amendment to
this subsection made by section 303 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, shall not be construed as reducing the period specified in section 10(mX3) of such
Act.
SEC.

304. TRANSITIONAL RULE FOR CERTAIN TRANSACTIONS WITH
AFFILIATES.

12 USC 1468
note.

(a) CONSISTENCY OF CERTAIN REGULATIONS WITH SECTION 23A OF
THE FEDERAL RESERVE ACT.—Not later than 6 months after the date

of enactment of this Act, the Director of the Office of Thrift Supervision shall revise the Director's conflicts regulations so as not to
prohibit a thrift institution from purchasing mortgages from a
mortgage-banking affiliate to the same extent as a member bank
may do so under section 250.250 of title 12, Code of Federal Regulations.
Ot)) TRANSITIONAL PERIOD.—Notwithstanding section 11(a) of the

Home Owners' Loan Act (as added by section 301 of this Act), a
thrift institution that, before May 1, 1989, had received approval
from the Federal Savings and Loan Insurance Corporation pursuant
to section 408(d)(6) of the National Housing Act as then in effect to
purchase mortgages from a mortgage-banking affiliate may, during
the 6-month period following the date on which final regulations are
prescribed pursuant to subsection (a), continue to engage in transactions for which it had received such approval. Any savings association that engages in such transactions pursuant to this subsection
shall comply with the standards that wfere applicable under section
408(d)(6) as in effect on May 1,1989.
(c) AUTHORITY T O EXTEND REGULATORY APPROVALS THAT WOULD
OTHERWISE LAPSE DURING THE TRANSITIONAL PERIOD.—The Director

of the Office of Thrift Supervision may extend until the expiration
of the 6-month period described in subsection (b) any approval
granted by the Federal Savings and Loan Insurance Corporation
that expires or would expire before the expiration of that 6-month
period. In determining whether to grant such exemptions, the Director shall apply the standards that were applicable under section
408(dX6) of the National Housing Act as in effect on May 1, 1989.
SEC. 305. TRANSITIONAL RULES REGARDING CERTAIN LOANS AND EFFECTIVE DATES.
(a) DIVESTITURE OF CERTAIN LOANS AND INVESTMENTS NOT RE- 12 u s e 1464

QUIRED.—The limitations on lo£ins and investments contained in ^°^section 5(c) of the Home Owners' Loan Act, as amended by section
301, do not require the divestiture of any loan or investment that
was lawful when made under the provisions of such section as those
provisions were in effect at the time such loan or investment was
made.
(b) LOANS SECURED BY NONRESIDENTIAL REAL PROPERTY.—

12 u s e 1464

(1) I N GENERAL.—The Director of the Office of Thrift Super- "°*®vision may, by order, permit a Federal savings association to
exceed the limitation set forth in section 5(c)(2XBXi) of the Home
Owners' Loan Act during the period beginning on the date of
enactment of this Act and ending on June 1, 1991, if the
Director determines that—

103 STAT. 352

12 use 1461
^°^-

PUBLIC LAW 101-73—AUG. 9, 1989

(A) there is a reasonable prospect that the savings
association can be in compliance, not later than June 1,
1991, with the capital standards prescribed under section
5(t) of the Home Owners' Loan Act; and
(B) the increased authority—
(i) is consistent with prudent operating practices, and
(ii) is in accordance with a plan submitted by the
savings association for—
(I) an orderly transition to compliance with section 5(c)(2)(B)(i), or
(II) an orderly conversion to a bank charter.
(2) OTHER EXEMPTIVE AUTHORITY NOT AFFECTED.—The authority granted by paragraph (1) is in addition to any authority of
the Director under section 5(c)(2)(B)(ii) of the Home Owners'
Loan Act.
(c) EFFECTIVE DATE.—The amendments made by section 301 relating to civil penalties shall apply with respect to violations committed and activities engaged in after the date of the enactment of this
Act, except that the increased maximum civil penalties of $5,000
and $25,000 per violation or per day may apply to such violations or
activities committed or engaged in before such date with respect to
an institution if such violations or activities—
(1) are not already subject to a notice issued by the appropriate Federal banking agency or the Board (initiating an
administrative proceeding); and
(2) occurred after the completion of the last report of examination of the institution by the appropriate Federal banking
agency (as defined in section 3 of the Federal Deposit Insurance
Act) occurring before the date of the enactment of this Act.
SEC. 306. AMENDMENT OF ADDITIONAL POWERS OF DIRECTOR.

(a) Section 502(c) of the Housing Act of 1948 (12 U.S.C. 1701c(c)) is
amended by striking out "Federal Home Loan Bank Board (which
term as used in this section shall also include and refer to the
Federal Savings and Loan Insurance Corporation, the Home Owners
Loan Corporation, and the Chairman of the Federal Home Loan
Bank Board)," and inserting in lieu thereof the following: "Director
of the Office of Thrift Supervision,".
OD) Section 502(c)(1) of the Housing Act of 1948 (12 U.S.C.
1701c(b)(l)) is amended by striking out "of any State" and inserting
in lieu thereof "of any Federal, State,".
SEC. 307. AMENDMENT TO TITLE 31, UNITED STATES CODE.
(a) OFFICE ESTABLISHED AS AN OFFICE WITHIN THE DEPARTMENT.—

'

(1) I N GENERAL.—Subchapter I of chapter 3 of title 31, United
States Code, is amended by redesignating section 309 as section
310 and by inserting after section 308 the following new section:

"§ 309. Office of Thrift Supervision
"The Office of Thrift Supervision established under section 2A(a)
of the Home Owners' Loan Act shall be an office in the Department
of the Treasury.".
(2) CLERICAL AMENDMENT.—The table of chapters for subchapter I of chapter 3 of title 31, United States Code, is amended
by redesignating the item relating to section 309 as section 310
and by inserting after the item relating to section 308 the
following new item:

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 353

"309. Office of Thrift Supervision.".

(b) CONFORMING AMENDMENT.—Section 821(c) of title 31, United
States Code, is amended—
(1) by adding at the end thereof the following new paragraph:
"(3) of the Director of the Office of Thrift Supervision;";
(2) by striking out "and" at the end of paragraph (1); and
(3) by striking out the period at the end of paragraph (2) and
inserting in lieu thereof ; and".
(c) GAO AUDIT AUTHORITY.—Section 714(a) of title 31, United
States Code, is amended—
(1) by inserting ", and the Office of Thrift Supervision" before
the period; and
(2) by striking out "and" after "Corporation,".
(d) CERTAIN REORGANIZATION PROHIBITED.—Section 321 of title 31,
United States Code, is amended by adding at the end thereof the
following new subsection:
"(e) CERTAIN REORGANIZATION PROHIBITED.—The Secretary of the

Treasury may not merge or consolidate the Office of Thrift Supervision, or any of the functions or responsibilities of the Office or the
Director of such office, with the Office of the Comptroller of the
Currency or the Comptroller of the Currency.".
(e) TECHNICAL AND CONFORMING AMENDMENT TO GOVERNMENT
CONTROL ACT.—Section 9101(3) of title 31, United States Code, is

amended by striking out subparagraph (E).
SEC. 308. PRESERVING MINORITY OWNERSHIP OF MINORITY FINANCIAL
INSTITUTIONS.

12 USC 1463
^°^-

(a) (CONSULTATION ON METHODS.—The Secretary of the Treasury

shall consult with the Director of the Office of Thrift Supervision
and the Chairperson of the Board of Directors of the Federal Deposit
Insurance (Corporation on methods for best achieving the following
goals:
(1) Preserving the present number of minority depository
institutions.
(2) Preserving their minority character in cases involving
mergers or acquisition of a minority depository institution by
using general preference guidelines in the following order:
(A) Same type of minority depository institution in the
same city.
(B) Same type of minority depository institution in the
same State.
(C) Same type of minority depository institution nationwide.
(D) Any tjrpe of minority depository institution in the
same city.
(E) Any type of minority depository institution in the
same State.
(F) Any type of minority depository institution nationwide.
(G) Any other bidders.
(3) Providing technical assistance to prevent insolvency of
institutions not now insolvent.
(4) Promoting and encouraging creation of new minority
depository institutions.
(5) Providing for training, technical assistance, and educational programs.
(b) DEFINITIONS.—For purposes of this section—

P

103 STAT. 354

^

PUBLIC LAW 101-73—AUG. 9, 1989
(1) MINORITY FINANCIAL INSTITUTION.—The term "minority
depository institution" means any depository institution that—
(A) if a privately owned institution, 51 percent is owned
by one or more socially and economically disadvantaged
individuals;
(B) if publicly owned, 51 percent of the stock is owned by
one or more socially and economically disadvantaged
individuals; and
Oi J
(C) in the case of a mutual institution where the majority
of the Board of Directors, account holders, and the community which it services is predominantly minority.
(2) MINORITY.—The term 'minority" means any black American, Native American, Hispanic American, or Asian American.

12 use 1437
Government
organization and
employees.
fimnlovfifis

TITLE I V — T R A N S F E R O F F U N C T I O N S ,
PERSONNEL, AND PROPERTY
SEC. 401. FSLIC AND FEDERAL HOME LOAN BANK BOARD ABOLISHED.
/ \T
(a) I N GENERAL.—

(1) FSLIC.—Effective on the date of the enactment of this Act,
the Federal Savings and Loan Insurance Corporation established under section 402 of the National Housing Act is abolished.
(2) FHLBB.—Effective at the end of the 60-day period beginning on the date of the enactment of this Act, the Federal Home
Loan Bank Board and the position of Chairman of the Federal
Home Loan Bank Board are abolished.
(b) DISPOSITION OF AFFAIRS.—

(1) I N GENERAL.—During the 60-day period beginning on the
date of the enactment of this Act, the Chairman of the Federal
Home Loan Bank Board—
(A) shall, solely for the purpose of winding up the affairs
of the Federal Savings and Loan Insurance Corporation and
the Federal Home Loan Bank Board—
(i) manage the employees of the Board and provide
for the payment of the compensation and benefits of
any such employee which accrue before the effective
•'
date of the transfer of such employee pursuant to
section 403; and
'
(ii) manage any property of the Board and the Corporation until such property is transferred pursuant to
section 405; and
(B) may take any other action necessary for the purpose
of winding up the affairs of the Corporation and the Board.
(2) AVAILABILITY OF FUNDS IN FSLIC RESOLUTION FUND ON A
REIMBURSABLE BASIS.—

' I
&-'

(A) AvAiLABiUTY OF FUNDS.—Notwithstanding any provision of section 11A of the Federal Deposit Insurance Act {as
added by section 215 of this Act), funds in the FSLIC
Resolution Fund shall be available to the Chairman of the
Federal Home Loan Bank Board to pay any expense incurred in carrying out the requirements of paragraph (1).
(B) PAYMENT BY FDIC.—Upon the request of the Chairman

of the Federal Home Loan Bank Board, the Federal Deposit
Insurance Corporation shall pay to the Chairman from the

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 355

FSLIC Resolution Fund the amounts requested for expenses
described in subparagraph (A).
(C) EXCLUSIVE SOURCE OF FUNDS.—No funds or other property of the Federal Home Loan Bank Board or the Federal
Savings and Loan Insurance Corporation (other than the
FSLIC Resolution Fund) may be used by the Chairman of
the Federal Home Loan Bank Board to pay any expense
incurred in carrying out any provision of this title.
(D) REIMBURSEMENT BY SUCCESSOR AGENCIES.—Disburse-

ments from the FSLIC Resolution Fund pursuant to
subparagraph (A) which are attributable to employees described in paragraph (IXAXi) and property described in
pargigraph (IXAXii) shall be reimbursed by the agency to
which any such employee or property is transferred.
(c) AUTHORITY AND STATUS OF CHAIRMAN OF THE FEDERAL HOME
LOAN BANK BOARD.—

(1) I N GENERAL.—Notwithstanding the repeal of section 17 of
the Federal Home Loan Bank Act by section 703 of this Act, the
repeal of section 402(c) of the National Housing Act by section
407 of this title, the abolishment of the Federal Savings and
Loan Insurance Corporation under section 401 of this title, the
Chairman of the Federal Home Loan Bank Board shall have
any authority vested in the Chairman or the Board before such
date of enactment which is necessary for the Chairman to carry
out the requirements of this section, paragraphs (1) and (2) of
section 403(b), and section 405(a) during the 60-day period beginning on such date.
(2) OTHER PROVISIONS.—For purposes of paragraph (1), the

Chairman of the Federal Home Loan Bank Board shall continue
to be—
(A) treated as an officer of the United States during the
60-day period referred to in such subparagraph; and
(B) entitled to compensation at the annual rate of basic
pay payable for level III of the Executive Schedule.

^

(3) No ADDITIONAL COMPENSATION IF APPOINTED DIRECTOR.—

During the 60-day period beginning on the date of the enactment of this Act, the Chairman of the Federal Home Loan Bank
Board shall not be entitled to any additional compensation by
reason of his appointment as Director of the Office of Thrift
Supervision.
(d) STATUS OF EMPLOYEES BEFORE TRANSFER.—
(1) EMPLOYEES OF FSUC.—Any employee of the Federal Sav-

"

ings and Loan Insurance (Corporation shall be treated eis an
employee of the Federal Home Loan Bank Board for purposes of
subsection (bXlXAXi).
(2) RULE OF CONSTRUCTION.—The repeal of section 17 of the

Federal Home Loan Bank Act by section 703 of this Act, the
repeal of section 402(c) of the National Housing Act by section
407 of this title, and the abolishment of the Federal Savings and
Loan Insurance (Corporation under section 401 of this title, shall
not be construed as affecting the status of employees of such
(Corporation or of the Federal Home Loan Bank Board as
employees of an agency of the United States for purposes of any
other provision of law before the effective date of the transfer of
any such employee pursuant to section 403.
(e) (CONTINUATION OF SERVICES.—

^

103 STAT. 356

PUBLIC LAW 101-73—AUG. 9, 1989
(1) IN GENERAL.—The Director of the Office of Thrift Supervision, the Chairperson of the Oversight Board of the Resolution
Trust Corporation, the Chairperson of the Federal Deposit
Insurance Corporation, and the Chairperson of the Federal
Housing Finance Board may use the services of employees and
other personnel and the property of the Federal Home Loan
Bank Board and the Federal Savings and Loan Insurance Corporation, on a reimbursable basis, to perform functions which
have been transferred to such agencies for such time as is
reasonable to facilitate the orderly transfer of functions transferred pursuant to any other provision of this Act or any
amendment made by this Act to any other provision of law.
(2) REIMBURSEMENT.—The reimbursement required under
paragraph (1) with respect to employees, personnel, and propV erty described in such paragraph shall be made to the FSLIC
Resolution Fund and shall be taken into account in determining
the amount of any reimbursement required under subsection
(bX2)(D).
(3) AGENCY SERVICES.—Any agency, department, or other
instrumentality of the United States (including any Federal
home loan bank), and any successor to any such agency, department, or instrumentality, which was providing supporting services to the Federal Home Loan Bank Board or the Federal
Savings and Loan Insurance Corporation before the enactment
of this Act in connection with functions that are transferred to
. the Office of Thrift Supervision, the Resolution Trust Corporation, the Federal Deposit Insurance Corporation, or the Federal
Housing Finance Board shall—
(A) continue to provide such services, on a reimbursable
basis, until the transfer of such functions is complete; and
(B) consult with any such agency to coordinate and facilitate a prompt and reasonable transition.
(f) SAVINGS PROVISIONS RELATING TO FSLIC.—
(1) EXISTING RIGHTS, DUTIES, AND OBUGATIONS NOT AFFECTED.—

'

Subsection (a) shall not affect the validity of any right, duty, or
obligation of the United States, the Federal Savings and Loan
Insurance Corporation, or any other person, which—
(A) arises under or pursuant to any section of title IV of
the National Housing Act; and
(B) existed on the day before the date of the enactment of
this Act.
(2) CONTINUATION OF SUITS.—No action or other proceeding
commenced by or against the Federal Savings and Loan Insurance Corporation, or any Federal home loan bank with respect
to any function of the Corporation which was delegated to
employees of such bank, shall abate by reason of the enactment
of this Act, except that the appropriate successor to the interests of such Corporation shall be substituted for the Corporation or the Federal home loan bank as a party to any such
action or proceeding.
(g) SAVINGS PROVISIONS RELATING TO F H L B B . —
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—

Subsection (a) shall not affect the validity of any right, duty, or
obligation of the United States, the Federal Home Loan Bank
Board, or any other person, which—
(A) arises under or pursuant to the Federal Home Loan
Bank Act, the Home Owners' Loan Act of 1933, or any other

PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 357

provision of law applicable with respect to such Board
(other than title IV of the National Housing Act); and
(B) existed on the day before the date of the enactment of
this Act.
(2) CONTINUATION OF SUITS.—

(A) I N GENERAL.—No action or other proceeding commenced by or against the Federal Home Loan Bank Board,
or any Federal home loan bank with respect to any function
of the Board which was delegated to employees of such
bank, shall abate by reason of the enactment of this Act,
except that the appropriate successor to the interests of
such Board shall be substituted for the Board or the Federal
home loan bank as a party to any such action or proceeding,

.

(h) CONTINUATION OF ORDERS, RESOLUTIONS, DETERMINATIONS, AND

REGULATIONS.—Subject to section 402, all orders, resolutions, determinations, and regulations, which—
(1) have been issued, made, prescribed, or allowed to become
effective by the Federal Savings and Loan Insurance Corporation or the Federal Home Loan Bank Board (including orders,
resolutions, determinations, and regulations which relate to the
conduct of conservatorships and receiverships), or by a court of
competent jurisdiction, in the performance of functions which
are transferred by this Act; and
(2) are in effect on the date this Act takes effect,
shall continue in effect according to the terms of such orders,
resolutions, determinations, and regulations and shall be enforceable by or against the Director of the Office of Thrift Supervision,
the Federal Deposit Insurance Corporation, the Federal Housing
Finance Board, or the Resolution Trust Corporation, as the case may
be, until modified, terminated, set aside, or superseded in accordance with applicable law by the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the Federal
Housing Finance Board, or the Resolution Trust Corporation, as the
case may be, by any court of competent jurisdiction, or by operation
of law.
(i) IDENTIFICATION OF REGULATIONS WHICH REMAIN IN EFFECT
PURSUANT TO THIS SECTION.—Before the end of the 60-day period

beginning on the date of the enactment of this Act, the Director of
the Office of Thrift Supervision and the Chairperson of the Federal
Deposit Insurance Corporation shall—
(1) identify the regulations and orders which relate to the
conduct of conservatorships and receiverships in accordance
with the allocation of authority between them under this Act
and the amendments made by this Act; and
(2) promptly publish notice of such identification in the Fed- Federal
eral Register.
Register,

publication.

SEC. 402. CONTINUATION AND COORDINATION OF CERTAIN REGULATIONS.

(a) REGULATIONS RELATING TO INSURANCE FUNCTIONS.—All regulations and orders of the Federal Savings and Loan Insurance Corporation, or the Federal Home Loan Bank Board (in such Board's
capacity as the board of trustees of such Corporation), which are in
effect on the date of the enactment of this Act and relate to—
(1) the provision, rates, or cancellation of insurance of accounts; or
(2) the administration of the insurance fund of the Federal
Savings and Loan Insurance Corporation,

^

103 STAT. 358

PUBLIC LAW 101-73—AUG. 9, 1989
shall remain in effect according to the terms of such regulations and
orders and shall be enforceable by the Federal Deposit Insurance
Corporation unless determined otherwise by such Corporation after
consultation with the Director of the Office of Thrift Supervision
and, with respect to regulations and orders relating to the scope of
deposit insurance coverage, pursuant to subsection (c).
(b) IDENTIFICATION OF REGULATIONS WHICH REMAIN IN EFFECT
PURSUANT TO THIS SECTION.—Before the end of the 60-day period

Federal
Register,
publication.

beginning on the date of the enactment of this Act, the Director of
the Office of Thrift Supervision and the Chairperson of the Federal
Deposit Insurance Corporation shall—
(1) identify the regulations and orders referred to in subsection (a) of this section in accordance with the allocation of
authority between them under this Act and the amendments
made by this Act; and
(2) promptly publish notice of such identification in the Federal Register.
(c) PROCEDURE FOR DIFFERENCES IN DEPOSIT INSURANCE COVERAGE
BETWEEN F S L I C AND F D I C —
(1) TRANSITION RULE.—Until the effective date of regulations

prescribed under paragraph (3XB), any determination of the
amount of any insured deposit in any depository institution
which becomes an insured depository institution as a result of
the amendment made to section 4(a) of the Federal Deposit
Insurance Act by section 205(1) of this Act shall be made in
accordance with the regulations and interpretations of the Federal Savings and Loan Insurance Corporation for determining
the amount of an insured account which were in effect on the
day before the date of the enactment of this Act.
(2) LIMITATION ON EXTENT OF COVERAGE.—During the period

Regulations.

beginning on the date of the enactment of this Act and ending
on the effective date of regulations prescribed under paragraph
(3XB), the amount of any insured account which is required to
be treated £is an insured deposit pursuant to parsigraph (1) shall
not exceed the amount of insurance to which such insured
account would otherwise have been entitled pursuant to the
regulations and interpretations of the Federal Savings and Loan
Insurance Corporation which were in effect on the day before
the date of the enactment of this Act.
(3) UNIFORM TREATMENT OF INSURED DEPOSITS.—The Federal
Deposit Insurance (Dorporation shall—
(A) review its regulations, principles, and interpretations
for deposit insurance coverage and those established by the
Federal Savings and Loan Insurance Corporation; and
(B) on or before the end of the 270-day period beginning
on the date of the enactment of this Act, prescribe a
uniform set of regulations which shall be applicable to all
^-sv
insured deposits in insured depository institutions (except
,.;
to the extent any provision of this Act, any amendment
made by this Act to the Federal Deposit Insurance Act, or
/^
any other provision of law requires or explicitly permits the
Federal Deposit Insurance Corporation to treat insured
deposits of Savings Association Insurance Fund members
differently than insured deposits of Bank Insurance Fund
members).
(4) FACTORS REQUIRED TO BE CONSIDERED.—In prescribing regulations providing for the uniform treatment of deposit insurance

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 359

coverage, the Federal Deposit Insurance Corporation shall consider all relevant factors necessary to promote safety and soundness, depositor confidence, and the stability of deposits in insured depository institutions.
(5) NOTICE; EFFECTIVE DATE.—Regulations prescribed under
this subsection shall—
(A) provide for effective notice to depositors in insured
depository institutions of any change in deposit insurance
coverage which would result under such regulations; and
(B) take effect on or before the end of the 90-day period
beginning on the date such regulations become final.
(6) DEFINITIONS.—For purposes of this subsection—
(A) INSURED ACCOUNT.—The term "insured account" has
the meaning given to such term in section 401(c) of the
National Housing Act (as in effect before the date of the
enactment of this Act).
(B) INSURED DEPOSITORY INSTITUTION.—The term "insured
depository institution" has the meaning given to such term
in section 3(c)(2) of the Federal Deposit Insurance Act.

?

(d) INTERIM TREATMENT OF CUSTODIAL ACCOUNTS.—

(1) I N GENERAL.—Subject to paragraph (2) and notwithstanding subsection (a) or any limitation contained in the Federal
Deposit Insurance Act relating to the amount of deposit insurance available to any 1 borrower, amounts held in custodial
accounts in insured depository institutions (as defined in section
3(c)(2) of such Act) for the payment of principal, interest, tax,
and insurance payments for mortgage borrowers, shall be insured under the Federal Deposit Insurance Act in the amount of
$100,000 per mortgage borrower.
(2) TREATMENT AFTER EFFECTIVE DATE OF NEW REGULATIONS.—

After the effective date of the regulations prescribed under
subsection (c)—
(A) the amount of deposit insurance available for custodial accounts shall be determined in accordance with such
regulations; and
(B) paragraph (1) shall cease to apply with respect to such
accounts.
(e) TREATMENT OF REFERENCES IN ADJUSTABLE RATE MORTGAGE
INSTRUMENTS.—

(1) I N GENERAL.—For purposes of adjustable rate mortgage
instruments that are in effect as of the date of enactment of this
Act, any reference in the instrument to the Federal Savings and
Loan Insurance Corporation, the Federal Home Loan Bank
Board, or institutions insured by the Federal Savings and Loan
Insurance Corporation before such date shall be treated as a
reference to the Federal Deposit Insurance Corporation, the
Federal Housing Finance Board, the Office of Thrift Supervision, or institutions which are members of the Savings
Association Insurance Fund, as appropriate on the basis of the
transfer of functions pursuant to this Act, unless the context of
the reference requires otherwise.
(2) SUBSTITUTION FOR INDEXES.—If any index used to calculate
the applicable interest rate on any adjustable rate mortgage
instrument is no longer calculated and made available as a
direct or indirect result of the enactment of this Act, any
index—

'

,
'

103 STAT. 360

PUBLIC LAW 101-73—AUG. 9, 1989
(A) made available by the Director of the Office of Thrift
Supervision, the Chairperson of the Federal Deposit Insurance Corporation, or the Chairperson of the Federal Housing Finance Board pursuant to paragraph (3); or
(B) determined by the Director of the Office of Thrift
Supervision, the Chairperson of the Federal Deposit Insurance Corporation, or the Chairperson of the Federal Housing Finance Board, pursuant to paragraph (4), to be
substantially similar to the index which is no longer calculated or made available,
may be substituted by the holder of any such adjustable rate
mortgage instrument upon notice to the borrower.
(3) AGENCY ACTION REQUIRED TO PROVIDE CONTINUED AVAILABILITY OF INDEXES.—Promptly after the enactment of this

subsection, the Director of the Office of Thrift Supervision, the
"^^ Chairperson of the Federal Deposit Insurance Corporation, and
the Chairperson of the Federal Housing Finance Board shall
take such action as may be necessary to assure that the indexes
_ prepared by the Federal Savings and Loan Insurance Corporation, the Federal Home Loan Bank Board, and the Federal
home loan banks immediately prior to the enactment of this
' subsection and used to calculate the interest rate on adjustable
rate mortgage instruments continue to be available.
(4) REQUIREMENTS RELATING TO SUBSTITUTE INDEXES.—If

any

agency can no longer make available an index pursuant to
paragraph (3), an index that is substantially similar to such
index may he substituted for such index for purposes of para• graph (2) if the Director of the Office of Thrift Supervision, the
Chairperson of the Federal Deposit Insurance Corporation, or
the Chairperson of the Federal Housing Finance Board, as the
case may be, determines, after notice and opportunity for comment, that—
(A) the new index is based upon data substantially simis
lar to that of the original index; and
(B) the substitution of the new index will result in an
interest rate substantially similar to the rate in effect at
?.:
the time the original index became unavailable.
SEC. 403. DETERMINATION OF TRANSFERRED FUNCTIONS AND EMPLOYEES.
(a) ALL F H L B B AND F S L I C EMPLOYEES SHALL B E TRANSFERRED.—

All employees of the Federal Home Loan Bank Board and the
Federal Savings and Loan Insurance Corporation shall be identified
for transfer under subsection (b) to the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, or the Federal Housing Finance Board.
(b) FUNCTIONS AND EMPLOYEES TRANSFERRED.—

(1) IN GENERAL.—The Director of the Office of Thrift Supervision, the Chairperson of the Oversight Board of the Resolution
Trust Corporation, the Chairperson of the Federal Deposit
Insurance Corporation, the Chairperson of the Federal Housing
Finance Board, and the Chairman of the Federal Home Loan
Bank Board (as of the day before the date of the enactment of
this Act) shall jointly determine the functions or activities of
the Federal Home Loan Bank Board and the Federal Savings
and Loan Insurance Corporation, and the number of employees
of such Board and Corporation necessary to perform or support

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 361

such functions or activities, which are transferred from the
Federal Home Loan Bank Board and the Federal Savings and
Loan Insurance Corporation to the Office of Thrift Supervision,
the Resolution Trust Corporation, the Federal Deposit Insurance Corporation, or the Federal Housing Finance Board, as the
case may be.
(2) ALLOCATION OF EMPLOYEES.—The Director of the Office of

Thrift Supervision, the Chairperson of the Oversight Board of
the Resolution Trust Corporation, the Chairperson of the Federal Deposit Insurance Corporation, and the Chairperson of the
Federal Housing Finance Board shall allocate the employees of
the Federal Home Loan Bank Board and the Federal Savings
and Loan Insurance Corporation consistent with the number
determined pursuant to paragraph (1) in a manner which such
Director, Chairman, and Chairpersons, in their sole discretion,
deem equitable, except that, within work units, the agency
preferences of individual employees shall be accommodated as
far as possible.
(c) FEDERAL HOME LOAN BANK PERSONNEL.—Employees of

the

Federal home loan banks or the joint offices of such banks who, on
the day before the date of the enactment of this Act, are performing
functions or activities on behalf of the Federal Home Loan Bank
Board or the Federal Savings and Loan Insurance Corporation shall
be treated as employees of the Federal Home Loan Bank Board or
the Federal Savings and Loan Insurance Corporation for purposes of
determining, pursuant to subsection (b)(1), the number of employees
performing or supporting functions or activities of such Board or
Corporation to the extent such functions or activities are transferred to the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, the Resolution Trust Corporation, or the Federal
Housing Finance Board.
(d) FSLIC EMPLOYEES ENGAGED IN CONSERVATORSHIP OR RECEIVERSHIP FUNCTIONS.—Individuals who, on the day before the date of the
enactment of this Act, are employed by the Federal Savings and
Loan Insurance Corporation in such Corporation's capacity as conservator or receiver of any insured depository institution shall be
treated as employees of the Federal Savings and Loan Insurance
Corporation for purposes of determining, pursuant to subsection
(b)(1), the number of employees performing or supporting functions
or activities of such Corporation if such conservatorship or receivership is transferred to the Federal Deposit Insurance Corporation or
the Resolution Trust Corporation.
SEC. 404. RIGHTS OF EMPLOYEES OF ABOLISHED AGENCIES.

All employees identified for transfer under subsection (b) of section 403 (other than individuals described in subsection (c) or (d) of
such section) shall be entitled to the following rights:
(1) Each employee so identified shall be transferred to the
appropriate agency or entity for employment no later than 60
days after the date of the enactment of this Act and such
transfer shall be deemed a transfer of function for the purpose
of section 3503 of title 5, United States Code.
(2) Each transferred employee shall be guaranteed a position
with the same status, tenure, and pay as that held on the day
immediately preceding the transfer. Each such employee holding a permanent position shall not be involuntarily separated or

103 STAT. 362

PUBLIC LAW 101-73—AUG. 9, 1989
reduced in grade or compensation for 1 year after the date of
transfer, except for cause.
(3XA) In the case of employees occupying positions in the
excepted service or the Senior Executive Service, any appointment authority established pursuant to law or regulations of
the Office of Personnel Management for filling such positions
shall be transferred, subject to subparagraph (B).
(B) An agency or entity may decline a transfer of authority
under subparagraph (A) (and the employees appointed pursuant
thereto) to the extent that such authority relates to positions
excepted from the competitive service because of their confidential, policy-making, policy-determining, or policy-advocating
character, and noncareer positions in the Senior Executive
Service (within the meaning of section 3132(aX7) of title 5,
United States Code).
(4) If any agency or entity to which employees are transferred
determines, after the end of the 1-year period beginning on the
date the transfer of functions to such agency or entity is completed, that a reorganization of the combined work force is
required, that reorganization shall be deemed a "major reorganization" for purposes of affording affected employees retirement under section 8336(d)(2) or 8414(bXlXB) of title 5, United
States Code.
(5) Any employee accepting emplojrment with any agency or
entity (other than the Office of Thrift Supervision) as a result of
such transfer may retain for 1 year after the date such transfer
occurs membership in any employee benefit program of the
Federal Home Loan Bank Board, including insurance, to which
such employee belongs on the date of the enactment of this Act
if—
(A) the employee does not elect to give up the benefit or
membership in the program; and
(B) the benefit or program is continued by the Director of
the Office of Thrift Supervision.
The difference in the costs between the benefits which would
have been provided by such agency or entity and those provided
by this section shall be paid by the Director of the Office of
Thrift Supervision. If any employee elects to give up membership in a health insurance program or the health insurance
program is not continued by the Director of the Office of Thrift
Supervision, the employee shall be permitted to select an alternate Federal health insurance program within 30 days of such
election or notice, without regard to any other regularly scheduled open season.
(6) Any employee employed by the Office of Thrift Supervision
as a result of the transfer may retain membership in any
employee benefit program of the Federal Home Loan Bank
Board, including insurance, which such employee has on the
date of enactment of this Act, if such employee does not elect to
give up such membership and the benefit or program is continued by the Director of the Office of Thrift Supervision. If any
employee elects to give up membership in a health insurance
program or the health insurance program is not continued by
the Director of the Office of Thrift Supervision, such employee
shall be permitted to select an alternate Federal health insurance program within 30 days of such election or discontinuance,
without regard to any other regularly scheduled open season.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 363

(7) A transferring employee in the Senior Executive Service
shall be placed in a comparable position at the agency or entity
to which such employee is transferred.
(8) Transferring employees shall receive notice of their position assignments not later than 120 days after the effective date
of their transfer.
(9) Upon the termination of the Resolution Trust Corporation
pursuant to section 21A(m) of the Federal Home Loan Bank Act,
any employee of such Corporation shall be transferred to the
Federal Deposit Insurance Corporation in accordance with the
provisions of paragraphs (2) and (4) through (7) of this subsection, except that the liability for any difference in the costs of
benefits described in paragraph (5) shall be a liability of the
Resolution Trust Corporation and not the Office of Thrift
Supervision.
SEC. 405. DIVISION OF PROPERTY AND FACILITIES.

Before the end of the 60-day period beginning on the date of the
enactment of this Act, the Director of the Office of Thrift Supervision, the Chairperson of the Oversight Board of the Resolution
Trust Corporation, the Chairperson of the Federal Deposit Insurance Corporation, and the Chairperson of the Federal Housing
Finance Board shall jointly divide all property of the Federal Savings and Loan Insurance Corporation and the Federal Home Loan
Bank Board used to perform functions and activities of the Federal
Home Loan Bank Board among the Office of Thrift Supervision, the
Resolution Trust Corporation, the Federal Deposit Insurance Corporation, and the Federal Housing Finance Board in accordance
with the division of responsibilities, functions, and activities effected
by this Act. Any disagreement between them in so doing shall be
resolved by the Director of the Office of Management and Budget.
SEC. 406. REPORT.

Before the end of the 60-day period beginning on the date of the
enactment of this Act, the Chairman of the Federal Home Loan
Bank Board shall provide by written report to the Secretary of the
Treasury, the Director of the Office of Management and Budget, and
the Congress, a final accounting of the finances and operations of
the Federal Savings and Loan Insurance Corporation.
SEC. 407. REPEALS.

Title 4 of the National Housing Act (1724 et seq.) is hereby 12USC1724
repealed.
«' »«9-

TITLE V—FINANCING FOR THRIFT
RESOLUTIONS
Subtitle A—Oversight Board and Resolution
Trust Corporation
SEC. 501. OVERSIGHT BOARD AND RESOLUTION TRUST CORPORATION
ESTABLISHED.

(a) I N GENERAL.—The Federal Home Loan Bank Act (12 U.S.C.
1421 et seq.) is amended by inserting after section 21 the following
new section:

103 STAT. 364
12 u s e 1441a.

PUBLIC LAW 101-73—AUG. 9, 1989
"SEC. 21A. OVERSIGHT BOARD AND RESOLUTION TRUST CORPORATION.
"(a) OVERSIGHT BOARD ESTABLISHED.—

"(1) I N GENERAL.—There is hereby established the Oversight
Board as an instrumentality of the United States with the
powers and authorities herein provided.
"(2) STATUS.—The Oversight Board shall oversee and be
accountable for the Resolution Trust Corporation (hereinafter
referred to in this section as the 'Corporation'). The Oversight
Board shall be an 'agency' of the United States for purposes of
subchapter 11 of chapter 5 and chapter 7 of title 5, United States
Code.
"(3) MEMBERSHIP.—

<;

"(A) IN GENERAL.—The Oversight Board shall consist of 5
members—
"(i) the Secretary of the Treasury;
"(ii) the Chairman of the Board of Governors of the
Federal Reserve System;
"(iii) the Secretary of Housing and Urban Development; and
"(iv) two independent members appointed by the
President, with the advice and consent of the Senate.
Such nominations shall be referred to the Committee
on Banking, Housing, and Urban Affairs of the Senate.
"(B) POLITICAL AFFILIATION.—The independent members
shall not be members of the same political party. No
independent member of the Oversight Board shall hold any
other appointed office during his or her term as a member.
"(C) CHAIRPERSON.—The Chairperson of the Oversight
Board shall be the Secretary of the Treasury.
"(D) TERM OF OFFICE.—The term of each member (other
than the independent members) of the Oversight Board
shall expire when such member has fulfilled all of his or
her responsibilities under this section and section 21B. The
term of each independent member shall be 3 years.
"(E) QUORUM REQUIRED.—A quorum shall consist of 3
members of the Oversight Board and all decisions of the
Board shall require an aftirmative vote of at least a majority of the members voting.
"(4) COMPENSATION AND EXPENSES.—

"(A) EXPENSES.—Members of the Oversight Board shall
receive allowances in accordance with subchapter I of chapter 57 of title 5, United States Code, for necessary expenses
of travel, lodging, and subsistence incurred in attending
meetings and other activities of the Oversight Board, as set
forth in the bylaws issued by the Oversight Board.
"(B) No ADDITIONAL COMPENSATION FOR UNITED STATES
OFFICERS OR EMPLOYEES.—Members of the Oversight Board

(other than independent members) shall receive no additional pay by reason of service on such Board.
"(C)

COMPENSATION FOR INDEPENDENT MEMBERS.—The

independent members of the Oversight Board shall be paid
at a rate equal to the daily equivalent of the rate of basic
pay for level II of the Executive Schedule for each day
(including travel time) during which such member is engaged in the actual performance of duties of the Oversight
Board.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 365

"(5) POWERS.—The Oversight Board shall be a body corporate
that shall have the power to—
"(A) adopt, alter, and use a corporate seal;
"(B) provide for a principal or executive officer and such
other officers and employees as may be necessary to perform the functions of the Oversight Board, define their
duties, and require surety bonds or make other provisions
against losses occasioned by acts of such persons;
"(C) fix the compensation and number of, and appoint,
employees for any position established by the Oversight
Board;
"(D) set and adjust rates of basic pay for employees of the
Oversight Board without regard to the provisions of chapter
51 or subchapter III of chapter 53 of title 5, United States
Code;
"(E) provide additional compensation and benefits to
employees of the Oversight Board if the same type of
compensation or benefits are then being provided by any
other Federal bank regulatory agency or, if not then being
provided, could be provided by such an agency under applicable provisions of law, rule, or regulation; in setting and
adjusting the total amount of compensation and benefits for
employees of the Oversight Board, the Oversight Board
shall consult with and seek to maintain comparability with
the other Federal bank regulatory agencies, except that the
Oversight Board shall not in any event exceed the compensation and benefits provided by the Federal Deposit
Insurance (Corporation with respect to any comparable
position;
"(F) with the consent of any executive agency, department, or independent agency utilize the information, services, staff, and facilities of such department or agency, on a
reimbursable (or other) basis, in carrying out this section;
"(G) prescribe bylaws that are consistent with law to
provide for the manner in which—
"(i) its officers and employees are selected, and
"(ii) its general operations are to be conducted;
"(H) enter into contracts and modify or consent to the
modification of any contract or agreement;
"(I) sue and be sued in courts of competent jurisdiction;
and
"(J) exercise any and all powers established under this
section and such incidental powers as are necessary to
carry out its powers, duties, and functions under this Act.
"(6) OVERSIGHT BOARD DUTIES AND AUTHORITIES.—The Oversight Board shall have the following duties and authorities with
respect to the Corporation:
"(A) To develop and establish overall strategies, policies,
and goals for the Corporation's activities in consultation
with the Corporation, including such items as—
"(i) general policies and procedures for case resolutions, the mansigement and disposition of assets, the
use of private contractors, and the use of notes, guarantees or other obligations by the Corporation;
"(ii) overall financial goals, plans, and budgets; and
"(iii) restructuring agreements described in subsection (bXll)(B).

v

^

103 STAT. 366

PUBLIC LAW 101-73—AUG. 9, 1989
,. ,^

i^
;:

~^

•

"(B) To approve prior to implementation periodic financing requests developed by the Corporation.
"(C) To review all rules, regulations, principles, procedures, and guidelines that may be adopted or announced by
the Corporation. After consultation with the Corporation,
the Oversight Board may require the modification of any
such rules, regulations, principles, procedures, or guidelines
except that the rules, regulations, principles, procedures,
and guidelines relating to the Corporation's powers and
activities as a conservator or receiver shall be consistent
with the Federal Deposit Insurance Act. The provisions of
this subparagraph shall not apply to internal administrative policies and procedures, and determinations or actions
described in paragraph (8) of this subsection.
"(D) To review the overall performance of the Corpora.
tion on a periodic basis, including its work, management
activities, and internal controls, and the performance of the
Corporation relative to approved budget plans.
"(E) To require from the Corporation any reports, documents, and records it deems necessary to carry out its
oversight responsibilities.
"(F) To establish a national advisory board and regional
advisory boards.
"(G) To authorize the use of proceeds from any funds
provided by the Treasury to the Corporation and from any
financing by the Resolution Funding (Dorporation estab- lished pursuant to section 21B of this Act consistent with
the approved budget and financial plans of the (Corporation
and to oversee the collection of funds by the Resolution
Funding C!orporation.
"(H) To evaluate audits by the Inspector General and
other congressionally required audits.
"(I) To have general oversight over the Resolution Funding Corporation as provided under section 21B of this Act.
"(J) To authorize, as appropriate, the Corporation's sale
of capital certificates to the Resolution Funding CJorporation.
"(7) TRANSITION POLICIES.—Until such time as the Oversight
Board and the Corporation (consistent with paragraph (6) and
subsection (bX12)) adopt strategies, policies, goals, regulations,
rules, operating principles, procedures, or guidelines, the Corporation may carry out its duties in accordance with the strategies, policies, goals, regulations, rules, operating principles,
procedures, or guidelines of the Federal Deposit Insurance (Corporation, notwithstanding the provisions of section 553 of title 5,
United States (Code.
"(8) LIMITATION ON AUTHORITY.—

„ .

*

"(A) I N GENERAL.—The (Corporation shall have the
authority, without any prior review, approval, or disapproval by the Oversight Board, to make such determinations and take such actions as it deems appropriate with
respect to case-specific matters (i) involving individual case
resolutions, (ii) asset liquidations, or (iii) day-to-day operations of the (Corporation. The preceding sentence in no way
limits the authority of the Oversight Board to provide
general policies and procedures.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 367

"(B) FEDERAL DEPOSIT INSURANCE CORPORATION.—Nothing

contained in this section shall give the Oversight Board
authority over the activities, powers, or functions of the
Federal Deposit Insurance Corporation except to the extent
provided in this section and only with respect to the activities of the Federal Deposit Insurance Corporation in carrying out the responsibilities of the Corporation. The Federal *
Deposit Insurance Corporation shall be subject to the
obligations, responsibilities, duties, and restrictions im,
posed by this section only to the extent it is carrying out the
functions of the Corporation.
"(9) DELEGATION.—Except with respect to the meetings required by paragraph (10), nothing in this section shall preclude
a member of the Oversight Board who is a public official from
delegating his or her authority to an employee or officer of such
member's agency or organization, if such employee or officer
has been appointed by the President with the advice and consent of the Senate. For purposes of the preceding sentence, the
Chairman of the Board of Governors of the Federal Reserve
System may delegate his or her authority to another member of
the Board of Governors.
"(10) QUARTERLY MEETINGS.—Not less than 4 times each year,
the Oversight Board shall conduct open meetings to establish
and review the general policy of the Corporation and to consider
such other standards, policies, and procedures necessary to
carry out its functions under this Act.
"(11) POWER TO REMOVE; JURISDICTION.—Notwithstanding any

other provision of law, any civil action, suit, or proceeding to
which the Oversight Board is a party shall be deemed to arise
under the laws of the United States, and the United States
district courts shall have original jurisdiction. The Oversight
Board may, without bond or security, remove any such action,
suit, or proceeding from a State court to a United States District
Court or to the United States District Court for the District of
Columbia.
"(12) ADMINISTRATIVE

EXPENSES.—The

administrative

ex-

penses of the Oversight Board shall be paid by the Corporation,
upon request of the Oversight Board.
"(13)

STANDARDS, POLICIES,

PROCEDURES, GUIDELINES, AND

STATEMENTS.—The Oversight Board may issue rules, regulations, standards, policies, procedures, guidelines, and
statements as the Oversight Board considers necessary or
appropriate to carry out its authorities and duties under this
Act which shall be promulgated pursuant to subchapter II of
chapter 5 of title 5, United States Code.
"(14) STRATEGIC PLAN FOR CORPORATION OPERATIONS.—

"(A) IN GENERAL.—The Oversight Board shall, subject to
paragraph (6), develop a strategic plan for conducting the
Corporation's functions and activities. The Oversight Board
shall submit the strategic plan to the Congress not later
than December 31,1989.
"(B) PROVISIONS OF PLAN.—The strategic plan and implementing policies and procedures required under this
paragraph shall at a minimum contain the following:
"(i) Factors the Corporation shall consider in deciding the order in which failed institutions or categories
of failed institutions will be resolved.

103 STAT. 368

Discrimination,
prohibition.
Women.
Minorities.

Disadvcmtaged
persons.
Homeless
persons.
Children and
youth.

PUBLIC LAW 101-73—AUG. 9, 1989
"(ii) Standards the Corporation shall use to select the
appropriate resolution action for a failed institution.
"(iii) With respect to assisted acquisitions, factors the
Corporation shall consider in deciding whether nonperforming assets of the failed institution will be transferred to the acquiring institution rather than retained
by the Corporation for management and disposal.
"(iv) Plans for the disposition of assets.
"(v) Management objectives by which the Corporation's progress in carrying out its duties under this
section can be measured.
"(vi) A plan for the organizational structure and
staffing of the Corporation, including an assessment of
the extent to which the Corporation will perform asset
management functions and other duties through contracts with public and private entities.
"(vii) Consideration of whether incentives should be
included in asset management contracts to promote
active and efficient asset management.
"(viii) Standards for adequate competition and fair
and consistent treatment of offerors.
"(ix) Standards that prohibit discrimination on the
basis of race, sex, or ethnic group in the solicitation and
consideration of offers.
"(x) Procedures for the active solicitation of offers
from minorities and women.
"(xi) Procedures requiring that unsuccessful offerors
be notified in writing of the decision within 30 days
after the offer has been rejected.
"(xii) Procedures for establishing the market value of
assets based upon standard market analysis, valuation,
and appraisal practices.
"(xiii) Procedures requiring the timely evaluation of
purchase offers for an institution.
"(xiv) Procedures for bulk sales and auction marketing of assets.
"(xv) Guidelines for determining if the value of an
asset has decreased so that no reasonable recovery is
anticipated. In such cases, the Corporation may consider potential public uses of such asset including
providing housing for lower income families (including
the homeless), day care centers for the children of lowand moderate-income families, or such other public
purpose designated by the Secretary of Housing and
Urban Development.
"(xvi) Guidelines for the conveyance of assets to units
of general local government. States, and public sigencies designated by a unit of general local government or
a State, for use in connection with urban homesteading
programs approved by the Secretary of Housing and
Urban Development under section 810 of the Housing
and Community Development Act of 1974.
"(xvii) Policies and procedures for avoiding political favoritism and undue influence in contracts and
decisions made by the Oversight Board and the
Corporation.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 369

"(15) TERMINATION.—The Oversight Board shall terminate
not later than 60 days after the Oversight Board fulfills all of its
responsibilities under this Act.
'(b) RESOLUTION TRUST CORPORATION ESTABUSHED.—
"(1) ESTABUSHMENT.—

"(A) IN GENERAL.—There is hereby established a Corporation to be known as the Resolution Trust Corporation which
shall be an instrumentality of the United States.
"(B) STATUS.—The Corporation shall be deemed to be an
agency of the United States for purposes of subchapter II of
chapter 5 and chapter 7 of title 5, United States (Dode, when
it is acting as a corporation. The (Dorporation, when it is
acting as a conservator or receiver of an insured depository
institution, shall be deemed to be an agency of the United
States to the same extent as the Federal Deposit Insurance
(Dorporation when it is acting as a conservator or receiver of
an insured depository institution.
"(C) FDIC AS EXCLUSIVE MANAGER.—Immediately upon
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, the Federal Deposit Insurance (Dorporation shall be authorized to and shall perform
all responsibilities of the (Dorporation, and shall continue to
do so unless removed pursuant to subsection (m).
"(2) GOVERNMENT CORPORATION.—Notwithstanding the fact
that no Government funds may be invested in the Corporation,
the (Dorporation shall be treated, for purposes of sections 9105,
9107, and 9108 of title 31, United States Code, as a mixedownership Government corporation which has capital of the
Government.
"(3) DUTIES.—The duties of the (Dorporation shall be to carry
out a program, under the general oversight of the Oversight
Board and through the Federal Deposit Insurance Corporation
(or any replacement authorized pursuant to subsection (m)),
including:
"(A) To manage and resolve all cases involving depository
institutions—
"(i) the accounts of which were insured by the Federal Savings and Loan Insurance Corporation before
the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989; and
"(ii) for which a conservator or receiver—
"(I) had been appointed at any time during the
period beginning on January 1, 1989, and ending
on the date of the enactment of such Act (including
any institution described in paragraph (6)); or
"(II) is appointed within the 3-year period beginning on the date of the enactment of such Act.
"(B) To manage the Federal Asset Disposition Association, subject to the provisions of subsection (f).
"(C) To conduct the operations of the (Dorporation in a
manner which—
"(i) maximizes the net present value return from the
sale or other disposition of institutions described in
subparagraph (A) or the assets of such institutions;
"(ii) minimizes the impact of such transactions on
local real estate and financial markets;

103 STAT. 370

PUBLIC LAW 101-73—AUG. 9, 1989
"(iii) makes efficient use of funds obtained from the
Funding Corporation or from the Treasury;
"(iv) minimizes the amount of any loss realized in the
resolution of cases; and
"(v) maximizes the preservation of the availability
and affordability of residential real property for lowand moderate-income individuals.
"(D) To perform any other function authorized under this
section.
"(4)

CONSERVATORSHIP,

RECEIVERSHIP,

AND ASSISTANCE

POWERS.—Except as provided in paragraph (5) and in addition to
any other provision of this section, the Corporation shall have
the same powers and rights to carry out its duties with respect
to institutions described in paragraph (3)(A) as the Federal
Deposit Insurance Corporation has under sections 11, 12, and 13
of the Federal Deposit Insurance Act with respect to insured
depository institutions (as defined in section 3 of the Federal
Deposit Insurance Act).
"(5) LIMITATION ON PARAGRAPH (4) POWERS.—The Corporation—
"(A) may not obligate the Federal Deposit Insurance
Corporation or any funds of the Federal Deposit Insurance
Corporation; and
"(B) in connection with providing assistance to an institution under this subsection, shall be subject to the limitations contained in section 13(c)(4) of the Federal Deposit
1
Insurance Act.
"(6) SUCCESSOR TO FSLIC AS CONSERVATOR OR RECEIVER.—As of

the date of enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, the Corporation shall
succeed the Federal Savings and Loan Insurance Corporation as
conservator or receiver with respect to any institution for which
the Federal Savings and Loan Insurance Corporation was appointed conservator or receiver during the period beginning on
January 1,1989 and ending on such date of enactment.
"(7)

OBUGATIONS

AND GUARANTEES.—The

Corporation's

authority to issue obligations and guarantees shall be subject to
general supervision by the Oversight Board under subsection (a)
and shall be consistent with subsection (j).
"(8) BOARD OF DIRECTORS.—

"(A) IN GENERAL.—Except as provided in subsection (m),
the Board of Directors of the Federal Deposit Insurance
Corporation shall serve as the Board of Directors of the
Corporation.
"(B) CHAIRPERSON.—Except as provided in subsection (m),
the Chairperson of the Board of Directors of the Federal
Deposit Insurance Corporation shall serve as the Chairperson of the Board of Directors of the Corporation.
"(C) COMPENSATION.—Members of the Board of Directors
of the Corporation shall receive no pay, allowances, or
benefits from the Corporation by reason of their service on
the Board of Directors, but shall receive allowances in
accordance with subchapter I of chapter 57 of title 5, United
States Code, for necessary expenses of travel, lodging, and
subsistence incurred in attending meetings and other
activities of the Board of Directors, as set forth in the
bylaws issued by the Board of Directors.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 371

"(9) STAFF —

"(A) IN GENERAL.—Unless the Oversight Board exercises
its authority under subsection (m), the Corporation itself
shall have no employees.
"(B)

UTILIZATION OF PERSONNEL OF OTHER AGENCIES.—

"(i) FDIC.—The Federal Deposit Insurance Corporation, when acting as the exclusive manager of the
Corporation, shall (subject to subsection (a)(6)) receive
reimbursement from the Corporation for all services
performed for the Corporation. Such reimbursement
may not exceed the actual and reasonable cost incurred
by the Federal Deposit Insurance Corporation in
performing such services.
"(ii) OTHER AGENCIES.—With the agreement of

any

executive department or agency, the Corporation may
utilize the personnel of any such executive department
or agency on a reimbursable basis to cover actual and
reasonable expenses.
"(10) CORPORATE POWERS.—The Corporation shall have the
following powers:
"(A) To adopt, alter, and use a corporate seal.
"(B) In the event the Oversight Board exercises its
authority under subsection (m), the Corporation shall provide for a chief executive officer, 1 or more vice presidents,
a secretary, a general counsel, a treasurer, and such other
officers, employees, attorneys, and agents as the Corporation may determine to be necessary, define the duties of
such officers or employees, and require surety bonds or
make other provisions against losses occasioned by acts of
such individuals.
"(C) To enter into contracts and modify, or consent to the
modification of, any contract or agreement to which the
Corporation is a party or in which the Corporation has an
interest under this section.
"(D) To make advance, progress, or other payments.
"(E) To acquire, hold, lease, mortgage, maintain, or dispose of, at public or private sale, real and personal property, and otherwise exercise all the usual incidents of
ownership of property necessary and convenient to the
operations of the Corporation.
"(F) To sue and be sued in its corporate capacity in any
court of competent jurisdiction.
"(G) To deposit any securities or funds held by the Corporation in any facility or depositary described in section
13(b) of the Federal Deposit Insurance Act under the terms
and conditions applicable to the Federal Deposit Insurance
Corporation under such section 13(b) and pay fees thereof
and receive interest thereon.
"(H) To take warrants, voting and nonvoting equity, or
other participation interests in institutions or assets or
properties of institutions described in paragraph (3XA) and
paragraph (llXAXiv).
"(I) To use the United States mails in the same manner
and under the same conditions as other departments and
agencies of the United States.
"(J) To prescribe through its Board of Directors bylaws
that shall be consistent with law.

103 STAT. 372

PUBLIC LAW 101-73—AUG. 9, 1989

.

"(K) To make loans.
"(L) To prepare reports and provide such reports, documents, and records to the Oversight Board as required by
this section.
"(M) To issue capital certificates to the Resolution Funding Corporation consistent with the provisions of section
21B of this Act in the following manner:
"(i) AUTHORIZATION TO ISSUE.—The Corporation is
hereby authorized to issue to the Resolution Funding
^
Corporation nonvoting capital certificates.
"(ii) REQUIREMENT RELATING TO THE AMOUNT OF CER-

TIFICATES.—The amount of certificates issued by the
Corporation under clause (i) shall be equal to the aggre. gate amount of funds provided by the Resolution Funding Corporation to the Corporation under section 21B,
"(iii) CERTIFICATES MAY BE ISSUED ONLY TO THE RESOLUTION FUNDING CORPORATION.—Capital certificates

issued under clause (i) may be issued only to the Resolution Funding Corporation in the manner and to the
extent provided in section 21B and this section.
"(iv) No DIVIDENDS.—The Corporation shall not pay
dividends on any capital certificates issued under this
section.
"(N) To exercise any other power established under this
section and such incidental powers as are necessary to
carry out its duties and functions under this section.
"(11) SPECIAL POWERS.—

"(A) I N GENERAL.—In addition to the powers of the Corporation described in paragraph (10), the Corporation shall
have the following powers:
"(i) CONTRACTS.—The Corporation may enter into
contracts with any person, corporation, or entity,
including State housing finance authorities (as such
term is defined in section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989)
and insured depository institutions, which the Corporation determines to be necessary or appropriate to carry
out its responsibilities under this section. Such contracts shall be subject to the procedures adopted pursuant to paragraph (12).
"(ii) UTILIZATION OF PRIVATE SECTOR.—In carrying out

,

the Corporation's duties under this section, the
Corporation and the Federal Deposit Insurance Corporation shall utilize the services of private persons,
including real estate and loan portfolio asset management, property management, auction marketing, and
brokerage services, if such services are available in the
private sector and the Corporation determines utilization of such services are practicable and efficient.
"(iii) MERGERS AND CONSOLIDATIONS.—The Corporation may require a merger or consolidation of an
institution or institutions over which the Corporation
has jurisdiction, if such merger or consolidation is
consistent with section 13(cX4) of the Federal Deposit
Insurance Act.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 373

"(iv) ORGANIZATION OF SAVINGS ASSOCIATIONS.—The

Corporation may organize 1 or more Federal savings
associations—
"(I) which shall be chartered by the Director of
the Office of Thrift Supervision,
L.
"(11) the deposits of which, if any, shall be insured by the Federal Deposit Insurance Corporation through the Savings Association Insurance
Fund, and
"(III) which shall operate in accordance with
subsection (e).
"(v) ORGANIZATION OF BRIDGE BANKS.—The Corpora-

tion may organize 1 or more bridge banks pursuant to
subsection (i) of section 11 of the Federal Deposit Insurance Act with respect to any institution described in
paragraph (3XA) which becomes a bank. Such bridge
bank shall be subject to subsection (e),
"(B) REVIEW OF PRIOR CASES.—The Corporation shall—
"(i) review and analyze all insolvent institution cases
resolved by the Federal Savings and Loan Insurance
Corporation between January 1, 1988, and the date of
enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and actively review
all means by which it can reduce costs under existing
Federal Savings and Loan Insurance Corporation
agreements relating to such cases, including restructuring such agreements;
(ii) evaluate the costs under existing Federal Savings and Loan Insurance Corporation agreements with
regard to the following—
"(I) capital loss coverage,
"(II) yield maintenance guarantees,
•
"(III) forbearances,
"(IV) tax consequences, and
"(V) any other relevant cost consideration;
"(iii) review the bidding procedures used in resolving
such cases in order to determine whether the bidding
and negotiating processes were sufficiently competitive;
and
"(iv) report to the Oversight Board and the Congress Reports,
pursuant to subsection (k).
The C!orporation shall exercise any and all legal rights to
<
modify, renegotiate, or restructure such agreements where
savings would be realized by such actions. The cost or
income of any modification shall be a liability or an asset of
the Corporation or the FSLIC Resolution Fund as determined by the Oversight Board. Nothing in this paragraph
(
shall be construed as granting the Corporation any legal
rights to modify, renegotiate, or restructure agreements
between the Federal Savings and Loan Insurance Corporation and any other party, which did not exist prior to the
date of enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989.
'(12) REGULATIONS, POUCIES, AND PROCEDURES.—

"(A) I N GENERAL.—Subject to the review of the Oversight
Board, the Corporation shall adopt the rules, regulations,
standards, policies, procedures, guidelines, and statements

103 STAT. 374

PUBLIC LAW 101-73—AUG. 9, 1989
necessary to implement the strategic plan established by
the Oversight Board under subsection (aX14). The Corporation may issue such rules, regulations, standards, policies,
procedures, guidelines, and statements as the Corporation
considers necessary or appropriate to carry out this section.
"(B) REVIEW, ETC.—Such rules, regulations, standards,
policies, procedures, guidelines, and statements—
"(i) shall be provided by the Corporation to the Oversight Board promptly or prior to publication or
announcement to the extent practicable;
"(ii) shall be subject to the review of the Oversight
>
Board as provided in subsection (aX6XC); and
"(iii) shall be promulgated pursuant to subchapter II
of chapter 5 of title 5, United States Code.
"(C) PREPARATION AND MAINTENANCE OF RECORDS RELATING TO SOUCITATION AND ACCEPTANCE OF OFFERS.—The Cor-

poration shall—
"(i) document decisions made in the solicitation and
selection process and the reasons for the decisions; and
"(ii) maintain such documentation in the offices of
the Corporation, as well as any other documentation
relating to the solicitation and selection process.
Real property.

"(D) DISTRESSED AREAS.—

"(i) I N GENERAL.—In developing its implementing
policies, the Corporation shall take the action described
in clause (ii) to avoid adverse economic impact for those
real estate markets that are distressed.
"(ii) VALUATION AND DISPOSITION.—The Corporation
shall establish an appraisal or other valuation method
for determining the market value of real property.
With respect to a real property asset with a market
vedue in excess of a certain dollar limit (such limit to be
determined by the Board of Directors of the (Corporation), consideration shall be given to the volume of
assets above such limit and the potential impact of
sales in such distressed areas. The (Corporation shall
not sell a real property asset located in a distressed
area without obtaining at least the minimum disposition price, unless a determination has been made that
such a transaction furthers the objectives set forth in
paragraph (3XC).
"(iii) EXCEPTION.—The provisions of this subparagraph shall not apply to any property as long as such
property is subject to the requirements of subsection
(0.
"(E) DEFINITIONS.—For the purposes of this subsection—
"(i) The term 'minimum disposition price' means 95
percent of the market value established by the (Corporation. The Board of Directors, in its discretion, may
change the percentage set forth in this definition from
time to time if the Board of Directors determines that
such change does not adversely impact the objectives
set forth in paragraph (3XC).
"(ii) The term 'sell a real property asset' means to
convey all title and interest in a piece of tangible real
property in which the Corporation has a fee simple or
equivalent interest. The term 'real property' does not

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 375

include loans secured by real property, joint ventures,
participation interests, options, or other similar interests. In addition, the term 'sell' does not include
hjrpothecation of assets, issuance of asset backed securities, issuance of joint ventures, or participation interests, or other similar activities.
"(iii) The term 'distressed area' means the geographic
areas in those political subdivisions designated from
time to time by the Board of Directors as having depressed real estate markets. Until the Board of Directors designates otherwise, such distressed areas shall be
the States of Arkansas, Colorado, Louisiana, New
Mexico, Oklahoma, and Texas.
"(iv) The term 'market value' means the most probable price which a property should bring in a competitive and open market if—
"(I) all conditions requisite to a fair sale are
present,
"(II) the buyer and seller are acting prudently
and are knowledgable, and
"(III) the price is not affected by any undue
stimulus.
"(F) REAL ESTATE ASSET DIVISION.—The Corporation shall
establish a Real Estate Asset Division to assist and advise
the Corporation with respect to the management, sale, or
other disposition of real property assets of institutions described in paragraph (3)(A). The Real Estate Asset Division Public
shall have such duties as the Corporation establishes, information,
including the publication of an inventory of real property
assets of institutions subject to the jurisdiction of the Corporation. Such inventory shall be published before January 1, 1990 and updated semiannually thereafter and shall
identify properties with natural, cultural, recreational, or
scientific values of special significance.
"(13) PERIODIC FINANCING REQUESTS.—The Corporation shall
provide the Oversight Board with periodic financing requests
which shall detail—
"(A) anticipated funding requirements for operations,
case resolution, and asset liquidation,
"(B) anticipated payments on previously issued notes,
guarantees, other obligations, and related activities, and
"(C) any proposed use of notes, guarantees or other
obligations.
Such financing requests shall be submitted on a quarterly basis
or such other period £is the Oversight Board determines necessary. Following approval by the Oversight Board, such request^ shall form the basis for expending funds provided by the
Treasury, for transferring funds from the Resolution Funding
Corporation to the Corporation and the issuance of capital
certificates by the Corporation in exchange therefor.
"(14) FISCAL YEAR 1989 F U N D I N G . —
"(A) FUNDS FROM TREASURY.—The Secretary of the Treas-

ury shall provide the Corporation with the sum of
$18,800,000,000 in fiscal year 1989, and for such purpose the
Secretary is authorized to use as a public debt transaction
the proceeds of the sale of any securities hereafter issued
under chapter 31 of title 31, United States Code.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 376

"(B)

FUNDS FROM RESOLUTION FUNDING CORPORATION.—

The Resolution Funding Corporation shall provide the Corporation with such sums authorized pursuant to section
21B(e)(8) and the Corporation shall issue capital certificates
in exchange therefor.
Disadvantaged

"(c) DISPOSITION OF EUGIBLE RESIDENTIAL PROPERTIES.—

persons.

"(1) PuRPOSE.—The purpose of this subsection is to provide
homeownership and rental housing opportunities for very lowincome, lower-income, and moderate-income families.
"(2) RULES GOVERNING DISPOSITION OF ELIGIBLE SINGLE FAMILY
PROPERTIES.—
"(A) NOTICE TO CLEARINGHOUSES.—Within a reasonable

^

period of time after acquiring title to an eligible single
family property, the (Dorporation shall provide written
notice to clearinghouses. Such notice shall contain basic
information about the property, including but not limited to
location, condition, and information relating to the estimated fair market value of the property. Each clearinghouse shall make such information available, upon request,
to other public agencies, other nonprofit organizations, and
qualifying households. The Corporation shall allow public
agencies, nonprofit organizations, and qualifying households reasonable access to eligible single family property
for purposes of inspection.
"(B) OFFERS TO SELL SINGLE FAMILY PROPERTIES TO NONPROFIT ORGANIZATIONS, PUBUC AGENCIES, AND QUALIFYING

HOUSEHOLDS.—For the 3-month period following the date on
which the Corporation makes an eligible single family property available for sale, the Corporation shall offer to sell the
property to (i) qualifying households, or (ii) public agencies
or nonprofit organizations that agree to (I) make the property available for occupancy by and maintain it as affordable for lower-income families for the remaining useful life
of such property, or (II) make the property available for
purchEise by such families. The restrictions described in
subclause (I) of the preceding sentence shall be contained in
the deed or other recorded instrument. If upon the expiration of such 3-month period, no qualifying household, public
agency, or nonprofit organization has made a bona fide
offer to purchase the property, the Corporation may offer to
sell the property to any purchaser. The Corporation shall
actively market eligible single family properties for sale to
lower-income families.

Marketing.

"(3) RULES GOVERNING DISPOSITION OF EUGIBLE MULTIFAMILY
HOUSING PROPERTIES.—
"(A) NOTICE TO CLEARINGHOUSES.—Within a reasonable

,

period of time after acquiring title to an eligible multifamily housing property, the Corporation shall provide written
notice to clearinghouses. Such notice shall contain basic
information about the property, including but not limited to
location, number of units (identified by number of bedrooms), and information relating to the estimated fair
market value of the property. The clearinghouses shall
make such information available, upon request, to qualifying multifamily purchasers. The Corporation shall allow
qualifying multifamily purchasers reasonable access to an

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 377

eligible multifamily housing property for purposes of
inspection.
(B) EXPRESSION OF SERIOUS INTEREST.—Qualifjdng multij
family purchasers may give written notice of serious interest in a property during a period ending 90 days after the
time the Corporation provides notice under subparagraph
(A), or until the Corporation determines that a property is
ready for sale, whichever occurs first. Such notice of serious ^
interest shall be in such form and include such information
^
as the Corporation may prescribe.
"(C) NOTICE OF READINESS FOR SALE.—Upon determining
that a property is ready for sale the Corporation shall
provide written notice to any qualifying multifamily purchaser that has expressed serious interest in the property.
Such notice shall specify the minimum terms and conditions for sale of the property.
"(D) OFFERS TO PURCHASE,—A qualifying multifamily purchaser receiving notice in accordance with subparagraph
(C) shall have 45 days (from the date notice is received) to
•^•
make a bona fide offer to purchase a property. The Corporation shall accept an offer that complies with the terms and
conditions established by the Corporation.
"(E) LOWER-INCOME OCCUPANCY REQUIREMENTS.—Not less
than 35 percent of sdl dwelling units purchased by a qualifying multifamily purchaser under subparagraph (D) shall be
made available for occupancy by and maintained £is affordable for lower-income families during the remaining useful
life of the property in which the units are located, provided
that not less than 20 percent of all units shall be made
available for occupancy by and maintained as affordable for
very low-income families during the remaining useful life of
such property. If a single entity purchases more than 1
eligible property as part of the same negotiation, the
requirements of this subparagraph shall apply in the aggre- C
gate to the properties so purchased. The requirements of
this subparagraph shall be contained in the deed or other
recorded instrument.
"(F) SALE OF MULTIFAMILY PROPERTIES TO OTHER PURCHASERS.—

"(i) If, upon the expiration of the period referred to in
subparagraph (B), no qualifying multifamily purchaser
has expressed serious interest in a property, the Corporation may offer to sell the property, individually or
in combination with other properties, to any purchaser,
"(ii) The Corporation may not sell in combination
with other properties any property which a qualifying
multifamily purchaser has expressed serious interest in
purchasing individually.
"(iii) If, upon the expiration of the period referred to
in subparagraph (D), no qualifying multifamily purchaser has made an offer to purchase the property, the
Corporation may sell the property, individually or in
combination with other properties, to any purchaser.
"(G) EXEMPTIONS.—
"(i) CONTINUED OCCUPANCY OF CURRENT RESIDENTS.—

No purchaser of an eligible multifamily housing property may terminate the occupancy of any person resid-

^

103 STAT. 378

PUBLIC LAW 101-73—AUG. 9, 1989
ing in the property on the date of purchase for purposes
of meeting the lower-income occupancy requirement
applicable to the property under subparagraph (E). The
purchaser shall be in compliance with this paragraph if
each newly vacant dwelling unit is reserved for lowerincome occupancy until the lower-income occupancy
requirement is met.

*

(ii)

FINANCIAL INFEASIBIUTY.—The

Secretary

of

Housing and Urban Development or the State housing
finance agency for the State in which the property is
located may temporarily reduce the lower-income occupancy requirements applicable to any property under
subparagraph (E), if the Secretary or the applicable
State housing finance agency determines that an
owner's compliance with such requirements is no
longer financially feasible. The owner of the property
shall make a good-faith effort to return lower-income
occupancy to the level required by subparagraph (E),
and the Secretary of Housing and Urban Development
or the State housing finance agency, as appropriate,
shall review the reduction annually to determine
whether financial infeasibility continues to exist.

4

'^

"(4) RENT UMITATIONS.—

"(A) I N GENERAL.—With respect to properties under
subparagraph (B), rents charged to tenants for units made
available for occupancy by very-low income families shall
not exceed 30 percent of the adjusted income of a family
whose income equals 50 percent of the median income for
the area, as determined by the Secretary, with adjustment
for family size. Rents charged to tenants for units made
available for occupancy by lower-income families other
than very low-income families shall not exceed 30 percent
of the adjusted income of a family whose income equals 65
percent of the median income for the area, as determined
by the Secretary, with adjustment for family size.
"(B) APPUCABIUTY.—The rent limitations under this
paragraph shall apply to any eligible single-family property
sold pursuant to paragraph (2XBXii)(I) and to any multifamily housing property sold pursuant to paragraph (3).

,

"(5) PREFERENCE FOR SALES.—When selling any eligible multi-

family housing property or combinations of eligible residential
properties, the Corporation shall give preference, among
substantially similar offers, to the offer that would reserve the
highest percentage of dwelling units for occupancy or purchase
by very low-income families and lower-income families and
would retain such affordability for the longest term.
"(6) FINANCING OF SALE.—
"(A) ASSISTANCE BY CORPORATION.—
"(i) SALE PRICE.—The Corporation shall establish a

J

market value for each eligible residential property. The
Corporation shall sell eligible residential property at
the net realizable market value. The Corporation may
agree to sell an eligible single family property at a
price below the net realizable market value to the
extent necessary to facilitate an expedited sale of the
property and enable a lower-income family to purchase
the property. The Corporation may agree to sell eligible

PUBLIC LAW 101-73—AUG. 9, 1989
residential property at a price below the net realizable
market value to the extent necessary to facilitate an
expedited sale of such property and enable a public
agency or nonprofit organization to comply with the
lower-income occupancy requirements applicable to
such property under paragraphs (2) and (3).
"(ii) PURCHASE LOAN.—The Corporation may provide
a loan at market interest rates to the purchaser of
eligible residential property for all or a portion of the
purchase price, which loan shall be secured by a first or
second mortgage on the property. The Corporation may
provide such a loan at below market interest rates to
the extent necessary to facilitate an expedited sale of
eligible residential property and permit (I) a lowerincome family to purchase an eligible single family
property under paragraph (2); or (II) a public agency or
nonprofit organization to comply with the lowerincome occupancy requirements applicable to the
purchase of an eligible residential property under paragraph (2) or (3). The Corporation shall provide such
loan in a form which would permit its sale or transfer
to a subsequent holder.
"(B) ASSISTANCE BY HUD.—The Secretary shall take such
action as may be necessary to expedite the processing of
applications for assistance under section 202 of the Housing
Act of 1959, the United States Housing Act of 1937, title IV
of the Stewart B. McKinney Homeless Assistance Act, section 810 of the Housing and Community Development Act
of 1974, and the National Housing Act to enable any
organization or individual to purchase eligible residential
property.
"(C) ASSISTANCE BY FMHA.—The Secretary of Agriculture

shall take such actions as may be necessary to expedite the
processing of applications for assistance under title V of the
Housing Act of 1949 to enable any organization or individual to purchase eligible residential property.
"(7) CONTRACTING RULES.—Contracts entered into under this
subsection shall not be subject to the requirements of subsection
(b)(ll)(A).
"(8) U S E OF SECONDARY MARKET AGENCIES.—

"(A) I N GENERAL.—In the disposition of eligible residential properties, the Corporation shall, in consultation *with
the Secretary, explore opportunities to work with secondary
market entities to provide housing for lower- and moderateincome families.
"(B) CREDIT ENHANCEMENT.—With respect to such Corporation properties, the Secretary may, consistent with
statutory authorities, work through the Federal Housing
Administration, the Government National Mortgage
Association, the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, and other
secondary market entities to develop risk sharing structures, mortgage insurance, and other credit enhancements
to assist in the provision of property ownership, rental, and
cooperative housing opportunities for lower- and moderateincome families.

103 STAT. 379

^

103 STAT. 380

PUBLIC LAW 101-73—AUG. 9, 1989
'

"(C) REPORT.—In the annual report submitted by the
Secretary to the Congress, the Secretary shall include a
detailed description of his activities under this paragraph,
including recommendations for such additional authorization as he deems necessary to implement the provisions of
this subsection.
"(9) DEFINITIONS.—For purposes of this subsection—
"(A) ADJUSTED INCOME.—The term 'adjusted income' has
the same meaning as such term has under section 3 of the
United States Housing Act of 1937.
"(B) CLEARINGHOUSES.—The term
'clearinghouses'
means—
"(i) the State housing finance agency for the State in
which an eligible residential property is located,
"(ii) the Office of Community Investment (or other
comparable division) within the Federal Housing
Finance Board, and
"(iii) any national nonprofit organizations (including
any nonprofit entity established by the corporation
established under title IX of the Housing and Community Development Act of 1968) that the Corporation
determines has the capacity to act as a clearinghouse
for information.
"(C) CORPORATION.—The term 'Corporation' means the
Resolution Trust Corporation either in its corporate capacity or as receiver, but does not include the Corporation in
ite capacity as an operating conservator.
"(D)

.

'

^

*
•

ELIGIBLE MULTIFAMILY HOUSING

PROPERTY.—The

term 'eligible multifamily housing property' means a property consisting of more than 4 dwelling units—
"(i) to which the Corporation acquires title; and
"(ii) that has an appraised value that does not exceed
the applicable dollar amount set forth in section
221(d)(3)(ii) of the National Housing Act for elevator,
type structures (without regard to any increase of such
amount for high-cost areas).
"(E) ELIGIBLE RESIDENTIAL PROPERTY.—The term 'eligible
residential property' includes eligible single family properties and eligible multifamily housing properties.
"(F) ELIGIBLE SINGLE FAMILY PROPERTY.—The term 'eligible single family property' means a 1- to 4-family residence (including a manufactured home)—
"(i) to which the Corporation acquires title; and
"(ii) that has an appraised value that does not exceed
the applicable dollar amount set forth in the first
.
sentence of section 208(bX2) of the National Housing
•'
Act (without regard to any increase of such amount for
high-cost areas).
"(G) LOWER-INCOME FAMILIES.—The term 'lower-income
families' means families and individuals whose incomes do
not exceed 80 percent of the median income of the area
involved, as determined by the Secretary, with adjustment
for family size.
"(H) NET REALIZABLE MARKET VALUE.—The term 'net
realizable market value' means a price below the market
value that takes into account (i) any reductions in holding
costs resulting from the expedited sale of a property, includ-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 381

ing but not limited to foregone real estate taxes, insurance,
maintenance costs, security costs, and loss of use of funds,
and (ii) the avoidance, where applicable, of fees paid to real
estate brokers, auctioneers, or other individuals or
organizations involved in the sale of property owned by the
Corporation.
"(I) NONPROFIT ORGANIZATION.—The term 'nonprofit
organization' means a private organization (including a
limited equity cooperative)—
"(i) no part of the net earnings of which inures to the
benefit of any member, shareholder, founder, contributor, or individual; and
"(ii) that is approved by the Corporation as to financial responsibility.
"(J) PuBUC AGENCY.—The term 'public agency'—
"(i) means any Federal, State, local, or other governmental entity; and
"(ii) includes any public housing agency.
"(K) QuAUFYiNG HOUSEHOLD.—'The term 'qualifying
household' means a household (i) who intends to occupy
eligible single family property £is a principle residence; and
(ii) whose adjusted income does not exceed 115 percent of
the median income for the area, as determined by the
Secretary, with adjustment for family size.
"(L) QUALIFYING MULTIFAMILY PURCHASER.—The term
'qualifjdng multifamily purchaser' means (i) a public
agency, (ii) a nonprofit organization, or (iii) a for-profit
entity which makes a commitment (for itself or any related
entity) to satisfy the lower-income occupancy requirements
specified under paragraph (3XE) for any eligible multifamily property for which an offer to purchase is made during
or after the periods specified under paragraph (3).
"(M) RURAL AREA.—The term 'rural area' has the meaning given such term in section 520 of the Housing Act of
1949.
"(N) SECRETARY.—The term 'Secretary' means the Secretary of the Housing and Urban Development.
"(O) STATE HOUSING FINANCE AGENCY.—The term 'State
housing finance agency' means the public agency, authority, corporation, or other instrumentality of a State that
has the authority to provide residential mortgage loan
financing throughout such State.
"(P) VERY LOW-INCOME FAMILIES.—The term 'very-low
income families' means families and individuals whose incomes do not exceed 50 percent of the median income of the
area involved, as determined by the Secretary, with adjustment for family size.
"(10) EXCEPTION.—The provisions of this subsection shall not
apply whenever the Corporation as receiver contracts to sell all
or substantially all of the assets of a closed savings association
to an insured depository institution (as defined in section 3 of
the Federal Deposit Insurance Act).
"(11) THIRD PARTY RIGHTS.—

"(A) I N GENERAL.—The provisions of this subsection, or
any failure by the Corporation to comply with such provisions, may not be used by any person to attack or defeat
any title to property once it is conveyed by the Corporation.

103 STAT. 382

PUBLIC LAW 101-73—AUG. 9, 1989
"(B) LOWER-INCOME OCCUPANCY.—The lower-income occupancy requirements specified under paragraphs (2) and (3)
shall be judicially enforceable against purchasers of property under this subsection or their successors in interest by
affected very low- and lower-income families. State housing
finance agencies, and any agency, corporation, or authority
of the United States Government. The parties specified in
the preceding sentence shall be entitled to reasonable attorney fees upon prevailing in any such judicial action.
"(C) CLEARINGHOUSE.—A clearinghouse shall not be subject to suit for its failure to comply with the requirements
of this subsection.
"(d) NATIONAL AND REGIONAL ADVISORY BOARDS.—
"(1) NATIONAL ADVISORY BOARD.—

"(A) ESTABUSHMENT.—The Oversight Board shall establish a national advisory board to provide information to the
Oversight Board, and to advise that Board on policies and
programs for the sale or other disposition of real property
assets of institutions which are described in subsection
(bX3XA).
"(B) MEMBERSHIP.—The national advisory board shall
consist of—
"(i) a chairperson appointed by the Oversight Board;
and
"(ii) the chairpersons of any regional advisory boards
established pursuant to paragraph (2).
"(C) MEETINGS.—The national advisory board shall meet
4 times a year, or more frequently if requested by the
Corporation.
"(2) REGIONAL ADVISORY BOARDS.—

"(A) ESTABLISHMENT.—The Oversight Board shall establish not less than 6 regional advisory boards to advise the
Corporation on the policies and programs for the sale or
other disposition of real property assets of institutions described in subsection (bX3XA). Such regional advisory
boards shall be established in any region where the Oversight Board determines that there exists a significsint portfolio of real property assets of institutions which are
described in subsection (bX3)(A).
"(B) MEMBERSHIP.—

"(i) APPOINTMENT.—Each regional advisory board
shall consist of 5 members. Each member shall be
appointed by the Oversight Board and shall serve at
the pleasure of the Oversight Board. The members
shall be selected from those residents of the region who
will represent the views of low- and moderate-income
consumers and small businesses, or who have knowledge and experience regarding business, financial, and
real estate matters.
"(ii) TERMS.—Each member of a regional advisory
board shall serve a term not to exceed 2 years, except
that the Oversight Board may provide for classes of
members so that the terms of not more than 3 members
of any such board shall expire in any 1 year.
"(C) MEETINGS.—Each regional advisory board shall meet
4 times a year, or more frequently if requested by the

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 383

Corporation. A regional advisory board shall conduct its
meetings in its region.
"(3) PROHIBITION ON COMPENSATION.—Members of the

na-

tional and regional advisory boards shall serve without compensation, except that such members shall be entitled to receive
allowances in accordance with subchapter I of chapter 57 of title
5, United States Code, for necessary expenses of travel, lodging,
and subsistence incurred in attending official meetings and
other activities of the boards.
"(4) TREATMENT AS ADVISORY COMMITTEE AND TERMINATION OF
NATIONAL AND REGIONAL ADVISORY BOARDS.—
"(A) FEDERAL ADVISORY COMMITTEE ACT.—The national

and regional advisory boards shall be subject to the provisions of the Federal Advisory Committee Act.
"(B) TERMINATION.—Notwithstanding the provisions of
the Federal Advisory Committee Act, the national advisory
board and any regional advisory board established pursuant
to this subsection which is in existence on the date on
which the Corporation terminates shall also terminate on
such date.
"(e) INSTITUTIONS ORGANIZED BY THE CORPORATION.—

"(1) LIMITATIONS ON CERTAIN ACTIVITIES.—All insured deposi-

tory institutions (as defined in section 3 of the Federal Deposit
Insurance Act) organized by the Corporation under this section
shall, during the period such institutions are within the control
of the (Dorporation, be subject to such limitations, restrictions,
and conditions as determined by the (Dorporation with respect to
the following activities:
"(A) Growth of assets.
"(B) Lending and borrowing activities.
"(C) Asset acquisitions.
'
f;
' "(D) Use of brokered deposits.
"(E) Pa)rment of deposit rates.
'^'
"(F) Setting policy or credit standards.
^
"(G) Capital standards.
*

,

"(2) APPLICABILITY OF OTHER PROVISIONS OF LAW.—Except as

otherwise provided, all insured depository institutions (defined
in section 3 of the Federal Deposit Insurance Act) organized by
the (Dorporation shall—
"(A) be subject to all laws and rules otherwise applicable
to them £is insured depository institutions, and
"(B) shall be subject to the supervision of the appropriate
Federal banking £igency (as that term is defined in section 3
of the Federal Deposit Insurance Act).
"(f) FADA.—Before the end of the 180-day period beginning on the
date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the (Dorporation shall liquidate
the Federal Asset Disposition Association.
"(g) EXEMPTION FROM STATE AND LOCAL TAXATION.—The Corporation and the Oversight Board, the capital, reserves, surpluses, and
assets of the Corporation and the Oversight Board, and the income
derived from such capital, reserves, surpluses, or assets shall be
exempt from State, municipal, and local taxation except taxes on
real estate held by the (Dorporation, according to its vahie as other
similar property held by other persons is taxed.
"(h) GUARANTEES OF F S L I C —

^

103 STAT. 384

PUBLIC LAW 101-73—AUG. 9, 1989
"(1) ASSUMPTION BY CORPORATION.—On the date of the enactment of this section, the Corporation shall, by operation of law
(and without further action by the Corporation, the Oversight
Board, the Federal Housing Finance Board, the Federal Savings
and Loan Insurance Corporation, or any court), assume all
rights and obligations of the Federal Savings and Loan Insurance Corporation with respect to any guarantee issued by the
Federal Savings and Loan Insurance Corporation during the
period beginning on January 1,1989, and ending on such date of
enactment, in connection with any loan to any savings association by any Federal Reserve bank or Federal Home Loan Bank
(hereinafter in this subsection referred to as a 'lender').
"(2) PAYMENT BY CORPORATION.—Any obligation assumed by
the Corporation for any guarantee described in paragraph (1) to
any lender shall be paid by the Corporation before the end of
the 1-year period beginning on the date of the enactment of this
section. Payment shall be made from funds or assets available
to the Corporation.
"(3) PRIORITY OF CLAIMS OF LENDERS.—Any claim by a lender
with respect to any obligation assumed by the Corporation for a
guarantee described in paragraph (1) shall have priority over all
other secured or unsecured obligations of the Corporation.
"(4) TREASURY BACKUP.—If the resources of the Corporation
are insufficient to pay all the obligations assumed by the Corporation under paragraph (1) within the 1-year period, the
Secretary of the Treasury shall pay the amount of any such
deficiency. There are hereby appropriated to the Secretary for
fiscal year 1989 and each fiscal year thereafter, such sums as
may be necessary to pay such deficiency,
"(i) BORROWING.—

Loans.

"(1) I N GENERAL.—The Corporation, upon approval of the
Oversight Board, is authorized to borrow from the Treasury.
The Secretary of the Treasury is authorized and directed to loan
to the Corporation, on such terms as may be fixed by the
Secretary of the Treasury, an amount not exceeding in the
aggregate $5,000,000,000 outstanding at any one time.
"(2) INTEREST RATE.—Each such loan shall bear interest at a
rate determined by the Secretary of the Treasury, taking into
consideration current market yields on outstanding marketable
obligations of the United States of comparable maturities.
"0*) MAXIMUM AMOUNT LIMITATIONS ON OUTSTANDING OBLIGATIONS.—

"(1) I N GENERAL.—Notwithstanding any other provision of
this section, the amount which is equal to—
"(A) the sum of—
"(i) the total amount of contributions received from
the Resolution Funding Corporation; and
"(ii) the total amount of outstanding obligations of
the Corporation; minus
"(B) the sum of—
"(i) the amount of cash held by the Corporation; and
"(ii) the amount which is equal to 85 percent of the
Corporation's estimate of the fair market value of other
assets held by the Corporation,
may not exceed $50,000,000,000.

PUBLIC LAW 101-73—AUG. 9, 1989

J

i

103 STAT. 385

"(2) OUTSTANDING OBUGATION DEFINED.—For purposes of this
subsection (other than paragraph (3)), the term 'outstanding
obligation' includes—
"(A) any obligation or other liability assumed by the
Corporation from the Federal Savings and Loan Insurance
Corporation under this section or pursuant to any provision
of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989;
"(B) any guarantee issued by the Corporation;
"(C) the total of the outstanding amounts borrowed from
the Secretary of the Treasury pursuant to subsection (i);
and
"(D) any other obligation for which the Corporation has a
direct or contingent liability to pay any amount.
"(3) FULL FAITH AND CREDIT.—The full faith and credit of the
United States is pledged to the payment of any obligation issued
by the Corporation, with respect to both principal and interest,
if—
"(A) the principal amount of such obligation is stated in
the obligation; and
"(B) the term to maturity or the date of maturity of such
obligation is stated in the obligation.
"(4) ESTIMATES
REQUIRED.—

OF

COSTS

OF

CONTINGENT

UABIUTIES

"(A) IN GENERAL.—The Corporation shall—
"(i) estimate the cost to such Corporation of any
contingent liability of the Corporation; and
"(ii) a t least once each calendar quarter, make such
adjustment as is appropriate in the estimate of such
cost.
"(B) INCLUSION IN FINANCIAL STATEMENTS AND OUTSTAND-

ING OBUGATiONS.—The estimated amount of the cost to the
Corporation of any contingent liability of the Corporation
(talung into account the most recent adjustment to such
estimate pursuant to paragraph (AXii)) shall be—
"(i) treated as an outstanding obligation of the Corporation for purposes of this subsection; and
"(ii) included in any financial statement of the Corporation,
"(k) REPORTING AND DISCLOSURE OBUGATIONS.—
"(1) AUDITS.—
"(A) ANNUAL AUDIT.—The Comptroller

^

^

Greneral shall
audit annually the financial statements of the Corporation
in accordance with generally accepted Government auditing
standards unless the Comptroller General notifies the Oversight Board not later than 180 days before the close of a
fiscal year that the Comptroller General will not perform
such audit for that fiscal year. In the event of such notifica- Contracts.
tion, the Oversight Board shall contract with an independent certified public accountant to perform the annual audit
of the Corporation's financial statement in accordance with
generally accepted Government auditing standards.
"(B) ACCESS TO BOOKS AND RECORDS.—All books, records,

accounts, reports, files, and property belonging to or used
by the Corporation, or the Oversight Board, or by an
independent certified public accountant retained to audit

/,

103 STAT. 386

PUBLIC LAW 101-73—AUG. 9, 1989
the Corporation's financial statement, shall be made available to the Comptroller General.
"(2) PUBUC DISCLOSURE OF TRANSACTIONS.—
"(A) DISCLOSURE REQUIRED.—Except £is otherwise pro-

Public

information.

vided in this subsection, the Corporation shall make available to the public—
"(i) any sigreement entered into by the Corporation
relating to a transaction for which the Corporation
provides assistance pursuant to section 13(c) of the
•
Federal Deposit Insurance Act, not later than 30 days
after the first meeting of the Oversight Board after
such agreement is entered into; and
. ' "^
"(ii) all agreements relating to cases reviewed by the
Corporation pursuant to subsection (bXUXB).

'

"(B) EXCEPTION FOR DISCLOSURES AGAINST THE PUBLIC
INTEREST.—

/
' '

"(i) I N GENERAL,—The Oversight Board may withhold
from public disclosure any document or part of a document if the Oversight Board determines, by a unanimous affirmative vote of the members of the Board,
that disclosure would be contrary to the public interest,
"(ii) REPORT OF DETERMINATION.—A written report

«'•

^

Federal
^S^cltion
pu ica ion.

^<'s
^

shall be made of any determination by the Oversight
Board to withhold any part of a document from public
disclosure pursuant to clause (i). Such report shall
contain a full explanation of the specific reasons for
such determination.
"(iii) PUBUCATION AND SUBMISSION OF REPORT.—The

report prepared pursuant to clause (ii) shall be—
"(I) published in the Federal Register; and
"^^^^ transmitted to the Committee on Banking,
Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate.
"(C) AGREEMENT DEFINED.—For purposes of this subsection, the term'agreement'includes—
"(i) all documents which effectuate the terms and
iU
conditions of the assisted transaction;
"(ii) a comparison, which the Corporation shall prepare of—
"(I) the estimated cost of the transaction, with
"(II) the estimated cost of liquidating the insured
institution; and
"(iii) a description of any economic or statistical
assumptions on which such estimates are based.
"(3) DISCLOSURE TO CONGRESS OF TRANSACTIONS.—
"(A) PROSPECTIVE TRANSACTIONS.—The Corporation

"'
*'
-^

shall
make available to the Committee on Banking, Finance and
Urban Affairs of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the
Senate any agreement entered into by the Corporation
relating to a transaction for which the Corporation provides
assistance pursuant to section 13(c) of the Federal Deposit
Insurance Act not later than 25 days after the first meeting
of the Oversight Board after such agreement is entered
into. The foregoing requirement is in addition to the Cor-

/
PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 387

poration's obligation to make such agreements publicly
available pursuant to paragraph (2).
"(B) PRIOR TRANSACTIONS.—The Corporation shall submit

a report to the Oversight Board and the Congress containing the results and conclusions of the review of the 1988
transactions conducted pursuant to subsection (bXUXB) and
such recommendations for legislative action as the Corporation may determine to be appropriate.

)

"(4) ANNUAL REPORTS.—

"(A) IN GENERAL.—The Oversight Board and the Corporation shall annually submit a full report of their respective
operations, activities, budgets, receipts, and expenditures
for the preceding 12-month period.
"(B) CONTENTS.—The report required under subparagraph (A) shall include—
"(i) audited statements and such information as is
necessary to make known the financial condition and
operations of the Corporation in accordance with generally accepted accounting principles;
"(ii) the Corporation's financial operating plans and
forecasts (including budgets, estimates of actual and
future spending, and estimates of actual and future
cash obligations) taking into account the Corporation's
financial commitments, guarantees, and other contingent liabilities;
"(iii) the number of minority and women investors
participating in the bidding process for assisted acquisitions and the disposition of assets and the number of
successful bids by such investors; and
"(iv) a list of the properties sold to State housing
finance authorities (as such term is defined in section
1301 of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989), the individusd purchase
prices of such properties, and an estimate of the premium paid by such authorities for such properties.
"(C) SUBMISSION TO CONGRESS AND THE PRESIDENT.—The

Corporation shall submit each annual report required
under this subsection to the CJongress and the President as
soon as practicable after the end of the calendar year for
which such report is made but not later than June 30 of the
year following such calendar year.
"(5) ADDITIONAL REPORTS.—
"(A) REPORTS REQUIRED.—In

addition to the annual report
required under paragraph (4), the Oversight Board and the
(Corporation shall submit to (Dongress not later than April
30 and October 31 of each calendar year, a semiannual
report on the activities and efforts of the (Corporation, the
Federal Deposit Insurance Corporation, and the Oversight
Board for the 6-month period ending on the last day of the
month prior to the month in which such report is required
to be submitted.
"(B) (DONTENTS OF REPORT.—Each semiannual report required under subparagraph (A) shall include the following
information with respect to the (Corporation's assets and
liabilities and to the assets and liabilities of institutions
described in subsection (bX3XA):

~^ , ^ .

103 STAT. 388

PUBLIC LAW 101-73—AUG. 9, 1989

_^

,

"(i) A statement of the total book value of all assets
held or managed by the Corporation at the beginning
and end of the reporting period.
"(ii) A statement of the total book value of such
assets which are under contract to be managed by
private persons and entities at the beginning and end
of the reporting period.
"(iii) The number of employees of the Corporation,
the Federal Deposit Insurance Corporation, and the
Oversight Board at the beginning and end of the
reporting period.
"(iv) The total amounts expended on employee wages,
salaries, and overhead, during such period which are
attributable to—
"(I) contracting with, supervising, or reviewing
the performance of private contractors, or
"(II) managing or disposing of such assets,
"(v) A statement of the total amount expended on
private contractors for the management of such assets,
"(vi) A statement of the efforts of the Corporation to
maximize the efficient utilization of the resources of
the private sector during the reporting period and in
future reporting periods and a description of the policies and procedures adopted to ensure adequate competition and fair and consistent treatment of qualified
third parties seeking to provide services to the Corporation or the Federal Deposit Insurance Corporation.
"(vii) The total book value and total proceeds from
such assets disposed of during the reporting period.
"(viii) Summary data on discounts from book value at
which such assets were sold or otherwise disposed of
during the reporting period.
"(ix) A list of all of the areas that carried a distressed
area designation during the reporting period (including
a justification for removal of areas from or addition of
areas to the list of distressed areas).
"(x) An evaluation of market conditions in distressed
areas and a description of any changes in conditions
during the reporting period.
"(xi) Any change adopted by the Oversight Board in a
minimum disposition price and the reasons for such
change.
"(xii) The valuation method or methods adopted by
the Oversight Board or the Corporation to value assets
and the reasons for selecting such methods.
"(6) A P P E A R A N C E S BEFORE CONGRESSIONAL COMMITTEES.—
"(A) SEMIANNUAL APPEARANCE REQUIRED.—Not later

Reports.

than
30 days after submission of the semiannual reports required
by paragraph (5), the Oversight Board shall appear before
the Committee on Banking, Finance and Urban Affairs of
the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate to—
"(i) report on the progress made during such period
in resolving cases involving institutions described in
subsection (bX3XA);

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 389

"(ii) provide an estimate of the short-term and longterm cost to the United States Government of obligations issued or incurred during such period;
"(iii) report on the progress made during such period Reports,
in selling assets of institutions described in subsection
Ot>)(3)(A) and the impact such sales are having on the
local markets in which such assets are located;
"(iv) describe the costs incurred by the Corporation in
issuing obligations, managing and selling assets acquired by the Corporation;
"(v) provide an estimate of the income of the Corporation from assets acquired by the Corporation;
"(vi) provide an assessment of any potential source of
additional funds for the Corporation; and
"(vii) provide an estimate of the remaining exposure
of the United States Government in connection with
institutions described in subsection (bX3XA) which, in
the Oversight Board's estimation, will require assistance or liquidation after the end of such period.
"(T) APPEARANCES CONCERNING START-UP OF CORPORATION.—

"(A) APPEARANCE REQUIRED.—Before January 31, 1990,

the Oversight Board and the Corporation shall appear
before the Committee on Banking, Finance and Urban
Affairs of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate for
the purposes described in subparagraph (B).
"(B) PURPOSES OF APPEARANCE.—In connection with the
appearance of the Oversight Board and the Corporation
required by subparagraph (A), the Oversight Board and the
Corporation shall—
"(i) describe the strategic plan established for the
operations of the Corporation;
"(ii) describe the policies and procedures established
or proposed to be established for the Corporation,
including specific measures taken to avoid political
favoritism or undue influence with respect to the
activities of the Corporation;
"(iii) provide any regulation proposed to be prescribed by the Corporation; and
"(iv) provide the proposed case resolution schedule.
"(1) POWER TO REMOVE; JURISDICTION.—

"(1) I N GENERAL.—Notwithstanding any other provision of
law, any civil action, suit, or proceeding to which the Corporation is a party shall be deemed to arise under the laws of the
United States, and the United States district courts shall have
original jurisdiction over such action, suit, or proceeding.
(2) CORPORATION AS PARTY.—The Corporation shall be substituted as a party in any civil action, suit, or proceeding to
which its predecessor in interest was a party with respect to
institutions which are subject to the management agreement
dated February 7, 1989, among the Federal Savings and Loan
Insurance Corporation, the Federal Home Loan Bank Board
and the Federal Deposit Insurance Corporation.
"(3) REMOVAL AND REMAND.—The Corporation may, without
bond or security, remove any such action, suit, or proceeding
from a State court to the United States District Court for the
District of Columbia, or if the action, suit, or proceeding arises

v

103 STAT. 390

(

,*i. ^^ ,
i

PUBLIC LAW 101-73—AUG. 9, 1989

out of the actions of the Corporation with respect to an institution for which a conservator or a receiver has been appointed,
the United States district court for the district where the
institution's principal business is located. The removal of any
action, suit, or proceeding shall be instituted—
"(A) not later than 90 days after the date the Corporation
is substituted as a party, or
"(B) not later than 30 days after the date suit is filed
against the Corporation, if such suit is filed after the date of
enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989.
The Corporation may appeal any order of remand entered by a
United States district court,

"(m) INTERVENTION BY OVERSIGHT BOARD IN EXTRAORDINARY CIRCUMSTANCES.—

/

"(1) I N GENERAL.—Notwithstanding any other provision of
law, the Oversight Board has the ultimate authority to supervise the Corporation and is ultimately accountable for the
administration of the Corporation. The Oversight Board is authorized to remove the Federal Deposit Insurance Corporation
(or any replacement) from its position as exclusive manager of
the Corporation and from all of its responsibilities and authorities to act for the Corporation, in any case where the Oversight
Board determines that any of the following extraordinary
events has occurred:
"(A) There has been a material failure of the Corporation
to adhere to the strategic plan developed pursuant to
subsection (aX14).
"(B) There has been a material failure of the (Corporation
to meet its financial goals, including over-commitment of
financial resources.
"(C) There is evidence of fraud, abuse, gross mismanagement in the C!orporation's programs or activities, or willful
violation of this Act or the (Dorporation's policies or proce]
dures.
"(D) There is a continuing failure to obtain consideration
at least nearly equivalent to the market value of the assets
sold or otherwise transferred by the (Corporation.
"(2) PROCEDURE.—Any decisions made or action taken by the
Oversight Board under parEigraph (1) shall be made or taken at
an open meeting of the Oversight Board and the Oversight
Board shall document its reasons for such actions or decisions.
"(3) NOTIFICATION TO CONGRESS.—Within 30 days of the meeting of the Oversight Board described in paragraph (2) and not
. ft later than 90 days before the removal of the Federal Deposit
Insurance Clorporation pursueint to paragraph (1), the Oversight
Board shall notify Congress of any decision made or action
taken pursuant to such paragraph and provide written documentation of its decision, including any supporting documentation relied on by the Oversight Board.
"(n) OPERATION OF CORPORATION AFTER EXERCISE OF POWERS
UNDER SUBSECTION (m).—If the Oversight Board exercises authority

under subsection (m), the Oversight Board shall—
"(1) develop an operations and management plan for the
(Corporation, including a detailed description of the emplojonent
and retention procedures for the (Corporation and the classification standards for employment positions for the (Corporation

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 391

and the compensation rates and benefits established for each
class of positions, all of which shall be subject to the provisions
of subsection (aX5);
"(2) select a Board of Directors and a chief executive officer
for the Corporation; and
"(3) provide to Congress, not later than 60 days before the
removal of the Federal Deposit Insurance Corporation, the operations and management plan developed pursuant to paragraph
(1) and the identity of the Board of Directors and the chief
executive officer selected pursuant to paragraph (2).
*(o) TERMINATION.—

"(1) I N GENERAL.—The Corporation shall terminate not later
than December 31, 1996. If at the time of its termination, the
Corporation is acting as a conservator or receiver, the Federed
Deposit Insurance Corporation shall succeed the Corporation as
conservator or receiver.
"(2) CASE RESOLUTIONS TRANSFERRED.—Simultaneous with the
termination of the Corporation as provided in paragraph (1), all
assets and liabilities of the Corporation shall be transferred to
the FSLIC Resolution Fund. Thereafter the FSLIC Resolution
Fund shall transfer any net proceeds from the sale of assets to
the Resolution Funding Corporation,
'(p) CoNFucT OF INTEREST.—
"(1) I N GENERAL.—

"(A) The Oversight Board and the Corporation shall each
be an 'agency' for purposes of title 18, United States Code.
Any individual who, pursuant to a contract or any other
arrangement, performs functions or activities of the Oversight Board or the Corporation, under the direct supervision of an officer or employee of the Oversight Board or
the Corporation, shall be deemed to be an employee of the
Oversight Board or the Corporation for the purposes of title
j^
18, United States Code and this Act.
"(B) Any individual who, pursuant to a contract or any
other agreement, acts for or on behalf of the Corporation
shall be deemed to be a public official for the purposes of
section 201 of title 18, United States Code.
"(2) EsTABUSHMENT OF RULES.—The Oversight Board and the Regulations.
Corporation shall, not later than 180 days after the date of
enactment of this subsection, promulgate rules and regulations
governing conflict of interest, ethical responsibilities, and postemployment restrictions applicable to members, officers, and
employees of the Oversight Board and the Corporation that
shall be no less stringent than those applicable to the Federal
Deposit Insurance Corporation.
(3) U S E OF CONFIDENTIAL INFORMATION.—The

Oversight

Board and the Corporation shall, not later than 180 days after
the date of enactment of this subsection, promulgate rules and
regulations applicable to independent contractors governing
conflicts of interest, ethical responsibilities, and the use of
confidential information consistent with the goals and purposes
of titles 18 and 41, United States Code.
"(4) POST EMPLOYMENT.—The chief executive officer of the

Corporation shall be prohibited for a period of 1 year after
leaving the Corporation from holding giny office, position, or
employment with, or receiving remuneration from, a company
(other than the Corporation) which, during the time the chief

Regulations.

•

r

•

•

:

103 STAT. 392

• • • • • . ;

•

-

PUBLIC LAW 101-73—AUG. 9, 1989

(

executive was employed by the Corporation, participated in any
case resolution or contract with the Corporation for which such
person was either responsible or in which such person was
personally and substantially involved except that the chief
executive officer may hold any office, position, or emplojonent
so long as the chief executive officer does not, during the 1-year
period, provide advice with respect to, participate in decisions
relating to, or otherwise provide assistance to such entity on the
enumerated matters or receive remuneration with respect
thereto from such company.
"(5)

OTHER

AGENCY

EMPLOYEES.—Directors,

officers,

and

employees of the Oversight Board and the Corporation who are
also subject to the ethical rules of another agency or Government Corporation shall file with the Corporation a copy of any
financial disclosure statement required by such other agency or
corporation.
"(6) DISAPPROVAL OF CONTRACTORS.—

Regulations.

"(A) IN GENERAL.—The Oversight Board shall prescribe
regulations establishing procedures for ensuring that any
individual who is performing, directly or indirectly, any
function or service on behalf of the Corporation meets
minimum standards of competence, experience, integrity,
and fitness.

/

"(B) PROHIBITION FROM SERVICE ON BEHALF OF CORPORA-

'

••

,- s

,, i

TION.—The procedures established under subparagraph (A)
shall provide that the Corporation shall prohibit any person
who does not meet the minimum standards of competence,
experience, integrity, and fitness from—
"(i) entering into any contract with the Corporation;
or
"(ii) being employed by the Corporation or any
person performing any service for or on behalf of the
Corporation.
"(C) INFORMATION REQUIRED TO BE SUBMITTED.—The procedures established under subparagraph (A) shall require
that any offer submitted to the Corporation by any person
under this section and any employment application submitted to the Corporation by any person shall include—
"(i) a list and description of any instance during the
preceding 5 years in which the person or company
under such person's control defaulted on a material
obligation to an insured depository institution; and
"(ii) such other information as the Board may prescribe by regulation.
"(D) SUBSEQUENT SUBMISSIONS.—No offer submitted to the
Corporation may be accepted unless the offeror agrees that
no person will be employed, directly or indirectly, by the
offeror under any contract with the Corporation unless all
applicable information described in subparagraph (C) with
respect to any such person is submitted to the Corporation
and the Corporation does not disapprove of the direct or
indirect emplojrment of such person. Any decision made by
the Corporation pursuant to this paragraph shall be in ite
sole discretion and shall not be subject to review.
"(E) PROHIBITION REQUIRED IN CERTAIN CASES.—The standards established under subparagraph (A) shall require the
Corporation to prohibit any person who has—

PUBLIC LAW 101-73—AUG. 9, 1989
"(i) been convicted of any felony,
"(ii) been removed from, or prohibited from participating in the affairs of, any insured depository institution pursuant to any final enforcement action by any
appropriate Federal banking agency,
"(iii) demonstrated a pattern or practice of defalcation regarding obligations to insure depository institu,
.
tions, or
"(iv) caused a substantial loss to Federal deposit
insurance funds,
from service on behalf of the Corporation.
"(7) ABROGATION OF CONTRACTS.—The Oversight Board or the
Corporation may rescind any contract with a person who—
"(A) fails to disclose a material fact to the Oversight
Board or the Corporation,
"(B) would be prohibited under paragraph (6) from
providing services to, receiving fees from, or contracting
with the Corporation or the Oversight Board, or
"(C) has been subject to a final enforcement action by any
Federal bank regulatory agency.
"(8) PRIORITY OF OVERSIGHT BOARD RULES.—To the extent that
the rules established under this subsection conflict with rules of
other Eigencies or Government corporations, officers, directors,
employees, and independent contractors of the (Corporation or
the Oversight Board, who are also subject to the conflict of
interest or ethical rules of another agency or Government
corporation, shall be governed by the rules and regulations
established by the Oversight Board under this subsection when
acting for or on behalf of the Corporation.
"(9) DEFINITIONS.—For the purposes of this subsection—
"(A) The term 'company' has the same meaning as in
section 2(b) of the Bank Holding Company Act of 1956.
"(B) The term 'control' has the same meaning given such
term under regulations promulgated by the Federal Home
Loan Bank Board with respect to savings and loan holding
companies as in effect on the day before the date of enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.
"(C) The term '(IJorporation' includes the Resolution Trust
Corporation, the national advisory board, and the regional
advisory boards.",
(b) INSPECTOR GENERAL OF THE CORPORATION.—

(1) EsTABUSHMENT.—Scction 11 of the Inspector General Act
of 1978 (5 U.S.C. App.) is amended—
(A) in paragraph (1), by inserting "the Oversight Board
and the Board of Directors of the Resolution Trust Corporation" before "; as the case may be,"; and
(B) in paragraph (2), by inserting "the Resolution Trust
CJorporation," after "the Railroad Retirement Board,".
(2) POSITION AT LEVEL IV OF THE EXECUTIVE SCHEDULE.—

(A) IN GENERAL.—Section 5315 of title 5, United States
(Dode, is amended by adding at the end thereof:
"Inspector General, Resolution Trust Corporation.".
(B) APPROPRIATION.—There is hereby authorized to be
appropriated such sums as may be necessary for the oper-

103 STAT. 393

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 394

ation of the Office of Inspector General established by the
amendment made by paragraph (1) of this subsection.
(c) CONFORMING AMENDMENTS TO TITLE 5.—Section 5313 of title 5,
United States Code, is amended by adding at the end thereof:
"Independent Members, Oversight Board, Resolution Trust
Corporation.".
(d)

MIXED-OWNERSHIP

GOVERNMENT

CORPORATION.—Section

9101(2) of title 31, United States Code, is amended by adding at the
end thereof:
"(L) the Resolution Trust Corporation.".
(e) CONFORMING AMENDMENTS TO URBAN HOMESTEADING PROGRAM

AND HOUSING ACT OF 1949.—
(1) URBAN HOMESTEADING.—Section 810(g) of the Housing and

Community Development Act of 1974 (12 U.S.C. 1706eS)) is
amended by adding at the end the following new paragraph:
"(3) The Secretary is authorized to reimburse the Resolution Trust
Corporation, in an amount to be agreed upon by the Secretary and
the Corporation, for property that the Corporation conveys to a unit
of general local government, State, or agency for use in connection
with an urban homesteading program approved by the Secretary.".
(2) HOUSING ACT OF 1949.—Section 517 of the Housing Act of
42 u s e 1487.

Reports.
12 u s e 1441a
note.

1949 (42 U.S.C. 1987) is amended by adding after subsection (m)
the following new subsection:
"(n) The Secretary may guarantee and service loans made for the
purchase of eligible residential properties under section 21A(c) of
the Federal Home Loan Bank Act in accordance with subsection (d)
of this section and the last sentence of section 521(a)(lXA).".
(f) GAO EXAMINATION OF CERTAIN F S L I C RESOLUTIONS.—Notwith-

standing any other provision of this Act, the Comptroller General of
the United States shall examine and monitor all insolvent institution cases resolved by the Federal Savings and Loan Insurance
Corporation from January 1, 1988, through the date of the enactment of this Act, and not later than April 30, 1990, shall report to
Congress with an estimate of the costs of the agreements entered
into by the Corporation pursuant to such resolutions. Not less than
annually thereafter, the last report being due on April 30, 1992, the
Comptroller General shall provide Congress with revisions to such
estimates, to take into account any new information that he obtains
with regard to such agreements.
-

Subtitle B—Resolution Funding Corporation
SEC. 511. RESOLUTION FUNDING CORPORATION ESTABLISHED.

(a) I N GENERAL.—The Federal Home Loan Bank Act (12 U.S.C.
1421 et seq.) is amended by inserting after section 21A the following
new section:
12 u s e 1441b.

"SEC. 21B. RESOLUTION FUNDING CORPORATION ESTABLISHED.

"(a) PURPOSE.—The purpose of the Resolution Funding Corporation is to provide funds to the Resolution Trust Corporation to
enable the Resolution Trust Corporation to carry out the provisions
of this Act.
"(b) ESTABLISHMENT.—There is established a corporation to be
known as the Resolution Funding Corporation.
"(c) MANAGEMENT OF FUNDING CORPORATION.—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 395

"(1) DIRECTORATE.—The Funding Corporation shall be under
the management of a Directorate composed of 3 members £is
follows:
"(A) The director of the Office of Finance of the Federal
Home Loan Banks (or the head of any successor office).
"(B) 2 members selected by the Oversight Board from
among the presidents of the Federal Home Loan Banks.
"(2) TERMS.—Of the 2 members appointed under paragraph
(IXB), 1 shall be appointed for an initial term of 2 years and 1
shall be appointed for an initial term of 3 years. Thereafter,
such members shall be appointed for a term of 3 years.
"(3) VACANCY.—If any member leaves the office in which such
member was serving when appointed to the Directorate—
"(A) such member's service on the Directorate shall
terminate on the date such member leaves such office; and
"(B) the successor to the office of such member shall serve
the remainder of such member's term.
"(4)

EQUAL REPRESENTATION OF BANKS.—No president of

a

Federal Home Loan Bank may be appointed to serve an additional term on the Directorate until such time as the presidents
of each of the other Federal Home Loan Banks have served as
many terms £is the president of such bank.
"(5) CHAIRPERSON.—The Oversight Board shall select the
chairperson of the Directorate from among the 3 members of
the Directorate.
"(6) STAFF.—

"(A) No PAID EMPLOYEES.—The Funding Corporation shall
have no paid employees.
"(B) POWERS.—The Directorate may, with the approval of
the Federal Housing Finance Board authorize the officers,
employees, or agents of the Federal Home Loan Banks to
act for and on behalf of the Funding Corporation in such
manner as may be necessary to carry out the functions of
the Funding Corporation.
"(7) ADMINISTRATIVE EXPENSES.—

"(A) IN GENERAL.—All administrative expenses of the
Funding Corporation, including custodian fees, shall be
paid by the Federal Home Loan Banks.
"(B) PRO RATA DISTRIBUTION.—The amount each Federal
Home Loan Bank shall pay under subparagraph (A) shall
be determined by the Oversight Board by multiplying the
total administrative expenses for any period by the percentage arrived at by dividing—
"(i) the aggregate amount the Oversight Board required such b£ink to invest in the Funding Corporation
(as of the time of such determination) under paragraphs (4) and (5) of subsection (e) (computed without
regard to paragraphs (3) or (6) of such subsection); by
(ii) the aggregate amount the Oversight Board required all Federal Home Loan Banks to invest (as of
the time of such determination) under such paragraphs.
"(8) REGULATION BY OVERSIGHT BOARD.—The Directorate of the
Funding Corporation shall be subject to such regulations,
orders, and directions as the Oversight Board may prescribe.
"(9) N O COMPENSATION FROM FUNDING CORPORATION.—Mem-

bers of the Directorate of the Funding Corporation shall receive

103 STAT. 396

PUBLIC LAW 101-73—AUG. 9, 1989

no pay, allowance, or benefit from the Funding Corporation for
serving on the Directorate.
"(d) POWERS OF THE FUNDING CORPORATION.—The Funding Corporation shall have only the powers described in paragraphs (1)
through (9), subject to the other provisions of this section and such
regulations, orders, and directions as the Oversight Board may
prescribe:
"(1) ISSUE STOCK.—To issue nonvoting capital stock to the
Federal Home Loan Banks.
"(2) PURCHASE CAPITAL STOCK; TRANSFER AMOUNTS.—To purchase capital certificates issued by the Resolution Trust Corporation under section 21A, and to transfer amounts to the
Resolution Trust Corporation pursuant to subsection (eX8) of
this section.
"(3) ISSUE OBLIGATIONS.—To issue debentures, bonds, or other
f obligations, and to borrow, to give security for any amount
borrowed, and to pay interest on (and any redemption premium
with respect to) any such obligation or amount.
"(4) IMPOSE ASSESSMENTS.—To impose assessments in accordance with subsection (eX7).
"(5) CORPORATE SEAL.—To adopt, alter, and use a corporate
seal.
"(6) SUCCESSION.—To have succession until dissolved.
"(7) (CONTRACTS.—To enter into contracts.
"(8) AUTHORITY TO SUE.—To sue and be sued in its corporate
capacity, and to complain and defend in any action brought by
or against the Funding Corporation in any State or Federal
court of competent jurisdiction.
"(9) INCIDENTAL POWERS.—To exercise such incidental powers
not inconsistent with the provisions of this section and section
21A as are necessary and appropriate to carry out the provisions of this section.
"(e) CAPITAUZATION OF FUNDING CJORPORATION, ETC.—
"(1) I N GENERAL.—
"(A) AMOUNT REQUIRED.—The Oversight

9

Board shall
ensure that the aggregate of the amounts obtained under
this subsection shall be sufficient so that—
"(i) the Funding (]!orporation may transfer the
amounts required under paragraph (8); and
"(ii) the total of the face amounts (the amount of
principal payable at maturity) of noninterest bearing
instruments in the Funding Corporation Principal
Fund are equal to the aggregate amount of principal on
the obligations of the Funding Corporation.
"(B)

PURCHASES OF STOCK BY FEDERAL HOME LOAN

BANKS.—Each Federal Home Loan Bank shall purchase
stock in the Funding (Dorporation at times and in amounts
prescribed by the Oversight Board.
"(2) PAR VALUE; TRANSFERABILITY.—Each share of stock issued
by the Funding Corporation to a Federal Home Loan Bank shall
have a par value in an amount determined by the Oversight
Board and shall be transferable at not less than par value only
among the Federal Home Loan Banks in the manner and to the
extent prescribed by the Oversight Board.
"(3) MAXIMUM INVESTMENT AMOUNT UMITATION FOR EACH FEDERAL HOME LOAN BANK.—The Cumulative £imount of funds

invested in nonvoting capital stock of the Funding Corporation

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 397

by each Federal Home Loan Bank under paragraph (1) shall not
at any time exceed the sum of the amounts calculated under
subparagraphs (A) and (B), as adjusted in subparagraph (C), as
follows:
"(A) RESERVES AND UNDIVIDED PROFITS ON DECEMBER 3 I ,

1988.—The sum on December 31,1988, of—
"(i) the reserves maintained by such Bank pursuant
to the reserve requirement contained in the first 2
sentences of section 16 (as in effect on December 31,
1988); and
"(ii) the undivided profits of such Bank, minus the
amounts invested in the capital stock of the Financing
Corporation pursuant to section 21.
"(B) SUBSEQUENT ADDITIONS TO RESERVES AND UNDIVIDED

PROFITS.—The amount, calculated until £he date on which
the Funding Corporation Principal Fund is fully funded,
equal t o ^
"(i) the sum of^
"(I) the amounts added to reserves by such Bank
after December 31, 1988, pursuant to the reserve
requirement contained in the first 2 sentences of
section 16 (as in effect on December 31, 1988); and
"(II) the quarterly additions to undivided profits
of the Bank after December 31,1988; minus
"(ii) the amounts invested by such Bank in the capital stock of the Financing (Corporation after December 31, 1988, pursuant to the requirement contained in
section 21.

^

"(C) ANNUAL ADJUSTMENT.—The amounts in subpara-

graph (B) shall be adjusted as follows:
"(i) INCREASE IN LIMIT.—If the aggregate amount for
all Federal Home Loan Banks determined under
subparagraph (BXi) is less than $300,000,000 per year,
the limit for each Bank shall be increased by an
£imount determined by the Oversight Board by multipljdng the aggregate deficiency by the percentage
applicable to such Bank arrived at in the manner
described in paragraph (5).
"(ii) DECREASE IN UMIT.—If the aggregate amount for ,
all Federal Home Loan Banks determined under
subparagraph (BXi) is more than $300,000,000 per year,
the limit for each Bank shall be decreased by an
amount determined by the Oversight Board by multiplying the aggregate excess by the percentage
applicable to such Bank arrived a t in the manner
described in paragraph (5).
"(4) PRO RATA DISTRIBUTION OF FIRST $1,000,000,000 INVESTED
IN FUNDING CORPORATION BY FEDERAL HOME LOAN BANKS.—OF

the first $1,000,000,000 of the aggregate that the Federal Housing Finance Board (pursuant to section 21) or the Oversight
Board (under this section) may require the Federal Home Loan
Banks collectively to invest in the capital stock of the Financing
(Corporation or invest in the capital stock of the Funding (Corporation, respectively, the amount which each Federal Home
Loan Bank (or any successor to the Bank) shall invest shall be
determined by the Federal Housing Finance Board or the Oversight Board (as the case may be) by multiplying the aggregate

^

103 STAT. 398

PUBLIC LAW 101-73—AUG. 9, 1989
amount of such investment by all Banks by the percentage
appearing in the following table for each such Bank:
Bank
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
"(5)

Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan

Bank of Boston
Bank of New York
Bank of Pittsburgh
Bank of Atlanta
Bank of Cincinnati
Bank of Indianapolis
Bank of Chicago
Bank of Des Moines
Bank of Dallas
Bank of Topeka
Bank of San Francisco
Bemk of Seattle

Percentage
1.8629
9.1006
4.2702
14.4007
8.2653
5.2863
9.6886
6.9301
8.8181
5.2706
19.9644
6.1422

PRO RATA DISTRIBUTION OP AMOUNTS REQUIRED TO BE

INVESTED IN EXCESS OF $1,000,000,000.—Of any amount which the
Oversight Board may require the Federal Home Loan Banks to
invest in capital stock of the Funding Corporation under this
subsection in excess of the $1,000,000,000 amount referred to in
paragraph (4), the amount which each Federal Home Loan
Bank (or any successor to such Bank) shall invest shall be
determined by the Oversight Board by multipl3dng the excess
amount by the percentage arrived at by dividing—
"(A) the sum of the total assets (as of the most recent
December 31) held by all Savings Association Insurance
Fund members which are members of such Bank; by
"(B) the sum of the total assets (as of such date) held by
all Savings Association Insurance Fund members which are
members of a Federal Home Loan Bank.

_

"(6) SPECIAL PROVISIONS RELATING TO MAXIMUM AMOUNT
UMITATIONS.—

(

A

^
.,1

"(A) I N GENERAL.—If the amount of any Federal Home
Loan Bank's allocation under paragraph (5) exceeds the
maximum amount applicable with respect to such Bank (in
this paragraph referred to as a 'deficient Bank') under
paragraph (3) at the time of such determination (in this
paragraph referred to as the 'excess amount')—
"(i) the Oversight Board shall require each Federal
Home Loan Bank that is not allocated an amount
under paragraph (5) that exceeds its maximum under
paragraph (3) (in this paragraph referred to as a
remaining Bank') to purchase stock in the Funding
Corporation (in addition to the amount determined
under paragraph (5) for such remaining Bank and subject to the maximum amount applicable with respect to
such remaining Bank under paragraph (3) at the time
of such determination) on behalf of the deficient Bank
the amount determined under subparagraph (B);
"(ii) the Oversight Board shall require the deficient
Bank to subsequently reimburse the remaining Banks
out of its net earnings (or reimbursements received
from other Banks) in the manner described in subparagraphs (C) and (D); and
"(iii) the requirements contained in subparagraph (D)
relating to the use of net earnings shall apply to the
deficient Bank until such Bank has reimbursed the
remaining Banks for all of the excess amount. ^^^

\

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 399

"(B) ALLOCATION OF EXCESS AMOUNT AMONG REMAINING
FEDERAL HOME LOAN BANKS.—

"(i) I N GENERAL.—The amount of stock each remaining Federal Home Loan Bank shall be required to
purchase under subparagraph (AXi) is the amount
determined by the Oversight Board by multiplying the
excess amount by the percentage arrived at by dividing—
(I) the cumulative amount of stock in the Funding Corporation purchased under this subsection
by such remaining Bank at the time of such determination; by
"(II) the aggregate of the cumulative amounts
invested under this subsection by all remaining
Banks at such time,
"(ii) REALLOCATION.—If the allocation under this
subparagraph results in a remaining Bank exceeding
its maximum amount under paragraph (3), such excess
amount shall be reallocated to the other remaining
Bank in accordance with this subparagraph.
"(C) REIMBURSEMENT PROCEDURE.—

"(i) I N GENERAL.—A Bank on whose behalf stock is
purchased under subparagraph (AXi) shall make payments annually from amounts, if any, in its reserve
account (as described in subparagraph (D)) to each
Bank that made pa3mients on its behalf until a full
reimbursement has been completed. A full reimbursement shall require repayment of the excess amounts
invested by other Banks plus interest which shall
accrue at a rate equal to the annual average cost of
funds in the most recent year to all Federal Home Loan
Banks and which shall begin to accrue 2 years after the
investments under subparagraph (AXi) are made.
"(ii)

DETERMINATION OF AMOUNTS.—The Oversight

Board shall annually determine the dollar amounts of
such reimbursemente by distributing the amount available for such reimbursements (at the time of such
determination) from the reimbursing Bank to the
Banks that made purchases on its behalf according to
the shares of the reimbursing Bank's excess amount
that the other Banks invested.

'

"(D) TRANSFER TO ACCOUNT FOR REIMBURSEMENTS REQUIRED.—

"(i) IN GENERAL.—Of the net earnings for any year of
a Bank on whose behalf a purchase is made under
subparagraph (AXi) and any reimbursements received
from other Banks, the amount necessary to make the
reimbursements required under subparagraph (AXii)
shall be placed in a reserve account (established in the
manner prescribed by the Oversight Board), which
shall be available only for such reimbursements.
"(ii) LIMITATION.—The total amount placed in such
reserve account in any year by any Bank shall not
exceed an amount equal to 20 percent of the net earnings of such Bank for such year.
"(7) ADDITIONAL SOURCES.—If each Federal Home Loan Bank
has exhausted the amount applicable with respect to the Bank

'

103 STAT. 400

PUBLIC LAW 101-73—AUG. 9, 1989
under paragraph (3) after purchases under paragraphs (4), (5),
and (6), the amounts necessary to provide additional funding for
the Funding Corporation Principal Fund shall be obtained from
the following sources:
"(A) ASSESSMENTS.—The Funding Corporation, with the
approval of the Board of Directors of the Federal Deposit
Insurance Corporation, shall assess £igainst each Savings
Association Insurance Fund member an assessment (in the
same manner as assessments are assessed against such
members by the Federal Deposit Insurance Corporation
pursuant to section 7 of the Federal Deposit Insurance Act)
except that—
"(i) the maximum amount of the aggregate amount
assessed shall be the amount of additional funds necessary to fund the Funding Corporation Principal
'
Fund;
"(ii) the sum of—
"(I) thie amount assessed under this subpara• ''"
graph; and
"(II) the amount assessed by the Financing Corporation under section 21;
shall not exceed the amount authorized to be assessed
against Savings Association Insurance Fund members
pursuant to section 7 of the Federal Deposit Insurance
; >^
Act;
'
"(iii) the Financing Corporation shall have first priority to make the assessment; and
"(iv) the amount of the applicable assessment determined under such section 7 shall be reduced by the sum
described in clause (ii) of this subparagraph.
"(B) RECEIVERSHIP PROCEEDS.—To the extent the amounts

\

available pursuant to subparagraph (A) are insufficient to
fund the Funding Corporation Principal Fund, the Federal
Deposit Insurance Corporation shall transfer amounts to
the Funding Corporation from the liquidating dividends
and payments made on claims received by the FSLIC Resolution Fund from receiverships.
"(8) TRANSFER TO RTC.—The Funding Corporation shall transfer to the Resolution Trust Corporation $1,200,000,000 in fiscal
year 1989.
"(0 OBLIGATIONS OF FUNDING CORPORATION.—

"(1) ISSUANCE.—The Funding Corporation may issue bonds,
notes, debentures, and similar obligations in an aggregate
amount not to exceed $30,000,000,000. No obligation may be
issued under this paragraph unless, at the time of issuance, the
face amounts (the amount of principal payable at maturity) of
noninterest bearing instruments in the Funding Corporation
Principal Fund are equal to the aggregate amount of principal
on the obligations of the Funding Corporation that will be
outstanding following such issuance.
"(2) INTEREST PAYMENTS.—The Funding Corporation shall pay
the interest due on such obligations from funds obtained for
such interest payments from the following sources:
"(A) EARNINGS ON CERTAIN ASSETS.—Earnings on assets of
the Funding Corporation which are not invested in the
Funding Corporation Principal Fund shall be used for in-

PUBLIC LAW 101-73—AUG. 9, 1989
terest paymentB on outstanding debt of the Funding Corporation.
"(B) PROCEEDS FROM RESOLUTION TRUST CORPORATION.—To

the extent the amounts available pursuant to subparagraph
(A) are insufficient to cover the amount of interest payments, the Resolution Trust Corporation shall pay to the
Funding Corporation—
"(i) the liquidating dividends and payments made on
claims received by the Resolution Trust Corporation
from receiverships to the extent such proceeds are
determined by the Oversight Board to be in excess of
funds presently necessary for resolution costs; and
"(ii) any proceeds from warrants and participations
acquired by the Resolution Trust Corporation.
"(C) PAYMENTS BY FEDERAL HOME LOAN BANKS.—To the

extent the amounts available pursuant to subparagraphs
(A) and (B) are insufficient to cover the amount of interest
pajonents, the Federal Home Loan Banks shall pay to the
Funding Corporation each calendar year the giggregate
amount of $300,000,000 minus the amounts required in such
year for Financing Corporation principal payments (pursuant to section 21) and the amounts required in such year by
the Funding Corporation pursuant to subsection (e). Each
Bank's individual share of any amounts required to be paid
by the Banks under this subparagraph shall be determined
as follows:
"(i) AMOUNTS UP TO 20 PERCENT OF NET EARNINGS.—

Each Federal Home Loan Bank shall pay an equal
percentage of its net earnings for the year for which
such amount is required to be paid, up to a maximum
of 20 percent of net earnings.
"(ii) AMOUNTS IN EXCESS OF 20 PERCENT OF NET EARN-

INGS.—If the aggregate amount required to be paid by
the Federal Home Loan Banks under this subparagraph for any year exceeds 20 percent of the aggregate
net earnings of the Banks for such year, each Bank
shall pay 20 percent of its net earnings for such year as
provided in clause (i), and each Bank s individual share
of the excess of the required amount over 20 percent of
the aggregate net earnings of the Banks for such year
shall be determined by dividing—
"(I) the average month-end level in the prior
year of advances outstanding by such Bank to
Savings Associations Insurance Fund members; by
"(II) the average month-end level in the prior
year of advances outstanding by all such Banks to
Savings Associations Insurance Fund members.
"(D) PROCEEDS FROM SALE OF ASSETS.—To the extent the
amounts available pursuant to subparagraphs (A), (B), and
(C) are insufficient to cover the amount of interest payments, the FSLIC Resolution Fund shall transfer to the
Funding Corporation any net proceeds from the sale of
gissets received from the Resolution Trust Ck>rporation,
which shall be used by the Funding Corporation to pay such
interest.
"(E) TREASURY BACKUP.—

103 STAT. 401

103 STAT. 402

PUBLIC L A W 101-73—AUG. 9, 1989
"(i) I N GENERAL.—To the extent the amounts available pursuant to subparagraphs (A), (B), (C), and (D) are
insufficient to cover the amount of interest payments,
the Secretary of the Treasury shall pay to the Funding
Corporation the additional amount due, which shall be
used by the Funding Corporation to pay such interest,
"(ii) LIABILITY OF FUNDING CORPORATION.—In each
instance where the Secretary is required to make a
pa3anent under this subparagraph to the Funding Corporation, the amount of the payment shall become a
liability of the Funding Corporation to be repaid to the
Secretary upon dissolution of the Funding Corporation
(to the extent the Funding Corporation may have any
remaining assets),
"(iii) APPROPRIATION OF FUNDS.—There are hereby
,
appropriated to the Secretary, for fiscal year 1989 and
each fiscal year thereafter, such sums as may be necessary to carry out clause (i).
"(3) PRINCIPAL PAYMENTS.—On maturity of an obligation
issued under this subsection, the obligation shall be repaid by
the Funding Corporation from the liquidation of noninterest
bearing instruments held in the Funding Corporation Principal
Fund.
"(4) PROCEEDS TO BE TRANSFERRED TO RESOLUTION TRUST COR-

PORATION.—Subject to terms and conditions approved by the
Oversight Board, the proceeds (less any discount, plus any
premium, net of issuance costs) of any obligation issued by the
Funding Corporation shall be used to—
"(A) purchase the capital certificates issued by the Resolution Trust Corporation under section 21A; or
"(B) refund any previously issued obligation the proceeds
of which were transferred in the manner described in
subparagraph (A).
"(5) INVESTMENT OF UNITED STATES FUNDS IN OBUGATIONS.—

Obligations issued under this section by the Funding Corporation, at the direction of the Oversight Board shall be lawful
investments, and may be accepted as security, for all fiduciary,
trust, and public funds the investment or deposit of which shall
be under the authority or control of the United States or any
officer of the United States.
"(6) MARKET FOR OBUGATIONS.—All persons having the power
to invest in, sell, underwrite, purchase for their own accounts,
accept as security, or otherwise deal in obligations of the Federal Home Loan Banks shall also have the power to do so with
respect to obligations of the Funding Corporation.
(7) TAX EXEMPT STATUS.—

"(A) I N GENERAL.—Except as provided in subparagraph
(B), obligations of the Funding Corporation shall be exempt
from ta^ both as to principal and interest to the same
extent as any obligation of a Federal Home Loan Bank is
exempt from tax under section 13 of this Act.
"(B) EXCEPTION.—The Funding Corporation, like the Federal Home Loan Banks, shall be treated as an agency of the
United States for purposes of the first sentence of section
3124(b) of title 31, United States Code (relating to determination of tax status of interest on obligations).
"(8) OBLIGATIONS NOT EXEMPT SECURITIES.—

PUBLIC LAW 101-73—AUG. 9, 1989

-H

103 STAT. 403

"(A) IN GENERAL.—For purposes of the laws administered
by the Securities and Exchange Commission, obUgations of
the Funding Corporation—
"(i) shall not be considered to be securities issued or
guaranteed by a person controlled or supervised by, or
acting £is an instrumentality of, the Government of the
United States; and
"(ii) shall not be considered to be 'exempted securities' within the meaning of section 3(a)(12)(A)(i) of the
Securities Exchange Act of 1934, except that such
^
obligations shall be considered to be exempted securities for purposes of section 15 of such Act.
"(B)

AUTHORITY

OF

COMMISSION.—Notwithstanding

subparagraph (A), the Securities and Exchange Commission
may, by rule or order, consistent with the public interest
and the protection of investors, exempt securities issued by
the Funding Corporation from the registration requirements of the Securities Act of 1933, subject to such terms
and conditions as the Commission may prescribe.
"(9) MINORITY PARTICIPATION IN PUBLIC OR NEGOTIATED OFFER-

INGS.—The Oversight Board and the Directorate shall ensure
that minority owned or controlled commercial banks, investment banking firms, underwriters, and bond counsels throughout the United States have an opportunity to participate to a
significant degree in any public or negotiated offering of obligations issued under this section.
"(10) N o FULL F A I T H A N D CREDIT OF THE UNITED STATES.—

Obligations of the Funding Corporation shall not be obligations
of, or guaranteed as to principal by, the Federal Home Loan
Bank System, the Federal Home Loan Banks, the United States,
or the Resolution Trust Corporation and the obligations shall so
plainly state. The Secretary shall pay interest on such obligations as required pursuant to this subsection.
"(g) U S E AND DISPOSITION OF ASSETS OF FUNDING CORPORATION NOT
TRANSFERRED TO RESOLUTION TRUST CORPORATION.—

"(1) I N GENERAL.—Subject to regulations, restrictions, and
limitations prescribed by the Oversight Board, assets of the
Funding Corporation which are not required to be invested in
capital certificates issued by the Resolution Trust Corporation
under section 21A and are not needed for current interest
payments shall be invested in direct obligations of the United
States issued by the Secretary.
"(2) SEPARATE ACCOUNT FOR ZERO COUPON INSTRUMENTS HELD
TO ENSURE PAYMENT OF PRINCIPAL.—Except as provided in

subsection (eX8), the Funding Corporation shall invest amounts
received pursuant to subsection (e) in, and hold in a separate
account to be known as the Funding Corporation Principal
Fund, noninterest bearing instruments—
"(A) which are direct obligations of the United States
issued by the Secretary; and
"(B) the total of the face amounts (the amount of principal payable at maturity) of which is approximately equal
to the eiggregate amount of principal on the obligations of
the Funding Corporation.
"(h) MISCELLANEOUS PROVISIONS.—
"(1) TREATMENT FOR CERTAIN PURPOSES.—Except as provided

?

in subsection (f)(7XB), the Funding Corporation shall be treated

103 STAT. 404

PUBLIC L A W 101-73—AUG. 9, 1989
as a Federal Home Loan Bank for purposes of section 13 (to the
extent such section relates to State, municipal, and local taxation) and section 23.
"(2) FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL

AGENTS.—The Federal Reserve banks are authorized to act as
depositaries for or fiscal agents or custodians of the Funding
Corporation.
"(3)

APPUCABILITY

OP CERTAIN PROVISIONS RELATING TO

GOVERNMENT CORPORATIONS.—The Funding Corporation shsdl be
treated, for purposes of sections 9105, 9107, and 9108 of title 31,
United States Code, as a mixed-ownership Government corporation which has capital of the Grovemment.
»

"(4) JURISDICTION AND POWER TO REMOVE.—
"(A) FEDERAL COURT JURISDICTION.—Notwithstanding any

other provision of law, any civil action, suit, or proceeding
to which the Funding Corporation is a party shall be
deemed to arise under the laws of the United States, and
the United States district courts shall have original jurisdiction over such action, suit, or proceeding.
"(B) REMOVAL.—The Funding Corporation may, without
bond or security, remove any such action, suit, or proceeding from a State court to the United States District Court
for the District of Columbia.
"(i) ANNUAL REPORT.—

"(1) IN GENERAL.—The Oversight Board shall annually submit
a full report of the operations, activities, budget, receipts, and
expenditures of the Funding Corporation for the preceding 12month period.
"(2) CONTENTS.—The report required imder paragraph (1)
shall include—
"(A) audited statements and any information necessary
to make known the financial condition and operations of
the Funding Corporation in accordance with generally
accepted accounting principles;
"(B) the financial operating plans and forecasts (including
estimates of actual and future spending, and estimates of
actual and future cash obligations) of the Funding Corporation taking into account its financial commitments, guarantees, and other contingent liabilities; and
"(C) the results of the annual audit of the financial
transactions of the Funding C!orporation conducted by the
Comptroller General pursuant to section 9105(a) of title 31,
a'
United States Code.
"(3) SUBMISSION TO CONGRESS AND PRESIDENT.—The Oversight

Board shedl submit each annual report required under this
subsection to the Congress and the President as soon as practicable after the end of the calendar year for which the report is
made, but not later than June 30 of the year following such
calendar year.
"(j) TERMINATION OF FUNDING (CORPORATION.—

"(1) I N GENERAL.—The Funding Ck)rporation shall be dissolved, as soon as practicable, after the maturity and full payment of all obligations issued by the Funding (Corporation under
this section.
"(2) AUTHORITY OF OVERSIGHT BOARD TO CONCLUDE AFFAIRS OF
FUNDING CORPORATION.—Effective on the date of the dissolution

of the Funding CJorporation under paragraph (1), the Oversight

PUBLIC LAW 101-73—AUG. 9, 1989
Board may exercise on behalf of the Funding Corporation any
power of the Funding Corporation which the Oversight Board
determines to be necessary to settle and conclude the affairs of
the Funding Corporation.
"Gt) DEFINITIONS.—For purposes of this section:
"(1) ADMINISTRATIVE EXPENSES.—The term 'administrative
expenses' does not include—
"(A) any interest on, or any redemption premium with
respect to, any obligation of the Funding Corporation; or
"(B) issuance costs.
"(2) CUSTODIAN FEE.—The term 'custodian fee' means—
"(A) any fee incurred by the Funding Corporation in
connection with the transfer of any security to, or the
maintenance of any security in, the segregated account
established under subsection (g); and
"(B) any other expense incurred by the Funding Ck)rporation in connection with the establishment or maintenance
of such account.
"(3) FUNDING CORPORATION.—The term 'Funding Corporation'
means the Resolution Funding Corporation established in
subsection (b).
"(4) FUNDING CORPORATION PRINCIPAL FUND.—The term 'Funding Corporation Principal Fund' means the separate account
established under subsection (gX2).
"(5) ISSUANCE COSTS.—The term 'issuance costs'—
"(A) means issuance fees and commissions incurred by
the Funding Corporation in connection with the issuance or
servicing of any obligation of the Funding Corporation; and
"(B) includes legal and accounting expenses, trustee and
fiscal and pa3dng agent charges, costs incurred in connection with preparing and printing offering materials, and
advertising expenses, to the extent that any such cost or
expense is incurred by the Funding Corporation in connection with issuing any obligation.
"(6) NET EARNINGS.—'The term 'net earnings' means net earnings without reduction for chargeoffs or expenses incurred by a
Federal Home Loan Bank for the purchase of capital stock of
the Financing Corporation or pa3mients relating to the Funding
Corporation required by the Oversight Board under subsections
(e) and (f).
"(7) OVERSIGHT BOARD.—The term 'Oversight Board' means—
"(A) the Oversight Board of the Resolution Trust Corporation under section 21A; and
"(B) after the termination of the Resolution Trust (Dorporation—
"(i) the Secretary of the Treasury;
"(ii) the Chairman of the Board of Governors of the
Federal Reserve System; and
"(iii) the Secretary of Housing and Urban Development.
"(8)

SAVINGS ASSOCIATION INSURANCE FUND MEMBER.—The

term 'Savings Association Insurance Fund member' means a
Savings Association Insurance member as such term is defined
by section 7(1) of the Federal Deposit Insurance Act.
"(9) SECRETARY.—The term 'Secretary' means the Secretary of
the "Treasury.

103 STAT. 405

103 STAT. 406

PUBLIC LAW 101-73—AUG. 9, 1989
r

"(10) UNDIVIDED PROFITS.—The term 'undivided profits' means
earnings retained after dividends have been paid minus the sum
of—
"(A) that portion required to be added to reserves maintained pursuant to the first 2 sentences of section 16; and
,?
"(B) the dollar amounts held by the respective Federal
Home Loan Banks in special dividend stabilization reserves
on December 31, 1985, as determined by the table set forth
in section 21(dX7).
"(1) REGULATIONS.—The Oversight Board may prescribe any regulations necessary to carry out this section.".
(b) FUNDING CORPORATION AS MIXED-OWNERSHIP GOVERNMENT
CORPORATION.—

(1) IN GENERAL.—Section 9101(2) of title 31, United States
Code, is amended by adding at the end the following new
,, subparagraph:
"(M) the Resolution Funding Corporation.".
(2) ANNUAL GAO AUDIT.—

(A) I N GENERAL.—Section 9105(aX2) of title 31, United
States Code, is amended by adding at the end the following
new sentence: "The Comptroller General shall audit the
Resolution Funding Corporation annually.".
(B) CONFORMING AMENDMENT.—Section 9105(a)(2) of title
' 3 1 , United States Code, is amended by striking "Federal
Savings and Loan Insurance Corporation and".
SEC. 512. FINANCING CORPORATION.

Section 21 of the Federal Home Loan Bank Act (12 U.S.C. 1441) is
amended—
(1) by striking "insured institution" each place it appears and
inserting "Savings Association Insurance Fund member";
(2) by striking "Federal Home Loan Bank Board" and
"Board" each place they appear and inserting "Federal Housing
* Finance Board";
(3) in subsection (cX2), by inserting before the period the
following: "prior to the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
and thereafter to transfer the proceeds of any obligation issued
by the Financing Corporation to the FSLIC Resolution Fund";
(4) in subsection (cX9) by striking "or section 402(b) of the
National Housing Act";
(5) by amending the portion of subsection (dX4) appearing
before the table to read as follows: "Of the first $1,000,000,000 in
the aggregate which the Oversight Board pursuant to section
21B or the Federal Housing Finance Board under this section
(as the case may be) may require the Federal Home Loan Banks
collectively to invest in the stock of the Funding Corporation or
'-? invest in the capital stock of the Financing Corporation, respectively, the amount which each Federal Home Loan Bank (or any
successor to such Bank) shall invest shall be determined by the
Oversight Board or the Federal Housing Finance Board (as the
case may be) by multiplying the aggregate amount of such
pajmient or investment by all Banks by the percentage appears^ ing in the following table for each such Bank:';
(6) in subsection (dX5), by striking "$1,000,000,000 which the
Board" and inserting "the $1,000,000,000 amount referred to in
paragraph (4) which the Federal Housing Finance Board";

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 407

(7) in subsection (dX6XAXiii), by striking "available for dividends";
(8) in subsection (dX6XD), by striking "available for dividends";
(9) in subsection (dX6XE), by striking "available for dividends";
(10) by striking subsection (dX6XF) and adding at the end of
subsection (1) the following:
"(4) N E T EARNINGS DEFINED.—The term 'net earnings' means
net earnings without reduction for any chargeoffs or expenses
incurred by a Bank in connection with the purchase of capital
stock of the Financing Corporation or the purchase of stock of
the Funding Corporation required by the Oversight Board
under subsections (e) and (f) of section 21B.";
(11) in subsection (eX3XA)—
(A) by striking "used to";
(B) by inserting "used t o " before "purchase" and
"refund*^; and
(C) by inserting before the semicolon the following: "prior
to the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, and thereafter
transferred to the FSLIC Resolution Fund";
(12) in subsection (e)—
(A) by striking paragraph (2) and redesignating paragraphs (3) through (10) as paragraphs (2) through (9), respectively, and
(B) in paragraph (6) as redesignated, by striking "the
Federal Savings and Loan Insurance Corporatioiv' and
inserting "the FSLIC Resolution Fund";
(13) by striking subsection (f) and inserting the following:
"(f) SOURCES OF FUNDS FOR INTEREST PAYMENTS; FINANCING CORPORATION ASSESSMENT AUTHORITY.—The Financing Corporation

shall obtain funds for anticipated interest pajrments, issuance costs,
and custodial fees on obligations issued hereunder from the following sources:
"(1) PREENACTMENT ASSESSMENTS.—The Financing Clorpora-

t

tion assessments which were assessed on insured institutions
pursuant to this section as in effect prior to the date of enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.
"(2) N E W ASSESSMENT AUTHORITY.—^To the extent the amounts

available pursuant to paragraph (1) are insufficient to cover the
amount of interest pajonents, issuance costs, and custodial fees,
the Financing Corporation, with the approval of the Board of
Directors of the Federal Deposit Insurance Corporation, shall
assess against each Savings Association Insurance Fund
member an assessment (in the same manner as assessments are
assessed against such members by the Federal Deposit Insurance (Corporation under section 7 of the Federal Deposit Insurance Act), except that—
"(A) the sum of—
"(i) the amount assessed under this paragraph; and
"(ii) the amount assessed by the Funding Corporation
;•
under section 21B;
shall not exceed the amount authorized to be assessed
against Savings Association Insurance Fund members pursuant to section 7 of the Federal Deposit Insurance Act;

103 STAT. 408

PUBLIC LAW 101-73—AUG. 9, 1989
"(B) the Financing Corporation shall have first priority to
make the assessment; and
"(C) the amount of the applicable assessment determined
under such section 7 shall be reduced by the sum described
in subparagraph (A) of this paragraph.
"(3) RECEIVERSHIP PROCEEDS.—To the extent the

amounts

available pursuant to paragraphs (1) and (2) are insufficient to
cover the amount of interest payments, issuance costs, and
custodial fees, and if the funds are not required by the Resolution Funding Corporation to provide funds for the Funding
Corporation Principal Fund under section 21B, the Federal
Deposit Insurance Corporation shall transfer to the Financing
Corporation, from the liquidating dividends and payments made
on claims received by the FSLIC Resolution Fund (established
under section 11A of the Federal Deposit Insurance Act) from
receiverships, the remaining amount of funds necessary for the
Financing Corporation to make interest payments.";
(14) in subsection (g)(1) by striking "National Housing Act,"
and inserting "National Housing Act before the date of enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 and after such date in capital certificates issued by the FSLIC Resolution Fund,";
(15) in subsection (g), by inserting the following at the end of
paragraph (2): "For purposes of the foregoing, the Financing
Corporation shall be deemed to hold noninterest bearing
instruments that it lends temporarily to primary United States
Treasury dealers in order to enhance market liquidity and
facilitate deliveries, provided that United States Treasury
securities of equal or greater value have been delivered as
collateral.";
(16) in subsection (j), by striking subparagraph (A) of paragraph (1) and inserting the following:
"(A) the maturity and full payment of all obligations
issued by the Financing Corporation pursuant to this section; or"; and
(17) in subsection (1)—
(A) by striking paragraph (1) and inserting the following:
"(1) SAVINGS ASSOCIATION INSURANCE FUND MEMBER.—The

term 'Savings Association Insurance Fund member' means a
savings association which is a Savings Association Insurance
-' Fund member as defined by section 7(1) of the Federal Deposit
Insurance Act."; and
(B) by striking paragraph (2) and redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

TITLE VI—THRIFT ACQUISITION
ENHANCEMENT PROVISIONS
SEC. 601. ACQUISITION OF THRIFT INSTITUTIONS BY BANK HOLDING
COMPANIES.

(a) I N GENERAL.—Section 4 of the Bank Holding Company Act of
1956 (12 U.S.C. 1843) is amended by adding at the end the following
new subsection:

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 409

"(i) ACQUISITION OF SAVINGS ASSOCIATIONS.—

"(1) I N GENERAL.—The Board may approve an application by
any bank holding company under subsection (cX8) to acquire
any savings association in accordance with the requirements
and limitations of this section.
"(2) PROHIBITION ON TANDEM RESTRICTIONS.—In approving an

application by a bank holding company to acquire a savings
association, the Board shall not impose any restriction on transactions between the savings association and its holding company affiliates, except as required under sections 23A and 23B
of the Federal Reserve Act or any other applicable law.",
(b) MODIFICATION OF PRIOR APPROVALS.—If the Board of Governors 12 use 1843
of the Federal Reserve System, in approving an application by a note.
bank holding company to acquire a savings association, imposed any
restriction that would have been prohibited under section 4(iX2) of
the Bank Holding Company Act of 1956 (as added by subsection (a)
of this section) if that section had been in effect when the application was approved, the Board shall modify that approval in a
manner consistent with that section.
SEC. 602. TECHNICAL AMENDMENTS TO THE BANK HOLDING COMPANY
ACT.

(a) DEFINITIONS.—Section 2(j) of the Bank Holding Company Act of
1956 (12 U.S.C. 18410)) is amended to read as follows:
"(j) DEFINITION OF SAVINGS ASSOCIATIONS AND RELATED TERM.—

The term 'savings association' or 'insured institution' means—
"(1) any Federal savings association or Federal savings bank;
"(2) any building and loan association, savings and loan
association, homestead association, or cooperative bank if such
association or cooperative bank is a member of the Savings
Association Insurance Fund; and
"(3) any savings bank or cooperative bank which is deemed by
the Director of the Office of Thrift Supervision to be a savings
association under section 10(1) of the Home Owners' Loan Act.".
(b) INSURANCE REQUIRED.—Section 3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(e)) is amended by striking "an
insured bank as defined in section 3(h)" and inserting "an insured
depository institution as defined in section 3".
SEC. 603. PASSIVE INVESTMENTS BY COMPANIES CONTROLLING CERTAIN
NONBANK BANKS.

(a) I N GENERAL.—Section 4(fX2XAXii) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)(AXii)) is amended to read as
follows:
"(ii) acquires control of more than 5 percent of the shares or
assets of an additional bank or a savings association other
than—
"(I) shares held as a bona fide fiduciary (whether with or
without the sole discretion to vote such shares);
"(II) shares held by any person as a bona fide fiduciary
solely for the benefit of employees of either the company
described in paragraph (1) or any subsidiary of that company and the beneficiaries of those employees;
"(III) shares held temporarily pursuant to an underwriting commitment in the normal course of an underwriting
business;

103 STAT. 410

PUBLIC LAW 101-73—AUG. 9, 1989
"(IV) shares held in an account solely for trading purposes;
"(V) shares over which no control is held other than
control of voting rights acquired in the normal course of a
proxy solicitation;
"(VI) loans or other accounts receivable acquired in the
normal course of business;
"(VII) shares or assets acquired in securing or collecting a
debt previously contracted in good faith, during the 2-year
period beginning on the date of such acquisition or for such
additional time (not exceeding 3 years) as the Board may
permit if the Board determines that such an extension will
not be detrimental to the public interest;
"(VIII) shares or assets of a savings association described
in paragraph (10) or (12) of this subsection;
(IX) shares of a savings association held by any insurance company, as defined in section 2(aX17) of the Investment Company Act of 1940, except as provided in
paragraph (11); and
"(X) shares issued in a qualified stock issuance under
section 10(q) of the Home Owners' Loan Act;
except that the aggregate amount of shares held under this
. clause (other than under subclauses (I), (II), (III), (IV), (V), and
(VIII)) may not exceed 15 percent of all outstanding shares or of
the voting power of a savings association; or",
(b) TECHNICAL AMENDMENTS.—

(1) Section 4(fK10) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(fK10)) is amended—
(A) by striking "and (ii)(V)" and inserting "and (ii)(VIII)";
and
(B) in subparagraph (A), by inserting "or section 13(k) of
the Federal Deposit Insurance Act" after "National Housing Act".
(2) Section 4(f) of the Bank Holding Company Act of 1956 (12
. U.S.C. 1843(f)) is amended by adding at the end the following:
"(11)

SHARES HELD BY INSURANCE AFFILIATES.—Shares

de-

scribed in clause (iiXIX) of paragraph (2)(A) shall not be excluded for purposes of clause (ii) of such paragraph if—
"(A) all shares held under such clause (iiXIX) by all
insurance company affiliates of such savings association in
the aggregate exceed 5 percent of all outstanding shares or
of the voting power of the savings association; or
"(B) such shares are acquired or retained with a view to
acquiring, exercising, or transferring control of the savings
association.".
.

SEC. 604. PURCHASE OF MINORITY INTEREST IN UNDERCAPITALIZED
SAVINGS ASSOCIATIONS BY HOLDING COMPANIES ALLOWED.
(a) AMENDMENT TO DEPOSITORY INSTITUTION MANAGEMENT INTER-

LOCKS ACT.—Section 205 of the Depository Institution Management
Interlocks Act (12 U.S.C. 3204) is amended by adding at the end
thereof the following new paragraph:
"(9) Any savings association (as defined in section lO(aXlXA)
of the Home Owners' Loan Act or any savings and loan holding
company (as defined in section 10(aXl)(D) of such Act) which has
issued stock in connection with a qualified stock issuance pursu-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 411

ant to section 10(q) of such Act, except that this paragraph shall
apply only with respect to service as a single management
official of such savings association or holding company, or any
subsidiary of such savings association or holding company, by a
single management official of the savings and loan holding
company which purchased the stock issued in connection with
such qualified stock issuance, and shall apply only when the
Director of the Office of Thrift Supervision has determined that
such service is consistent with the purposes of this Act and the
Home Owners' Loan Act.",

i

(b) AMENDMENTS TO BANK HOLDING COMPANY ACT.—Section 4(f) of

the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)) is
amended—
(1) by adding at the end thereof the following new paragraphs:
"(12)

EXEMPTION UNAFFECTED BY CERTAIN OTHER ACQUISI-

TIONS.—For purposes of clauses (i) and (ii)(VIII) of paragraph
(2XA), an insured institution is described in this pareigraph if
the insured institution was acquired (or any shares or assets of
such institution were acquired) by a company described in
paragraph (1)—
"(A) from the Resolution Trust Corporation, the Federal
Deposit Insurance (Corporation, or the Director of the Office
of Thrift Supervision, in any capacity; or
"(B) in an acquisition in which the insured institution has
been found to be in danger of default (as defined in section 3
of the Federal Deposit Insurance Act) by the appropriate
Federal or State authority.
"(13) SPECIAL RULE RELATING TO SHARES ACQUIRED IN A QUALI-

FIED STOCK ISSUANCE.—A Company described in paragraph (1)
that holds shares issued in a qualified stock issuance pursuant
to section 10(q) of the Home Owners' Loan Act by any savings
association or savings and loan holding company (neither of
which is a subsidiary) shall not be deemed to control such
savings association or savings and loan holding company solely
because such company holds such shares unless—
"(A) the company fails to comply with any requirement
or condition imposed by paragraph (2XAXii)(X) or section
10(q) of the Home Owners' Loan Act with respect to such
shares; or
"(B) the shares are acquired or retained with a view to
acquiring, exercising, or transferring control of the savings
association or savings and loan holding company."; and
(2) in clause (i) of paragraph (2XA), by striking out "paragraph
(10)" and inserting in lieu thereof "paragraph (10) or (12)".

TITLE VII—FEDERAL HOME LOAN BANK
SYSTEM REFORMS
Subtitle A—Federal Home Loan Bank Act
Amendments
SEC. 701. DEFINITIONS.

(a) I N GENERAL.—Section 2 of the Federal Home Loan Bank Act
(12 U.S.C. 1422) is amended—

^

^,

* - '

103 STAT. 412

PUBLIC LAW 101-73—AUG. 9, 1989

(1) by striking paragraphs (1) and (2) and inserting the
following:
"(1) BOARD.—The term 'Board' means the Federal Housing
Finance Board established under section 2A.
"(2)(A) BANK.—The term 'Federal Home Loan Bank' or 'Bank'
means a bank established under the authority of the Federal
Home Loan Bank Act.
"(B) BANK SYSTEM,—The term 'Federal Home Loan Bank
System' means the Federal Home Loan Banks under the supervision of the Board.";
(2) in paragraph (4) by striking "(except when used in reference to the member of the Board)"; and
*f
(3) by striking paragraph (9) and adding at the end the
following:
"(9) SAVINGS ASSOCIATION.—The term 'savings association' has
the meaning given to such term in section 8 of the Federal
Deposit Insurance Act.
"(10) CHAIRPERSON.—The term 'Chairperson' means the
Chairperson of the Board.
"(11) SECRETARY.—The term 'Secretary' means the Secretary
of Housing and Urban Development.
"(12) INSURED DEPOSITORY INSTITUTION.—The term 'insured
' • depository institution' means—
"(A) an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act), and
"(B) except as used in sections 21A and 21B, an insured
credit union (as defined in section 101 of the Federal Credit
Union Act).".
Ot)) CHANGE IN TERMS.—

(1) I N GENERAL.—Except as otherwise specifically provided in
this title, the Federal Home Loan Bank Act is amended by
striking "board" (other than in section 7) and "Federal Home
Loan Bank Board" each place such terms appear and inserting
"Board".
(2) CHAIRPERSON.—The Federal Home Loan Bank Act is
amended by striking "Chairman" and "chairman" each place
such terms appear and inserting "Chairperson" and "chairperson".

12 use 1421 et
*^912 use 1421 e«
««9V

(3) EXCEPTIONS.—
(A) GENERAL RULE.—The amendments made by para-

graph (1) shall not apply to sections 18(c), 21A, and 21B of
the Federsd Home Loan Bank Act.
(B) CONFORMING AMENDMENT.—Section 18(c) of the Federal Home Loan Bsink Act (12 U.S.C. 1438(c)) is amended by
striking "Federal Home Loan Bank Board" and "board"
each place such terms appear and inserting "Director of the
Office of Thrift Supervision".
(c) TECHNICAL AMENDMENTS.—Section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431) is amended—
(1) in subsection (e)(2)(C), by inserting "Federal Home Loan"
before "Banks,"; and
(2) in the first sentence of the third paragraph of subsection (i)
by inserting "Federal" before "Home Loan Bank System".
u

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 413

SEC. 702. FEDERAL HOUSING FINANCE BOARD ESTABLISHED.

(a) I N GENERAL.—The Federal Home Loan Bank Act (12 U.S.C.
1421 et seq.) is amended by inserting after section 2 the following
new sections:
"SEC. 2A. F E D E R A L HOUSING F I N A N C E BOARD.

^^"-

*

?f^

"(a) ESTABUSHMENT.—

"(1) I N GENERAL.—There is established the Federal Housing
Finance Board, which shall succeed to the authority of the
Federal Home Loan Bank Board with respect to the Federal
Home Loan Banks.
"(2) STATUS.—The Board shall be an independent agency in
the executive branch of the Gk)vemment.
"(3) DUTIES.—The duties of the Board shall be—
"(A) to supervise the Federal Home Loan Banks,
"(B) to ensure that the Federal Home Loan Banks carry
out their housing finance mission,
"(C) to ensure the Federal Home Loan Banks remain
adequately capitalized and able to raise funds in the capital
markets, and
4
"(D) to ensure the Federal Home Loan Banks operate in a
safe and sound manner.
"(b) MANAGEMENT.—

"(1) I N GENERAL.—The management of the Board shall be
vested in a Board of Directors consisting of 5 directors as
follows:
"(A) The Secretary who shall serve without additional
compensation.
"(B) Four citizens of the United States, appointed by the
President, by and with the advice and consent of the
Senate, each of whom shall hold office for a term of 7 years.
"(2) PROVISIONS RELATING TO APPOINTED DIRECTORS.—
"(A) I N GENERAL.—The directors appointed pursuant to
paragraph (IXB) shall be from among persons with extensive experience or training in housing tinance or with a
commitment to providing specialized housing credit. An
appointed director shall not hold any other appointed office
during his or her term as director. Not more than 3 directors shall be members of the same political party. Not more
than 1 appointed director shall be from any single district
of the Federal Home Loan Bank System. Nominations
pursuant to this subparagraph shall be referred in the
Senate to the Committee on Banking, Housing, and Urban
Affairs.
"(B) CONSUMER REPRESENTATIVE.—At least 1 director
shall be chosen from an organization with more than a 2year history of representing consumer or community interests on banking services, credit needs, housing, or financial consumer protections.
"(C) LIMITATIONS ON CONFUCTS OF INTEREST.—No director

may—
"(i) serve as a director or officer of any Federal Home
Loan Bank or any member of any Bank; or
"(ii) hold shares of, or any other financial interest in,
any member of any such Bank.
"(3) INITIAL TERMS.—Notwithstanding paragraph (2), of the

directors first appointed—

12 USC 1422a.

103 STAT. 414

PUBLIC LAW 101-73—AUG. 9, 1989
"(A) one shall be appointed for a term of 1 year; ,
"(B) one shall be appointed for a term of 3 years; and
"(C) one shall be appointed for a term of 5 years.
"(c) CHAIRPERSON; TRANSITIONAL PROVISIONS.—

President of U.S.
'

I,

j,

"(1) IN GENERAL.—The President shall designate 1 of the
appointed directors to be the Chairperson of the Board. The
Chairperson shall designate another director to serve as Acting
Chairperson during the absence or disability of the Chairperson.
"(2) TRANSITIONAL PROVISION.—Beginning on the date of
enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, until such time that at least 2 directors are appointed and confirmed pursuant to subsection (b), the
Secretary shall act for all purposes and with the full powers of
the Board of Directors. The Secretary may utilize the services of
employees from the Department of Housing and Urban Development to perform services for the Board of Directors during
such transition period.
"(d) VACANCIES.—

/;

12 u s e 1422b.

"(1) I N GENERAL.—Any vacancy on the Board of Directors
shall be filled in the manner in which the original appointment
was made. Any director appointed to fill a vacancy occurring
before the expiration of the term for which such director's
predecessor w£is appointed shall be appointed only for the
remainder of such term. Each director may continue to serve
until a successor has been appointed and qualified.
"(2) THE SECRETARY.—In the event of a vacancy in the office of
Secretary or during the absence or disability of the Secretary,
the Acting Secretary shall act as a director in place of the
Secretary.
.
.^^

"SEC. 2B. POWERS AND DUTIES.

"(a) GENERAL POWERS.—The Board shall have the following
powers:
"(1) To supervise the Federal Home Loan Banks and to
promulgate and enforce such regulations and orders as are
necessary from time to time to carry out the provisions of this
, Act.
"(2) To suspend or remove for cause a director, officer, employee, or agent of any Federal Home Loan Bank or joint office.
The cause of such suspension or removal shall be communicated
in writing to such director, officer, employee, or agent and to
such Bank or joint office. Notwithstanding any other provision
of this Act, no officer, employee, or agent of a Bank or joint
office shall be a Federal officer or employee under any definition of either term in title 5, United States Code.
"(3) To determine necessary expenditures of the Board under
this Act and the manner in which such expenditures shall be
incurred, allowed, and paid.
"(4) To use the United States mails in the same manner and
under the same conditions as a department or agency of the
United States.
"(b) STAFF.—
"(1) BOARD STAFF.—Subject to title IV of the Financial Institu-

tions Reform, Recovery, and Enforcement Act of 1989, the
Board may employ, direct, and fix the compensation and
number of employees, attorneys, and agents of the Federal
Housing Finance Board, except that in no event shall the Board

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 415

delegate any function to any employee, administrative unit of
any Bank, or joint office of the Federal Home Loan Bank
System. The prohibition contained in the preceding sentence
shall not apply to the delegation of ministerial functions including issuing consolidated obligations pursuant to section IIG)). In
directing and fixing such compensation, the Board shall consult
with and maintain comparability with the compensation at the
Federal bank regulatory agencies. Such compensation shall be
paid without regard to the provisions of other laws applicable to
officers or employees of the United States, except the Chairperson and other Directors shall be compensated as prescribed
in sections 5314 and 5315 of title 5, United States Code, respectively.
"(2) ABOLITION OF JOINT OFFICES.—The joint or collective offices of the Federsd Home Loan Bank System, except for the
Office of Finance, are hereby abolished.
"(c) RECEIPTS OF THE BOARD.—Receipts of the Board derived from
assessments levied upon the Federal Home Loan Banks and from
other sources (other than receipts from the sale of consolidated
Federal Home Loan Bank bonds and debentures issued under section 11 of this Act) shall be deposited in the Treasury of the United
States. Salaries of the directors and other employees of the Board
and all other expenses thereof may be paid from such assessments
or other sources and shall not be construed to be Government Funds
or appropriated monies, or subject to apportionment for the purposes of chapter 15 of title 31, United States Code, or any other
authority.
"(d) ANNUAL REPORT.—The Board shall make an annual report to
the Congress.".
(b) AUDITS AND REPORTS.—Section 20 of the Federal Home Loan
Bank Act (12 U.S.C. 1440) is amended by adding at the end the
following: "In addition to such examinations, the Comptroller General may audit or examine the Board and the Banks, to determine
the extent to which the Board and the Banks are fairly and effectively fulfilling the purposes of this Act.".
(c) APPOINTMENT OF INSPECTOR GENERAL.—Section 8E(aX2) of the
Inspector Genersd Act of 1978 (5 U.S.C. App.) is amended by striking
"Federal Home Loan Bank Board," and inserting "Federal Housing
Finance Board,".
SEC. 703. TERMINATION OF THE FEDERAL HOME LOAN BANK BOARD.
(a) I N GENERAL.—Section 17 of the Federal Home Loan Bank Act
(12 U.S.C. 1437) is hereby repealed.
SEC. 704. ELIGIBILITY FOR MEMBERSHIP.
(a) INSURED DEPOSITORY INSTITUTIONS.—Section 4(a) of the Federal

Home Loan Bank Act (12 U.S.C. 1424(a)) is amended to read as
follows:
"(a) CRITERIA FOR ELIGIBILITY.—

"(1) I N GENERAL.—Any building and loan association, savings
and loan association, cooperative bank, homestead association,
insurance company, savings bank, or any insured depository
institution (as defined in section 2 of this Act), shall be eligible
to become a member of a Federal Home Loan Bank if such
institution—
.^
"(A) is duly organized under the laws of any State or of
the United States;

103 STAT. 416

PUBLIC LAW 101-73—AUG. 9, 1989

"(B) is subject to inspection and regulation under the
banking laws, or under similar laws, of the State or of the
United States; and
"(C) makes such home mortgage loans as, in the judgment
of the Board, are long-term loans (except that in the case of
a savings bank, this subparagraph applies only if, in the
judgment of the Board, its time deposits, as defined in
section 19 of the Federal Reserve Act, warrant its making
such loans).
"(2) QuAUFiED THRIFT LENDER.—An insured depository
institution that is not a member on January 1, 1989, may
become a member of a Federal Home Loan Bank only if—
"(A) the insured depository institution has at least 10
percent of its total assets in residential mortgage loans;
"(B) the insured depository institution's financial condition is such that advances may be safely made to such
institution; and
J, .
"(C) the character of its management and its homefinancing policy are consistent with sound and economical
home financing.
An insured depository institution commencing its initial business
operations after January 1, 1989, may become a member of a
Federal Home Loan Bank if it complies with regulations and orders
prescribed by the Board for the 10 percent asset requirement (described in the preceding sentence) within one year after the
commencement of its operations.".
(c) REPEAL OF SECTION 27.—Section 27 of the Federal Home Loan
Bank Act (12 U.S.C. 1447) is hereby repealed.
SEC. 705. REPEAL OF PROVISION RELATING TO RATE OF INTEREST ON
DEPOSITS.

Section 5B of the Federal Home Loan Bank Act (12 U.S.C. 1425b)
is hereby repealed.
*
SEC. 706. CAPITAL STOCK.

Section 6 of the Federal Home Loan Bank Act (12 U.S.C. 1426) is
amended—
(1) by striking subsections (a), (e), (f), and (g) and redesignating
subsections (b), (c), (d), (h), (i), (j), (k), and (m) as subsections (a),
(b), (c), (d), (e), (f), (g), and (h), respectively;
(2) by striking the second sentence of subsection (e) (as redesignated by paragraph (1) of this section) and inserting the
following: "If any member's membership in a Federal Home
Loan Bank is terminated, the indebtedness of such member to
the Federal Home Loan Bank shall be liquidated in an orderly
manner (as determined by the Federal Home Loan Bank), and
upon completion of such liquidation, the capital stock in the
Federal Home Loan Bank owned by such member shall be
surrendered and canceled. Any such liquidation shall be deemed
a prepayment of any such indebtedness, and shall be subject to
any penalties or other fees applicable to such prepayment."; and
(3) in subsection (h) (as redesignated by paragraph (1) of this
section), by striking "charter" and all that follows through the
end period and inserting "charter as a Federal savings association (as defined in section 3 of the Federal Deposit Insurance
Act).".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 417

SEC. 707. ELECTION OF BANK DIRECTORS.

Section 7 of the Federal Home Loan Bank Act (12 U.S.C. 1427) is
amended—
(1) in subsection (a)—
(A) by striking "appointed by the Federal Home Loan
Bank Board referred to in subsection (b) of section 17,
hereinafter in this section referred to as the Board" and
inserting "appointed by the Board referred to in section
2A",
(B) by inserting after the last sentence the following: "At
least 2 of the Federal Home Loan Bank directors who are
appointed by the Board shall be representatives chosen
from organizations with more than a 2-year history of
representing consumer or community interests on banking
services, credit needs, housing, or financial consumer
protections. No Federal Home Loan Bank director who is
appointed pursuant to this subsection may, during such
Bank director's term of office, serve as an officer of any
Federal Home Loan Bank or a director or officer of any
member of a Bank, or hold shares, or any other financial
interest in, any member of a Bank,";
(2) by inserting after the first sentence of subsection (b) the
following: "No person who is an officer or director of a member
that fails to meet any applicable capital requirement is eligible
to hold the office of Federal Home Loan Bank director.";
(3) by amending subsection (f) to read as follows:
"(f) VACANCIES.—

"(1) IN GENERAL.—A Bank director appointed or elected to fill
a vacancy shall be appointed or elected for the unexpired term
of his or her predecessor in office,
"(2) APPOINTED BANK DIRECTORS.—In the event of a vacancy in
any appointive Bank directorship, such vacancy shall be filled
through appointment by the Board for the unexpired term. If
any appointive Bank director shall cease to have the qusdifications set forth in subsection (a), the office held by such person
shall immediately become vacant, but such person may continue to act as a Bank director until his or her successor
assumes the vacated office or the term of such office expires,
whichever occurs first.
"(3) ELECTED BANK DIRECTORS.—In the event of a vacancy in
any elective Bank directorship, such vacancy shall be filled by
an affirmative vote of a majority of the remaining Bank directors, regardless of whether such remaining Bank directors constitute a quorum of the Bank's board of directors. A Bank
director so elected shall satisfy the requirements for eligibility
which were applicable to his predecessor. If any elective Bank
director shall cease to have any qualification set forth in this
section, the office held by such person shall immediately become
vacant, and such person shall not continue to act as a Bank
director."; and
(4) by adding at the end the following new subsection:
"(k) INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES.—

The board of directors of each Bank shall determine the terms and
conditions under which such Bank may indemnify its directors,
officers, employees or agents.".

.^

103 STAT. 418

PUBLIC LAW 101-73—AUG. 9, 1989
SEC. 708. REPEAL OF PROVISIONS RELATING TO CERTAIN POWERS OF
THE FEDERAL HOME LOAN BANK BOARD.
Section 19 of the Federal Home Loan Bank Act (12 U.S.C. 1439) is
hereby repealed.
SEC. 709. POWERS AND DUTIES OF BANKS.

Section 11 of the Federal Home Loan Bank Act (12 U.S.C. 1431) is
amended—
(1) in subsection (eXl), by inserting "incidental to activities"
after "not";
(2) in subsection (f), by striking out "or whenever in the
judgment of at least 4 members of the board an emergency
exists requiring such action";
(3) by amending subsection (k) to read as follows:
,

"(k) BANK LOANS TO S A I F . —
"(1) LOANS AUTHORIZED.—Subject

to paragraph (3), the Federal Home Loan Banks may, upon the request of the Federal
Deposit Insurance Corporation, make loans to such Corporation
for the use of the Savings Association Insurance Fund.
"(2) LIABILITY OF THE FUND.—Any loan by a Federal Home
Loan Bank pursuant to paragraph (1) shall be a direct liability
of the Savings Association Insurance Fund.
"(3) INTEREST ON AND SECURITY FOR SUCH LOANS.—Any loan by
a Federal Home Loan Bank pursuant to paragraph (1) shall—
"(A) bear a rate of interest not less than such Bank's
current marginal cost of funds, taking into account the
maturities involved; and
"(B) be adequately secured.".

SEC. 710. ELIGIBILITY OF BORROWERS TO SECURE ADVANCES.

12 use 1422,
1424.
12 use 1426.

12 use 1427,
1430.
12 use 1431.

(a) I N GENERAL.—Section 9 of the Federal Home Loan Bank Act
(12 U.S.C. 1429) is amended by striking "or nonmember borrower"
in the first sentence.
(b) CIONFORMING AMENDMENTS.—The Federal Home Loan Bank
Act (12 U.S.C. 1421 et seq.) is amended—
(1) in sections 2(5) and 4(b), by striking "or a nonmember
borrower" wherever it appears;
(2) in section 6(e) (as redesignated by section 706 of this Act),
by striking "or nonmember borrower" wherever it appears;
(3) in section 6(e) (as redesignated by section 706 of this Act),
by striking "or deprive any nonmember borrower of the privilege of further advances,";
(4) in sections 70') and 10(c), by striking "or nonmember
borrower" wherever it appears;
(5) in section 10(c), by striking ", or made to a nonmember
borrower" in the second sentence; and
(6) in sections 11(g) and 11(h), by striking "or nonmember
borrowers" wherever it appears.
(c) COMMUNITY SUPPORT.—Section 10 of the Federal Home Loan
Bank Act (12 U.S.C. 1430) is amended by adding at the end the
following:
"(g) COMMUNITY SUPPORT REQUIREMENTS.—

Regulations.

"(1) I N GENERAL.—Before the end of the 2-year period beginning on the date of enactment of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, the Board
shall adopt regulations establishing standards of community

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 419

investment or service for members of Banks to maintain continued access to long-term advances.
"(2) FACTORS TO BE INCLUDED.—The regulations promulgated
pursuant to paragraph (1) shall take into account factors such
as a member's performance under the Community Reinvestment Act of 1977 and the member's record of lending to firsttime homebuyers.".

;
_
~

SEC. 711. ADMINISTRATIVE EXPENSES.

Section 18(b) of the Federal Home Loan Bank Act (12 U.S.C.
1437(b)) is amended to read as follows:
"(b) ASSESSMENTS FOR ADMINISTRATIVE EXPENSES.—

"(1) I N GENERAL.—The Board may impose a semiannual
assessment on the Federal Home Loan Banks, the aggregate
amount of which is sufficient to provide for the payment of the
Board's estimated expenses for the period for which such assessment is made.
"(2) DEFICIENCIES.—If, at any time, amounts available from
any assessment for any semiannual period are insufficient to
cover the expenses of the Board incurred in carr3dng out the
provisions of this Act during such period, the Board may make
an immediate £issessment against the Bsmks to cover the
amount of the deficiency for such semiannual period.
"(3) SURPLUSES.—If, at the end of any semiannual period for
which an assessment is made, any amount remains from such
assessment, such amount will be deducted from the assessment
on the Banks by the Board for the following semiannual period.
"(4) TRANSITION PROVISION.—On or after the effective date of
the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989, the Board may levy a one-time special assessment
on the Banks pursuant to this subsection for the Board's estimated expenses for the transitional period following enactment
of such Act, if such assessment is made before the Board's first
semiannual assessment under paragraph (1).".
SEC. 712. N O N A D M I N I S T R A T I V E EXPENSES.

Subsection (a) of section 18 of the Federal Home Loan Bank Act
(12 U.S.C. 1438(a)) and section 19A of such Act (12 U.S.C. 1439-1) are
hereby repealed.
SEC. 713. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION INDUSTRY ADVISORY COMMITTEE.

Subsection (i) of section 21 of the Federal Home Loan Bank Act (12
U.S.C. 1441) is repealed and subsections (j), (k), and (1) are redesignated subsections (i), (j), and (k), respectively.
SEC. 714. ADVANCES.

(a) IN GENERAL.—Subsection (a) of section 10 of the Federal Home
Loan Bank Act (12 U.S.C. 1430(a)) is amended by striking everything
after "members" to the end period and inserting the following:
"upon collateral sufficient, in the judgment of the Bank, to fully
secure advances obtained from the Bank under this section or
section 11(g) of this Act. All long-term advances shall only be made
for the purpose of providing funds for residential housing finance. A
Bank, at the time of origination or renewsd of a loan or advance,
shall obtain and maintain a security interest in collateral eligible
pursuant to one or more of the following categories:

12 USC 1438.

103 STAT. 420

...

PUBLIC LAW 101-73—AUG. 9, 1989

"(1) Fully disbursed, whole first mortgages on improved residential property (not more than 90 days delinquent), or securities representing a whole interest in such mortgages.
"(2) Securities issued, insured, or guaranteed by the United
States Government or any agency thereof (including without
limitation, mortgage-backed securities issued or guaranteed by
the Federal Home Loan Mortgage C!orporation, the Federal
National Mortgage Corporation, and the Government National
Mortgage Association).
"(3) Deposits of a Federal Home Loan Bank.
"(4) Other real estate related collateral acceptable to the
Bank if such collateral has a readily ascertainable value and
the Bank can perfect its interest in the collateral. The aggregate
' amount of outstanding advances secured by such other real
estate related collateral shall not exceed 30 percent of such
member's capital.
"(5) Paragraphs (1) through (4) shall not affect the ability of
any Federal Home Loan Bank to take such steps as it deems
necessary to protect its security position with respect to
outstanding advances, including requiring deposits of additional
coUatersd security, whether or not such additional security
would be eligible to originate an advance. If an advance existing
; on the date of enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 matures and the
member does not have sufficient eligible collateral to fully
secure a renewal of such advance, a Bank may renew such
advance secured by such collateral as the Bank and the Board
determines is appropriate. A member that has an advance
secured by such insufficient eligible collateral must reduce its
level of outstanding advances promptly and prudently in
accordance with a schedule determined by the Board.",
(b) REDUCED ELIGIBILITY FOR ADVANCES.—Section 10(e) of the Federal Home Loan Bank Act (12 U.S.C. 1430(e)) is amended to read as
follows:
"(e) QUALIFIED THRIFT LENDER STATUS.—

/

"(1) I N GENERAL.—A member that is not a qualified thrift
lender may only receive an advance if it holds stock in its
Federal Home Loan Bank at the time it receives that advance in
an amount equal to at least—
"(A) 5 percent of that member's total advances, divided
by
"(B) such members actual thrift investment percentage.
^ Such members that are not qualified thrift lenders may only
apply for advances under this section for the purpose of obtaining funds for housing finance.
"(2) PRIORITY.—The Board, by regulation, shall establish a
priority for advances to members that are qualified thrift lenders. The aggregate amount of any Bank's advances to members
that are not qualified thrift lenders shall not exceed 30 percent
of a Bank's total advances.
"(3) MINIMUM STOCK PURCHASE REQUIREMENT FOR MEMBER-

SHIP.—Each member of a Federal Home Loan Bank shall, at a
minimum, purchase and maintain stock in its Federal Home
Loan Bank in the amount that would be required under section
6(b) if at least 30 percent of such member's assets were home
mortgage loans.

PUBLIC LAW 101-73—AUG. 9, 1989
"(4) EXCEPTIONS.—Paragraphs (1) and (2) of this subsection do
not apply to—
"(A) a savings bank as defined in section 3 of the Federal
Deposit Insurance Act; or
"(B) a Federal savings association in existence as a Federal savings association on the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement
Act of 1989—
"(i) that w£is chartered as a savings bank or cooperative bank prior to October 15,1982; or
"(ii) that acquired its principal assets from an institution which was chartered prior to October 15,1982, as a
savings bank or cooperative bank under State law.
"(5) DEFINITIONS.—As used in this subsection—
"(A) SAVINGS ASSOCIATION.—The term 'savings association' has the same meaning as in section 10(a)(lXA) of the
Home Owners' Loan Act.
"(B) QuAUFiED THRIFT LENDER.—The term 'qualified
thrift lender' has the same meaning as in section 10(m) of
the Home Owners' Loan Act.
"(C) ACTUAL THRIFT INVESTMENT PERCENTAGE.—The term
'actual thrift investment percentage' has the same meaning
as in section 10(m) of the Home Owners' Loan Act.".
(c) SPECIAL LIQUIDITY ADVANCES.—Section 10 of the Federal Home
Loan Bank Act (12 U.S.C. 1430) (as amended by section 710(c) of this
Act) is amended by adding at the end the following new subsection:
"(h) SPECIAL LIQUIDITY ADVANCES.—

"(1) IN GENERAL.—Subject to paragraph (2), the Federal Home
Loan Banks may, upon the request of the Director of the Office
of Thrift Supervision, make short-term liquidity advances to a
savings association that—
"(A) is solvent but presents a supervisory concern because
of such association's poor financial condition; and
"(B) has reasonable and demonstrable prospects of
returning to a satisfactory financial condition.
"(2)

INTEREST ON AND SECURITY FOR SPECIAL UQUIDITY AD-

VANCES.—Any loan by a Federal Home Loan Bank pursuant to
paragraph (1) shall be subject to all applicable collateral
requirements, including the requirements of section 10(a) of this
Act, and shall be at an interest rate no less favorable than those
made available for similar short-term liquidity advances to
savings associations that do not present such supervisory
concern.".
SEC. 715. AMENDMENTS RELATING TO WITHDRAWAL FROM FEDERAL
HOME LOAN BANK MEMBERSHIP.

Section 6(h) of the Federal Home Loan Bank Act (as redesignated
by section 706 of this Act) is amended by striking "five" and
inserting "10".
SEC. 716. REPEAL OP PROVISIONS RELATING TO LAWFUL CONTRACT
RATE.

Section 5 of the Federal Home Loan Bank Act (12 U.S.C. 1425) is
hereby repealed.

103 STAT. 421

103 STAT. 422

PUBLIC LAW 101-73—AUG. 9, 1989

SEC. 717. BANK STOCK AND OBLIGATIONS.

Section 23 of the Federal Home Loan Bank Act (12 U.S.C. 1443) is
amended to read as follows:
"SEC. 23. FORMS OF BANK STOCK AND OBLIGATIONS.

"Any stock, debentures, bonds, notes, or other obligations issued
under the authority of this Act may be issued in uncertificated form,
utilizing a book entry method, or in certificated form under such
rules, regulations, or guidelines as the Board of Directors of the
Federal Housing Finance Board may provide.".
SEC. 718. THRIFT ADVISORY COUNCIL.

Section 8a of the Federal Home Loan Bank Act (12 U.S.C. 1428a) is
hereby repealed.
SEC. 719. EXAMINATION OF MEMBERS.

Section 22 of the Federal Home Loan Bank Act (12 U.S.C. 1442) is
amended to read as follows:
"SEC. 22. MEMBER FINANCIAL INFORMATION.
Classified
information.

Reports.

"(a) I N GENERAL.—In order to enable the Federal Home Loan
Banks to carry out the provisions of this Act, the Secretary of the
Treasury, the Comptroller of the Currency, the Chairman of the
Board of Governors of the Federal Reserve System, the Chairperson
of the Federal Deposit Insurance Corporation, the Chairperson of
the National Credit Union Administration, and the Director of the
Office of Thrift Supervision, upon request by any Federal Home
Loan Bank—
"(1) shall make available in confidence to any Federal Home
Loan Bank, such reports, records, or other information as may
be available, relating to the condition of any member of any
Federal Home Loan Bank or any institution with respect to
which any such Bank has had or contemplates having transactions under this Act; and
1
"(2) may perform through their examiners or other employees
or agents, for the confidential use of the Federal Home Loan
Bank, examinations of institutions for which such agency is the
appropriate Federal banking regulatory agency.
In addition, the Comptroller of the Currency, the Chairman of the
Board of Governors of the Federal Reserve System, the Chairperson
of the National Credit Union Administration, and the Director of
the Office of Thrift Supervision shall make available to the Board or
any Federal Home Loan Bank the financial reports filed by members of £my Bank to enable the Board or a Bank to compile and
publish cost of funds indices or other financial or statistical reports.
"(b) CONSENT BY MEMBERS.—Every member of a Federal Home
Loan Bank shall, as a condition precedent thereto, be deemed—
"(1) to consent to such examinations as the Bank or the Board
may require for the purposes of this Act;
'i
"(2) to agree that reports of examinations by local, State, or
Federal gigencies or institutions may be furnished by such
authorities to the Bank or the Board upon request; and
"(3) to agree to give the Bank or the Federal agency, upon
request, such information as they may need to compile and
publish cost of funds indices and to publish other reports or
statistical summaries pertaining to the activities of Bank members.".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 423

SEC. 720. LIQUIDITY.

Section 5A of the Federal Home Loan Bank Act (12 U.S.C. 1425a)
is hereby repealed.
SEC. 721. AFFORDABLE HOUSING.

Section 10 of the Federal Home Loan Bank Act (12 U.S.C. 1430) (as
amended by section 710 and section 714 of this Act) is amended by
adding at the end the following:
"(i) COMMUNITY INVESTMENT PROGRAM.—

"(1) I N GENERAL.—Each Bank shall establish a program to
provide funding for members to undertake community-oriented
mortgage lending. Each Bank shall designate a community
investment officer to implement community lending and affordable housing advance programs of the Banks under this subsection and subsection (j) and provide technical assistance and
outreach to promote such programs. Advances under this program shall be priced at the cost of consolidated Federal Home
Loan Bank obligations of comparable maturities, taking into
account reasonable administrative costs.
"(2) COMMUNITY-ORIENTED MORTGAGE LENDING.—For purposes

of this subsection, the term 'community-oriented mortggige lending' means providing loans—
"(A) to finance home purchases by families whose income
does not exceed 115 percent of the median income for the
area,
"(B) to finance purchase or rehabilitation of housing for
occupancy by families whose income does not exceed 115
percent of median income for the area,
"(C) to finance commercial and economic development
activities that benefit low- and moderate-income families or
activities that are located in low- and moderate-income
neighborhoods, and
"(D) to finance projects that further a combination of the
purposes described in subparagraphs (A) through (C).

^-^v

"(j) AFFORDABLE HOUSING PROGRAM.—

"(1) I N GENERAL.—Pursuant to regulations promulgated by Disadvantaged
the Board, each Bank shall establish an Affordable Housing persons.
Program to subsidize the interest rate on advances to members
engaged in lending for long term, low- and moderate-income,
owner-occupied and affordable rental housing at subsidized interest rates.
"(2) STANDARDS.—The Board's regulations shall permit Bank
members to use subsidized advances received from the Banks
to—
"(A) finance homeownership by families with incomes at
or below 80 percent of the median income for the area; or
"(B) finance the purchase, construction, or rehabilitation
of rental housing, at least 20 percent of the units of which
will be occupied by and affordable for very low-income
households for the remaining useful life of such housing or
the mortgage term.
"(3) PRIORITIES FOR MAKING ADVANCES.—In using advances
authorized under paragraph (1), each Bank member shall give
priority to qualified projects such as the following:
"(A) purchase of homes by families whose income is 80
percent or less of the median income for the area,

103 STAT. 424

/

"

,

PUBLIC LAW 101-73—AUG. 9, 1989

"(B) purchase or rehabilitation of housing owned or held
, by the United States Government or any agency or
instrumentality of the United States; and
"(C) purchase or rehabilitation of housing sponsored by
any nonprofit organization, any State or political subdivision of any State, any local housing authority or State
housing finance agency.
"(4) REPORT.—Each member receiving advances under this
program shall report annually to the Bank making such advances concerning the member's use of advances received under
this program.
"(5) CONTRIBUTION TO PROGRAM.—Each Bank shall annually
contribute the percentage of its annual net earnings prescribed
in the following subparagraphs to support subsidized advances
through the Affordable Housing Program:
"(A) In 1990, 1991, 1992, and 1993, 5 percent of the
preceding year's net income, or such prorated sums as may
be required to assure that the aggregate contribution of all
the Banks shall not be less than $50,000,000 for each such
year.
"(B) In 1994, 6 percent of the preceding year's net income,
or such prorated sum as may be required to assure that the
aggregate contribution of the Banks shall not be less than
$75,000,000 for such year.
"(C) In 1995, and subsequent years, 10 percent of the
preceding year's net income, or such prorated sums as may
be required to assure that the aggregate contribution of the
Banks shall not be less than $100,000,000 for each such
year.
"(6) GROUNDS FOR SUSPENDING CONTRIBUTIONS.—

"(A) I N GENERAL.—If a Bank finds that the payments
required under this paragraph are contributing to the
financial instability of such Bank, it may apply to the
Federal Housing Finance Board for a temporary suspension
of such payments.
"(B) FINANCIAL INSTABILITY.—In determining the finanV cial instability of a Bank, the Federal Housing Finance
Board shall consider such factors as (i) whether the Bank's
earnings are severely depressed, (ii) whether there has been
a substantial decline in membership capital, and (iii)
whether there has been a substantial reduction in advances
outstanding.
"(C) REVIEW.—The Board shall review the application
and any supporting financial data and issue a written
decision approving or disapproving such application. The
Board's decision shall be accompanied by specific findings
and reasons for its action.
"(D) MONITORING SUSPENSION.—If the Board grants a
suspension, it shall specify the period of time such suspension shall remain in effect and shall continue to monitor
the Bank's financial condition during such suspension.
"(E)

^

LIMITATIONS ON GROUNDS FOR SUSPENSION.—The

Board shall not suspend payments to the Affordable Housing Program if the Bank's reduction in earnings is a result
of (i) a change in the terms for advances to members which
is not justified by market conditions, (ii) inordinate operating and administrative expenses, or (iii) mismanagement.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 425

"(F) The Federal Housing Finance Board shall notify the
Committee on Banking, Finance and Urban Affairs of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate not less than 60
days before such suspension takes effect. Such suspension
shall become effective unless a joint resolution is enacted
disapproving such suspension.
"(7) FAILURE TO USE AMOUNTS FOR AFFORDABLE HOUSING.—If

any Bank fails to utilize or commit the full amount provided in
this subsection in any year, 90 percent of the amount that has
not been utilized or committed in that year shall be deposited by
the Bank in an Affordable Housing Reserve Fund administered
by the Board. The 10 percent of the unutilized and uncommitted
amount retained by a Bank should be fully utilized or committed by that Bank during the following year and any remaining
portion must be deposited in the Affordable Housing Reserve
Fund. Under regulations established by the Board, funds from
the Affordable Housing Reserve Fund may be made available to
any Bank to meet additional affordable housing needs in such
Bank's district pursuant to this section.
"(8) NET EARNINGS.—The net earnings of any Federal Home
Loan Bank shall be determined for purposes of this paragraph—
"(A) after reduction for any payment required under
section 21 or 21B of this Act; and
"(B) before declaring any dividend under section 16.
"(9) REGULATIONS.—The Federal Housing Finance Board shall
promulgate regulations to implement this subsection. Such
regulations shall, at a minimum—
"(A) specify activities eligible to receive subsidized advances from the Banks under this program;
"(B) specify priorities for the use of such advances;
"(C) ensure that advances made under this program will
be used only to assist projects for which adequate long-term
monitoring is available to guarantee that affordability
standards and other requirements of this subsection are
satisfied;
"(D) ensure that a preponderance of assistance provided
under this subsection is ultimately received by low- and
moderate-income households;
"(E) ensure that subsidies provided by Banks to member
institutions under this program are passed on to the ultimate borrower;
"(F) establish uniform standards for subsidized advances
under this program and subsidized lending by member
institutions supported by such advances, including maximum subsidy and risk limitations for different categories of
loans made under this subsection; and
"(G) coordinate activities under this subsection with
A other Federal or federally-subsidized affordable housing
activities to the maximum extent possible.
"(10) OTHER PROGRAMS.—No provision of this subsection or
subsection (i) shall preclude any Bank from establishing additional community investment cash advance programs or
contributing additional sums to the Affordable Housing Reserve
Fund.
"(11) ADVISORY COUNCIL.—Each Bank shall appoint an Advisory Council of 7 to 15 persons drawn from community and

' *'

103 STAT. 426

PUBLIC LAW 101-73—AUG. 9, 1989
nonprofit organizations actively involved in providing or
promoting low- and moderate-income housing in its district. The
Advisory Council shall meet with representatives of the board
of directors of the Bank quarterly to advise the Bank on lowand moderate-income housing programs and needs in the district and on the utilization of the advances for these purposes.
Each Advisory Council established under this paragraph shall
submit to the Board at least annually its analysis of the lowincome housing activity of the Bank by which it is appointed.
"(12) REPORTS TO CONGRESS.—

--

"(A) The Board shall monitor and report annually to the
Congress and the Advisory Council for each Bank the support of low-income housing and community development by
the Banks and the utilization of advances for these purposes.
"(B) The analyses submitted by the Advisory Councils to
the Board under paragraph (11) shall be included as part of
the report required by this paragraph.
"(C) The Comptroller General of the United States shall
audit and evaluate the Affordable Housing Program established by this subsection after such program has been
operating for 2 years. The Comptroller General shall report
to (Dongress on the conclusions of the audit and recommend
improvements or modifications to the program.
"(13) DEFINITIONS.—For purposes of this subsection—
"(A) Low- OR MODERATE-INCOME HOUSEHOLD.—The term
. .t.. 'low- or moderate-income household' means any household
which has an income of 80 percent or less of the area
median.
"(B) VERY LOW-INCOME HOUSEHOLD.—The term 'very lowincome household' means any household that has an
income of 50 percent or less of the area median.
"(C)

Low-

OR MODERATE-INCOME NEIGHBORHOOD.—The

term 'low- or moderate-income neighborhood' means any
neighborhood in which 51 percent or more of the households are low- or moderate-income households.
"(D) AFFORDABLE FOR VERY-LOW INCOME HOUSEHOLDS.—

'-'•

12 u s e 1437
note.

For purposes of paragraph (2)(B) the term 'affordable for
very-low income households' means that rents charged to
tenants for units made available for occupancy by lowincome families shall not exceed 30 percent of the adjusted
income of a feimily whose income equals 50 percent of the
income for the area (as determined by the Secretary of
Housing and Urban Development) with adjustment for
family size.".

SEC. 722. TRANSFERRED EMPLOYEES OF FEDERAL HOME LOAN BANKS
AND JOINT OFFICES.

(a) I N GENERAL.—Each employee of the Federal Home Loan Banks
or joint offices of such Banks performing a function identified for
transfer under section 403 of this Act, including employees who
otherwise would be ineligible for employment by the United States
because of their citizenship, shall be transferred for emplo3mient not
later than 60 days after the date of the enactment of this Act.
(b) NOTICE TO EMPLOYEES.—Transferring employees shall receive
notice of their position assignments not later than 120 days after the
effective date of their trgmsfer.

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

103 STAT. 427

(c) GUARANTEED POSITION.—Each transferred employee shall be
guaranteed a position with the same status and tenure as that held
by such employee on the day immediately preceding the transfer.
Each such employee holding a permanent position shall not be
involuntarily separated for one year after the date of transfer,
except for cause.
(d) PAY AND BENEFITS.—Each employee transferred under this
section shall be entitled to receive, during the one-year period
immediately following the transfer, pay and benefits comparable to
those received by such employee immediately preceding the transfer. Where necessary or appropriate to further the safety and
soundness of the thrift industry, the employing agency may continue the pre-transfer compensation of any transferring employee
for up to 2 years beyond the expiration of the period provided for
under the preceding sentence. Such pay and benefits shall be subject
to the comparability provisions of this Act. Any transferred employee who suffers a reduction of pay or benefits as a result of such
comparability provisions shall be compensated for such reduction
during the 1 year period following the transfer by assessments from
the Federal Home Loan Bank or joint office of such Banks, from
which the employee transferred. In any event, this subsection shall
only apply to a transferred employee while such employee remains
with the agency to which the employee is transferred.

^

(e) HEALTH INSURANCE.—If the health insurance program of a

transferred employee is not continued by the agency to which the
employee is transferred, such employee may elect to participate in
the agency's health insurance program notwithstanding health
conditions pre-existing at the time of election or enrollment into an
alternate health insurance program of the agency to which he or she
is transferred and without regard to any other regularly scheduled
open season. Such election shall be made within 30 days of the
transfer.
(f) EQUITABLE TREATMENT.—The Director of the Office of Thrift
Supervision or the Chairperson of the Federal Housing Finance
Board shall take such action as is necessary on a case-by-case basis
so that employees transferring under this section receive equitable
treatment regarding credit for prior service with a Federal entity or
instrumentality, or with a Federal Home Loan Bank or joint office
of such Banks, with respect to the transferring employees' retirement accounts and the transferring employees' accrued leave or
vacation time, in recognition of the transferring employees' supervisory service.
(g) SPECIAL RULE FOR CERTAIN ANNUITANTS.—An individual who
was a reemployed annuitant on July 26, 1989, and who is transferred under this section, shall not be subject to the deduction from
pay required by section 8344 or 8468 of title 5, United States Code,
during the 1-year period beginning on the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989.
SEC. 723. TRANSITIONAL PROVISIONS.
(a) FEDERAL HOME LOAN BANKS' SHARE OF ADMINISTRATIVE EX-

PENSES.—The Federal Home Loan Banks shall pay to the Director of
the Office of Thrift Supervision the amount obtained by multiplying
the administrative expenses of the Office of Thrift Supervision
incurred in connection with functions of the Banks that are trans-

12 USC 1437

103 STAT. 428

PUBLIC LAW 101-73—AUG. 9, 1989

ferred to the Office (less any fees or assessments collected by the
Office) by a fraction—
(1) the numerator of which is the amount of such expenses of
the Federal Home Loan Bank Board and the Federal Savings
and Loan Insurance Corporation paid by the Banks during the
1-year period ending on the date of enactment of this Act; and
(2) the denominator of which is the total expenses of such
Board and Corporation during such period.
No payment under this subsection is required after December 31,
1989.
(b) COMPENSATION OF SUPERVISORY AND EXAMINATIONS EMPLOY-

EES.—The Federal Home Loan Banks shall continue to pay the
compensation of employees of the Federal Home Loan Banks or the
joint offices of such banks who, on the day before the date of the
enactment of this Act, are performing supervisory and examination
functions until such supervisory and examination functions are
transferred under this Act. Thereafter, the obligation of the Federal
Home Loan Banks hereunder to pay such applicable compensation
shall continue until the later of—
(1) the date which is 120 days after the date of transfer of such
supervisory and examination functions to the Office of Thrift
Supervision, or
(2) March 31,1990.
Payment of such compensation by the Federal Home Loan Banks
shall be in lieu of, and not in addition to, the payment of compensation by the Office of Thrift Supervision.
(c) FACIUTIES AND SUPPORT SERVICES.—Until December 31, 1990,
the Federal Home Loan Banks, as necessary, shall (with respect to
supervisory and examination functions performed by employees
transferred from the Federal Home Loan Banks or joint offices of
such Banks to the Office of Thrift Supervision), provide the Office of
Thrift Supervision facilities and support services comparable to
those presently provided for the employees of the Federal Home
Loan Banks or joint offices of such Banks performing such supervisory and examination functions, including office space, furniture
and equipment, computer, personnel, and other support services.
With respect to supervisory and examination functions presently
performed by employees of individual Federal Home Loan Banks,
each such Bank will only be required to provide such facilities and
support services to the extent that the functions continue to be
performed in that Bank's offices.
(d) PRINCIPAL SUPERVISORY AGENT.—Beginning on the date of
enactment of this Act until the Director of the Office of Thrift
Supervision shall otherwise provide, the Principal Supervisory
Agent for each Federal Home Loan Bank district shall be the senior
supervisory official (other than the President of the Federal Home
Loan Bank) employed by the Federal Home Loan Bank in such
district on the day before the date of the enactment of this Act, and
such employees performing supervisory and examination functions
shall continue to be responsible for the supervision and examination
of savings associations within such district.
SEC. 724. FEDERAL HOME LOAN BANK RESERVES.
(a) I N GENERAL.—Section 16(a) of the Federal Home Loan Bank
Act (12 U.S.C. 1436(a)) is amended—
(1) by striking the first three sentences and inserting in lieu
thereof: "Each Federal Home Loan Bank may carry to a reserve

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 429

account from time-to-time such portion of its net earnings as
may be determined by its board of directors."; and
(2) by striking the fifth sentence and inserting the following:
"No dividends shall be paid except out of net earnings remaining after reductions for all reserves, chargeoffs, purchases of
capital certificates of the Financing Corporation, and payments
relating to the Funding Corporation required under this Act
have been provided for, other than chargeoffs or expenses incurred by a Bank in connection with the purchase of capital
stock of the Financing Corporation under section 21 or payments relating to the Funding Corporation Principal Fund
under section 21B(e), and then only with the approval of the
Federal Housing Finance Board. Beginning on January 1, 1992, Effective date,
the preceding sentence shall be applied by substituting 'previously retained earnings or current net earnings' for 'net
earnings'.",
(b) EFFECTIVE DATE.—The amendment made by subsection (aXD 12 use 1436
shall take effect on January 1,1992.
note.
SEC. 725. SPECIAL ACCOUNT.

At the time of dissolution of the Federal Home Loan Bank Board,
all such moneys and funds as shall remsiin in the special deposit
account of the Federal Home Loan Bank Board, or other such
accounts, shall become the property of the Federsil Housing Finance
Board.

Subtitle B—Federal Home Loan Mortgage
Corporation
SEC. 731. FEDERAL HOME LOAN MORTGAGE CORPORATION.
(a) STATEMENT OF PURPOSE.—

(1) I N GENERAL.—Section 301 of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 note) is amended—
(A) by inserting "(a)" after the section designation; and
(B) by adding at the end the following new subsection:
"(b) It is the purpose of the Federeil Home Loan Mortgage Corporation—
"(1) to provide stability in the secondary market for home
mortgages;
"(2) to respond appropriately to the private capital market;
and
"(3) to provide ongoing assistance to the secondary market for
home mortgages (including mortgages securing housing for lowand moderate-income families involving a reasonable economic
return to the CJorporation) by increasing the liquidity of mortgage investments and improving the distribution of investment
capital available for home mortgage financing.".
(2) CONFORMING AMENDMENT.—The section heading for section 301 of the Federal Home Loan Mortgage Corporation Act
(12 U.S.C. 1451 note) is amended to read as follows:
"SHORT TITLE A N D STATEMENT OF PURPOSE".
(b) BOARD OF DIRECTORS.—

12 USC 1437

103 STAT. 430

PUBLIC LAW 101-73—AUG. 9, 1989

(1) N E W BOARD.—Section 303(a) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1452(a)) is amended to read
as follows:
"(aXD There is hereby created the Federal Home Loan Mortgage
Corporation, which shall be a body corporate under the direction of
a Board of Directors, Within the limitations of law and regulation,
the Board of Directors shall determine the general policies that
District of
govern the operations of the Corporation. The principal office of the
Columbia.
Corporation shall be in the District of Columbia or at any other
place determined by the Corporation.
"(2)(A) The Board of Directors of the Corporation shall consist of
President of U.S.
18 persons, 5 of whom shall be appointed annually by the President
of the United States and the remainder of whom shall be elected
annually by the voting common stockholders. The Board of Directors shall at all times have as members appointed by the President
of the United States at least 1 person from the homebuilding
industry, at least 1 person from the mortgage lending industry, and
at least 1 person from the real estate industry.
"(B) Each member of the Board of Directors shall be such or
elected for a term ending on the date of the next annual meeting of
the voting common stockholders.
"(C) Any appointive seat on the Board of Directors that becomes
vacant shall be filled by appointment by the President of the United
States, but only for the unexpired portion of the term. Any elective
seat on the Board of Directors that becomes vacant after the annual
election of the directors shall be filled by the Board of Directors, but
only for the unexpired portion of the term.
"(D) Any member of the Board of Directors who is a full-time
officer or employee of the Federal Government shall not, as such
member, receive compensation for services as such a member.".
12 u s e 1452
note.

(2) TRANSITIONAL PROVISIONS.—
(A) INTERIM BOARD.—

(i) ESTABUSHMENT.—There shall be an interim Board
of Directors of the Federal Home Loan Mortgage C!or'
poration, which shall serve from the date of the enactment of this Act until the date of the 1st meeting of the
' *
•
voting common shareholders of the Corporation at
"' '
which the first election of the directors elected by the
shareholders occurs.
(ii) MEMBERS.—The interim Board of Directors of the
Federal Home Loan Mortgage Corporation shall consist
of—
' <
•
(I) the President of the (Dorporation; and
(II) the persons who were (on the day before the
date of the enactment of this Act) the Chairman of
^
the Federal Home Loan Bank Board and the Secretary of Housing and Urban Development (or
their designees),
(iii) QUORUM.—A quorum of the interim Board of
Directors of the Federal Home Loan Mortgage Corporation shall consist of a majority of the directors duly
serving from time to time.
(B) ELECTION OF PERMANENT DIRECTORS.—The first meeting of the voting common shareholders of the Federal Home
Loan Mortgage Corporation for election of directors shall
occur, under procedures established by the Corporation,
within 6 months after the date of the enactment of this Act.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 431

(c) REGULATORY POWER.—Section 308 of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1452) is amended—
(1) by redesignating subsections Ot>) through (f) as subsections
(c) through (g), respectively; and
(2) by inserting after subsection (a) the following new subsection:
"(b)(1) The Secretary of Housing and Urban Development shall
have general regulatory power over the Corporation and shall make
such rules and regulations as shall be necessary and proper to
ensure that the purposes of this title are accomplished.
"(2) The Secretary of Housing and Urban Development may require that a reasonable portion of the mortgage purchases of the
Corporation be related to the national goal of providing adequate
housing for low- and moderate-income families, but with reasonable
economic return to the Corporation.
"(3) The aggregate amount of cash dividends paid by the Corporation in any fiscal year on account of any share of its common stock
shall not exceed any rate that may be determined from time to time
by the Secretary of Housing and Urban Development to be a fair
rate of return after consideration of the current earnings and
capital condition of the Corporation.
"(4) The Secretary of Housing and Urban Development may examine and audit the books and financial transactions of the Corporation and may require the Corporation to issue any reports on its
activities that the Secretary determines to be advisable. The Secretary shall, not later than June 30 of each year, submit to the
Congress a report describing the activities of the Corporation under
this Act.
"(5) The aggregate amount of notes, debentures, or substantially
identical types of unsecured obligations outstanding at any time
shall not exceed the amount which is 15 times the sum of the
Corporation's capital, capital surplus, general surplus, reserves, and
undistributed earnings unless a greater ratio shall be fixed at any
time or from time to time by the Secretary of Housing and Urban
Development. The outstanding total principal amount of any obligations of the Corporation which are entirely subordinated to the
general debt obligations of the Corporation shall be deemed to be
capital of the Corporation for the purpose of determining the aggregate amount of notes, debentures, or substantially identical types of
unsecured obligations outstanding at any time.
"(6) All issuances of stock, and debt obligations convertible into
stock, by the Corporation shall be made only with the approval of
the Secretary of Housing and Urban Development.
"(7)(A) The exercise of the authority of the Corporation pursuant
to commitments or otherwise to purchase, service, sell, lend on the
security of, or otherwise deal in conventional residential mortgages
under section 305(a) shall be subject to the approval of the Secretary
of Housing and Urban Development.
"(B) Any conventional mortgage programs or activities with respect to purchasing, servicing, selling, lending on the security of, or
otherwise dealing in mortgages in which the Corporation has engaged or is engaging as of the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 shall be
deemed to have been approved by the Secretary of Housing and
Urban Development as required by this paragraph.
"(8) If the Corporation submits to the Secretary of Housing and
Urban Development a request for approval or other action under

Disadvantaged
persons.

Reports,

Reports.

103 STAT. 432

PUBLIC LAW 101-73—AUG. 9, 1989

this title, the Secretary shall, not later than the expiration of the 45day period following the submission of the request, approve the
request or transmit to the Congress a report explaining why the
request has not been approved. The period may be extended for an
additional 15-day period if the Secretary requests additional
information from the Corporation, but the 45-day period may not be
extended for any other reason or for any period in addition to or
other than the 15-day period. If the Secretary fails to transmit the
report to the Congress within the 45-day period or 60-day period, as
the case may be, the Corporation may proceed as if the request had
been approved.",
(d) COMMON STOCK.—

(1) I N GENERAL.—Section 304(a) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1453(a)) is amended to read
as follows:
"(a)(1) The common stock of the Corporation shall consist of—
"(A) nonvoting common stock, which shall be issued only to
Federal home loan banks; and
"(B) voting common stock, which shall be issued to such
holders in the manner and amount, and subject to any limitations on concentration of ownership, as may be established by
the (Corporation.
"(2) The nonvoting common stock and the voting common stock
^
shall have such par value and other characteristics as the Corpora*'' tion provides, l l i e voting common stock shall be vested with all
voting rights, each share being entitled to 1 vote. The free transferability of the voting common stock at all times to any person, firm,
corporation or other entity shall not be restricted except that, as to
the (Corporation, it shall be transferable only on the books of the
Corporation. Nonvoting common stock of the Corporation shall be
evidenced in the manner and shall be transferable only to the
extent, to the trcmsferees, and in the manner, provided by the
Corporation.".
12 use 1453
(2) CONVERSION OF STOCK.—On the date of the enactment of
^°^this Act, each share of outstanding senior participating preferred stock of the Federal Home Loan Mortgage Corporation,
with a par value of $2,50 per share, shall be changed into and
1
shall become 1 share of voting common stock of the Corporation.
Such voting common stock shall, with respect to the nonvoting
common stock of the Corporation, retain all of the rights,
I
' priorities and privileges of the senior participating preferred
'' stock. The transformation of the senior participating preferred
stock into voting common stock under this paragraph shall be
deemed to satisfy the obligation of the Corporation to redeem
senior participating preferred stock for non-callable common
stock.
(3) CONFORMING AMENDMENTS.—
(A) SUBSCRIPTIONS OF FEDERAL HOME LOAN BANKS.—Sec-

tion 304(b) of the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1453(b)) is amended by inserting "nonvoting"
before "common".
(B) ALLOCATION OF SUBSCRIPTIONS.—Section 304(c) of the

X

Federal Home Loan Mortgage Corporation Act (12 U.S.C.
1453(c)) is amended by striking "such" and by inserting
"nonvoting common" before "stock".
(C) RETIREMENT OF STOCK.—Section 304(d) of the Federal

Home Loan Mortgage Corporation Act (12 U.S.C. 1453(d)) is

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 433

amended by inserting "nonvoting common" before "stock"
each place it appears.
(e) MORTGAGE OPERATIONS.—

(1) PROHIBITION ON FEES.—Section 305(a)(1) of the Federal
Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(1)) is
amended by adding at the end the following: "Nothing in this
section authorizes the Corporation to impose any charge or fee
upon any mortgagee approved by the Secretary of Housing and
Urban Development for participation in any mortgage insurance program under the National Housing Act solely because of
such status.".
(2) LENDING ACTIVITIES.—Section 805(a) of the Federal Home
Loan Mortgage Corporation Act (12 U.S.C. 1454(a)) is amended
by adding at the end the following new paragraph:
"(5) The Corporation is authorized to lend on the security of, and
to make commitments to lend on the security of, any mortgage that
the Corporation is authorized to purchase under this section. The
volume of the Corporation's lending activities and the establishment
of its loan ratios, interest rates, maturities, and charges or fees in its
secondary market operations under this paragraph, shall be determined by the Corporation from time to time; and such determinations shall be consistent with the objectives that the lending activities shall be conducted on such terms as will reasonably prevent
excessive use of the Corporation's facilities, and that the operations
of the Corporation under this paragraph shall be within its income
derived from such operations and that such operations shall be fully
self-supporting. The Corporation shall not be permitted to use its
lending authority under this paragraph (A) to advance funds to a
mortgage seller on an interim basis, using mortgage loans as collateral, pending the sale of the mortgages in the secondary market; or
(B) to originate mortgage loans. Notwithstanding any Federal, State,
or other law to the contrary, the Corporation is hereby empowered,
in connection with any loan under this paragraph, whether before
or after any default, to provide by contract with the borrower for the
settlement or extinguishment, upon default, of any redemption,
equitable, legal, or other right, title, or interest of the borrower in
any mortgage or mortgages that constitute the security for the loan;
and with respect to any such loan, in the event of default and
pursuant otherwise to the terms of the contract, the mortgages that
constitute such security shall become the absolute property of the
Corporation.".
(f) REFERENCES TO F S L I C AND F H L B B . —
(1) SECTION 302.—Section 302a))(2) of the Federal National

J

Mortgage Association Charter Act (12 U.S.C. 1717(b)(2)) is
amended—
(A) in the 4th sentence, by striking out "Federal Savings
and Loan Insurance Corporation" and inserting in lieu
thereof "Resolution Trust Corporation"; and
(B) in the 8th sentence, by striking out "Federal Home
Loan Bank Board" and inserting in lieu thereof "Federal
Housing Finance Board".
(2) SECTION 305.—Section 305 of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1454) is amended—
(A) by striking out "Federal Savings and Loan Insurance
Corporation" each place it appears and inserting in lieu
thereof "Resolution Trust Corporation"; and

103 STAT. 434

,

PUBLIC LAW 101-73—AUG. 9, 1989

(B) in subsection (a)(2), by striking out "Federal Home
Loan Bank Board" and inserting in lieu thereof "Federal
Housing Finance Board".
(g) STANDBY CREDIT.—Section 306(c) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. i455(c)) is amended to read as
follows:
"(c)(1) The Secretary of the Treasury may purchase any obligations issued under subsection (a). For such purpose, the Secretary
may use as a public debt transaction the proceeds of the sale of any
securities issued under chapter 31 of title 31, United States Code,
and the purposes for which securities may be issued under such
chapter are extended to include such purpose.
"(2) The Secretary of Treasury shall not at any time purchase any
obligations under this subsection if the purchase would increase the
aggregate principal amount of the outstanding holdings of obligations under this subsection by the Secretary to an amount greater
than $2,250,000,000.
"(3) Each purchase of obligations by the Secretary of the Treasury
under this subsection shall be upon terms and conditions established
to 5deld a rate of return determined by the Secretary to be appropriate, taking into consideration the current average rate on
outstanding marketable obligations of the United States as of the
last day of the month preceding the making of the purchase.
"(4) The Secretary of the Treasury may at any time sell, upon
terms and conditions and at prices determined by the Secretary, any
of the obligations acquired by the Secretary under this subsection.
"(5) All redemptions, purchases and sales by the Secretary of the
Treasury of obligations under this subsection shall be treated as
public debt transactions of the United States.".
(h) PREFERRED STOCK.—Section 306(f) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1455(f)) is amended to read as
follows:
"(f) The C!orporation may have preferred stock on such terms and
conditions as the Board of Directors shall prescribe. Any preferred
stock shall not be entitled to vote with respect to the election of any
member of the Board of Directors.".
(i) TERMS OF OBUGATIONS.—Section 306 of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1455) is amended by adding at
the end the following new subsections:
"(j)(l) Any notes, debentures, or substantially identical types of
unsecured obligations of the Corporation evidencing money borrowed, whether general or subordinated, shall be issued upon the
approval of the Secretary of the Treasury and shall have such
maturities and bear such rate or rates of interest as may be determined by the Corporation with the approval of the Secretary of the
Treasury.
"(2) Any notes, debentures, of substantially identical types of
unsecured obligations of the Corporation having maturities of 1 year
or less that the Corporation has issued or is issuing as of the date of
the enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 shall be deemed to have been approved by
the Secretary of the Treasury as required by this subsection. Such
deemed approval shall expire 365 days after such date of enactment.
"(3) Any notes, debentures, or substantially identical types of
unsecured obligations of the Corporation having maturities of more
than 1 year that the Corporation has issued or is issuing as of the
date of the enactment of the Financial Institutions Reform, Recov-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 435

ery, and Enforcement Act of 1989 shall be deemed to have been
approved by the Secretary of the Treasury as required by this
subsection. Such deemed approval shall expire 60 days after such
date of enactment.
"(k)(l) Any securities in the form of debt obligations or trust
certificates of beneficial interest, or both, and based upon mortgages
held and set aside by the Corporation, shall be issued upon the
approval of the Secretary of the Treasury and shall have such
maturities and shall bear such rate or rates of interest as may be
determined by the Corporation with the approval of the Secretary of
the Treasury.
"(2) Any securities in the form of debt obligations or trust certificates of beneficial interest, or both, and based upon mortgages held
and set aside by the Corporation, that the Corporation has issued or
is issuing as of the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 shall be
deemed to have been approved by the Secretary of the Treasury as
required by this subsection.".
(j) STATE LIMITATIONS.—

(1) The second sentence of section 807(a) of the Federal Home
Loan Mortgage Corporation Act (12 U.S.C. 1456(a)) is amended
to read as follows: "The Corporation is authorized to conduct its
business without regard to any qualification or similar statute
in any State.".
(2) The amendment made by this subsection shall not apply to 12 USC 1456
any assertion of priority by the Federal Home Loan Mortgage note.
Corporation with respect to any cause of action or claim filed
before the date of the enactment of this Act.
(k) PENAL PROVISIONS.—Section 308 of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1457) is amended—
(1) in subsection (a), by striking the subsection designation;
and
(2) by striking subsections (b), (c), (d), (e), and (f).
(1) CONSTRUCTION.—Section 310 of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1459) is amended—
(1) in the section heading, by striking "CONSTRUCTION AND";
and
(2) by striking the first sentence,
(m) CONFORMING AMENDMENTS TO FEDERAL NATIONAL MORTGAGE
ASSOCIATION CHARTER ACT.—
(1) STATEMENT OF PURPOSE.—Section 301 of the Federal Na-

tional Mortgage Association Charter Act (12 U.S.C. 1716) is
amended—
(A) by striking paragraphs (a) and Ot)) and inserting the
following new paragraphs:
"(1) provide stability in the secondary market for home mortgages;
"(2) respond appropriately to the private capital market;
"(3) provide ongoing assistance to the secondary market for
home mortgages (including mortgages securing housing for lowand moderate-income families involving a reasonable economic
return) by increasing the liquidity of mortgage investments and
improving the distribution of investment capital available for
home mortgage financing; and"; and
(B) by redesignating paragraph (c) as paragraph (4).

103 STAT. 436
^

Reports.

PUBLIC L A W 101-73—AUG. 9, 1989
(2) LENDING ACTIVITIES.—Section 304(aX2) of the Federal Na-

tional Mortgage Association Charter Act (12 U.S.C. 1719(aX2)) is
amended—
(A) by inserting after the 3rd sentence the following new
sentence: "The corporation shall not be permitted to use its
lending authority (A) to advance funds to a mortgage seller
on an interim basis, using mortgage loans as collateral,
pending the sale of the mortgages in the secondary market;
or (B) to originate mortgage loans."; and
(B) by striking the 1st and 2d sentences.
(3) AUDITS BY GAO.—Section 309 of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1723a) is amended
by adding at the end the following new subsection:
"0) The mortgage transactions of the corporation may be subject
to audit by the Comptroller General of the United States in accordance with the principles and procedures applicable to commercial
corporation transactions under such rules and regulations as may be
prescribed by the Comptroller General. The representatives of the
General Accounting Office shall have access to such books, accounts,
financial records, reports, files, and such other papers, things, or
property belonging to or in use by the corporation and necessary to
facilitate the audit, and they shall be afforded full facilities for
verifying transactions with the balances or securities held by depositories, fiscal agents, and custodians. A report on each such audit
shall be made by the Comptroller General to the Congress. The
corporation shall reimburse the General Accounting Office for the
full cost of any such audit as billed therefor by the Comptroller
General.".

Subtitle C—Technical and Conforming
Amendments
SEC. 741. REPEAL OF LIMITATION OF OBLIGATION FOR ADMINISTRATIVE
EXPENSES.

Section 7(b) of the First Deficiency Appropriation Act of 1936 (15
U.S.C. 712a(b)) is amended by striking the following:
" 1 . Federal Home Loan Bank Board;";
"2. Home Owners' Loan Corporation;"; and
"11. Federal Savings and Loan Insurance Corporation;".
SEC. 742. AMENDMENT OF TITLE 5, UNITED STATES CODE.
(a) EXECUTIVE SCHEDULE.—

(1) Section 5314 of title 5, United States Code (5 U.S.C. 5315) is
amended—
(A) by striking
"Chairman of the Federal Home Loan Bank Board."; and
(B) by adding at the end thereof the following:
"Director of the Office of Thrift Supervision.
"Chairperson of the Federal Housing Finance Board.".
(2) Section 5315 of title 5, United States Code (5 U.S.C. 5315) is
amended—
(A) by striking out
"Members, Federal Home Loan Bank Board.", and
(B) by inserting
"Directors, Federal Housing Finance Board.".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 437

(b) LIMITATION ON PAY FIXED BY ADMINISTRATIVE ACTION.—Section

5373(2) of title 5, United States Code, is amended by inserting after
"481," the following: "1437,1439,".
(c) DEFINITION OF AoENCY.^Section 3132(aXl) of title 5, United
States Code (5 U.S.C. 3132(aXl)), is amended—
(1) in subparagraph (B), by striking "or" after the semicolon;
(2) in subparagraph (C), by inserting "or" after the semicolon;
and
(3) by adding at the end the following:
"(D) the Office of the Comptroller of the Currency, the
Office of Thrift Supervision, the Federal Housing Finance
Board, the Resolution Trust Corporation, and the National
Credit Union Administration;".
SEC. 743. AMENDMENT OF BALANCED BUDGET AND EMERGENCY DEFICIT
CONTROL ACT PROVISIONS.

(a) Section 255(g)(1)(A) of the Balanced Budget and Emergency
Deficit Control Act of 1985 (2 U.S.C. 905(gXl)(A)) is amended—
(1) by inserting after the item relating to the Comptroller of
the Currency the following new item:
"Director of the Office of Thrift Supervision;";
(2) by striking out "Federal Home Loan Bank Board;" and
inserting in lieu thereof the following new items:
"Federal Deposit Insurance Corporation, Bank Insurance
N^
Fund;
"Federal Deposit Insurance Corporation, FSLIC Resolution Fund;
"Federal Deposit Insurance Corporation, Savings Association Insurance Fund;";
*
(3) by striking out "Federal Home Loan Bank Board, Federal
Savings and Loan Insurance Corporation" and inserting in lieu
thereof "Federal Housing Finance Board"; and
(4) by inserting after the item relating to the Postal service
fund the following new items:
"Resolution Funding Corporation;
"Resolution Trust Corporation;".
(b) Section 256(b)(4) of the Balanced Budget and Emergency Deficit
Control Act of 1985 (2 U.S.C. 256(bX4)) is amended—
2 use 906.
(1) by striking out subparagraph (C) and inserting in lieu
thereof the following new subparagraph
"(C) Office of Thrift Supervision.";
(2) by striking subparagraph (D) and inserting in lieu thereof
-^
the following new subparagraph:
"(D) Office of Thrift Supervision."; and
.
(3) by adding at the end thereof the following new subparagraphs:
"(H) Resolution Funding Corporation.
"(I) Resolution Trust Corporation.".
(c) Section 255(gX2) of the Balanced Budget and Emergency Deficit
Control Act of 1985 is amended by striking "Federal Savings and
Loan Insurance Corporation fund (82-4037-0-3-371);".
SEC. 744. CONFORMING AMENDMENTS TO FINANCIAL INSTITUTION RELATED ACTS.
(a) FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
ACT.—

103 STAT. 438

I

^

PUBLIC LAW 101-73—AUG. 9, 1989

(1) SECTION IOO3.—Section 1003 of the Federal Financial
Institutions Examination Council Act of 1978 (12 U.S.C. 3302) is
amended—
*
(A) in paragraph (1), by striking out "Federal Home Loan
Bank Board" and inserting in lieu thereof "Office of Thrift
,- Supervision"; and
, • _.
(B) in paragraph (3), by striking out "savings and loan
association" and inserting in lieu thereof "savings association".
(2) SECTION 1004.—Section 1004(a)(4) of the Federal Financial
Institutions Examination Council Act of 1978 (12 U.S.C.
3303(a)(4)) is amended by striking out "Chairman of the Federal
Home Loan Bank Board, and" and inserting in lieu thereof
"Director, Office of Thrift Supervision".
(3) SECTION looe.—Section 1006(d) of the Federal Financial
Institutions Examination Council Act of 1978 (12 U.S.C. 3305(d))
is amended in the 2d sentence by inserting "and employees of
^ the Federal Housing Finance Board" after "supervisory agencies".
(b) RIGHT TO FINANCIAL PRIVACY ACT.—Section 1101 of the Right
to Financial Privacy Act of 1978 (12 U.S.C. 3401) is amended—
(1) in paragraph (1), by striking out "savings and loan" and
inserting in lieu thereof "savings association";
(2) in paragraph (6), by striking out subparagraph (B) and
redesignating the remaining subparagraphs as subparagraphs
(B) through (H), respectively; and
(3) in paragraph (6)(B) (as so redesignated), by striking out
"the Federal Home Loan Bank Board" and inserting in lieu
thereof "Director, Office of Thrift Supervision".
(c) ALTERNATIVE MORTGAGE TRANSACTIONS PARITY ACT.—The

Alternative Mortgage Transactions Parity Act of 1982 (12 U.S.C.
3801-06) is amended by striking out "Federal Home Loan Bank
Board" each place such term appears and inserting in lieu thereof
"Director of the Office of Thrift Supervision".
(d) EXPEDITED FUNDS AVAILABILITY ACT.—Section 610(aX2) of the
Expedited Funds Availability Act (12 U.S.C. 4009(aX2)) is amended
to read as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision in the case of
savings associations the deposits of which are insured by the
Federal Deposit Insurance Corporation; and".
(e) PAPERWORK REDUCTION ACT.—Section 2(aX10) of the Paperwork Reduction Act of 1980 (44 U.S.C. 3502(aX10)) is amended by
striking out "Federal Home Loan Bank Board" and inserting in lieu
thereof "the Federal Housing Finance Board".
(f) FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT.—Sec-

^

tion 602(11) of the Federal Property and Administrative Services Act
of 1949 (40 U.S.C. 474(11)) is amended—
(1) by inserting "or the Resolution Trust Corporation" after
"Department of Housing and Urban Development";
(2) by striking out "savings and loan accounts" and inserting
in lieu thereof savings association accounts"; and
(3) by inserting "under the Federal Deposit Insurance Act or
any other law." after "National Housing Act".
(g) PUBLIC BUILDINGS ACT.—Section 13(4) of the Public Buildings
Act of 1959 (40 U.S.C. 612(d)) is amended by striking out subparagraph (D).

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 439

(h) BANK PROTECTION ACT.—Section 2 of the Bank Protection Act
of 1968 (12 U.S.C. 1881) is amended—
(1) in paragraph (4), by—
(A) striking out "Federal Home Loan Bank Board" and
inserting in lieu thereof "Director of the Office of Thrift
Supervision";
(B) striking out "and login"; and
(C) striking "associations" and all that follows through
"Corporation"; and
(2) in paragraph (8), by inserting "and State savings associations" before ", and".
(i) T H E FEDERAL RESERVE ACT.—
(1) SECTION ii.—Section 11(a)(2) of the Federal Reserve Act (12

U.S.C. 248(a)(2)) is amended by striking "(iii) Federal Home
Loan Bank Board in the case of any institution insured by the
Federal Savings and Loan Insurance Corporation" and inserting "(iii) the Director of the Office of Thrift Supervision in the
case of any savings association which is an insured depository
institution (as defined in section 8 of the Federal Deposit Insurance Act)".
(2) SECTION 19 (b) .—Section 19(b)(l)(AXvi) of the Federal Reserve Act (12 U:S.C. 461(b)(l)(A)(vi)) is amended to read as
follows:
"(vi) any savings association (as defined in section 3
of the Federal Deposit Insurance Act) which is an
insured depository institution (as defined in such Act)
or is eligible to apply to become an insured depository
institution under the Federal Deposit Insurance Act;
and".
(3) SECTION 19.—Section 19 of the Federal Reserve Act (12
U.S.C. 461) is amended by striking out "the Federal Home Loan
Bank Board," and inserting in lieu thereof "the Director of the
Office of Thrift Supervision," each place it appears.
(j) PUBLIC LAW 98-495.—Section 3 of title I of Public Law 93-495
(12 U.S.C. 250) is amended by striking "Federal Home Loan Bank
Board" and inserting "Director of the Office of Thrift Supervision".
(k) TRUTH IN LENDING ACT.—Section 108(aX2) of the Truth in
Lending Act (15 U.S.C. 1607(a)(2)) is amended to read as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation.".
(1) FAIR CREDIT REPORTING ACT.—Section 6210t)X2) of the Fair
Credit Reporting Act (15 U.S.C. 1681s(bX2)) is amended to read as
follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation;".
(m) EQUAL CREDIT OPPORTUNITY ACT.—Section 704(aX2) of

the

Equal Credit Opportunity Act (15 U.S.C. 1691c(aX2)) is amended to
read as follows:
"(2) Section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation.".

r

103 STAT. 440

PUBLIC LAW 101-73—AUG. 9, 1989

(n) FAIR DEBT COLLECTION PRACTICES ACT.—Section 814(bX2) of the
Fair Debt Collection Practices Act (15 U.S.C. 1692/(bX2)) is amended
to read as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation;".
(o) ELECTRONIC FUND TRANSFER ACT.—Section 917(aX2) of the

Electronic Fund Transfer Act (15 U.S.C. 1693o(aX2)) is amended to
read as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation;",
(p) HOME MORTGAGE DISCLOSURE ACT OF 1975.—
(1) SECTION 305.—Section 305(bX2) of the Home Mortgage
Disclosure Act of 1975 (12 U.S.C. 2804(bX2)) is amended to read
as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
^^ savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation; and".
(2) SECTION 306.—Section 306(bX2) of the Home Mortgage
;
Disclosure Act of 1975 (12 U.S.C. 2805(bX2)) is amended to read
as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation.".
:
(3) SECTION 307.—Section 307 of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2806) is amended by striking
"Federal Home Loan Bank Board" each place it appears and
inserting "Director of the Office of Thrift Supervision",
(q) COMMUNITY REINVESTMENT ACT OF 1977.—Section 803(1XD) of
the Community Reinvestment Act of 1977 (12 U.S.C. 2902(1XD)) is
amended to read as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association (the deposits of which are insured by the
Federal Deposit Insurance Corporation) and a savings and loan
holding company;",
(r) DEPOSITORY INSTITUTIONS MANAGEMENT INTERLOCKS ACT.—

(1) Section 207(4) of the Depository Institutions Management
Interlocks Act (12 U.S.C. 3206(4)) is amended to read as follows:
"(4) the Director of the Office of Thrift Supervision with
respect to a savings association (the deposits of which are
insured by the Federal Deposit Insurance Corporation) and
savings and loan holding companies,".
(s) DEPOSITORY INSTITUTIONS DEREGULATION ACT OF 1980.—Section

^

208(aX2) of the Depository Institutions Deregulation Act of 1980 (12
U.S.C. 3507(aX2)) is amended to read as follows:
"(2) section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision, in the case of a
savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation.".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 441

(t) FEDERAL TRADE COMMISSION ACT.—Section 18(fX3) of the Federal Trade Commission Act (15 U.S.C. 57a(fX3)) is amended to read
as follows:
"(3) Compliance with regulations prescribed under this
subsection shall be enforced under section 8 of the Federal
Deposit Insurance Act with respect to savings gissociations as
defined in section 3 of the Federal Deposit Insurance Act.".
(u) SECURITIES EXCHANGE ACT OF 1934.—
(1) SECTION 3.—Section 3(aX34) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(aX34)) is amended—
(A) in subparagraph (G)—
(i) by striking clauses (iv) and (v) and inserting the
following:
"(iv) the Director of the Office of Thrift Supervision,
in the case of a savings association the deposits of
which are insured by the Federal Deposit Insurance
Corporation;"; and
(ii) by redesignating clause (vi) as clause (v); and
(B) in the second sentence, by striking "the Federal Home
Loan Bank Board" and inserting "the Office of Thrift
Supervision".
(2) SECTION 12.—Section 12(i) of the Securities Exchange Act
of 1934 (15 U.S.C. 78/(i)) is amended—
(A) in the first sentence—
(i) by inserting "and savings eissociations" after
"banks" the first place it appears;
(ii) by striking "or institutions the accounts of which
are insured by the Federal Savings and Loan Insurance
Corporation"; and
(iii) by striking paragraph (4) and inserting "(4) with
>
respect to savings sissociations the accounts of which
are insured by the Federal Deposit Insurance Corporation are vested in the Office of Thrift Supervision"; and
(B) in the second sentence, by striking "the Federal Home
Loan Bank Board" and inserting "the Office of Thrift
Supervision".
(3) SECTION 15.—Section 15afXl) (15 U.S.C. 78o-5(f)(l)) of such
Act is amended by striking "Federal Home Loan Bank Board"
and inserting "Director of the Office of Thrift Supervision".

TITLE VIII—BANK CONSERVATION ACT
AMENDMENTS
SEC. 801. DEFINITIONS.

Section 202 of the Bank Conservation Act (12 U.S.C. 202) is
amended—
(1) by inserting after "national banking association" the following: "or any other financial institution chartered or licensed
under Federal law and subject to the supervision of the
Comptroller of the Currency"; and
(2) by inserting before "and the term 'State' " the following:
"the term 'voluntary dissolution and liquidation' means a transaction pursuant to section 5220 of the Revised Statutes that
involves the assumption of the bank's insured deposit liabilities

103 STAT. 442

PUBLIC LAW 101-73—AUG. 9, 1989
'

and the sale of the bank, or of control of the bank, as a going
concern;".

SEC. 802. APPOINTMENT OF CONSERVATOR

Section 203 of the Bank Conservation Act (12 U.S.C. 203) is
amended to read as follows:
"SEC. 203. APPOINTMENT OF CONSERVATOR.

\

"(a) APPOINTMENT.—The Comptroller of the Currency may, without notice or prior hearing, appoint a conservator, which may be the
Federal Deposit Insurance Corporation, to take possession and control of a bank whenever the Comptroller determines that one or
more of the following circumstances exist:
"(1) any one or more of the conditions for appointment of a
receiver for the bank specified in the first section of the Act of
June 30,1876 (12 U.S.C. 191) are present;
"(2) the bank is not likely to be able to meet the demands of
its depositors or pay its obligations in the normal course of
business;
"(3) the bank is in an unsafe or unsound condition to transact
business, including having substantially insufficient capital or
otherwise;
"(4)(A) the bank has incurred or is likely to incur losses that
will deplete all or substantially all of its capital, and
"(B) there is no reasonable prospect for the bank's capital to
be replenished without Federal assistance;
"(5) there is a violation or violations of laws, rules, or regulations, or any unsafe or unsound practice or condition which is
likely to cause insolvency or substantial dissipation of assets or
earnings, or is likely to weaken the bank's condition or otherwise seriously prejudice the interests of its depositors;
"(6) there is concealment of books, papers, records, or assets of
the bank, or refusal to submit books, papers, records, or affairs
of the bank for inspection to any examiner or to any lawful
agent of the Comptroller;
"(7) there is a willful or continuing violation of an order
enforceable against the bank under section 8(i) of the Federal
Deposit Insurance Act; or
(8) the bank's board of directors consists of fewer than 5
members.
•
"Ot)) JUDICIAL REVIEW.—

^

"(1) I N GENERAL.—Not later than 20 days after the initial
appointment of a conservator pursuant to this section, the bank
may bring an action in the United States district court for the
judicial district in which the home office of such bank is located,
or in the United States District Court for the District of Columbia, for an order requiring the Comptroller to terminate the
appointment of the conservator, and the court, upon the merits,
shall dismiss such action or shall direct the Comptroller to
terminate the appointment of such conservator. The Comptroller's decision to appoint a conservator pursuant to this section
shall be set aside only if the court finds that such decision was
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.
"(2) STAY.—The conservator may request that any judicial
action or proceeding to which the conservator or the bank is or
may become a party be stayed for a period of up to 45 days after

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 443

the appointment of the conservator. Upon petition, the court
shall grant such stay £is to all parties.
"(3) ACTIONS AND ORDERS.—Except as otherwise provided in

this subsection, no court may take any action regarding the
removal of a conservator, or restrain, or £iffect the exercise of
powers or functions of a conservator. A court, upon application
by the Comptroller, shall have jurisdiction to enforce an order
of the Comptroller relating to—
"(A) the conservatorship
and the bank in
conservatorship, or
"(B) restraining or affecting the exercise of powers or
functions of a conservator.
"(c) ADDITIONAL GROUNDS FOR APPOINTMENT.—In addition to the

foregoing provisions, the Comptroller may appoint a conservator for
a bank if—
"(1) the bank, by an affirmative vote of a majority of its board
of directors or by an affirmative vote of a majority of its
shareholders, consents to such appointment, or
"(2) the Federal Deposit Insurance Corporation terminates
the bank's status as an insured bank.
The appointment of a conservator pursuant to this subsection shall
not be subject to review.
"(d) EXCLUSIVE AUTHORITY.—The Comptroller shall have exclusive
power and jurisdiction to appoint a conservator for a bank. Whenever the Comptroller appoints a conservator for any bank, the
Comptroller may appoint the Federal Deposit Insurance Corporation conservator for such bank. The Federal Deposit Insurance
Corporation, as such conservator, shall have all the powers granted
under the Federal Deposit Insurance Act, and (when not inconsistent therewith) any other rights, powers, and privileges possessed by
conservators of banks under this Act and £iny other provision of law.
The Comptroller may also appoint another person as conservator,
who shall be subject to the provisions of this Act.
"(e) REPLACEMENT OF CONSERVATOR.—The

Comptroller

may,

without notice or hearing, replace a conservator with another conservator. Such replacement shall not affect the bank's right under
subsection (b) to obtain judicial review of the Comptroller's original
decision to appoint a conservator.".
SEC. 803. EXAMINATIONS.

Section 204 of the Bank Conservation Act (12 U.S.C. 204) is
amended to read as follows:
"SEC. 204. EXAMINATIONS.

"The Comptroller of the Currency (in consultation with the Board
of Directors of the Federal Deposit Insurance Corporation when the
Corporation is appointed conservator) is authorized to examine and
supervise the bank in conservatorship as long as the bank continues
to operate as a going concern. The Comptroller may use reports and
other information provided by the Federal Deposit Insurance Corporation for this purpose.".
SEC. 804. TERMINATION OF CONSERVATORSHIP.

Section 205 of the Bank Conservation Act (12 U.S.C. 205) is
amended to read as follows:

103 STAT. 444

PUBLIC LAW 101-73—AUG. 9, 1989

"SEC. 205. TERMINATION OF CONSERVATORSHIP.

Courts, U.S.

(
-^
Courts, U.S.

^

"(a) GENERAL RULE.—At any time the Comptroller becomes satisfied that it may safely be done and that it would be in the public
interest, the Comptroller (with the agreement of the Board of
Directors of the Federal Deposit Insurance Corporation when the
Corporation has been appointed conservator) may—
"(1) terminate the conservatorship and permit the involved
bank to resume the transaction of its business subject to such
'
terms, conditions, and limitations as the Comptroller may prescribe; or
'
"(2) terminate the conservatorship upon a sale, merger,
consolidation, purchase and assumption, change in control, or
voluntary dissolution and liquidation of the involved bank.
"(b) OTHER GROUNDS FOR TERMINATION.—The Comptroller also
may terminate the conservatorship upon the appointment of a
receiver pursuant to the first section of the Act of June 30, 1876 (12
U.S.C. 191).
"(c) ENFORCEMENT UNDER FEDERAL DEPOSIT INSURANCE ACT.—
Such terms, conditions, and limitations as may be prescribed under
subsection (a)(1) shall be enforceable under the provisions of section
8(i) of the Federal Deposit Insurance Act, to the same extent as an
order issued pursuant to section 8(b) of the Federal Deposit Insurance Act which has become final. The bank may bring an action in
the United States district court for the judicial district in which the
home office of such bank is located or in the United States District
Court for the District of Columbia for an order requiring the
Comptroller to terminate the order. An action for judicial review of
the terms, conditions, and limitations may not be commenced later
than 20 days from the date of the termination of the conservatorship
or the imposition of the order, whichever is later.
"(d) ACTION UPON TERMINATION.—

"(1) I N GENERAL.—Upon termination of the conservatorship
under subsection (aX2), the Federal Deposit Insurance Corporation, as conservator, or when another person is appointed conservator, such other person, shall conclude the affairs of the
conservatorship in accordance with paragraph (2).
"(2) DEPOSIT AND DISTRIBUTION OF PROCEEDS.—(A) Within 180 days
of the sale, merger, consolidation, purchase and assumption, change
in control, or voluntary dissolution and liquidation, the conservator
shall deposit all net proceeds received from the transaction, less any
outstanding expenses of the conservatorship, with the United States
district court for the judicial district in which the home office of
such bank is located and shall cause notice to be published for three
consecutive months and notify by mail all known and remaining
creditors and shareholders. Within 60 days thereafter, any depositor, creditor, or other claimant of the bank, or any shareholder of
the bank may bring an action in interpleader in that court for
distribution of the proceeds. The district court shall distribute such
funds equitably. If no such action is instituted within one year after
the date the funds are deposited with the district court, title to such
net proceeds shall revert to the United States and the district court
shall remit the funds to the Treasury of the United States.
"(B) The conservator shall be deemed to have discharged all
responsibility of the conservatorship upon the deposit of the proceeds with the district court and giving the required notifications.".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 445

SEC. 805. CONSERVATOR; POWERS AND DUTIES.

Section 206 of the Bank Conservation Act (12 U.S.C. 206) is
amended to read as follows:
"SEC. 206. CONSERVATOR; POWERS AND DUTIES.

"(a) GENERAL POWERS.—A conservator shall have all the powers of
the shareholders, directors, and officers of the bank and may operate the bank in its own name unless the Comptroller in the order of
appointment limits the conservator's authority.
"Qi) SUBJECT TO RULES OF COMPTROLLER.—The conservator shall be
subject to such rules, regulations, and orders as the Comptroller
from time to time deems appropriate; and, except as otherwise
specifically provided in such rules, regulations, or orders or in
section 209 of this Act, shall have the same rights and privileges and
be subject to the same duties, restrictions, penalties, conditions, and
limitations as apply to directors, officers, or employees of a national
bank.
"(c) PAYMENT OF DEPOSITORS AND CREDITORS.—The Comptroller
may require the conservator to set aside and make available for
withdrawal by depositors and payment to other creditors such
amounts as in the opinion of the Comptroller may safely be used for
that purpose. All depositors and creditors who are similarly situated
shall be treated in the same manner.
"(d) COMPENSATION OF CONSERVATOR AND EMPLOYEES.—The conservator and professional employees appointed to represent or assist
the conservator shall not be paid amounts greater than are payable
to employees of the Federal Government for similar services, except
that the Comptroller of the Currency may authorize payment at
higher rates (but not in excess of rates prevailing in the private
sector), if the Comptroller determines that paying such higher rates
is necessary in order to recruit and retain competent personnel.
"(e) EXPENSES.—All expenses of any such conservatorship shall be
paid by the bank and shall be a lien upon the bank which shall be
prior to any other lien.".
SEC. 806. L I A B I L I T Y PROTECTION.

Section 209 of the Bank Conservation Act (12 U.S.C. 209) is
amended to read as follows:
"SEC. 209. LIABILITY PROTECTION.

"(a) FEDERAL AGENCY AND EMPLOYEES.—In any case in which the
conservator is a Federal agency or an employee of the Government,
the provisions of chapters 161 and 171 of title 28, United States
Code, shall apply with respect to such conservator's liability for acts
or omissions performed pursuant to and in the course of the duties
and responsibilities of the conservatorship.
"(b) OTHER CONSERVATORS.—In any case where the conservator is
not a conservator described in subsection (a), the conservator shall
not be liable for damaiges in tort or otherwise for acts or omissions
performed pursuant to and in the course of the duties and responsibilities of the conservatorship, unless such acts or omissions constitute gross negligence, including any similar conduct or any form
of intentional tortious conduct, £is determined by a court.
"(c) INDEMNIFICATION.—The Comptroller shall have authority to
indemnify the conservator on such terms as the Comptroller deems
proper.".

-^

.^

103 STAT. 446

PUBLIC L A W 101-73—AUG. 9, 1989

SEC. 807. RULES AND REGULATIONS.

Section 211 of the Bank Conservation Act (12 U.S.C. 211) is
amended to read as follows:
"SEC. 211. RULES AND REGULATIONS.

"(a) IN GENERAL.—The Comptroller of the Currency may prescribe
such rules and regulations as the Comptroller may deem necessary
to carry out the provisions of this Act.
"(b) F.D.I.C. AS CONSERVATOR.—In any case in which the Federal
Deposit Insurance Corporation is the conservator, any rules or
regulations prescribed by the Comptroller shall be consistent with
any rules and regulations prescribed by the Federal Deposit Insurance Corporation pursuant to the Federal Deposit Insurance Act.".
SEC. 808. REPEALS.

Sections 207 and 208 of the Bank Conservation Act (12 U.S.C. 207
and 208) are repealed.

TITLE IX—REGULATORY ENFORCEMENT
AUTHORITY AND CRIMINAL ENHANCEMENTS
Subtitle A—Expanded Enforcement Powers,
Increased Penalties, and Improved Accountability
SEC. 901. INSTITUTION-AFFILIATED PARTIES OF A DEPOSITORY INSTITUTION SUBJECT TO ADMINISTRATIVE ENFORCEMENT ORDERS;
SUBSTITUTION OF "DEPOSITORY INSTITUTION" FOR "BANK"
IN ENFORCEMENT PROVISIONS.
(a) INSTITUTION-AFFILIATED PARTY DEFINED.—Section 206 of

the

Federal Credit Union Act (12 U.S.C. 1786) is amended by adding at
the end thereof the following new subsection:
"(r) INSTITUTION-AFFILIATED PARTY DEFINED.—For purposes of this
Act, the term 'institution-affiliated party' means—
"(1) any committee member, director, officer, or employee of,
or agent for, an insured credit union;
"(2) any consultant, joint venture partner, and any other
person as determined by the Board (by regulation or on a caseby-case basis) who participates in the conduct of the affairs of an
insured credit union; and
"(3) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates
in^
"(A) any violation of any law or regulation;
"(B) any breach of fiduciary duty; or
"(C) any unsafe or unsound practice,
which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured credit
union.".
Ot)) AMENDMENTS RELATING TO U S E OF "INSTITUTION-AFFILIATED
PARTY".—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 447

(1) FDIA.—Section 8 of the Federal Deposit Insurance Act (12
U.S.C. 1818) is amended—
(A) in subsection (bXD—
(i) by striking out "director, officer, employee, agent,
or other person participating in the conduct of the
affairs of such a bank" and inserting in lieu thereof
"institution-affiliated party"; and
(ii) by striking out "directors, officers, employees,
agents, or other persons participating in the conduct of
the affairs of such bank" and inserting in lieu thereof
"institution-affiliated parties";
(B) in each of subsections (bXD and (c)—
(i) by striking out "director, officer, employee, agent,
or other person participating in the conduct of the
affairs of such bank" each place such term appears and
inserting in lieu thereof "institution-affiliated party";
and
(ii) by striking out "such director, officer, employee,
agent, or other person" each place such term appears
and inserting in lieu thereof "such party";
(C) in subsection (eX4), as so redesignated by section
903(aX2) of this Act—
(i) by striking out "a director, officer, or other person
from office or to prohibit his participation" and inserting in lieu thereof "an institution-affiliated party from
office or to prohibit such party from participating";
(ii) by striking out "such director or officer or other
person" and inserting in lieu thereof "such party";
(iii) by striking out "such director, officer, or other
person" and inserting in lieu thereof "such party";
(iv) by striking out "he" and inserting in lieu thereof
"such party";
(v) by striking out "any director, officer or other
person" and inserting in lieu thereof "any such party";
and
(vi) by striking out "the director, officer, or other
person concerned" and inserting in lieu thereof "such
party";
(D) in subsection (eX5), as so redesignated by section
903(aX2)ofthisAct—
(i) by inserting after "the term 'officer' " the following: "within the term 'institution-affiliated party' ";
and
(ii) by inserting after "the term 'director' " the following: "within the term 'institution-affiliated party' as
used in this subsection";
(E) in subsection (f)—
(i) by striking out "any director, officer, or other
person" and inserting in lieu thereof "any institutionaffiliated party"; and
(ii) by striking out "such director, officer, or other
person' each place such term appears and inserting in
lieu thereof "such party";
(F) in subsection (gXD—
(i) by striking out "director or officer of an insured
bank, or other person participating in the conduct of

^

103 STAT. 448

PUBLIC LAW 101-73—AUG. 9, 1989
A ,

-"
^

'

the affairs of such bank" and inserting in lieu thereof
"institution-affiliated party";
(ii) by striking out "the individual" each place such
term appears and inserting in lieu thereof "such
, .
party";
(iii) by striking out "such director, officer, or other
person" each place such term appears and inserting in
,
lieu thereof "such party";
(iv) by striking out "him" each place such term
,
appears and inserting in lieu thereof "such party";
(v) by striking out "director, officer or other person"
and inserting in lieu thereof "party"; and
(vi) by striking out "whereupon such director or officer" and inserting in lieu thereof "whereupon such
party (if a director or an officer)";
(G) in subsection (g)(3)—
(i) by striking out "the director, officer, or other
^
person concerned" and inserting in lieu thereof "the
institution-affiliated party concerned";
(ii) by striking out "such individual" each place such
., term appears and inserting in lieu thereof "such
party";
(iii) by striking out "the concerned director, officer,
or other person' and inserting in lieu thereof "such
party";
(iv) by striking out "the director, officer, or other
person" each place such term appears (except in "the
director, officer, or other person concerned") and
inserting in lieu thereof "such party";
(v) by striking out "said director, officer or other
person" and inserting in lieu thereof "such party"; and
(vi) by striking out "the director, officer or other
person" and inserting in lieu thereof "such party";
(H) in subsection (h)(2), by striking out "director or officer
or other person" and inserting in lieu thereof "institutionaffiliated party";
(I) in subsection (1), by striking out "director or officer
thereof or other person participating in the conduct of its
affairs" and inserting in lieu thereof "institution-affiliated
party"; and
(J) in subsection (m), by striking out "director or officer or
other person participating in the conduct of its affairs" and
inserting in lieu thereof "institution-affiliated party".
(2) FCUA.—Section 206 of the Federal Credit Union Act (12
U.S.C. 1786) is amended—
(A) in subsection (e)(1)—
• -^
(i) by striking out "director, officer, committee
member, employee, agent, or other person participating
in the conduct of the affairs of such a credit union" and
"•'ar- inserting in lieu thereof "institution-affiliated party";
and
(ii) by striking out "directors, officers, committee
i i members, employees, agents, or other persons participating in the conduct of the affairs of such credit
union" and inserting in lieu thereof "institution-affiliated parties";
(B) in each of subsections (e)(1) and (f)—

PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 449

(i) by striking out "director, officer, committee
member, employee, agent, or other person participating
in the conduct of the affairs of such credit union' each
place such term appears and inserting in lieu thereof
institution-affiliated party"; and
(ii) by striking out "such director, officer, committee
member, employee, agent, or other person" each place
such term appears and inserting in lieu thereof * such
party"; and
(C) in subsection (fXD, by striking out "such director,
officer, committee member, employee, agents, or other
person" and inserting in lieu thereof "such party";
(D) in subsection (iXl)—
(i) by striking out "director, committee member, or
officer of an insured credit union, or other person
participating in the conduct of the affairs of such credit
union' and inserting in lieu thereof "institution-affiliated party";
(ii) by striking out "the individual" each place such
term appears and inserting in lieu thereof "such
party";
(iii) by striking out "such director, committee
member, officer, or other person" each place such term
appears and inserting in lieu thereof "such party";
(iv) by striking out "him" and inserting in lieu
thereof such party";
(v) by striking out "director, officer or other person"
and inserting in lieu thereof "party"; and
(vi) by striking out "whereupon such director,
committee member, or officer" and inserting in lieu
thereof "whereupon such party (if a director, a committee member, or an officer)^;
(E) in subsection (iX3)—
(i) by striking out "director, committee member, officer, or other person concerned" and inserting in lieu
thereof "institution-affiliated party concerned'; and
(ii) by striking out "such individual" each place such
term appears and inserting in lieu thereof "such
party";
(iii) by striking out "the concerned director, committee member, officer, or other person" and inserting in
lieu thereof "such party";
(iv) by striking out "the director, committee member,
officer, or other person" each place such term appears
(except in "the director, committee member, officer, or
other person concerned") and inserting in lieu thereof
"such party"; and
(v) by striking out "said director, committee member,
officer or other person" and inserting in lieu thereof
"such party";
(F) in subsection (jX2), by striking out "director, officer,
committee member, or other person" and inserting in lieu
thereof "institution-affiliated party"; and
(G) in subsection (o), by striking out "director, officer,
committee member or other person participating in the
conduct of its affairs" and inserting in lieu thereof "institution-affiliated party".

i

103 STAT. 450

PUBLIC LAW 101-73—AUG. 9, 1989
(d) SUBSTITUTION OF "DEPOSITORY INSTITUTION" FOR " B A N K " . —

Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818), as
amended by subsection (b)(1) of this section, is amended by striking
out "bank" and "banks" each place such terms appear and inserting
in lieu thereof "depository institution" and "depository institutions", respectively, except in subsections (b)(3), (b)(4), (m), (o), and
(r).
SEC. 902. AMENDMENTS TO CEASE AND DESIST AUTHORITY WITH RESPECT TO RESTITUTION, RESTRICTIONS ON SPECIFIC ACTIVITIES, GROUNDS FOR ISSUANCE OF A TEMPORARY ORDER. AND
INCOMPLETE OR INACCURATE RECORDS.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE F D I C . —
(1) CEASE AND DESIST AUTHORITY.—Section 8(b) of the Federal

Deposit Insurance Act (12 U.S.C. 1818(b)) is amended—
(A) in paragraph (3), by striking out "subsections (c)
»j.
through (f) and (h) through (n)" and inserting in lieu thereof
"subsections (c) through (s) and subsection (u)";
(B) in paragraph (4), by striking out "subsections (c)
through (0 and (h) through (n)" and inserting in lieu thereof
"subsections (c) through (s) and subsection (u)"; and
(C) by adding at the end thereof the following new paragraphs:
"(6) AFFIRMATIVE ACTION TO CORRECT CONDITIONS RESULTING

,

-

FROM VIOLATIONS OR PRACTICES.—The authority to issue an order
under this subsection and subsection (c) which requires an
' insured depository institution or any institution-affiliated party
to take affirmative action to correct any conditions resulting
from any violation or practice with respect to which such order
is issued includes the authority to require such depository
institution or such party to—
"(A) make restitution or provide reimbursement, indemnification, or guarantee against loss if—
"(i) such depository institution or such party was
unjustly enriched in connection with such violation or
practice; or
/w
'
"(ii) the violation or practice involved a reckless
disregard for the law or any applicable regulations or
prior order of the appropriate Federal banking agency;
"(B) restrict the growth of the institution;
"(C) dispose of any loan or asset involved;
"(D) rescind agreements or contracts; and
"(E) employ qualified officers or employees (who may be
subject to approval by the appropriate Federal banking
agency at the direction of such agency); and
"(F) take such other action as the banking agency determines to be appropriate.
"(7) AUTHORITY TO LIMIT ACTIVITIES.—The authority to issue
an order under this subsection or subsection (c) includes the
authority to place limitations on the activities or functions of an
insured depository institution or any institution-affiliated party.
"(8) EXPANSION OF AUTHORITY TO SAVINGS AND LOAN AFFIUATES AND ENTITIES.—Subsections (a) through (s) and subsection

(u) shall apply to any savings and loan holding company and to
any subsidiary (other than a bank or subsidiary of that bank) of
a savings and loan holding company, to any service corporation
of a savings association and to any subsidiary of such service

PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 451

corporation, whether wholly or partly owned, in the same
manner as such subsections apply to a savings association.".
(2) TEMPORARY CEASE AND DESIST AUTHORITY.—Section 8(c) of

the Federal Deposit Insurance Act (12 U.S.C. 1818(c)) is amended—
(A) in paragraph (1)—
(i) by striking out "substantial" and inserting in lieu
thereof "significant";
(ii) by striking out "seriously" each place such term
appears; and
(iii) by inserting after the 1st sentence the following
new sentence: "Such order may include any requirement authorized under subsection (bX6)(B)."; and
(B) by adding at the end thereof the following new paragraph:
"(8) INCOMPLETE OR INACCURATE RECORDS.—
"(A) TEMPORARY ORDER.—If a notice of

charges served
under subsection (bXD specifies, on the basis of particular
facts and circumstances, that an insured depository institution's books and records are so incomplete or inaccurate
that the appropriate Federal banking agency is unable,
through the normal supervisory process, to determine the
financial condition of that depository institution or the
details or purpose of any transaction or transactions that
may have a material effect on the financial condition of
that depository institution, the agency may issue a temporary order requiring—
"(i) the cessation of any activity or practice which
gave rise, whether in whole or in part, to the incomplete or inaccurate state of the books or records; or
"(ii) affirmative action to restore such books or
records to a complete and accurate state, until the
completion of the proceedings under subsection (bXD"(B) EFFECTIVE PERIOD.—Any temporary order issued
under subparagraph (A)—
"(i) shall become effective upon service; and
"(ii) unless set aside, limited, or suspended by a court
in proceedings under paragraph (2), shall remain in
effect and enforceable until the earlier of—
"(I) the completion of the proceeding initiated
under subsection (b)(1) in connection with the
notice of charges; or
"(II) the date the appropriate Federal banking
agency determines, by examination or otherwise,
that the insured depository institution's books and
records are accurate and reflect the financial
condition of the depository institution.",

(b) CREDIT UNIONS INSURED BY THE N C U A . —
(1) CEASE AND DESIST AUTHORITY.—Section

206(e) of the Federal Credit Union Act (12 U.S.C. 1786(e)) is amended by adding
at the end thereof the following new paragraphs:
"(3) AFFIRMATIVE ACTION TO CORRECT CONDITIONS RESULTING

FROM VIOLATIONS OR PRACTICES.—The authority to issue an order
under this subsection and subsection (f) which requires an
insured credit union or any institution-affiliated party to take
affirmative action to correct any conditions resulting from any
violation or practice with respect to which such order is issued

103 STAT. 452

PUBLIC LAW 101-73—AUG. 9, 1989

'«

'

includes the authority to require such insured credit union or
such party to—
"(A) make restitution or provide reimbursement, indemnification, or guarantee against loss if—
"(i) such credit union or such party was unjustly
enriched in connection with such violation or practice;
or
"(ii) the violation or practice involved a reckless
disregard for the law or any applicable regulations or
prior order of the Board;
"(B) restrict the growth of the institution;
"(C) rescind agreements or contracts;
"(D) dispose of any loan or asset involved; and
"(E) employ qualified officers or employees (who may be
subject to approval by the Board at the direction of such
Board); and
"(F) take such other action as the Board determines to be
appropriate.
"(4) AUTHORITY TO LIMIT ACTIVITIES.—The authority to issue
an order under this subsection or subsection (f) includes the
authority to place limitations on the activities or functions of an
insured credit union or any institution-affiliated party.".
(2) TEMPORARY CEASE AND DESIST AUTHORITY.—Section 206(f) of
the Federal Credit Union Act (12 U.S.C. 1786(f)) is amended—
(A) by redesignating paragraph (3) as paragraph (4);
(B) in paragraph (1)—
(i) by striking out "substantial" and inserting in lieu
thereof "significant";
(ii) by striking out "seriously" each place such term
appears; and
(iii) by inserting after the 1st sentence the following
new sentence: "Such order may include any requirement authorized under subsection (eX3XB)."; and
(C) by inserting after paragraph (2) the following new
paragraph:
"(3) INCOMPLETE OR INACCURATE RECORDS.—
"(A) TEMPORARY ORDER.—If a notice of

charges served
under subsection (eXl) specifies, on the basis of particular
facts and circumstances, that an insured credit union's
books and records are so incomplete or inaccurate that the
Board is unable, through the normsd supervisory process, to
determine the financial condition of that insured credit
union or the details or purpose of any transaction or transactions that may have a material effect on the financial
condition of that insured credit union, the Board may issue
a temporary order requiring—
"(i) the cessation of any activity or practice which
gave rise, whether in whole or in part, to the incomplete or inaccurate state of the books or records; or
"(ii) affirmative action to restore such books or
records to a complete and accurate state, until the
completion of the proceedings under subsection (eXD"(B) EFFECTIVE PERIOD.—Any temporary order issued
under subparagraph (A)—
"(i) shall become effective upon service; and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 453

"(ii) unless set aside, limited, or suspended by a court
in proceedings under paragraph (2), shall remain in
effect and enforceable until the earlier of^
"(I) the completion of the proceeding initiated
under subsection (e)(1) in connection with the
notice of charges; or
"(ID the date the Board determines, by examination or otherwise, that the insured credit union's
books and records are accurate and reflect the
financial condition of the credit union.".

^

SEC. 903. MERGER OF REMOVAL AND PROHIBITION AUTHORITY.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE F D I C . —

(1) I N GENERAL.—Section 8(e)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(1)) is amended to read as follows:
"(e) R E M O V A L AND P R O H I B I T I O N A U T H O R I T Y . —
"(1) AUTHORITY TO ISSUE ORDER.—Whenever

the appropriate
Federal banking agency determines that—
"(A) any institution-affiliated party has, directly or indirectly—
"(i) violated—
"(I) any law or regulation;
"(II) any cease-and-desist order which has
become final;
"(III) any condition imposed in writing by the
appropriate Federal banking agency in connection
with the grant of any application or other request
by such depository institution; or
"(IV) any written agreement between such
depository institution and such agency;
"(ii) engaged or participated in any unsafe or unsound practice in connection with any insured depository institution or business institution; or
' (iii) committed or engaged in any act, omission, or
practice which constitutes a breach of such party's
fiduciary duty;
"(B) by reason of the violation, practice, or breach described in any clause of subparagraph (A)—
"(i) such insured depository institution or business
institution has suffered or will probably suffer financial loss or other damage;
"(ii) the interests of the insured depository institution's depositors have been or could be prejudiced; or
"(iii) such party has received financial gain or other
benefit by reason of such violation, practice, or breach;
and
"(C) such violation, practice, or breach—
"(i) involves personal dishonesty on the part of such
party; or
"(ii) demonstrates willful or continuing disregard by
such party for the safety or soundness of such insured
depository institution or business institution,
the agency may serve upon such party a written notice of the
agency's intention to remove such party from office or to prohibit any further participation by such party, in any manner, in
the conduct of the affairs of any insured depository institution.".

^

,-

*

103 STAT. 454

PUBLIC LAW 101-73—AUG. 9, 1989
(2) TEMPORARY SUSPENSION OR PROHIBITION.—Section 8(e) of

the Federal Deposit Insurance Act (12 U.S.C. 1818(e)) is amended by striking out paragraphs (2) and (4), by redesignating
paragraphs (3), (5), and (6) as paragraphs (2), (4), and (5), respectively, and by inserting after paragraph (2) (as so redesignated)
the following new paragraph:
"(3) SUSPENSION ORDER.—
"(A) SUSPENSION OR PROHIBITION AUTHORIZED.—If the

,^

appropriate Federal banking agency serves written notice
under paragraph (1) or (2) to any institution-affiliated party
of such agency's intention to issue an order under such
paragraph, the appropriate Federal banking agency may
suspend such party from office or prohibit such party from
further participation in any manner in the conduct of the
affairs of the depository institution, if the agency—
"(i) determines that such action is necessary for the
protection of the depository institution or the interests
of the depository institution's depositors; and
"(ii) serves such party with written notice of the
suspension order.
"(B) EFFECTIVE PERIOD.—Any suspension order issued
under subparagraph (A)—
"(i) shall become effective upon service; and
"(ii) unless a court issues a stay of such order under
subsection (f), shall remain in effect and enforceable
until—
"(I) the date the appropriate Federal banking
agency dismisses the charges contained in the
notice served under paragraph (1) or (2) with respect to such party; or
"(II) the effective date of an order issued by the
agency to such party under paragraph (1) or (2).
"(C) COPY OF ORDER.—If an appropriate Federal banking

agency issues a suspension order under subparagraph (A) to
any institution-affiliated party, the agency shall serve a
copy of such order on any insured depository institution
with which such party is associated at the time such order
is issued.".
(3) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Section 8(e)

""

of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)) is
amended by adding after paragraph (5) (as so redesignated by
paragraph (2) of this subsection) the following new paragraph:
"(6) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Any person
subject to an order issued under this subsection shall not—
"(A) participate in any manner in the conduct of the
affairs of any institution or agency specified in paragraph
(7XA);
"(B) solicit, procure, transfer, attempt to transfer, vote, or
attempt to vote any proxy, consent, or authorization with
respect to any voting rights in any institution described in
subparagraph (A);
"(C) violate any voting agreement previously approved by
the appropriate Federal banking agency; or
t"(D) vote for a director, or serve or act as an institutionaffiliated party.".
(4) CONFORMING AMENDMENTS.—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 455

(A) Section 8(f) of the Federal Deposit Insurance Act (12
U.S.C. 1818(f)) is amended—
(i) by striking out "(e)(4)" and inserting in lieu
thereof "(eX3)"; and
(ii) by striking out "(e)(1), (e)(2), or (eX3)" and inserting in lieu thereof "(e)(1) or (e)(2)".
(B) Section 8(gXl) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(gXl)) is amended by striking out "(1), (2), (3),
or (4)" and inserting in lieu thereof "(1), (2), or (3)".

;

(b) CREDIT UNIONS INSURED BY THE N C U A . —

(1) I N GENERAL.—Section 206(gXl) of the Federal Credit Union
Act (12 U.S.C. 1786(gXl)) is amended to read as follows:
"(g) REMOVAL AND PROHIBITION AUTHORITY.—
"(1) AUTHORITY TO ISSUE ORDER.—Whenever the Board deter-

mines that—
"(A) any institution-affiliated party has, directly or indirectly—
"(i) violated—
"(I) any law or regulation;
"(II) any cease-and-desist order which has
become final;
"(III) any condition imposed in writing by the
Board in connection with the grant of any applica'
tion or other request by such credit union; or
"(IV) any written agreement between such credit
union and the Board;
"(ii) engaged or participated in any unsafe or unsound practice in connection with any insured credit
union or business institution; or
"(iii) committed or engaged in any act, omission, or
practice which constitutes a breach of such party's
fiduciary duty;
"(B) by reason of the violation, practice, or breach described in any clause of subparagraph (A)—
"(i) such insured credit union or business institution
haB suffered or will probably suffer financial loss or
other damage;
;
"(ii) the interests of the insured credit union's members have been or could be prejudiced; or
"(iii) such party has received financial gain or other
benefit by reason of such violation, practice or breach;
and
"(C) such violation, practice, or breach—
"(i) involves personal dishonesty on the part of such
party; or
"(ii) demonstrates such party's unfitness to serve as a
director or officer of, or to otherwise participate in the
conduct of the affairs of, an insured credit union,
the Board may serve upon such party a written notice of the
Board's intention to remove such party from office or to prohibit
any further participation, by such party, in any manner in the
conduct of the affairs of any insured credit union.".
(2) TEMPORARY SUSPENSION OR PROHIBITION.—Section 206(g) of
the Federal Credit Union Act (12 U.S.C. 1786(g)) is amended by
striking out paragraphs (2) and (4), by redesignating paragraphs
(3) and (5) as paragraphs (2) and (4), respectively, and by insert-

^

•

103 STAT. 456

PUBLIC L A W 101-73—AUG. 9, 1989
ing after paragraph (2) (as so redesignated) the following new
paragraph:
'

^

"(3) SUSPENSION ORDER.—
"(A) SUSPENSION OR PROHIBITION AUTHORIZED.—If

_

the

Board serves written notice under paragraph (1) or (2) to
any institution-affiliated party of the Board's intention to
issue an order under such paragraph, the Board may suspend such party from office or prohibit such party from
further participation in any manner in the conduct of the
affairs of the institution, if the Board—
"(i) determines that such action is necessary for the
protection of the credit union or the interests of the
credit union's members; and
"(ii) serves such person with written notice of the
suspension order.
"(B) EFFECTIVE PERIOD.—Any suspension order issued
under subparagraph (A)—
"(i) shall become effective upon service; and
"(ii) unless a court issues a stay of such order under
paragraph (6), shall remain in effect and enforceable
until—
"(I) the date the Board dismisses the charges
contained in the notice served under paragraph (1)
, or (2) with respect to such party; or
"(II) the effective date of an order issued by the
Board to such person under paragraph (1) or (2).
"(C) COPY OF ORDER.—If the Board issues a suspension

order under subparagraph (A) to any institution-affiliated
party, the Board shall serve a copy of such order on any
insured credit union with which such party is associated at
the time such order is issued.".
(3) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES REQUIRED.—

Section 206(g) of the Federal Credit Union Act (12 U.S.C.
1786(g)) is amended by adding after paragraph (4) (as so redesignated by paragraph (2) of this subsection) the following new
paragraph:
"(5) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Any person
subject to an order issued under this subsection shall not—
"(A) participate in any manner in the conduct of the
affairs of any institution or agency specified in paragraph
(7XA);
"(B) solicit, procure, transfer, attempt to transfer, vote, or
attempt to vote any proxy, consent, or authorization with
respect to any voting rights in any institution described in
subparagraph (A);
"(C) violate any voting agreement previously approved by
the appropriate Federal banking agency; or
"(D) vote for a director, or serve or act as an institutionaffiliated party.".
(4) CONFORMING AMENDMENTS.—Section 206(gX6) of the Federal Credit Union Act (12 U.S.C. 1786(gX6)) is amended—
(A) by striking out "paragraph (4)" and inserting in lieu
thereof "paragraph (3)"; and
(B) by striking out "(1), (2), or (3)" and inserting in lieu
thereof "(Dor (2)".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 457

(e) EFFECTIVE DATE.—The amendments made by this section shall
apply with respect to violations committed and activities engaged in
after the date of the enactment of this Act.

12 use 1786
^°^-

SEC. 904. INDUSTRYWIDE APPLICATION OF REMOVAL, SUSPENSION, AND
PROHIBITION ORDERS.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE FDIC.—Section 8(e)

of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)) is amended
by inserting after the paragraph added by section 903(a)(3) of this
Act the following new paragraph:
"(7) INDUSTRYWIDE PROHIBITION.—

"(A) I N GENERAL.—Except as provided in subparagraph
(B), any person who, pursuant to an order issued under this
subsection or subsection (g), h£is been removed or suspended
from office in an insured depository institution or prohibited from participating in the conduct of the affairs of an
insured depository institution may not, while such order is
in effect, continue or commence to hold any office in, or
participate in any manner in the conduct of the affairs of—
"(i) any insured depository institution;
"(ii) any institution treated as an insured bank under
subsection (b)(3) or (b)(4), or as a savings association
under subsection (b)(8);
"(iii) any insured credit union under the Federal
Credit Union Act;
"(iv) any institution chartered under the Farm Credit
Act of 1971;
"(v) any appropriate Federal depository institution
regulatory agency;
"(vi) the Federal Housing Finance Board and any
Federal home loan bank; and
"(vii) the Resolution Trust Corporation.
"(B) EXCEPTION IF AGENCY PROVIDES WRITTEN CONSENT.—

. c'

If, on or after the date an order is issued under this
subsection which removes or suspends from office any
institution-affiliated party or prohibits such party from
participating in the conduct of the affairs of an insured
depository institution, such party receives the written consent of—
"(i) the Eigency that issued such order; and
"(ii) the appropriate Federal financial institutions
regulatory agency of the institution described in any
clause of subparagraph (A) with respect to which such
party proposes to become an institution-affiliated
party,
subparagraph (A) shall, to the extent of such consent, cease
to apply to such party with respect to the institution described in each written consent. Any agency that grants Reports,
such a written consent shall report such action to the Public
Corporation and publicly disclose such consent.
information.
"(C) VIOLATION OF PARAGRAPH TREATED AS VIOLATION OF

ORDER.—Any violation of subparagraph (A) by any person
who is subject to an order described in such subparagraph
shall be treated as a violation of the order.
"(D) APPROPRIATE FEDERAL FINANCIAL INSTITUTIONS REGULATORY AGENCY DEFINED.—For purposes of this paragraph

103 STAT. 458

PUBLIC L A W 101-73—AUG. 9, 1989
f

' :

and subsection 0')> the term "appropriate Federal financial
institutions regulatory agency" means—
"(i) the appropriate Federal banking agency, in the
case of an insured depository institution;
"(ii) the Farm Credit Administration, in the case of
an institution chartered under the Farm Credit Act of
1971;
"(iii) the National Credit Union Administration
Board, in the case of an insured credit union (as defined
in section 101(7) of the Federal Credit Union Act);
"(iv) the Secretary of the Treasury, in the case of the
Federal Housing Finance Board and any Federal home
loan bank; and
"(v) the Oversight Board, in the case of the Resolution Trust Corporation.
"(E) CONSULTATION BETWEEN AGENCIES.—The agencies re-

ferred to in clauses (i) and (ii) of subparagraph (B) shall
consult with each other before providing any written consent described in subparagraph (B).
"(F) AppLiCABiLrry.—This paragraph shall only apply to a
person who is an individual, unless the appropriate Federal
banking agency specifically finds that it should apply to a
corporation, firm, or other business enterprise.",
(b) CREDIT UNIONS INSURED BY THE NCUA.—Section 206(g)(7) of

the Federal Credit Union Act (12 U.S.C. 1786(gX7)) is amended to
read as follows:
"(7) INDUSTRYWIDE PROHIBITION.—

"(A) I N GENERAL.—Except as provided in subparagraph (B),
any person who, pursuant to an order issued under this subsection or subsection (i), has been removed or suspended from office
in an insured credit union or prohibited from participating in
the conduct of the affairs of an insured credit union may not,
while such order is in effect, continue or commence to hold any
office in, or participate in any manner in the conduct of the
affairs of—
"(i) any insured depository institution;
"(ii) any institution treated as an insured bank under
paragraph (3) or (4) of section 8(b) of the Federal Deposit
Insurance Act, or as a savings association under section
8(b)(8) of such Act;
"(iii) any insured credit union;
"(iv) any institution chartered under the Farm Credit Act
of 1971;
"(v) any appropriate Federal depository institution regulatory agency;
"(vi) the Federal Housing Finance Board and any Federal
home loan bank; and
"(vii) the Resolution Trust Corporation.
"(B) EXCEPTION I F AGENCY PROVIDES WRITTEN CONSENT.—

If, on or after the date an order is issued under this
subsection which removes or suspends from office any
institution-affiliated party or prohibits such party from
participating in the conduct of the affairs of an insured
credit union, such party receives the written consent of—
"(i) the Board; and
"(ii) the appropriate Federal financial institutions
regulatory agency of the institution described in any

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 459

clause of subparagraph (A) with respect to which such
party proposes to become an institution-affiliated
party,
subparagraph (A) shall, to the extent of such consent, cease
to apply to such party with respect to the institution described in each written consent. If any person receives such
a written consent from the Board, the Board shall publicly
disclose such consent. If the agency referred to in clause (ii) Reports.
grants such a written consent, such agency shall report ?^^|^
such action to the Board and publicly disclose such consent. information.
"(C) VIOLATION OP PARAGRAPH TREATED AS VIOLATION OP

ORDER.—Any violation of subparagraph (A) by any person
who is subject to an order described in such subparagraph
shall be treated as a violation of the order.
"(D) APPROPRIATE FEDERAL FINANCIAL INSTITUTIONS REGU-

*

-

LATORY AGENCY DEFINED.—For purposes of this paragraph
and subsection (1), the term "appropriate Federal financial
institutions regulatory agency" means—
"(i) the appropriate Federal banking agency, as provided in section 3(q) of the Federal Deposit Insurance
Act;
"(ii) the Farm Credit Administration, in the case of
an institution chartered under the Farm Credit Act of
1971;
"(iii) t h e National Credit Union Administration
Board, in the case of an insured credit union (as defined
in section 101(7) of the Federal Credit Union Act);
"(iv) the Secretary of the Treasury, in the case of the
Federal Housing Finance Board and any Federal home
loan bank; and
"(v) the Oversight Board, in the case of the Resolution Trust Corporation.
"(E) CONSULTATION BETWEEN AGENCIES.—The agencies re-

ferred to in clauses (i) and (ii) of subparagraph (B) shall
consult with each other before providing any written consent described in subparagraph (B).
"(F) APPUCABIUTY.—This paragraph shall only apply to a
person who is an individual, unless the Board specifically
finds that it should apply to a corporation, firm, or other
business enterprise.".
SEC. 905. ENFORCEMENT PROCEEDINGS ALLOWED AFTER SEPARATION
FROM SERVICE.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE FDIC.—Section 8(i) of

the Federal Deposit Insurance Act (12 U.S.C. 1818(i)) is amended by
adding at the end thereof the following new paragraph:
"(3) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (including a
separation caused by the closing of an insured depository
institution) shall not affect the jurisdiction and authority of the
appropriate Federal banking agency to issue any notice and
proceed under this section against any such party, if such notice
is served before the end of the 6-year period beginning on the
date such party ceased to be such a party with respect to such
depository institution (whether such date occurs before, on, or
after the date of the enactment of this paragraph).".

c

103 STAT. 460

PUBLIC LAW 101-73—AUG. 9, 1989
(b) CREDIT UNIONS INSURED BY THE NCUA.—Section 206(k) of the
Federal Credit Union Act (12 U.S.C. 1786(k)) is amended by adding
at the end thereof the following new paragraph:
"(3) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation, or separation of a institution-affiliated party (including a
separation caused by the closing of an insured credit union)
shall not affect the jurisdiction £uid authority of the Board to
issue any notice and proceed under this section against any
such party, if such notice is served before the end of the 6-year
period beginning on the date such party ceased to be such a
party with respect to such credit union (whether such date
occurs before, on, or after the date of the enactment of this
paragraph).".
(c) CHANGE IN CONTROL OF DEPOSITORY INSTITUTION.—Section

7(jX15) of the Federal Deposit Insurance Act (12 U.S.C. 1817(j)(15)) is
amended by adding at the end thereof the following new sentence:
"The resignation, termination of employment or participation,
divestiture of control, or separation of or by an institution-affiliated
party (including a separation caused by the closing of a depository
institution) shall not affect the jurisdiction and authority of the
appropriate Federal banking agency to issue any notice and proceed
under this subsection against any such party, if such notice is served
before the end of the 6-year period beginning on the date such party
ceased to be such a party with respect to such depository institution
(whether such date occurs before, on, or after the date of the
enactment of this sentence).".
(d) NONMEMBER INSURED BANKS AND SAVINGS ASSOCIATIONS.—

Section 180') of the Federal Deposit Insurance Act (12 U.S.C. 18280'))
is amended by adding at the end the following new paragraph:
"(6) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (including a
separation caused by the closing of a nonmember bank or a
savings association) shall not affect the jurisdiction and authority of the Corporation or the Director of the Office of Thrift
Supervision, as appropriate, to issue any notice and proceed
under this section against any such party, if such notice is
served before the end of the 6-year period beginning on the date
such party ceased to be such a party with respect to such
nonmember bank or such savings association (whether such
date occurs before, on, or after the date of the enactment of this
paragraph).".
(e) NATIONAL BANKS.—Section 5239 of the Revised Statutes (12
U.S.C. 93) is amended by adding at the end thereof the following
new subsection:
"(c) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE,—The resignation, termination of employment or participation,
or separation of an institution-affiliated party (within the meaning
of section 3(u) of the Federal Deposit Insurance Act) with respect to
such an Eissociation (including a separation caused by the closing of
such an association) shall not affect the jurisdiction and authority of
the Clomptroller of the Currency to issue any notice and proceed
under this section against any such party, if such notice is served
before the end of the 6-year period beginning on the date such party
ceased to be such a party with respect to such association (whether

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 461

such date occurs before, on, or after the date of the enactment of this
subsection).".
(f) MEMBER BANKS.—Section 29 of the Federal Reserve Act (12
U.S.C. 504(a)), as added by section 907(g) of this Act, is amended by
adding at the end the following new subsection:
"(m) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation,
or separation of an institution-affiliated party (within the meaning
of section 3(u) of the Federal Deposit Insurance Act) with respect to
a member bank (including a separation caused by the closing of such
a bank) shall not affect the jurisdiction and authority of the appropriate Federal banking agency to issue any notice and proceed
under this section against any such party, if such notice is served
before the end of the 6-year period beginning on the date such party
ceased to be such a party with respect to such bank (whether such
date occurs before, on, or after the date of the enactment of this
subsection).".
(g) MEMBER BANKS.—Section 19 of the Federal Reserve Act (12
U.S.C. 505) is amended by adding at the end thereof the following 12 USC 506.
new subsection:
"(m) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation,
or separation of an institution-affiliated party (within the meaning
of section 3(u) of the Federal Deposit Insurance Act) with respect to
a member bank (including a separation caused by the closing of such
a bank) shall not affect the jurisdiction and authority of the Board
to issue any notice and proceed under this section against any such
party, if such notice is served before the end of the 6-year period
beginning on the date such party ceased to be such a party with
respect to such bank (whether such date occurs before, on, or after
the date of the enactment of this subsection).".
(h) BANKS.—Section 106(b)(2) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. 1972(2)) is amended by adding at the
end the following new subparagraph:
"(I) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation,
or separation of an institution-affiliated party (within the meaning
of section 3(u) of the Federal Deposit Insurance Act) with respect to
such a bank (including a separation caused by the closing of such a
bank) shall not affect the jurisdiction and authority of the appropriate Federal banking agency to issue any notice and proceed
under this section against any such party, if such notice is served
before the end of the 6-year period beginning on the date such party
ceased to be such a party with respect to such bank (whether such
date occurs before, on, or after the date of the enactment of this
subparagraph).".
(i) BANK HOLDING COMPANIES.—Section 8 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1847) is amended by adding at the
end the following new subsection:
"(c) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of emplojonent or participation,
or separation of an institution-affiliated party (vdthin the meaning
of section 3(u) of the Federal Deposit Insurance Act) with respect to
a bank holding company (including a separation caused by the
deregistration of such a company) shall not affect the jurisdiction
and authority of the Board to issue any notice and proceed under
this section against any such party, if such notice is served before

,

103 STAT. 462

PUBLIC LAW 101-73—AUG. 9, 1989

the end of the 6-year period beginning on the date such party ceased
to be such a party with respect to such holding company (whether
such date occurs before, on, or after the date of the enactment of this
subsection).".
0) SAVINGS AND LOAN HOLDING COMPANIES.—Section 10(i) of the

Home Owners' Loan Act (as amended by section 301 of this Act) is
amended by adding at the end thereof the following new paragraph:
"(5) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM SERV-

ICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (within the
meaning of section 3(u) of the Federal Deposit Insurance Act)
with respect to a savings and loan holding company or subsidiary thereof (including a separation caused by the deregistration
of such a company or such a subsidiary) shall not affect the
jurisdiction and authority of the Director to issue any notice
and proceed under this section against any such party, if such
notice is served before the end of the 6-year period beginning on
the date such party ceased to be such a party with respect to
such holding company or its subsidiary (whether such date
occurs before, on, or after the date of the enactment of this
paragraph).".
SEC. 906 EXPANSION OF REMOVAL POWERS FOR STATE CRIMINAL
PROCEEDINGS.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE FDIC.—Section

8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(g)(1)) is
amended—
(1) in the 1st sentence, by striking "authorized by a United
States attorney"; and
(2) in the 4th sentence, by striking "with respect to such
crime" and inserting in lieu thereof "or an agreement to enter a
pre-trial diversion or other similar program".
(b) CREDIT UNIONS INSURED BY THE NCUA.—Section 206(i)(l) of the

Federal Credit Union Act (12 U.S.C. 1786(i)) is amended—
(1) in the 1st sentence, by striking "authorized by a United
States Attorney"; and
(2) in the 4th sentence, by striking "with respect to such
crime" and inserting in lieu thereof "or an agreement to enter a
pre-trial diversion or other similar program".
SEC. 907. AMENDMENTS TO EXPAND AND INCREASE CIVIL MONEY
PENALTIES.
(a) GENERAL PROVISIONS FOR DEPOSITORY INSTITUTIONS INSURED BY

THE FDIC.—Section 8(i)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1818(i)(2)) is amended to read as follows:
"(2) CIVIL MONEY PENALTY.—

"(A) FIRST TIER.—Any insured depository institution
which, and any institution-affiliated party who—
"(i) violates any law or regulation;
"(ii) violates any final order or temporary order
issued pursuant to subsection (b), (c), (e), (g), or (s);
"(iii) violates any condition imposed in writing by the
appropriate Federal banking agency in connection with
the grant of any application or other request by such
depository institution; or
"(iv) violates any written agreement between such
depository institution and such agency,

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 463

shall forfeit and pay a civil penalty of not more than $5,000
for each day during which such violation continues.
"(B) SECOND TIER.—Notwithstanding subparagraph (A),
any insured depository institution which, and any institution-affiliated party who—
"(iXD commits any violation described in any clause
of subparagraph (A);
"(II) recklessly engages in an unsafe or unsound
practice in conducting the affairs of such insured
depository institution; or
"(III) breaches any fiduciary duty;
"(ii) which violation, practice, or breach—
"(I) is part of a pattern of misconduct;
"(II) causes or is likely to cause more than a
minimal loss to such depository institution; or
"(III) results in pecuniary gain or other benefit
to such party,
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation, practice,
or breach continues.
"(C) THIRD TIER.—Notwithstanding subparagraphs (A)

and (B), any insured depository institution which, and any
institution-affiliated party who—
"(i) knowingly—
"(I) commits any violation described in any
clause of subparagraph (A);
"(II) engages in any unsafe or unsound practice
in conducting the affEiirs of such depository institution; or
"(III) breaches any fiduciary duty; and
"(ii) knowingly or recklessly causes a substantial loss
to such depository institution or a substantial pecuniary gain or other benefit to such party by reason of
such violation, practice, or breach,
shall forfeit and pay a civil penalty in an amount not to
exceed the applicable maximum amount determined under
subparagraph (D) for each day during which such violation,
practice, or breach continues,
"(D) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION

DESCRIBED IN SUBPARAGRAPH (c).—The maximum daily
amount of any civil penalty which may be assessed pursuant to subparagraph (C) for any violation, practice, or
breach described in such subparagraph is—
"(i) in the case of any person other than an insured
depository institution, an amount to not exceed
$1,000,000; and
"(ii) in the case of any insured depository institution,
an amount not to exceed the lesser of—
"(I) $1,000,000; or
"(II) 1 percent of the total assets of such institution.
"(E) ASSESSMENT.—
"(i) WRITTEN NOTICE.—Any penalty imposed under

subparagraph (A), (B), or (C) may be assessed and collected by the appropriate Federal banking agency by
written notice.

103 STAT. 464

PUBLIC LAW 101-73—AUG. 9, 1989
"(ii) FINALITY OF ASSESSMENT.—If, with respect to any
assessment under clause (i), a hearing is not requested
pursuant to subparagraph (H) within the period of time
allowed under such subparagraph, the assessment shall
constitute a final and unappesdable order.

'

"(F) AUTHORITY TO MODIFY OR REMIT PENALTY.—Any

appropriate Federal banking agency may compromise,
:
modify, or remit any penalty which such agency may assess
•...,. or had already assessed under subparagraph (A), (B), or (C).
"(G) MITIGATING FACTORS.—In determining the amount of

any penalty imposed under subparagraph (A), (B), or (C),
the appropriate agency shall take into account the appropriateness of the penalty with respect to—
"(i) the size of financial resources and good faith of
the insured depository institution or other person
charged;
"(ii) the gravity of the violation;
"(iii)thehistory of previous violations; and
"(iv) such other matters as justice may require.
"(H) HEARING.—The insured depository institution or
other person against whom any penalty is assessed under
this paragraph shall be afforded an agency hearing if such
institution or person submits a request for such hearing
within 20 days after the issuance of the notice of assessment.

?

"(I) COLLECTION.—

(i
i
'• /'

'

"(i) REFERRAL.—If any insured depository institution
or other person fails to pay an assessment after any
penalty assessed under this paragraph has become
final, the agency that imposed the penalty shall recover
the amount assessed by action in the appropriate
United States district court.
"(ii) APPROPRIATENESS OF PENALTY NOT REVIEWABLE,—

In any civil action under clause (i), the validity and
appropriateness of the penalty shall not be subject to
. .;
review.
•
"(J) DISBURSEMENT.—All penalties collected under
authority of this paragraph shall be deposited into the
Treasury.
"(K) REGULATIONS.—Each appropriate Federal banking
agency shall prescribe regulations establishing such procedures as may be necessary to carry out this paragraph.",
(b) GENERAL PROVISIONS FOR CREDIT UNIONS INSURED BY THE

NCUA.—Section 206(k)(2) of the Federal Credit Union Act (12 U.S.C.
1786(k)(2)) is amended to read as follows:
"(2) CIVIL MONEY PENALTY.—

. ?,

"(A) FIRST TIER.—Any insured credit union which, and
any institution-affiliated party who—
"(i) violates any law or regulation;
"(ii) violates any final order or temporary order
issued pursuant to subsection (e), (f), (g), (i), or (q);
"(iii) violates any condition imposed in writing by the
Board in connection with the grant of any application
or other request by such credit union; or
"(iv) violates any written agreement between such
credit union and such agency,

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

103 STAT. 465

shall forfeit and pay a civil penalty of not more than $5,000
for each day during which such violation continues.
"(B) SECOND TIER.—Notwithstanding subparagraph (A),
any insured credit union which, and any institution-affiliated party who—
"(i)(I) commits any violation described in any clause
of subparagraph (A);
"(II) recklessly engages in an unsafe or unsound
practice in conducting the affairs of such credit union;
or
"(III) breaches any fiduciary duty;
"(ii) which violation, practice, or breach—
"(I) is part of a pattern of misconduct;
,,
"(II) causes or is likely to cause more than a
minimal loss to such credit union; or
"(III) results in pecuniary gain or other benefit
to such party,
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation, practice,
or breach continues.

^^

"(C) THIRD TIER.—Notwithstanding subparagraphs (A)

and (B), any insured credit union which, and any institution-affiliated party who—
"(i) knowingly—
"(I) commits any violation described in any
clause of subparagraph (A);
"(II) engages in any unsafe or unsound practice
in conducting the affairs of such credit union; or
"(III) breaches any fiduciary duty; and
"(ii) knowingly or recklessly causes a substantial loss
to such credit union or a substantial pecuniary gain or
other benefit to such party by reason of such violation,
practice, or breach,
shall forfeit and pay a civil penalty in an amount not to
exceed the applicable maximum amount determined under
subparagraph (D) for each day during which such violation,
practice, or breach continues.

^

"(D) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION
DESCRIBED IN SUBPARAGRAPH (C).—The maximum daily

amount of any civil penalty which may be assessed pursuant to subparagraph (C) for any violation, practice, or
breach described in such subparagraph is—
"(i) in the case of any person other than an insured
credit union, an amount to not exceed $1,000,000; and
"(ii) in the case of any insured credit union, an
amount not to exceed the lesser of—
"(I) $1,000,000; or
"(II) 1 percent of the total assets of such credit
union.
"(E) ASSESSMENT.—
"(i) WRITTEN NOTICE.—Any penalty imposed under

subparagraph (A), (B), or (C) may be assessed and collected by the Board by written notice.
"(ii) FINALITY OF ASSESSMENT.—If, with respect to any
assessment under clause (i), a hearing is not requested
pursuant to subparagraph (H) within the period of time

*

103 STAT. 466

PUBLIC LAW 101-73—AUG. 9, 1989
allowed under isuch subparagraph, the assessment shall
constitute a final and unappealable order.
• I "(F) AUTHORITY TO MODIFY OR REMIT PENALTY.—The Board
"• may compromise, modify, or remit any penalty which such
agency may assess or had already assessed under subparagraph (A), (B), or (C).
"(G) MITIGATING FACTORS.—In determining the amount of

any penalty imposed under subparagraph (A), (B), or (C),
the Board shall take into account the appropriateness of
the penalty with respect to—
"(i) the size of financial resources and good faith of
the insured credit union or the person charged;
"(ii) the gravity of the violation;
"(iii) the history of previous violations; and
"(iv) such other matters as justice may require.
"(H) HEARING.—The insured credit union or other person
against whom any penalty is assessed under this paragraph
shall be afforded an agency hearing if such institution or
person submits a request for such hearing within 20 days
after the issuance of the notice of assessment.

i -

"(I) COLLECTION.—

'
^

"(i) REFERRAL.—If any insured credit union or other
person fails to pay an assessment after any penalty
assessed under this paragraph has become final, the
Board shall recover the amount assessed by action in
the appropriate United States district court.
"(ii) APPROPRIATENESS OF PENALTY NOT REVIEWABLE.—

In any civil action under clause (i), the validity and
appropriateness of the penalty shall not be subject to
review.
"(J) DISBURSEMENT.—All penalties collected under
authority of this paragraph shall be deposited into the
Treasury.
"(K) VIOLATE DEFINED.—For purposes of this section, the
term 'violate' includes any action (alone or with another or
others) for or toward causing, bringing about, participating
in, counseling, or aiding or abetting a violation.
"(L) REGULATIONS.—The Board shall prescribe regulations establishing such procedures as may be necessary to
carry out this paragraph.".
(c) NONMEMBER INSURED B A N K S AND SAVINGS ASSOCIATIONS.—

*

Paragraphs (4) and (5) of section 180") of the Federal Deposit Insurance Act (12 U.S.C. 18280')) are amended to read as follows:
"(4) CIVIL MONEY PENALTY.—
"(A) FIRST TIER.—Any nonmember insured bank or sav-

ii

>; ,

ings association which, and any institution-affiliated party
who, violates any provision of section 22(h), 23A, or 23B of
the Federal Reserve Act or any lawful regulation issued
pursuant thereto, and any nonmember insured bank which,
and any institution-affiliated party who, violates any provision of section 20 of the Banking Act of 1933, shall forfeit
and pay a civil penalty of not more than $5,000 for each day
during which such violation continues.
"(B) SECOND TIER.—^Notwithstanding subparagraph (A),
any nonmember insured bank or savings association which,
and any institution-affiliated party who—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 467

"(i)(I) commits any violation described in any clause
of subparagraph (A);
"(ID recklessly engages in an unsafe or unsound
practice in conducting the affairs of such bank or
association, as the case may be; or
"(III) breaches any fiduciary duty;
"(ii) which violation, practice, or breach—
"(I) is part of a pattern of misconduct;
"(II) results in more than a minimal loss to such
bank or association, as the case may be; or
"(III) causes or is likely to cause pecuniary gain
or other benefit to such party,
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation, practice,
or breach continues.
"(C) THIRD TIER.—Notwithstanding subparagraphs (A)

and (B), any nonmember insured bank or savings association which, and any institution-affiliated party who—
"(i) knowingly—
"(I) commits any violation described in any
clause of subparagraph (A);
"(II) engages in any unsafe or unsound practice
in conducting the affairs of such bank or association; or
"(III) breaches any fiduciary duty; and
1
"(ii) knowingly or recklessly causes a substantial loss
to such bank or association or a substantial pecuniary
gain or other benefit to such party by reason of such
violation, practice, or breach,
shall forfeit and pay a civil penalty in an amount not to
exceed the applicable maximum amount determined under
subparagraph (D) for each day during which such violation,
practice, or breach continues.
"(D) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION

DESCRIBED IN SUBPARAGRAPH (c).—The maximum daily
amount of any civil penalty which may be assessed pursuant to subparagraph (C) for any violation, practice, or
breach described in such subparagraph is—
"(i) in the case of any person other than a
nonmember insured bank or savings association, an
amount to not exceed $1,000,000; and
"(ii) in the case of any nonmember insured bank or
savings association, an amount not to exceed the lesser
of—
"(I) $1,000,000; or
"(II) 1 percent of the total assets of such bank or
association.
"(E) ASSESSMENT; ETC.—Any penalty imposed under
subparagraph (A), (B), or (C) shall be assessed and collected
by the appropriate Federal banking agency in the manner
provided in subparagraphs (E), (F), (G), and (I) of section
8(i)(2) for penalties imposed (under such section) and any
such assessment shall be subject to the provisions of such
section.
"(F) HEARING.—The nonmember insured bank, savings
association, or other person against whom any penalty is
assessed under this paragraph shall be afforded an agency
• • V

103 STAT. 468

PUBLIC LAW 101-73—AUG. 9, 1989
r

hearing if such nonmember insured bank, savings association, or other person submits a request for such hearing
within 20 days after the issuance of the notice of assessment. Section 8(h) shall apply to any proceeding under this
paragraph.
"(G) DISBURSEMENT.—All penalties collected under
authority of this paragraph shall be deposited into the
Treasury.
"(5) REGULATIONS.—The appropriate Federal banking agency
shall prescribe regulations establishing such procedures as may
be necessary to carry out paragraph (4).".

(d) CHANGE IN CONTROL OF DEPOSITORY INSTITUTION.—Section

7(j)(16) of the Federal Deposit Insurance Act (12 U.S.C. 18170')(16)) is
amended to read as follows:
"(16) CIVIL MONEY PENALTY.—

'

"(A) FIRST TIER.—Any person who violates any provision
of this subsection, or any regulation or order issued by the
appropriate Federal banking agency under this subsection,
shall forfeit and pay a civil penalty of not more than $5,000
for each day during which such violation continues.
"(B) SECOND TIER.—Notwithstanding subparagraph (A),
any person who—
"(i)(I) commits any violation described in any clause
of subparagraph (A);
"(II) recklessly engages in an unsafe or unsound
practice in conducting the affairs of a depository
institution; or
"(III) breaches any fiduciary duty;
"(ii) which violation, practice, or breach—
"(I) is part of a pattern of misconduct;
"(II) causes or is likely to cause more than a
minimal loss to such institution; or
"(III) results in pecuniary gain or other benefit
to such person,
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation, practice,
or breach continues.
"(C) THIRD TIER.—Notwithstanding subparagraphs (A)

V

and (B), any person who—
"(i) knowingly—
"(I) commits any violation described in any
.
clause of subparagraph (A);
"(II) engages in any unsafe or unsound practice
in conducting the affairs of a depository institution; or
"(III) breaches any fiduciary duty; and
"(ii) knowingly or recklessly causes a substantial loss
to such institution or a substantial pecuniary gain or
other benefit to such person by reason of such violation,
practice, or breach,
shall forfeit and pay a civil penalty in an amount not to
exceed the applicable maximum amount determined under
subparagraph (D) for each day during which such violation,
practice, or breach continues.
"(D) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION
DESCRIBED IN SUBPARAGRAPH (C).—The maximum daily

amount of any civil penalty which may be assessed pursu-

PUBLIC LAW 101-73—AUG. 9, 1989
ant to subparagraph (C) for any violation, practice, or
breach described in such subparagraph is—
"(i) in the case of any person other than a depository
institution, an amount to not exceed $1,000,000; and
"(ii) in the case of a depository institution, an amount
not to exceed the lesser of—
"(I) $1,000,000; or
"(II) 1 percent of the total assets of such institution.
"(E) ASSESSMENT; ETC.—Any penalty imposed under
subparagraph (A), (B), or (C) shall be assessed and collected
by the appropriate Federal banking agency in the manner
provided in subparagraphs (E), (F), (G), and (I) of section
8(i)(2) for penalties imposed (under such section) and any
such assessment shall be subject to the provisions of such
section.
"(F) HEARING.—The depository institution or other
person against whom any penalty is assessed under this
paragraph shall be afforded an agency hearing if such
institution or other person submits a request for such hearing within 20 days after the issuance of the notice of
assessment. Section 8(h) shall apply to any proceeding
under this paragraph.
"(G) DISBURSEMENT.—All penalties collected under
authority of this paragraph shall be deposited into the
TreEisury.".
(e) NATIONAL BANKS.—Section 5239(b) of the Revised Statutes (12
U.S.C. 93(b)) is amended to read as follows:

103 STAT. 469

^

"(b) CIVIL MONEY PENALTY.—

"(1) FIRST TIER.—Any national banking Eissociation which, and
any institution-affiliated party (within the meaning of section
3(u) of the Federal Deposit Insurance Act) with respect to such
association who, violates any provision of this title or any of the
provisions of the first section of the Act of September 28, 1962,
(76 Stat. 668; 12 U.S.C. 92a), or any regulation issued pursuant
thereto, shall forfeit and pay a civil penalty of not more than
$5,000 for each day during which such violation continues.
"(2) SECOND TIER.—Notwithstanding paragraph (1), any na-

tional banking association which, and any institution-affiliated
party (within the meaning of section 3(u) of the Federal Deposit
Insurance Act) with respect to such association who, commits
any violation described in paragraph (1) which—
"(A)(i) commits any violation described in any paragraph
(1);
"(ii) recklessly engages in an unsafe or unsound practice
in conducting the affairs of such association; or
"(iii) breaches any fiduciary duty;
"(B) which violation, practice, or breach—
"(i) is part of a pattern of misconduct;
"(ii) causes or is likely to cause more than a minimal
loss to such association; or
"(iii) results in pecuniary gain or other benefit to
such party,
shall forfeit and pay a civil penalty of not more than $25,000 for
each day during which such violation, practice, or breach
continues.

>

103 STAT. 470

PUBLIC LAW 101-73—AUG. 9, 1989
"(3) THIRD TIER.—Notwithstanding paragraphs (1) and (2), any

national banking association which, and any institution-affili'
ated party (within the meaning of section 3(u) of the Federal
Deposit Insurance Act) with respect to such association who—
"(A) knowingly—
"(i) commits any violation described in paragraph (1);
"(ii) engages in any unsafe or unsound practice in
conducting the Eiffairs of such association; or
"(iii) breaches any fiduciary duty; and
'
"(B) knowingly or recklessly causes a substantial loss to
- ' > such association or a substantial pecuniary gain or other
*
benefit to such party by reason of such violation, practice,
or breach,
shall forfeit and pay a civil penalty in an amount not to exceed
the applicable maximum amount determined under paragraph
(4) for each day during which such violation, practice, or breach
continues.
";i

"(4) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION

•^

'

^

DESCRIBED IN PARAGRAPH (3).—The maximum daily amount of
any civil penalty which may be assessed pursuant to paragraph
(3) for any violation, practice, or breach described in such
paragraph is—
"(A) in the case of any person other than a national
banking association, an amount to not exceed $1,000,000;
and
"(B) in the case of a national banking association, an
amount not to exceed the lesser of—
"(i) $1,000,000; or
"(ii) 1 percent of the total assets of such association.
"(5) ASSESSMENT; ETC.—Any penalty imposed under paragraph
• (1), (2), or (3) shall be assessed and collected by the Comptroller
of the Currency in the manner provided in subparagraphs (E),
(F), (G), and (I) of section 8(iX2) of the Federal Deposit Insurance
Act for penalties imposed (under such section) and any such
assessment shall be subject to the provisions of such section.
"(6) HEARING.—The association or other person against whom
any penalty is assessed under this subsection shall be afforded
L- an agency hearing if such association or person submits a
request for such hearing within 20 days after the issuance of the
' notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under this subsection.
"(7) DISBURSEMENT.—All penalties collected under authority
of this subsection shall be deposited into the Treasury.
.,
"(8) VIOLATE DEFINED.—For purposes of this section, the term
Violate' includes any action (alone or with another or others)
for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.
"(12) REGULATIONS.—The Comptroller shall prescribe regulations establishing such procedures as may be necessary to carry
out this subsection.".
(f) NATIONAL BANKS.—The 2d paragraph of section 5240 of the
Revised Statutes (12 U.S.C. 481) is amended by striking "$100" and
inserting "$5,000".
(g) MEMBER BANKS.—Section 29 of the Federal Reserve Act (12

U.S.C. 504) is amended to read as follows:

PUBLIC L A W 101-73—AUG. 9, 1989

103 STAT. 471

"SEC. 29. CIVIL MONEY PENALTY.
"(a) FIRST TIER.—Any member bank which, and any institution-

affiliated party (within the meaning of section 3(u) of the Federal
Deposit Insurance Act) with respect to such member bank who,
violates any provision of section 22, 23A, or 23B, or any regulation
issued pursuant thereto, shall forfeit and pay a civil penalty of not
more than $5,000 for each day during which such violation continues.
"(b) SECOND TIER.—Notwithstanding subsection (a), any member
bank which, and any institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect
to such member bank who
"(1)(A) commits any violation described in subsection (a);
"(B) recklessly engages in an unsafe or unsound practice in
conducting the affairs of such member bank; or
"(C) breaches any fiduciary duty;
"(2) which violation, practice, or breach—
"(A) is part of a pattern of misconduct;
"(B) causes or is likely to cause more than a minimal loss
to such member bank; or
"(C) results in pecuniary gain or other benefit to such
party,
shall forfeit and pay a civil penalty of not more than $25,000 for
each day during which such violation, practice, or breach continues.

^

"(c) THIRD TIER.—Notwithstanding subsections (a) and (b), any

member bank which, and any institution-affiliated party (within the
meaning of section 3(u) of the Federal Deposit Insurance Act) with
respect to such member bank who—
"(1) knowingly—
"(A) commits any violation described in subsection (a);
"(B) engages in any unsafe or unsound practice in
conducting the affairs of such credit union; or
"(C) breaches any fiduciary duty; and
"(2) knowingly or recklessly causes a substantial loss to such
credit union or a substantial pecuniary gain or other benefit to
such party by reason of such violation, practice, or breach,
shall forfeit and pay a civil penalty in an amount not to exceed the
applicable maximum amount determined under subsection (d) for
each day during which such violation, practice, or breach continues.

^

"(d) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION DESCRIBED IN SUBSECTION (C).—The msiximum daily amount of any civil

penalty which may be assessed pursuant to subsection (c) for any
violation, practice, or breach described in such subsection is—
"(1) in the case of any person other than a member bank, an
amount to not exceed $1,000,000; and
"(2) in the case of a member bank, an amount not to exceed
the lesser of—
"(A) $1,000,000; or
"(B) 1 percent of the total assets of such member bank.
"(e) ASSESSMENT; ETC.—Any penalty imposed under subsection (a),
(b), or (c) shall be assessed and collected by
"(1) in the case of a national bank, by the Comptroller of the
Currency; and
"(2) in the csise of a State member bank, by the Board,
in the manner provided in subparagraphs (E), (F), (G), and (I) of
section 8(i)(2) of the Federal Deposit Insurance Act for penalties

x

103 STAT. 472

PUBLIC LAW 101-73—AUG. 9, 1989

imposed (under such section) and any such assessment shall be
subject to the provisions of such section.
"(f) HEARING.—The member bank or other person against whom
any penalty is assessed under this section shall be afforded an
agency hearing if such member bank or person submits a request for
such hearing within 20 days after the issuance of the notice of
assessment. Section 8(h) of the Federal Deposit Insurance Act shall
apply to any proceeding under this section,
"(g) DISBURSEMENT.—All penalties collected under authority of
this paragraph shall be deposited into the Treasury.
"(h) VIOLATE DEFINED.—For purposes of this section, the term
'violate' includes any action (alone or with another or others) for or
toward causing, bringing about, participating in, counseling, or
aiding or abetting a violation.
"(i) REGULATIONS.—The Comptroller of the Currency and the
Board shall prescribe regulations establishing such procedures as
may be necessary to carry out this section.".
(h) MEMBER BANK.—Section 19(1) of the Federal Reserve Act (12
U.S.C. 505(1)) is amended to read as follows:
"(1) CIVIL MONEY PENALTY.—
"(1) FIRST TIER.—Any member

bank which, and any institution-affiliated party (within the meaning of section 3(u) of the
Federal Deposit Insurance Act) with respect to such member
bank who, violates any provision of this section, or any regulation issued pursuant thereto, shall forfeit and pay a civil penalty of not more than $5,000 for each day during which such
violation continues.
"(2) SECOND TIER.—Notwithstanding

paragraph

(1), any

member bank which, and any institution-affiliated party
(within the meaning of section 3(u) of the Federal Deposit
Insurance Act) with respect to such member bank who—
"(A)(i) commits any violation described in paragraph (1);
"(ii) recklessly engages in an unsafe or unsound practice
in conducting the affairs of such member bank; or
"(iii) breaches any fiduciary duty;
"(B) which violation, practice, or breach—
:
"(i) is part of a pattern of misconduct;
"(ii) causes or is likely to cause more than a minimal
loss to such member bank; or
"(iii) results in pecuniary gain or other benefit to
such party,
shall forfeit and pay a civil penalty of not more than
$25,000 for each day during which such violation, practice,
J or breach continues.
"(3) THIRD TIER.—Notwithstanding paragraphs (1) and (2),

>r

any member bank which, and any institution-affiliated
party (within the meaning of section 3(u) of the Federal
Deposit Insurance Act) with respect to such member bank
who—
"(A) knowingly—
"(i) commits any violation described in paragraph (1);
(
"(ii) engages in any unsafe or unsound practice in
conducting the affairs of such member bank; or
"(iii) breaches any fiduciary duty; and
"(B) knowingly or recklessly causes a substantial loss to
such member bank or a substantial pecuniary gain or other

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 473

benefit to such party by reason of such violation, practice,
or breach,
shall forfeit and pay a civil pensilty in an amount not to exceed
the applicable maximum amount determined under paragraph
(4) for each day during which such violation, practice, or breach
continues.
"(4) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION

DESCRIBED IN PARAGRAPH (3).—The maximum daily amount of
any civil penalty which may be gissessed pursuant to paragraph
(3) for any violation, practice, or breach described in such
paragraph is—
"(A) in the case of any person other than a member bgink,
an amount not to exceed $1,000,000; and
"(B) in the case of a member bank, an amount not to
exceed the lesser of—
"(i) $1,000,000; or
"(ii) 1 percent of the total assets of such member
b£ink.
"(5) ASSESSMENT; ETC.—Any penalty imposed under paragraph
(1), (2), or (3) may be Eissessed and collected by the Board in the
manner provided in subparagraphs (E), (F), (G), and (I) of section
8(iX2) of the Federal Deposit Insurance Act for penalties imposed (under such section) and any such assessment shall be
subject to the provisions of such section.
"(6) HEARING.—The member bank or other person against
whom any penalty is assessed under this subsection shall be
afforded an agency hearing if such member bank or person
submits a request for such hearing within 20 days after the
issuance of the notice of assessment. Section 8(h) of the Federal
Deposit Insurance Act shall apply to any proceeding under this
subsection.
"(7) DISBURSEMENT.—All penalties collected under authority
of this subsection shall be deposited into the Treasury.
"(8) VIOLATE DEFINED.—For purposes of this section, the term
'violate' includes any action (alone or with another or others)
for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.
(9) REGULATIONS.—The Board shall prescribe regulations
establishing such procedures as may be necessary to carry out
this subsection.",
(i) BANKS.—Section 106(bX2)(F) of the Bank Holding Ck)mpany Act
Amendments of 1970 (12 U.S.C. 1972(2XF)) is amended to read as
follows:
"(F) CIVIL MONEY PENALTY.—
"(i) FIRST TIER.—Any bank which, and any institution-affili-

ated party (within the meaning of section 3(u) of the Federal
Deposit Insurance Act) with respect to such bank who, violates
any provision of this paragraph shall forfeit and pay a civil
penalty of not more than $5,000 for each day during which such
violation continues.
"(ii) SECOND TIER.—Notwithstanding clause (i), any bank
which, and any institution-affiliated party (within the meaning
of section 3(u) of the Federal Deposit Insurance Act) with
respect to such bank who—
"(IXaa) commits any violation described in clause (i);
"(bb) recklessly engages in an unsafe or unsound practice
in conducting the affairs of such bank; or

103 STAT. 474

PUBLIC LAW 101-73—AUG. 9, 1989
• -^

'

-'f

"(cc) breaches any fiduciary duty;
"(II) which violation, practice, or breach—
"(aa) is part of a pattern of misconduct;
"(bb) causes or is likely to cause more than a minimal
loss to such bank; or
"(cc) results in pecuniary gain or other benefit to
such party,
shall forfeit and pay a civil penalty of not more than $25,000 for
each day during which such violation, practice, or breach
continues.
"(iii) THIRD TIER.—Notwithstanding clauses (i) and (ii), any
bank which, and any institution-affiliated party (within the
meaning of section 3(u) of the Federal Deposit Insurance Act)
with respect to such bank who—
"(I) knowingly—
"(aa) commits any violation described in clause (i);
•'
"(bb) engages in any unsafe or unsound practice in
conducting the affairs of such bank; or
"(cc) breaches any fiduciary duty; and
"(II) knowingly or recklessly causes a substantial loss to
such bank or a substantial pecuniary gain or other benefit
to such party by reason of such violation, practice, or
breach,
shall forfeit and pay a civil penalty in an amount not to exceed
the applicable maximum amount determined under clause (iv)
for each day during which such violation, practice, or breach
continues.
"(iv) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION

,

DESCRIBED IN CLAUSE (iii).—The maximum daily amount of any
civil penalty which may be assessed pursuant to clause (iii) for
any violation, practice, or breach described in such clause is—
"(I) in the case of any person other than a bank, an
amount to not exceed $1,000,000; and
"(II) in the case of a bank, an amount not to exceed the
1GSS6T* of"""

"(aa) $1,000,000; or
"(bb) 1 percent of the total Eissets of such bank.
"(v) ASSESSMENT; ETC.—Any penalty imposed under clause (i),
(ii), or (iii) may be assessed and collected—
"(I) in the case of a national bank, by the Comptroller of
the Currency;
"(II) in the case of a State member bank, by the Board;
and
"(III) in the case of an insured nonmember State bank, by
the Federal Deposit Insurance Corporation,
in the manner provided in subparagraphs (E), (F), (G), and (I) of
section 8(i)(2) of the Federal Deposit Insurance Act for penalties
imposed (under such section) and any such assessment shall be
subject to the provisions of such section.
"(vi) HEARING.—The bank or other person against whom any
penalty is assessed under this subparagraph shall be afforded
an agency hearing if such bank or person submits a request for
• such hearing within 20 days after the issuance of the notice of
assessment. Section 8(h) of the Federal Deposit Insurance Act
shall apply to any proceeding under this subparagraph.
"(vii) DISBURSEMENT.—All penalties collected under authority
of this subsection shall be deposited into the Treasury.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 475

"(viii) VIOLATE DEFINED.—For purposes of this paragraph, the
term 'violate' includes any action (alone or with another or
others) for or toward causing, bringing about, participating in,
counseling, or aiding or abetting a violation.
"(ix) REGULATIONS.—The Comptroller of the Currency, the
Board, and the Federal Deposit Insurance Corporation shall
prescribe regulations establishing such procedures as may be
necessary to carry out this subparagraph.'.
(j) BANK HOLDING COMPANIES.—Section 8 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1847) is amended—
(1) in subsection (a), by striking out the first 2 sentences and
inserting in lieu thereof the following:
"(a) CRIMINAL PENALTY.—

"(1) Whoever knowingly violates any provision of this Act or,
being a company, violates any regulation or order issued by the
Board under this Act, shall be imprisoned not more than 1 year,
fined not more than $100,000 per day for each day during which
the violation continues, or both.
"(2) Whoever, with the intent to deceive, defraud, or profit
significantly, knowingly violates any provision of this Act shall
be imprisoned not more than 5 years, fined not more than
$1,000,000 per day for each day during which the violation
continues, or both."; and
(2) by amending subsection (b) to read as follows:
"(b) CIVIL MONEY PENALTY.—

"(1) PENALTY.—Any company which violates, and any individual who participates in a violation of, any provision of this Act,
or any regulation or order issued pursuant thereto, shall forfeit
and pay a civil penalty of not more than $25,000 for each day
during which such violation continues.
"(2) ASSESSMENT; ETC.—Any penalty imposed under paragraph
(1) may be assessed and collected by the Board in the manner
provided in subparagraphs (E), (F), (G), and (I) of section 8(i)(2) of
the Federal Deposit Insurance Act for penalties imposed (under
such section) and any such assessment shall be subject to the
provisions of such section.
"(3) HEARING.—The company or other person against whom
any penalty is assessed under this subsection shall be afforded
an agency hearing if such association or person submits a
request for such hearing within 20 days after the issuance of the
notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under this subsection.
"(4) DISBURSEMENT.—All penalties collected under authority
of this subsection shall be deposited into the Treasury.
"(5) VIOLATE DEFINED.—For purposes of this section, the term
'violate' includes any action (alone or with another or others)
for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.
"(6) REGULATIONS.—The Board shall prescribe regulations
establishing such procedures as may be necessary to carry out
this subsection.".
(k) SAVINGS AND LOAN HOLDING COMPANIES.—Section 10(i) of the

Home Owners Loan Act of 1933 (as amended by section 301 of this
Act) is amended—
(1) by striking paragraphs (1) and (2) and inserting in lieu
thereof the following:
"(1) CRIMINAL PENALTY.—

103 STAT. 476

"

PUBLIC LAW 101-73—AUG. 9, 1989
"(A) Whoever knowingly violates any provision of this section
or being a company, violates any regulation or order issued by
the Director under this section, shall be imprisoned not more
than 1 year, fined not more than $100,000 per day for each day
during which the violation continues, or both.
"(B) Whoever, with the intent to deceive, defraud, or profit
significantly, knowingly violates any provision of this section
shall be fined not more than $1,000,000 per day for each day
during which the violation continues, imprisoned not more than
5 years, or both.";
(2) by redesignating paragraphs (3) and (4) as paragraphs (2)
and (3), respectively; and
(3) by amending paragraph (3) (as so redesignated by paragraph <2) of this subsection) to read £is follows:
"(3) CIVIL MONEY PENALTY.—

12 use 93 note.

"(A) PENALTY.—Any company which violates, and any
person who participates in a violation of, any provision of
this section, or any regulation or order issued pursuant
thereto, shall forfeit and pay a civil penalty of not more
than $25,000 for each day during which such violation
continues.
"(B) ASSESSMENT; ETC.—Any penalty imposed under
subparagraph (A) may be assessed and collected by the
Director in the meinner provided in subparagraphs (E), (F),
(G), and (I) of section 8(i)(2) of the Federal Deposit Insurance
Act for penalties imposed (under such section) and any such
assessment shall be subject to the provisions of such section.
]
"(C) HEARING.—The company or other person against
I
whom any penalty is assessed under this paragraph shall be
afforded an agency hearing if such company or person
submits a request for such hearing within 20 days after the
issuance of the notice of assessment. Section 8(h) of the
Federal Deposit Insurance Act shall apply to any proceeding under this paragraph.
(D) DISBURSEMENT.—All penalties collected under
authority of this paragraph shall be deposited into the
Treasury.
"(E) VIOLATE DEFINED.—For purposes of this section, the
term 'violate' includes any action (alone or with another or
others) for or toward causing, bringing about, participating
in, counseling, or aiding or abetting a violation.
"(F) REGULATIONS.—The Director shall prescribe regulations establishing such procedures as may be necessary to
carry out this paragraph.".
(1) EFFECTIVE DATE.—The amendments made by this section shall
apply with respect to conduct engaged in by any person after the
date of the enactment of this Act, except that the increased maximum civil penalties of $5,000 and $25,000 per violation or per day
may apply to such conduct engaged in before such date if such
conduct—
(1) is not already subject to a notice (initiating an administrative proceeding) issued by the appropriate Federal banking
agency (as defined in section 3(q) of the Federal Deposit Insurance Act) or the National Credit Union Administration Board;
and
(2) occurred after the completion of the last report of examination of the institution involved by the appropriate Federal

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 477

banking agency (as so defined) occurring before the date of the
enactment of this Act.
SEC. 908. CLARIFICATION OF CRIMINAL PENALTY PROVISIONS FOR VIOLATION OF CERTAIN ORDERS.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE FDIC.—Section 8(j) of

the Federal Deposit Insurance Act (12 U.S.C. 1818(j)) is amended to
read as follows:
"(j) CRIMINAL PENALTY.—Whoever, being subject to an order in
effect under subsection (e) or (g), without the prior written approval
of the appropriate Federal financial institutions regulatory agency,
knowingly participates, directly or indirectly, in any manner
(including by engaging in an activity specifically prohibited in such
an order or in subsection (eX6)) in the conduct of the affairs of—
"(1) any insured depository institution;
"(2) any institution treated as an insured bank under subsection (bX3) or (bX4), or as a savings association under subsection
(bX8);
"(3) any insured credit union (as defined in section 101(7) of
the Federal Credit Union Act);
"(4) any institution chartered under the Farm Credit Act of
1971; or
"(5) the Resolution Trust Corporation,
shall be fined not more than $1,000,000, imprisoned for not more
than 5 years, or both.".
(b) CREDIT UNIONS INSURED BY THE NCUA.—Section 206(1) of the
Federal Credit Union Act (12 U.S.C. 1786(1)) is amended to read as
follows:

V

^

"(1) CRIMINAL PENALTY FOR VIOLATION OF CERTAIN ORDERS.—Who-

ever—
"(1) under this Act, is suspended or removed from, or prohibited from participating in the affairs of any credit union described in section 206(gX5); and
"(2) knowingly participates, directly or indirectly, in any
manner (including by engaging in an activity specifically
prohibited in such an order or in subsection (gX5)) in the conduct of the Eiffairs of such a credit union;
shall be fined not more than $1,000,000, imprisoned for not more
than 5 years, or both.".
SEC. 909. SUPERVISORY RECORDS.

Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is
amended by inserting after subsection (m) (as added by section 214 of
this Act) the following new subsection:
"(o) SUPERVISORY RECORDS.—In addition to the requirements of

section 7(aX2) to provide to the (Dorporation copies of reports of
examination and reports of condition, whenever the Corporation has
been appointed as receiver for an insured depository institution, the
appropriate Federal banking agency shall make available all supervisory records to the receiver which may be used by the receiver in
any manner the receiver determines to be appropriate.".
SEC. 910. INCREASED PENALTY FOR PARTICIPATION BY CONVICTED
INDIVIDUALS.

(a) BANKS INSURED BY THE FDIC.—Section 19 of the Federal
Deposit Insurance Act (12 U.S.C. 1829) is amended to read as follows:

'

103 STAT. 478

PUBLIC LAW 101-73—AUG. 9, 1989
"SEC. 19. PENALTY FOR UNAUTHORIZED PARTICIPATION BY CONVICTED
INDIVIDUAL.

^

"(a) PROHIBITION.—Except with the prior written consent of the
Corporation—
"(1) any person who has been convicted of any criminal
offense involving dishonesty or a breach of trust may not
participate, directly or indirectly, in any manner in the conduct
of the affairs of an insured depository institution; and
"(2) an insured depository institution may not permit such
participation.
"(b) PENALTY.—Whoever knowingly violates subsection (a) shall be
fined not more than $1,000,000 for each day such prohibition is
violated or imprisoned for not more than 5 years, or both.".
(b) CREDIT UNIONS INSURED BY THE NCUA.—Section 205(d) of the
Federal Credit Union Act (12 U.S.C. 1785(d)) is amended to read as
follows:
"(d) PENALTY FOR PROHIBITED PARTICIPATION.—

"(1) PROHIBITION.—Except with the prior written consent of
the Board—
"(A) any person who has been convicted of any criminal
i.
offense involving dishonesty or a breach of trust may not
participate, directly or indirectly, in any manner in the
conduct of the affairs of an insured credit union; and
"(B) an insured credit union may not permit such participation.
"(2) PENALTY.—Whoever knowingly violates paragraph (1)
,,/ shall be fined not more than $1,000,000 for each day such
prohibition is violated or imprisoned for not more than 5 years,
or both.".
SEC. 911. AMENDMENTS TO VARIOUS PROVISIONS OF LAW RELATING TO
REPORTS.

(a) BANK PROTECTION ACT.—Section 3(b) of the Bank Protection
Act of 1968 (12 U.S.C. 1882) is amended by striking out "and shall
require the submission of periodic reports with respect to the
installation, maintenance, and operation of security devices and
procedures".
(b) AMENDMENTS RELATING TO NATIONAL BANKS.—

(1) Section 5211 of the Revised Statutes (12 U.S.C. 161) is
amended—
(A) in the 5th sentence of subsection (a), by striking out
"within ten days after the receipt of a request therefor from
him" and inserting in lieu thereof "within the period of
* time specified by the Comptroller"; and
(B) in subsection (c), by striking out the last sentence.
(2) Section 5213 of the Revised Statutes (12 U.S.C. 164) is
amended to read as follows:
"SEC. 5213. P E N A L T Y FOR FAILURE TO MAKE REPORTS.

"(a) FIRST TIER.—Any association which—

"(1) maintains procedures reasonably adapted to avoid any
inadvertent error and, unintentionally and as a result of such
an error—
"(A) fails to make, obtain, transmit, or publish any report
or information required by the Comptroller of the Currency
' under section 5211 of this chapter, within the period of time
specified by the Comptroller; or

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 479

"(B) submits or publishes any false or misleading report
or information; or
"(2) inadvertently transmits or publishes any report which is
minimally late,
shall be subject to a penalty of not more than $2,000 for each day
during which such failure continues or such false or misleading
information is not corrected. The association shall have the burden
of proving that an error w£is inadvertent and that a report was
inadvertently transmitted or published late.
"Ot)) SECOND TIER.—Any association which—
"(1) fails to make, obtain, transmit, or publish any report or
information required by the Comptroller of the Currency under
section 5211 of this chapter, within the period of time specified
by the Comptroller; or
"(2) submits or publishes any false or misleading report or
information,
in a manner not described in subsection (a) shall be subject to a
penalty of not more than $20,000 for each day during which such
failure continues or such false or misleading information is not
corrected.
"(c) THIRD TIER.—Notwithstanding subsections (a) and (b), if any

association knowingly or with reckless disregard for the accuracy of
any information or report described in subsection (b) submits or
publishes any false or misleading report or information, the
Comptroller may sissess a penalty of not more than $1,000,000 or 1
percent of total assets of the association, whichever is less, per day
for each day during which such failure continues or such false or
misleading information is not corrected.
"(d) ASSESSMENT; ETC.—Any penalty imposed under subsection (a),
(b), or (c) shall be assessed and collected by the Comptroller of the
Currency in the manner provided in subparagraphs (E), (F), (G), and
(I) of section 8(i)(2) of the Federal Deposit Insurance Act (for penalties imposed under such section) and any such assessment (including the determination of the amount of the penalty) shgill be subject
to the provisions of such section.
"(e) HEARING.—Any association against which any penalty is
assessed under this subsection shall be afforded an agency hearing if
such association submits a request for such hearing within 20 days
after the issuance of the notice of assessment. Section 8(h) of the
Federal Deposit Insurance Act shall apply to any proceeding under
this section.".
(c)

AMENDMENT

RELATING

TO STATE

NONMEMBER

INSURED

BANKS.—Section 7(aXl) of the Federal Deposit Insurance Act (12
U.S.C. 1817(a)(1)) is amended by striking out the last sentence and
inserting in lieu thereof the following new sentences: "Any such
bank which (A) mainteuns procedures reasonably adapted to avoid
any inadvertent error and, unintentionally and as a result of such
an error, fails to make or publish any report required under this
paragraph, within the period of time specified by the Corporation, or
submits or publishes any false or misleading report or information,
or (B) inadvertently transmits or publishes any report which is
minimally late, shall be subject to a penalty of not more thsui $2,000
for each day during which such failure continues or such false or
misleading information is not corrected. Such bank shall have the
burden of proving that an error was inadvertent and that a report
was inadvertently transmitted or published late. Any such bank
which fails to make or publish any report required under this

•

103 STAT. 480

PUBLIC LAW 101-73—AUG. 9, 1989
paragraph, within the period of time specified by the Corporation, or
submits or publishes any false or misleading report or information,
in a manner not described in the 2nd preceding sentence shall be
subject to a penalty of not more than $20,000 for each day during
which such failure continues or such false or misleading information
is not corrected. Notwithstanding the preceding sentence, if any
such bank knowingly or with reckless disregard for the accuracy of
any information or report described in such sentence submits or
publishes any false or misleading report or information, the Corporation may assess a penalty of not more than $1,000,000 or 1
percent of total assets of such bank, whichever is less, per day for
each day during which such failure continues or such false or
misleading information is not corrected. Any penalty imposed under
any of the 4 preceding sentences shall be assessed and collected by
the Corporation in the manner provided in subparagraphs (E), (F),
(G), and (I) of section 8(i)(2) (for penalties imposed under such
section) and any such assessment (including the determination of
the amount of the penalty) shall be subject to the provisions of such
section. Any such bank against which any penalty is assessed under
this subsection shall be afforded an agency hearing if such bank
submits a request for such hearing within 20 days after the issuance
of the notice of assessment. Section 8(h) shall apply to any proceeding under this paragraph.".
(d) AMENDMENT RELATING TO STATE MEMBER BANKS.—The

6th

undesignated paragraph of section 9 of the Federal Reserve Act (12
U.S.C. 324) is amended by striking out the penultimate sentence and
inserting in lieu thereof the following new sentences: "Any bank
which (A) maintains procedures reasonably adapted to avoid any
inadvertent error and, unintentionally and as a result of such an
error, fails to make or publish any report required under this
paragraph, within the period of time specified by the Board, or
submits or publishes any false or misleading report or information,
or (B) inadvertently transmits or publishes any report which is
minimally late, shall be subject to a penalty of not more than $2,000
for each day during which such failure continues or such false or
misleading information is not corrected. The bank shall have the
burden of proving that an error was inadvertent and that a report
was inadvertently transmitted or published late. Any bank which
fails to make or publish such reports within the period of time
specified by the Board, or submits or publishes any false or misleading report or information, in a manner not described in the 2nd
preceding sentence shall be subject to a penalty of not more than
$20,000 for each day during which such failure continues or such
false or misleading information is not corrected. Notwithstanding
the preceding sentence, if any bank knowingly or with reckless
disregard for the accuracy of any information or report described in
such sentence submits or publishes any false or misleading report or
information, the Board may assess a penalty of not more than
$1,000,000 or 1 percent of total assets of such bank, whichever is less,
per day for each day during which such failure continues or such
false or misleading information is not corrected. Any penalty imposed under any of the 4 preceding sentences shall be assessed and
collected by the Board in the manner provided in subparagraphs (E),
(F), (G), and (I) of section 8(i)(2) of the Federal Deposit Insurance Act
(for penalties imposed under such section) and any such assessment
(including the determination of the amount of the penalty) shall be
subject to the provisions of such section. Any bank against which

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 481

any penalty is assessed under this subsection shall be afforded an
agency hearing if such bank submits a request for such hearing
within 20 days after the issuance of the notice of assessment. Section
8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under this paragraph.".
(e) AMENDMENT RELATING TO BANK HOLDING COMPANIES.—Section

8 of the Bank Holding Company Act of 1956 (12 U.S.C. 1847) is
amended by adding after the subsection added by section 905(i) of
this Act the following new subsection:
"(d) PENALTY FOR FAILURE TO MAKE REPORTS.—
"(1) FIRST TIER.—Any company which—

"(A) maintains procedures reasonably adapted to avoid
any inadvertent error and, unintentionally and as a result
of such an error—
"(i) fails to make, submit, or publish such reports or
information as may be required under this Act or
under regulations prescribed by the Board pursuant to
this Act, within the period of time specified by the
Board; or
"(ii) submits or publishes .any false or misleading
report or information; or
"(B) inadvertently transmits or publishes any report
which is minimally late,
shall be subject to a penalty of not more than $2,000 for each
day during which such failure continues or such false or misleading information is not corrected. The company shall have
the burden of proving that an error was inadvertent and that a
report was inadvertently transmitted or published late.

1

(2) SECOND TIER.—Any company which—

"(A) fails to make, submit, or publish such reports or
information as may be required under this Act or under
regulations prescribed by the Board pursuant to this Act,
within the period of time specified by the Board; or
"(B) submits or publishes any false or misleading report
or information,
in a manner not described in paragraph (1) shall be subject to a
penalty of not more than $20,000 for each day during which
such failure continues or such false or misleading information is
not corrected.
"(3) THIRD TIER.—Notwithstanding paragraph (2), if any com-

pany knowingly or with reckless disregard for the accuracy of
any information or report described in paragraph (2) submits or
publishes any false or misleading report or information, the
Board may, in its discretion, assess a penalty of not more than
$1,000,000 or 1 percent of total assets of such company, whichever is less, per day for each day during which such failure
continues or such false or misleading information is not corrected.
"(4) ASSESSMENT; ETC.—Any penalty imposed under paragraph
(1), (2), or (3) shall be assessed and collected by the Board in the
manner provided in subsection (b) (for penalties imposed under
such subsection) and any such assessment (including the determination of the amount of the penalty) shall be subject to the
provisions of such subsection.
"(5) HEARING.—Any company against which any penalty is
assessed under this subsection shall be afforded an agency
hearing if such company submits a request for such hearing

,

-

103 STAT. 482

PUBLIC LAW 101-73—AUG. 9, 1989

within 20 days after the issuance of the notice of assessment.
Section 8(h) of the Federal Deposit Insurance Act shall apply to
-"
any proceeding under this subsection.".
(f) AMENDMENT RELATING TO CREDIT UNIONS.—Section 202(aX3) of
the Federal Credit Union Act (12 U.S.C. 1782(a)(3)) is amended by
striking out the 2nd sentence and inserting in lieu thereof the
following new sentences: "Any insured credit union which maintains procedures reasonably adapted to avoid any inadvertent error
and, unintentionally and as a result of such an error, fails to submit
or publish any report required under this subsection or section 106,
within the period of time specified by the Board, or submits or
publishes any false or misleading report or information, or inadvertently transmits or publishes any report which is minimally late,
shall be subject to a penalty of not more than $2,000 for each day
during which such failure continues or such false or misleading
information is not corrected. The insured credit union shall have the
burden of proving that an error was inadvertent and that a report
was inadvertently transmitted or published late. Any insured credit
union which fails to submit or publish any report required under
this subsection or section 106, within the period of time specified by
the Board, or submits or publishes any false or misleading report or
information, in a manner not described in the 2nd preceding sentence shall be subject to a penalty of not more than $20,000 for each
day during which such failure continues or such false or misleading
information is not corrected. Notwithstanding the preceding sentence, if any insured credit union knowingly or with reckless disregard for the accuracy of any information or report described in
such sentence submits or publishes any false or misleading report or
information, the Board may assess a penalty of not more than
$1,000,000 or 1 percent of total assets of such credit union, whichever is less, per day for each day during which such failure continues or such false or misleading information is not corrected. Any
penalty imposed under any of the 4 preceding sentences shall be
assessed and collected by the Board in the manner provided in
section 206(kX2) (for penalties imposed under such section) and any
such assessment (including the determination of the amount of the
penalty) shall be subject to the provisions of such section. Any
insured credit union ag£iinst which any penalty is assessed under
this subsection shall be afforded an agency hearing if such insured
credit union submits a request for such hearing within 20 days after
the issuance of the notice of assessment. Section 206(j) shall apply to
any proceeding under this subsection.".
12 use 161 note.
(i) EFFECTIVE DATE.—The amendments made by this section shall
apply with respect to reports filed or required to be filed after the
date of the enactment of this Act.
SEC. 912. AUTHORITY OF THE FDIC TO TAKE ENFORCEMENT ACTION
AGAINST SAVINGS ASSOCIATIONS.

Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) is
amended by adding at the end thereof the following new subsection:
"(t) AUTHORITY OF BOARD TO TAKE ENFORCEMENT ACTION AGAINST
SAVINGS ASSOCIATIONS.—
"(1) AUTHORITY TO RECOMMEND THAT DIRECTOR OF OFFICE OF
THRIFT SUPERVISION TAKE ENFORCEMENT ACTION.—The Corpora-

tion, based on an examination of a savings association by the
Corporation or by the Director of the Office of Thrift Supervision or on other information, may recommend that the Direc-

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 483

tor take any enforcement action authorized under section 7(j),
this section, or section 18(j) with respect to any savings association.
"(2) AUTHORITY OF BOARD TO ORDER CORPORATION TO TAKE
ENFORCEMENT ACTION IF DIRECTOR OF OFFICE OF THRIFT SUPER-

VISION FAILS TO FOLLOW RECOMMENDATION.—If the Director fails
to take the recommended action or to provide an acceptable
plan for addressing the concerns of the Corporation as set forth
in its recommendation before the close of the 60-day period
beginning on the date of the receipt of the formal recommendation from the Corporation, the Board of Directors may order the
Corporation to take such action if the Board determines that—
"(A) the association is in an unsafe or unsound condition;
or
"(B) failure to take the recommended action will result in
continuance of unsafe or unsound practices in conducting
the business of the savings association.
"(3) EFFECT OF EXIGENT CIRCUMSTANCES.—
"(A) AUTHORITY TO ACT.—Notwithstanding paragraphs (1)

and (2), the Board of Directors may order the Corporation to
exercise its authority, without regard to the time period set
forth, in exigent circumstances after notifying the Director.
"(B) AGREEMENT ON EXIGENT CIRCUMSTANCES.—The Corporation shall, by agreement with the Director, set forth
those exigent circumstances in which the Corporation may
act without regard to the time period set forth above.
"(4) REQUESTS FOR FORMAL ACTIONS AND INVESTIGATIONS.—

"(A) SUBMISSION OF REQUESTS.—The regional offices of the

Office of Thrift Supervision shall concurrently submit all
requests for formal investigations or enforcement actions to
both the Director and the Corporation.
"(B) DIRECTOR REQUIRED TO REPORT ON REQUESTS.—The

Director shall report semiannually to the Corporation the
status or disposition of all such requests, including the
reasons for the Director's decision to either approve or deny
all such requests.
"(5) NONDELEGATION.—Any decisions by the Board of Directors to order actions described in this subsection shall not be
delegated.".
SEC. 913. PUBLIC DISCLOSURE OF ENFORCEMENT ACTIONS REQUIRED.
(a) ORDERS ISSUED BY APPROPRIATE FEDERAL BANKING AGENCIES.—

Section 8 of the Federal Deposit Insurance Act is amended by adding
after the subsection added by section 912 of this Act the following
new subsection:
"(u) PuBuc DISCLOSURE OF FINAL ORDERS.—
"(1) I N GENERAL.—The appropriate Federal banking agency
shall publish and make available to the public—
"(A) any final order issued with respect to any administrative enforcement proceeding initiated by such agency
under this section or any other provision of law; and
"(B) any modification to or termination of any final order
described in subparagraph (A) of this paragraph.
"(2)

DELAY

OP

PUBUCATION

UNDER

EXCEPTIONAL

•

CIR-

CUMSTANCES.—If the appropriate Federal banking agency
makes a determination in writing that the publication of any
final order pursuant to paragraph (1) would seriously threaten

^

(

103 STAT. 484

PUBLIC LAW 101-73—AUG. 9, 1989
the safety or soundness of an insured depository institution,
such agency may delay the publication of such order for a
reasonable time.",
(b) ORDERS ISSUED BY NCUA.—Section 206 of the Federal Credit

Union Act (12 U.S.C. 1786) is amended by inserting after the subsection added by section 901(b) of this Act the following new subsection:
"(s) PUBLIC DISCLOSURE OF FINAL ORDERS.—

"(1) I N GENERAL.—The Board shall publish and make available to the public—
"(A) any final order issued with respect to any administrative enforcement proceeding initiated by such agency
under this section or any other provision of law; and
"(B) any modification to or termination of any final order
described in subparagraph (A).
"(2)

;

DELAY

OF PUBLICATION

UNDER

EXCEPTIONAL

CIR-

CUMSTANCES.—If the Board makes a determination in writing
that the publication of any final order pursuant to paragraph (1)
would seriously threaten the safety or soundness of an insured
credit union or other federally regulated depository institution,
the Board may delay the publication of such order for a reasonable time.".

SEC. 914. AGENCY DISAPPROVAL OF DIRECTORS AND SENIOR EXECUTIVE
OFFICERS OF CERTAIN DEPOSITORY INSTITUTIONS.
(a) DEPOSITORY INSTITUTION INSURED BY THE F D I C . — T h e Federal

Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding
after the section added by section 226 of this Act the following new
section:
12 use 18311.

"SEC. 32. AGENCY DISAPPROVAL OF DIRECTORS AND SENIOR EXECUTIVE
OFFICERS OF INSURED DEPOSITORY INSTITUTIONS OR
DEPOSITORY INSTITUTION HOLDING COMPANIES.
"(a) PRIOR NOTICE REQUIRED.—An insured depository institution
or depository institution holding company shall notify the appropriate Federal banking agency of the proposed addition of any
individual to the board of directors or the employment of any
individual as a senior executive officer of such institution or holding
company at least 30 days before such addition or employment
becomes effective, if the insured depository institution or depository
institution holding company—
"(1) has been chartered less than 2 years in the case of an
insured depository institution;
"(2) has undergone a change in control within the preceding 2
years; or
"(3) is not in compliance with the minimum capital requirement applicable to such institution or is otherwise in a troubled
condition, as determined by such agency on the basis of such
institution's or holding company's most recent report of condition or report of examination or inspection.
"(b) DISAPPROVAL BY AGENCY.—An insured depository institution
or depository institution holding company may not add any individual to the board of directors or employ any individual as a senior
executive officer if the appropriate Federal banking agency issues a
notice of disapproval of such addition or employment before the end
of the 30-day period beginning on the date the agency receives notice
of the proposed action pursuant to subsection (a).
"(c) EXCEPTION IN EXTRAORDINARY CIRCUMSTANCES.—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 485

"(1) IN GENERAL.—Each appropriate Federal banking agency
may prescribe by regulation conditions under which the prior
notice requirement of subsection (a) may be waived in the event
of extraordinary circumstances.
"(2) N o EFFECT ON DISAPPROVAL AUTHORITY OF AGENCY.—Such

waivers shall not affect the authority of each agency to issue
notices of disapproval of such additions or employment of such
individuals within 30 days after each such waiver.
"(d) ADDITIONAL INFORMATION.—Any notice submitted

to

an

appropriate Federal banking agency with respect to an individual by
any insured depository institution or depository institution holding
company pursuant to subsection (a) shall include—
"(1) the information described in section 7(j)(6)(A) about the
individual; and
"(2) such other information as the agency may prescribe by
regulation.
"(e) STANDARD FOR DISAPPROVAL.—The appropriate Federal banking agency shall issue a notice of disapproval with respect to a notice
submitted pursuant to subsection (a) if the competence, experience,
character, or integrity of the individual with respect to whom such
notice is submitted indicates that it would not be in the best
interests of the depositors of the depository institution or in the best
interests of the public to permit the individual to be employed by, or
associated with, the depository institution or depository institution
holding company.
"(f) DEFINITION REGULATIONS.—Each appropriate Federal banking
agency shall prescribe by regulation a definition for the terms
'troubled condition' and 'senior executive officer' for purposes of
subsection (a).".
(b) CREDIT UNIONS INSURED BY THE N C U A . — T i t l e II of the Federal

Credit Union Insurance Act (12 U.S.C. 1781 et seq.) is amended by
adding at the end thereof the following new section:
"SEC. 212. BOARD DISAPPROVAL OF DIRECTORS, COMMITTEE MEMBERS, 12 USC 1790a.
AND SENIOR EXECUTIVE OFFICERS OF INSURED CREDIT
UNIONS.

"(a) PRIOR NOTICE REQUIRED.—An insured credit union shall
notify the Board of the proposed addition of any individual to the
board of directors or committee or the emplojnnent of any individual
as a senior executive officer of such credit union at legist 30 days
before such addition or employment becomes effective, if the insured
credit union—
"(1) has been chartered less than 2 years; or
"(2) is in troubled condition, as determined on the basis of
such credit union's most recent report of condition or report of
examination.
"(b) DISAPPROVAL BY THE BOARD.—An insured credit union may
not add any individual to the board of directors or employ any
individual as a senior executive officer if the Board issues a notice of
disapproval of such addition or employment before the end of the 30day period beginning on the date the agency receives notice of the
proposed action pursuant to subsection (a).
"(c) EXCEPTION IN EXTRAORDINARY CIRCUMSTANCES.—

"(1) IN GENERAL.—The Board may prescribe by regulation
conditions under which the prior notice requirement of subsection (a) may be waived in the event of extraordinary circumstances.

103 STAT. 486

PUBLIC LAW 101-73—AUG. 9, 1989
"(2) N o EFFECT ON DISAPPROVAL AUTHORITY OF BOARD.—Such

waivers shall not affect the authority of the Board to issue
notices of disapproval of such additions or employment of such
individuals within 30 days after each such waiver,
"(d) ADDITIONAL INFORMATION.—Any notice submitted to the

Board by any insured credit union pursuant to subsection (a) shall
include—
"(1) the information described in section 7(jX6)(A) of the Federal Deposit Insurance Act about the individual; and
"(2) such other information as the Board may prescribe by
regulation.
"(e) STANDARD FOR DISAPPROVAL.—The Board shall issue a notice
of disapproval with respect to a notice submitted pursuant to subsection (a) if the competence, experience, character, or integrity of the
individual with respect to whom such notice is submitted indicates
that it would not be in the best interests of the depositors of the
insured credit union or in the best interests of the public to permit
the individual to be employed by, or associated with, such insured
credit union.
"(f) DEFINITION REGULATIONS.—The Board shall prescribe by regulation a definition for the terms 'troubled condition' and 'senior
executive officer' for purposes of subsection (a).".
SEC. 915. CLARIFICATION OF NCUA'S AUTHORITY TO CONDUCT COMPLIANCE INVESTIGATIONS.

(a) EXAMINATIONS.—Section 204(b) of the Federal Credit Union
Act (12 U.S.C. 1784(b)) is amended—
(1) by inserting after "insured credit unions," the following:
"or with other types of investigations to determine compliance
with applicable law and regulations,"; and
(2) by inserting after "subpena duces tecum" the following:
"and to exercise such others powers as are set forth in section
206(p)".
(b) ENFORCEMENT.—Section 206(p) of the Federal Credit Union Act
(12 U.S.C. 1786(p)) is amended in the 1st sentence—
(1) by inserting after "any proceeding under this section" the
following: "or in connection with any claim for insured deposits
or any examination or investigation under section 204(b)";
(2) by inserting after "the Board" the 1st place such term
appears the following: ", in conducting the proceeding, examination, or investigation or considering the claim for insured deposits,"; and
(3) by inserting ", claims, examinations, or investigations"
before the period.
(c) PAYMENT OF CLAIMS.—Section 207(c)(1) of the Federal Credit
Union Act (12 U.S.C. 1787(c)(1)) is amended in the last sentence by
inserting after "before paying the insured accounts," the following:
"may investigate said claims under section 206(p),".
12 u s e 1818

SEC. 916. IMPROVED ADMINISTRATIVE HEARINGS AND PROCEDURES.

Before the close of the 24-month period beginning on the date of
the enactment of this Act, the appropriate Federal banking agencies
(as defined in section 3(q) of the Federal Deposit Insurance Act) and
the National Credit Union Administration Board shall jointly—
(1) establish their own pool of administrative law judges, and
(2) develop a set of uniform rules and procedures for administrative hearings, including provisions for summary judgment

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 487

rulings where there are no disputes as to material facts of the
case.
SEC.

917. TASK FORCE STUDY OF DELEGATION OF ENFORCEMENT 12 USC 1818
ACTIONS.
"°*®

(a) CREATION OF TASK FORCE.—The appropriate Federal banking
agencies (as defined in section 3(q) of the Federal Deposit Insurance
Act) and the National Credit Union Administration Board shall
create a joint task force to study the desirability and feasibility of
delegating investigation and enforcement authority to their regional
or district offices or banks.
(b) COMPOSITION OF TASK FORCE.—The composition of the task
force shall be reasonably balanced between officials from headquarters and officials from the regions, districts, or district banks.
(c) REPORT.—Not later than September 30, 1990, the task force
shall report to the Congress the findings and recommendations of
the Tgisk Force, together with the responses of the Comptroller of
the Currency, the Director of the Office of Thrift Supervision, the
Chairperson of the Federal Deposit Insurance Corporation, the
Chairman of the Board of Governors of the Federal Reserve System,
and the Chairman of the National Credit Union Administration.
SEC. 918. ANNUAL REPORT TO CONGRESS.

(a) IN GENERAL.—Each agency described in subsection (b) shall
submit an annual report to the Congress which shall contain the
following information with respect to the 12-month period for which
such report is made:
(1) The number of formal and informal supervisory, administrative, and civil enforcement actions initiated by such agency
during such 12-month period, and the number of such actions
completed by such agency during such 12-month period, including actions initiated or taken with respect to memoranda of
understanding, written agreements, cease and desist orders
(including temporary orders), suspension orders, removal or
prohibition orders, and civil money penalty assessments.
(2) The number of individuals and institutions against whom
civil money penalties were assessed by such agency during such
12-month period, the amount of each such penalty, the total
amount of all such penalties, and data on uncollected penalties
for such period and prior years.
(3) A description of all other enforcement efforts and initiatives relating to unsafe and unsound practices, criminal misconduct, and insider abuse which were undertaken by such
agency during such 12-month period.
(4) The number of criminal referrals made to the Department
of Justice.
(5) With respect to the criminal referrals received by the
Department of Justice and with respect to investigations of
similar matters initiated without such a referral, the number
and status of grand jury investigations and investigations being
conducted by the Federal Bureau of Investigation, and the
number and disposition of prosecutions and civil actions commenced by the Attorney General.
(6) Recommendations concerning the need for additional legislation or financial resources.
(b) AGENCIES REQUIRED TO SUBMIT REPORTS.—The agencies re-

ferred to in subsection (a) are as follows:

12 USC1833.

103 STAT. 488

PUBLIC LAW 101-73—AUG. 9, 1989
(1) The Comptroller of the Currency.
(2) The Board of Governors of the Federal Reserve System.
(3) The Federal Deposit Insurance Corporation.
(4) The Federal Housing Finance Board.
(5) The Office of Thrift Supervision.
(6) The National Credit Union Administration.
(7) The Attorney General of the United States.
SEC. 919. CREDIT UNION AUDIT REQUIREMENTS.

Section 202(a) of the Federal Credit Union Act (12 U.S.C. 1782(a))
is amended by adding at the end thereof the following new paragraph:
"(6) AUDIT REQUIREMENT.—

Regulations.

"(A) I N GENERAL.—Before the end of the 120-day period
beginning on the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989 and notwithstanding any other provision of Federal or
State law, the Board shall prescribe, by regulation, audit
standards which require an outside, independent audit of
any insured credit union by a certified public accountant
for any fiscal year (of such credit union)—
"(i) for which such credit union has not conducted an
annual supervisory committee audit;
"(ii) for which such credit union has not received a
complete and satisfactory supervisory committee audit;
or
"(iii) during which such credit union has experienced
persistent and serious recordkeeping deficiencies, as
determined by the Board.
"(B) UNSAFE OR UNSOUND PRACTICE.—The Board may
treat the failure of any insured credit union to obtain an
outside, independent audit for any fiscal year for which
such audit is required under subparagraph (A) as an unsafe
or unsound practice within the meaning of section 206(b).".
SEC. 920. TECHNICAL AMENDMENTS RELATING TO ADMINISTRATIVE AND
JUDICIAL REVIEW.

(a) FDIA.—Section 8(h)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1818(h)(2)) is amended by striking "Any party" and all that
follows through "therein," and inserting in lieu thereof "Any party
to any proceeding under paragraph (1)".
(b) FCUA.—Section 206(j)(2) of the Federal Credit Union Act (12
U.S.C. 17860")(2)) is amended by striking "Any party" and all that
follows through "therein," and inserting in lieu thereof "Any party
to any proceeding under paragraph (1)".
(c) MISCELLANEOUS CONFORMING AMENDMENT.—Section 8(k) of the

Federal Deposit Insurance Act (12 U.S.C. 1818(k)) is amended by
striking out all that follows "(k)".

Subtitle B—Termination of Deposit Insurance
SEC. 926. REVISION OF PROCEDURES FOR TERMINATION OF FDIC
DEPOSIT INSURANCE.

Section 8(a) of the Federal Deposit Insurance Act (12 U.S.C.
1818(a)) is amended—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 489

(1) by striking out "(a) Any insured bank" and all that follows
through the period at the end of the 4th sentence and inserting
in lieu thereof the following:
"(a) TERMINATION OF INSURANCE.—
"(1) VOLUNTARY TERMINATION.—Any

insured depository
institution which is not—
"(A) a national member bank;
"(B) a State member bank;
"(C) a Federal branch;
"(D) a Federal savings association; or
"(E) an insured branch which is required to be insured
under subsection (a) or (b) of section 6 of the International
Banking Act of 1978,
may terminate such depository institution's status as an insured depository institution if such insured institution provides
written notice to the Corporation of the institution's intent to
terminate such status not less than 90 days before the effective
date of such termination.
"(2) INVOLUNTARY TERMINATION.—
"(A) NOTICE TO PRIMARY REGULATOR.—If

the Board of
Directors determines that—
"(i) an insured depository institution or the directors
or trustees of an insured depository institution have
engaged or are engaging in unsafe or unsound practices
in conducting the business of the depository institution;
"(ii) an insured depository institution is in an unsafe
or unsound condition to continue operations as an insured institution; or
"(iii) an insured depository institution or the directors or trustees of the insured institution have violated
any applicable law, regulation, order, condition imposed in writing by the (Dorporation in connection with
the approval of any application or other request by the
insured depository institution, or written agreement
entered into between the insured depository institution
and the Corporation,
the Board of Directors shall notify the appropriate Federal
banking agency with respect to such institution (if other
than the Corporation) or the State banking supervisor of
such institution (if the Corporation is the appropriate Federal banking agency) of the Board's determination and the
facts and circumstances on which such determination is
based for the purpose of securing the correction of such
practice, condition, or violation. Such notice shall be given
to the appropriate Federal banking agency not less than 30
days before the notice required by subparagraph (B), except
that this period for notice to the appropriate Federal banking agency may be reduced or eliminated with the agreement of such agency.
"(B) NOTICE OF INTENTION TO TERMINATE INSURANCE.—If,

after giving the notice required under subparagraph (A)
with respect to an insured depository institution, the Board
of Directors determines that any unsafe or unsound practice or condition or any violation specified in such notice
requires the termination of the insured status of the insured depository institution, the Board shall—

103 STAT. 490

PUBLIC LAW 101-73—AUG. 9, 1989
"(i) serve written notice to the insured depository
institution of the Board's intention to terminate the
insured status of the institution;
"(ii) provide the insured depository institution with a
statement of the charges on the beisis of which the
determination to terminate such institution's insured
status was made (or a copy of the notice under subparagraph (A)); and
"(iii) notify the insured depository institution of the
date (not less than 30 days after notice under this
**
subparagraph) and place for a hearing before the Board
of Directors (or any person designated by the Board)
with respect to the termination of the institution's
insured status.
"(3) HEARING; TERMINATION.—If, on the basis of the evidence
presented at a hearing before the Board of Directors (or any
person designated by the Board for such purpose), in which all
issues shall be determined on the record pursuant to section 554
of title 5, United States Code, and the written findings of the
Board of Directors (or such person) with respect to such evidence (which shall be conclusive), the Board of Directors finds
that any unsafe or unsound practice or condition or any violation specified in the notice to an insured depository institution
under subparagraph (B) has been established, the Board of
Directors may issue an order terminating the insured status of
such depository institution effective as of a date subsequent to
such finding.";
(2) by striking out "Unless the" and inserting in lieu thereof
the following:
"(4)

APPEARANCE; CONSENT TO TERMINATION.—Unless

the";

(3) by striking out "Any insured" and all that follows through
"status" the 1st place such term appears and inserting in lieu
thereof the following:
"(5) JUDICIAL REVIEW.—Any insured depository institution
whose insured status";
(4) by striking out "The Corporation may publish" and inserting in lieu thereof the following:
"(6) PUBLICATION OF NOTICE OF TERMINATION.—The Corpora-

tion may publish";
(5) by striking out "After the termination of the insured
status" and inserting in lieu thereof the following:
"(7) TEMPORARY INSURANCE OF DEPOSITS INSURED AS OF TERMI-

NATION.—After the termination of the insured status";
(6) in paragraph (7) (as so designated by the amendment made
by paragraph (5) of this section)—
(A) by striking out "of two years" the 1st place such term
appears and inserting in lieu thereof "of at least 6 months
or up to 2 years, within the discretion of the Board of
Directors";
(B) by striking out "of two years" the 2nd place such term
appears and inserting in lieu thereof "the period referred to
in the 1st sentence"; and
(C) by striking out "of two years" the 3rd place such term
appears;
(7) by adding at the end the following new paragraphs:
"(8) TEMPORARY SUSPENSION OF INSURANCE.—

PUBLIC LAW 101-73—AUG. 9, 1989
"(A) I N GENERAL.—If the Board of Directors initiates a
termination proceeding under paragraph (2), and the Board
of Directors, after consultation with the appropriate Federal banking agency, finds that an insured depository
institution (other than a savings association to which
subparagraph (B) applies) has no tangible capital under the
capital guidelines or regulations of the appropriate Federal
banking agency, the Corporation may issue a temporary
order suspending deposit insurance on all deposits received
by the institution.
"(B) SPECIAL RULE FOR CERTAIN SAVINGS INSTITUTIONS.—
"(i) CERTAIN GOODWILL INCLUDED IN TANGIBLE CAP-

ITAL.—In determining the tangible capital of a savings
association for purposes of this paragraph, the Board of
Directors shall include goodwill to the extent it is
considered a component of capital under section 5(t) of
the Home Owners' Loan Act. Any savings association
which would be subject to a suspension order under
subparagraph (A) but for the operation of this subparagraph, shall be considered by the Corporation to be a
Special supervisory association'.
"(ii) SUSPENSION ORDER.—The Corporation may issue
a temporary order suspending deposit insurance on all
deposits received by a special supervisory association
whenever the Board of Directors determines that—
"(I) the capital of such association, as computed
utilizing applicable accounting standards, has suffered a material decline;
"(II) that such association (or its directors or
officers) is engaging in an unsaJFe or unsound practice in conducting the business of the association;
"(III) that such association is in an unsafe or
unsound condition to continue operating as an insured association; or
"(IV) that such association (or its directors or
officers) has violated any applicable law, rule, regulation, or order, or any condition imposed in writing by a Federal banking agency, or any written
agreement including a capital improvement plan
entered into with any Federal banking £igency, or
that the association has failed to enter into a capital improvement plan which is acceptable to the
CJorporation within the time period set forth in
section 5(t) of the Home Owners' Loan Act.
Nothing in this paragraph limits the right of the Corporation or the Director of the Office of Thrift Supervision to enforce a contractual provision which authorizes the Corporation or the Director of the Office of
Thrift Supervision, as a successor to the Federal Savings and Loan Insurance dlorporation or the Federal
Home Loan Bank Board, to require a savings association to write down or amortize goodwill at a faster rate
than otherwise required under this Act or under applicable accounting standards.
"(C) EFFECTIVE PERIOD OF TEMPORARY ORDER.—Any order
issued under subparagraph (A) shall become effective not
earlier than 10 days from the date of service upon the

103 STAT. 491

103 STAT. 492

PUBLIC LAW 101-73—AUG. 9, 1989
^

institution and, unless set aside, limited, or suspended by a
court in proceedings authorized hereunder, such temporary
order shall remain effective and enforceable until an order
of the Board under paragraph (3) becomes final or until the
Corporation dismisses the proceedings under paragraph (3).
"(D) JUDICIAL REVIEW.—Before the close of the 10-day
period beginning on the date any temporary order has been
served upon an insured depository institution under
subparagraph (A), such institution may apply to the United
States District Court for the District of Columbia, or the
United States district court for the judicieil district in which
the home office of the institution is located, for an injunction setting aside, limiting, or suspending the enforcement,
operation, or effectiveness of such order, and such court
shall have jurisdiction to issue such injunction.
"(E) CONTINUATION OF INSURANCE FOR PRIOR DEPOSITS.—

The insured deposits of each depositor in such depository
institution on the effective date of the order issued under
this paragraph, minus all subsequent withdrawals from any
deposits of such depositor, shall continue to be insured,
subject to the administrative proceedings as provided in
this Act.
"(F) PuBUCATiON OF ORDER.—The depository institution
shall give notice of such order to each of its depositors in
such manner and at such times as the Board of Directors
may find to be necessary and may order for the protection
of depositors.
"(G) NoncE BY CORPORATION.—If the Corporation determines that the depository institution has not substantially
complied with the notice to depositors required by the
Board of Directors, the Corporation may provide such
notice in such manner £is the Board of Directors may find to
be necessary and appropriate.
"(H) LACK OF NOTICE.—Notwithstanding subparagraph

(A), any deposit made after the effective date of a suspension order issued under this paragraph shall remain
insured to the extent that the depositor establishes that—
(i) such deposit consists of additions made by automatic deposit the depositor was unable to prevent; or
(ii) such depositor did not have actual knowledge of
the suspension of insurance.
"(9) FINAL DECISIONS TO TERMINATE INSURANCE.—Any decision
by the Board of Directors to—
"(A) issue a temporary order terminating deposit insurance; or
"(B) issue a final order terminating deposit insurance
(other than under subsection (p) or (q));
shall be made by the Board of Directors and may not be
delegated.
" ( 1 0 ) L o w - TO MODERATE-INCOME HOUSING L E N D E R . — I n m a k i n g

any determination regarding the termination of insurance of a
solvent savings association, the Corporation may consider the
extent of the association's low- to moderate-income housing
loans.".

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 493

Subtitle C—Improving Early Detection of
Misconduct and Encouraging Informants
SEC. 931. INFORMATION REQUIRED TO BE MADE AVAILABLE TO OUTSIDE
AUDITORS.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE FDIC.—Section 7(a)

of the Federal Deposit Insurance Act (12 U.S.C. 1817(a)) is amended
by adding at the end thereof the following new paragraph:
"(8) REPORT TO INDEPENDENT AUDITOR.—

"(A) I N GENERAL.—Each insured depository institution
which has engaged the services of an independent auditor
to audit such depository institution within the past 2 years
shall transmit to such auditor a copy of the the most recent
report of condition made by such depository institution
(pursuant to this Act or any other provision of law) and a
copy of the most recent report of examination received by
such depository institution.
"(B) ADDITIONAL INFORMATION.—In addition to the copies

of the reports required to be provided to an auditor under
subparagraph (A), each insured depository institution shall
provide such auditor with—
"(i) a copy of any supervisory memorandum of understanding with such depository institution and any written agreement between a Federal or State banking
agency and the depository institution which is in effect
during the period covered by the audit; and
"(ii) a report of any action initiated or taken by a
Federal banking agency during such period under
subsection (a), (b), (c), (e), (g), (i), or (s) of section 8, or of
any similar action taken by a State banking agency
under State law, or any other civil money penalty
assessed under any other provision of law with respect
to—
"(I) the depository institution; or
"(II) any institution-affiliated party.".
(b) INSTITUTIONS INSURED BY THE NCUA.—Section 202(a) of the
Federal Credit Union Act (12 U.S.C. 1782(a)) is amended by adding
after the paragraph added by section 922 of this Act the following
new paragraph:
"(7) REPORT TO INDEPENDENT AUDITOR.—

"(A) I N GENERAL.—Each insured credit union which has
engaged the services of an independent auditor to audit
such depository institution within the past 2 years shall
transmit to such auditor a copy of the most recent report of
condition made by such credit union (pursuant to this Act
or any other provision of law) and a copy of the most recent
report of examination received by such credit union.
"(B) ADDITIONAL INFORMATION.—In addition to the copies

of the reports required to be provided to an auditor under
subparagraph (A), each insured credit union shall provide
such auditor with—
"(i) a copy of any supervisory memorandum of understanding with such credit union and any written agreement between the Board or a State regulatory agency

103 STAT. 494

PUBLIC LAW 101-73—AUG. 9, 1989
and the credit union which is in effect during the
period covered by the audit; and
"(ii) a report of any action initiated or taken by the
Board during such period under subsection (e), (f), (g),
(i), (1), or (q) of section 206, or any similar action taken
by a State regulatory agency under State law, or any
other civil money penalty assessed by the Board under
this Act, with respect to—
"(I) the credit union; or
"(II) any institution-affiliated party.".

SEC. 932. DEPOSITORY INSTITUTION EMPLOYEE PROTECTION REMEDY.
(a)

EMPLOYEES OF DEPOSITORY INSTITUTIONS INSURED BY THE

FDIC—The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by adding after the section added by section 914(a) of this
Act the following new section:
12 u s e 1831J.

"SEC. 33. DEPOSITORY INSTITUTION EMPLOYEE PROTECTION REMEDY.
"(a)

PROHIBITION AGAINST DISCRIMINATION AGAINST WHISTLE-

BLOWERS.—No federally insured depository institution may discharge or otherwise discriminate against any employee with respect
to compensation, terms, conditions, or privileges of employment
because the employee (or any person acting pursuant to the request
of the employee) provided information to any Federal bginking
agency or to the Attorney General regarding a possible violation of
any law or regulation by the depository institution or £iny of its
officers, directors, or employees.
"(b) ENFORCEMENT.—Any employee or former employee who believes he has been discharged or discriminated against in violation
of subsection (a) may file a civil action in the appropriate United
States district court before the close of the 2-year period beginning
on the date of such discharge or discrimination. The complainant
shall gdso file a copy of the complaint initiating such action with the
appropriate Federal banking agency.
'(c) REMEDIES.—If the district court determines that a violation of
subsection (a) has occurred, it may order the depository institution
which committed the violation—
"(1) to reinstate the employee to his former position,
"(2) to pay compensatory damages; or
"(3) take other appropriate actions to remedy any past
discrimination.
"(d) LIMITATION.—The protections of this section shall not apply to
any employee who—
(1) deliberately causes or participates in the alleged violation
of law or regulation; or
"(2) knowingly or recklessly provides substantially false
information to such an agency or the Attorney General.".
(b) EMPLOYEES OF CREDIT UNIONS INSURED BY THE N C U A . — T h e

Federal Credit Union Act (12 U.S.C. 1751 et seq.) is amended by
inserting after the section added by section 914(b) of this Act the
following new section:
12 u s e 1790b.

"SEC. 213. CREDIT UNION EMPLOYEE PROTECTION REMEDY.
"(a)

PROHIBITION AGAINST DISCRIMINATION AGAINST WHISTLE-

BLOWERS.—No federally insured credit union may discharge or
otherwise discriminate against any employee with respect to compensation, terms, conditions, or privileges of employment because

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 495

the employee (or any person acting pursuant to the request of the
employee) provided information to the Board or to the Attorney
General regarding a possible violation of any law or regulation by
the credit union or any of its officers, directors, or employees.
"(b) ENFORCEMENT.—Any employee or former employee who believes he has been discharged or discriminated against in violation
of subsection (a) may file a civil action in the appropriate United
States district court before the close of the 2-year period beginning
on the date of such discharge or discrimination. The complainant
shall also file a copy of the complaint initiating such action with the
Board.
"(c) REMEDIES.—If the district court determines that a violation of
subsection (a) has occurred, it may order the credit union which
committed the violation—
"(1) to reinstate the employee to his former position,
"(2) to pay compensatory damages, or
"(3) take other appropriate actions to remedy any past
discrimination.
"(d) LIMITATIONS.—The protections of this section shall not apply
to any employee who—
"(1) deliberately causes or participates in the alleged violation
of law or regulation, or
"(2) knowingly or recklessly provides substantially false
information to such an agency or the Attorney General.".
SEC. 933. REWARD FOR INFORMATION LEADING TO RECOVERIES OR CIVIL
PENALTIES.
(a) DEPOSITORY INSTITUTIONS INSURED BY THE F D I C . — T h e Federal

Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding
after the section added by section 932(a) of this Act the following
new section:
"SEC. 34. REWARD FOR INFORMATION LEADING TO RECOVERIES OR
CIVIL PENALTIES.

"(a) I N GENERAL.—An appropriate Federal banking agency, with
the concurrence of the Attorney General, may pay a reward to a
person who provides original information which leads to—
"(1) recovery, in an amount that exceeds $50,000, of a criminal
fine, restitution, or civil penalty—
"(A) under—
"(i) the Federal Deposit Insurance Act;
"(ii) the Federal Credit Union Act;
"(iii) sections 5213, 5239(b), and 5240 of the Revised
Statutes;
"(iv) the Federal Reserve Act;
"(v) the Bank Holding Company Act Amendments of
1970;
"(vi) the Bank Holding Company Act of 1956;
"(vii) the Home Owners' Loan Act; or
"(viii) section 3663 of title 18, United States Code,
pursuant to a conviction for an offense referred to in
subparagraph (B) of this paragraph,
"(B) pursuant to a conviction for an offense under section
215, 656, 657, 1005, 1006, 1007, 1014, 1341, 1343, or 1344 of
title 18, United States Code, affecting a depository institution insured by the Federal Deposit Insurance Corporation,
or for a conspiracy to commit such an offense; or

12 USC 1831k.

103 STAT. 496

PUBLIC LAW 101-73—AUG. 9, 1989
"(C) under section 951 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989; or
"(2) a forfeiture under section 981 or 982 of title 18, United
States Code, that—
"(A) arises in connection with a depository institution
insured by the Federal Deposit Insurance Corporation; and
"(B) exceeds $50,000.
"(b) PERCENTAGE LIMITATION.—An appropriate Federal banking

agency may not pay a reward under subsection (a) of more than 25
percent of the amount of the fine, penalty, restitution, or forfeiture
or $100,000, whichever is less.
"(c) OFFICIALS AND PERSONS INEUGIBLE.—An appropriate Federal
banking agency may not pay a reward under subsection (a) to—
"(1) an officer or employee of the United States or of a State
or local government who provides information described in
subsection (a), obtained in the performance of official duties; or
"(2) a person who—
"(A) deliberately causes or participates in the alleged
violation of law or regulation, or
"(B) knowingly or recklessly provides substantially false
information to such an agency or the Attorney General.
"(d) NONREVIEWABIUTY.—Any agency decision under this section
is final and not reviewable by any court.".
(b) CREDIT UNIONS INSURED BY THE N C U A . — T i t l e II of the Federal

Credit Union Act (12 U.S.C. 1790 et seq.) is amended by inserting
after the section added by section 932(b) of this Act the following
new section:
12 u s e 1790c.

"SEC. 214. REWARD FOR INFORMATION LEADING TO RECOVERIES OR
CIVIL PENALTIES.

"The Board may pay rewards in connection with an offense
affecting an insured credit union, under the same circumstances and
subject to the same limitations that a Federal banking agency may
pay rewards under section 33 of the Federal Deposit Insurance Act
in connection with an offense affecting a depository institution
insured by the Federal Deposit Insurance Corporation.".

Subtitle D—Right to Financial Privacy Act
Amendments
SEC. 941. DEFINITIONS.

Section 1101 of the Right to Financial Privacy Act of 1978 (12
U.S.C. 3401), as amended by section 744(b) of this Act, is amended—
(1) by redesignating paragraphs (6) and (7) as paragraphs (7)
and (8), respectively; and
(2) in paragraph (7) (as so redesignated), by striking all that
precedes subparagraph (A) and inserting in lieu thereof the
following:
"(7) 'supervisory agency' means with respect to any particular
financial institution, holding company, or any subsidiary of a
financial institution or holding company, any of the following
which has statutory authority to examine the financial condition, business operations, or records or transactions of that
institution, holding company, or subsidiary—"; and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 497

(3) by inserting after paragraph (5) the following new paragraph:
"(6) 'holding company' means—
"(A) any bank holding company (as defined in section 2 of
the Bank Holding Company Act of 1956);
"(B) any company described in section 3(fXl) of the Bank
Holding Company Act of 1956; and
"(C) any savings and loan holding company (as defined in
the Home Owners' Loan Act);".
SEC. 942. ADDITIONAL EXCEPTIONS.

Section 1113 of the Right to Financial Privacy Act of 1978 (12
U.S.C. 3413(b)) is amended—
(1) by amending subsection (b) to read as follows:
"(b) This chapter shall not apply to the examination by or disclosure to any supervisory agency of financial records or information in
the exercise of its supervisory, regulatory, or monetary functions,
including conservatorship or receivership functions, with respect to
any financial institution, holding company, subsidiary of a financial
institution or holding company, institution-affiliated party (within
the meaning of section 3(u) of the Federal Deposit Insurance Act)
with respect to a financial institution, holding company, or subsidiary, or other person participating in the conduct of the eiffairs
thereof."; and
(2) by adding at the end the following new subsections:
"(m) This title shall not apply to the examination by or disclosure
to employees or agents of the Board of Governors of the Federal
Reserve System or gmy Federal Reserve Bank of financial records or
information in the exercise of the Federal Reserve System's authority to extend credit to the financial institutions or others.
"(n) This title shall not apply to the examination by or disclosure
to the Resolution Trust Corporation or its employees or agents of
financial
records or information in the exercise of its
conservatorship, receivership, or liquidation functions with respect
to a financial institution.
"(o) This title shall not apply to the examination by or disclosure
to the Federal Housing Finance Board or any of the Federal home
loan banks of financial records or information in the exercise of the
Federal Housing Finance Board's authority to extend credit (either
directly or through a Federal home loan bank) to financial institutions or others.".
SEC. 943. PROHIBITION.

Section 1120 of the Right to Financial Privacy Act of 1978 (12
U.S.C. 3420) is redesignated as section 1120(a) and is amended by
adding at the end the following new subsection:
"(b)(1) No officer, director, partner, employee, or shareholder of, or
agent or attorney for, a financial institution shall, directly or indirectly, notify any person named in a grand jury subpoena served
on such institution in connection with an investigation relating to a
possible—
"(A) crime against any financial institution or supervisory
agency; or
"(B) conspiracy to commit such a crime,
about the existence or contents of such subpoena, or information
that has been furnished to the grand jury in response to such
subpoena.

103 STAT. 498

PUBLIC L A W 101-73—AUG. 9, 1989
"(2) Section 8 of the Federal Deposit Insurance Act and section
206(kX2) of the Federal Credit Union Act shall apply to any violation
of this subsection.".
SEC. 944. MISCELLANEOUS PROVISIONS.

Section 1112(e) of the Right to Financial Privacy Act of 1978 (12
U.S.C. 3412(e)) is amended—
(1) by inserting after "with respect to a depository institution"
the following: ", holding company, or any subsidiary of a depository institution or holding company,"; and
(2) by striking out "Council" and inserting in lieu thereof
"Council and the Securities and Exchange Commission".

Subtitle E—Civil Penalties For Violations
Involving Financial Institutions
12 u s e 1833a.

SEC. 951. CIVIL PENALTIES.

(a) I N GENERAL.—Whoever violates any provision of law to which
this section is made applicable by subsection (c) shall be subject to a
civil penalty in an amount assessed by the court in a civil action
under this section.
(b) MAXIMUM AMOUNT OF PENALTY.—

(1) GENERALLY.—The amount of the civil penalty shall not
exceed $1,000,000.
(2) SPECIAL RULE FOR CONTINUING VIOLATIONS.—In the case of
a continuing violation, the amount of the civil penalty may
exceed the amount described in paragraph (1) but may not
exceed the lesser of $1,000,000 per day or $5,000,000.
(3) SPECIAL RULE FOR VIOLATIONS CREATING GAIN OR LOSS.—(A)

If any person derives pecuniary gain from the violation, or if the
violation results in pecuniary loss to a person other than the
violator, the amount of the civil penalty may exceed the
amounts described in paragraphs (1) and (2) but may not exceed
the amount of such gain or loss.
(B) As used in this paragraph, the term "person" includes the
Bank Insurance Fund, the Savings Association Insurance Fund,
and the National Credit Union Share Insurance Fund.
(c) VIOLATIONS TO WHICH PENALTY Is APPLICABLE.—This section

applies to a violation of, or a conspiracy to violate—
(1) section 215, 656, 657, 1005, 1006,1007,1014, or 1344 of title
18, United States Code; or
(2) section 1341 or 1343 of title 18, United States Code, affecting a federally insured financial institution.
(d) ATTORNEY GENERAL TO BRING ACTION.—A civil action to recover a civil penalty under this section shall be commenced by the
Attorney General.
(e) BURDEN OF PROOF.—In a civil action to recover a civil penalty
under this section, the Attorney General must establish the right to
recovery by a preponderance of the evidence.
if) ADMINISTRATIVE SUBPOENAS.—

(1) I N GENERAL.—For the purpose of conducting a civil investigation in contemplation of a civil proceeding under this section, the Attorney General may—
(A) administer oaths and affirmations;
(B) take evidence; and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 499

(C) by subpoena, summon witnesses £ind require the
production of any books, papers, correspondence, memoremda, or other records which the Attorney General deems
relevant or material to the inquiry. Such subpoena may
require the attendance of witnesses and the production of
any such records from any place in the United States at any
place in the United States designated by the Attorney
General.
(2) PROCEDURES APPUCABLE.—The same procedures and
limitations as are provided with respect to civil investigative
demands in subsections (g), (h), and (j) of section 1968 of title 18,
United States Code, apply with respect to a subpoena issued
under this subsection. Process required by such subsections to
be served upon the custodian shall be served on the Attorney
General. Failure to comply with an order of the court to enforce
such subpoena shall be punishable as contempt.
(3) LIMITATION.—In the case of a subpoena for which the
return date is less than 5 days after the date of service, no
person shall be found in contempt for failure to comply by the
return date if such person files a petition under paragraph (2)
not later than 5 days after the date of service.

Subtitle F—Criminal Law and Procedure
SEC. 961. INCREASED CRIMINAL PENALTIES FOR CERTAIN FINANCIAL
INSTITUTION OFFENSES.
(a) RECEIPT OF COMMISSIONS OR GIFTS FOR PROCURING LOANS.—

Section 215(a) of title 18, United States Code, is amended—
(1) by striking "$5,000" and inserting "$1,000,000"; and
(2) by striking "five" and inserting ' ^ 0 " .
OJ) THEFT, EMBEZZLEMENT, OR MISAPPUCATION BY BANK OFFICER

OR EMPLOYEE.—Section 656 of title 18, United States Code, is amended—
(1) by striking "$5,000" and inserting "$1,000,000"; and
(2) by striking "five" and inserting ' ^ 0 " .
(c) LENDING, CREDIT, AND INSURANCE INSTITUTIONS.—Section 657 of

title 18, United States Code, is amended—
(1) by striking "$5,000" and inserting "$1,000,000"; and
(2) by striking "five" and inserting "20".
(d) BANK ENTRIES, REPORTS, AND TRANSACTIONS.—Section 1005 of

title 18, United States Code, is amended—
(1) in the 1st paragraph, by inserting "bank or savings and
loan holding company," after member bank,";
(2) in the 3rd paragraph—
(A) by inserting or company" after "bank" each place it
appears; and
(B) by striking the "—" at the end and inserting a
semicolon;
(3) by adding after the 3rd paragraph the following:
"Whoever with intent to defraud the United States or any agency Fraud,
thereof, or any financial institution referred to in this section,
participates or shares in or receives (directly or indirectly) any
money, profit, property, or benefits through any transaction, loan,
commission, contract, or any other act of any such financial institution—";
(4) by striking "$5,000" and inserting "$1,000,000"; and

103 STAT. 500

PUBLIC LAW 101-73—AUG. 9, 1989
(5) by striking "five" and inserting "20".
(e) FEDERAL CREDIT INSTITUTION ENTRIES, REPORTS, AND TRANS-

ACTIONS.—Section 1006 of title 18, United States Code, is amended—
(1) by striking "$10,000" and inserting "$1,000,000"; and
(2) by striking "five" and inserting "20".
(f) FEDERAL DEPOSIT INSURANCE CORPORATION TRANSACTIONS.—

Section 1007 of title 18, United States Code, is amended to read as
follows:
Fraud.

"§ 1007. Federal Deposit Insurance Corporation Transactions
"Whoever, for the purpose of influencing in any way the action of
the Federal Deposit Insurance Corporation, knowingly makes or
invites reliance on a false, forged, or counterfeit statement, document, or thing shall be fined not more than $1,000,000 or imprisoned
not more than 20 years, or both.".
(g) FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION TRANSACTIONS.—

(1) IN GENERAL.—Chapter 47 of title 18, United States Code, is
amended by striking section 1008.
(2) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 47 of title 18, United States Code, is amended by
striking the item relating to section 1008.
(h) LOAN AND CREDIT APPLICATIONS GENERALLY; RENEWALS AND
DISCOUNTS; CROP INSURANCE.—Section 1014 of title 18, United States

Code, is amended—
(1) by striking "a Federal Home Loan Bank, the Federal
Home Loan Bank Board, the Home Owners' Loan Corporation,
a Federal Saving and Loan Association";
(2) by striking "the Federal Saving and Loan Insurance Corporation, any bank the deposits of which are insured by";
(3) by striking "any member of;
(4) by inserting 'the Resolution Trust Corporation" after
"Federal Deposit Insurance Corporation,";
(5) by striking "$5,000" and inserting "$1,000,000"; and
(6) by striking "two" and inserting "20".
(i) FRAUDS AND SWINDLES.—Section 1341 of title 18, United States
Code, is amended by adding at the end: "If the violation affects a
financial institution, such person shall be fined not more than
$1,000,000 or imprisoned not more than 20 years, or both.".
(j) FRAUD BY WIRE, RADIO, OR TELEVISION.—Section 1343 of title 18,
United States Code, is amended by adding at the end: "If the
violation affects a financial institution, such person shall be fined
not more than $1,000,000 or imprisoned not more than 20 years, or
both.".
(k) BANK FRAUD.—Section 1344 of title 18, United States Code, is
amended to read as follows:
"§ 1344. Bank fraud
"Whoever knowingly executes, or attempts to execute, a scheme
or artifice—
"(1) to defraud a financial institution; or
"(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control
of, a financial institution, by means of false or fraudulent
pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more than
20 years, or both.".

PUBLIC LAW 101-73—AUG. 9,1989

103 STAT. 501

G) LIMITATIONS.—

(1) IN GENERAL.—Chapter 213 of title 18, United States Code,
is amended by adding at the end the following:
"§ 3293. Financial institution offenses
"No person shall be prosecuted, tried, or punished for a violation
of, or a conspiracy to violate—
"(1) section 215, 656, 657, 1005, 1006, 1007, 1008, 1014, or 1344;
or
"(2) section 1341 or 1343, if the offense affects a financial
institution;
unless the indictment is returned or the information is filed within
10 years after the commission of the offense.".
(2) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 213 of title 18, United States Code, is amended
by adding at the end the following new item:
"3293. Financial institution offenses.".
(3) EFFECT OF AMENDMENTS ON OFFENSES FOR WHICH THE CUR- 18 u s e 3293

RENT PERIOD OF UMiTATiONS HAD NOT RUN.—The amendments ^'^^•
made by this subsection shall apply to an offense committed
before the effective date of this section, if the statute of limitations applicable to that offense under this chapter had not run
as of such date,
(m) SENTENCING GUIDELINES.—Pursuant to section 994 of title 28, 28 USC 994 note.
United States Code, £ind section 21 of the Sentencing Act of 1987, the
United States Sentencing Commission shall promulgate guidelines,
or amend existing guidelines, to provide for a substantial period of
incarceration for a violation of, or a conspiracy to violate, section
215, 656, 657, 1005, 1006, 1007, 1014, 1341, 1343, or 1344 of title 18,
United States Code, that substantially jeopardizes the safety and
soundness of a federally insured finsincial institution.
SEC. 962. MISCELLANEOUS REVISIONS TO TITLE 18.
(a) SPECIFIC TERMINOLOGY CHANGES AND REPEAL.—
(1) SECTION 212.—Section 212 of title 18, United States Code, is

amended—
(A) by striking "bank" the first place it appears and
inserting "financial institution" in lieu thereof;
(B) by striking "land bank" and all that follows through
"farm credit examiner" and inserting "Farm Credit Bank,
bank for cooperatives, production credit association, Federal land bank association, agriculturgd credit association,
Federal land credit association, service organization chartered under section 4.26 of the Farm Credit Act of 1971, the
Farm Credit System Financial Assistance Corporation, the
FederEil Agricultural Mortgage Credit Corporation, the Federal Farm Credit Banks Funding Corporation, the National
Consumer Cooperative Bank, or other institution subject to
examination by a Farm Credit Administration examiner";
(C) in the 2nd undesignated paragraph, by striking "insured banks" and inserting "insured financial institutions"
in lieu thereof; and
(D) in the 2nd undesignated paragraph, by striking "or by
the Federal Deposit Insurance Corporation" and inserting
in lieu thereof ", by the Federal Deposit Insurance Corpora-

>

103 STAT. 502

PUBLIC LAW 101-73—AUG. 9, 1989
^
'

:

tion, by the Office of Thrift Supervision, or by the Federal
Housing Finance Board".
(2) SECTION 213.—Section 213 of title 18, United States Code, is
amended by striking "banks the deposits of which" and inserting "financial institutions the deposits of which".
(3) REPEAL OF SECTION IOO9.—Title 18, United States Code, is
amended by striking out section 1009.
(4) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 47 of title 18, United States Code, is amended by
striking out the item relating to section 1009.
(5) SECTION 1030(e)(4).—Section 1030(eX4) of title 18, United
States Code, is amended—
(A) in subparagraph (A), by striking "a bank" and inserting "an institution, ;
(B) by striking subparagraph (C); and
(C) by redesignating subparagraphs (D), (E), (F), (G), and
(H), as subparagraphs (C), (D), (E), (F), and (G), respectively.
(6) SECTION IH4.—Section 1114 of title 18, United States Code,
is amended—
(A) by striking "the Federal Savings and Loan Insurance
Corporation,"; and
(B) by striking "the Federal Home Loan Bank Board" and
inserting "the Office of Thrift Supervision, the Federal
Housing Finance Board, the Resolution Trust Corporation".
(7) CHANGES RELATING TO NATIONAL CREDIT UNION ADMINISTRA-

TION.—Sections 657, 1006, 1014, and 2113(h) of title 18, United
States Code, are each amended by striking "Administrator of
the National Credit Union Administration' and inserting "National Credit Union Administration Board".
. (8) CHANGES RELATING TO THE FARM CREDIT SYSTEM,—

(A) Sections 657 and 1006 of title 18, United States Code,
are each amended by striking "any land bank, intermediate
credit bank," and inserting in lieu thereof "the Farm Credit
System Insurance Corporation, a Farm Credit Bank, a".
(B) Section 1014 of title 18, United States Code, is amend; r ed—
(i) by striking "any Federal intermediate credit
bank" and all that follows through "Title 12" and
inserting in lieu thereof "any Farm Credit Bank,
production credit association, agricultural credit
,,
association, bank for cooperatives, or any division, officer, or employee thereof ; and
(ii) by striking "Federal Savings and Loan Insurance
Corporation" and inserting "Farm Credit System
Insurance Corporation" in lieu thereof.
(b) CROSS REFERENCE CHANGE.—Section 1306 of title 18, United
States Code, is amended by striking "section 20 of the Federal
Deposit Insurance Act, or section 410 of the National Housing Act"
and inserting "or section 20 of the Federal Deposit Insurance Act".
(c) OBSTRUCTION OF CRIMINAL INVESTIGATIONS.—Section 1510

of

title 18, United States Code, is amended—
(1) by redesignating subsection (b) as subsection (c); and
(2) by inserting after subsection (a) the following:
"(b)(1) Whoever, being an officer of a financial institution, with
the intent to obstruct a judicial proceeding, directly or indirectly
notifies any other person about the existence or contents of a
subpoena for records of that financial institution, or information

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 503

that has been furnished to the grand jury in response to that
subpoena, shall be fined under this title or imprisoned not more
than 5 years, or both.
"(2) Whoever, being an officer of a financial institution, directly or
indirectly notifies—
"(A) a customer of that financial institution whose records are
sought by a grand jury subpoena; or
"(B) any other person named in that subpoena;
about the existence or contents of that subpoena or information that
has been furnished to the grand jury in response to that subpoena,
shall be fined under this title or imprisoned not more than one year,
or both.
"(3) As used in this subsection—
"(A) the term *an officer of a financial institution' means an
officer, director, partner, employee, agent, or attorney of or for a
financial institution; and
"(B) the term 'subpoena for records' means a Federal grand
jury subpoena for customer records that has been served relating to a violation of, or a conspiracy to violate—
"(i) section 215, 656, 657,1005,1006,1007,1014, or 1344; or
"(ii) section 1341 or 1343 affecting a financial institution.".
(d) CONFORMING TERMINOLOGY IN BANK ROBBERY SECTION.—Sec-

tion 2113 of title 18, United States Code, is amended—
(1) in subsection (f), by striking "any bank the deposits of
which" and inserting "any institution the deposits of which";
(2) by adding before the period at the end of subsection (h) ",
and any 'Federal credit union' as defined in section 2 of the
Federal Credit Union Act"; and
(3) by striking subsection (g) and redesignating subsection (h)
as subsection (g).
(e) CREATION OF GENERAL DEFINITION OF FINANCIAL INSTITUTION
FOR TITLE 18.—

(1) I N GENERAL.—Subsection (b) of section 215 of title 18,
United States Code, is transferred to the end of chapter 1 of
such title.
(2) UPDATING AND TECHNICAL AMENDMENTS.—Such subsection
(b), as so transferred, is amended—
(A) by inserting at the beginning the following section
;
heading:
"§ 20. Financial institution deflned"
(B) by striking "(b)";
(C) by striking "this section" and inserting "this title";
(D) so that paragraph (1) reads as follows:
"(1) an insured depository institution (as defined in section 3(cX2)
of the Federal Deposit Insurance Act);";
(E) by striking paragraphs (2) and (8);
(F) so that paragraph (5) reads as follows:
"(5) a System institution of the Farm Credit System, as defined in
section 5.35(3) of the Farm Credit Act of 1971;";
(G) so that paragraph (7) reads as follows:
"(7) a depository institution holding company (as defined in section 3(wXl) of the Federal Deposit Insurance Act.";
and

103 STAT. 504

PUBLIC LAW 101-73—AUG. 9, 1989
(H) by redesignating paragraphs (3), (4), (5), (6), and (7) (as
amended by this paragraph) as paragraphs (2), (3), (4), (5),
.
and (6), respectively.
(3) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 1 of title 18, United States Code, is amended by
adding at the end the following new item:

"20. Financial institution defined.".
SEC. 963. CIVIL AND CRIMINAL FORFEITURE.

Real property.

(a) CIVIL FORFEITURE.—Section 981(a)(1) of title 18, United States
Code, is amended by adding at the end the following:
"(C) Any property, real or personal, which constitutes or is
derived from proceeds traceable to a violation of section 215,
656, 657,1005,1006,1007,1014, or 1344 of this title.".
(b) TRANSFER OF PROPERTY UNDER CIVIL FORFEITURE.—Section

981(e) of title 18, United States Code, is amended—
(1) in the matter before paragraph (1), by striking out "determine to—" and inserting in lieu thereof "determine—";
(2) by striking out paragraphs (1) and (2) and inserting in lieu
thereof the following:
"(1) to any other Federal agency;
"(2) to any State or local law enforcement agency which
participated directly in any of the acts which led to the seizure
or forfeiture of the property;
"(3) in the case of property referred to in subsection (a)(1)(C)
(if the affected financial institution is in receivership or liquidation), to any Federal financial institution regulatory agency—
"(A) to reimburse the agency for payments to claimants
or creditors of the institution; and
"(B) to reimburse the insurance fund of the agency for
losses suffered by the fund £is a result of the receivership or
liquidation;
"(4) in the C£ise of property referred to in subsection (aXl)(C)
(if the affected financial institution is not in receivership or
liquidation), upon the order of the appropriate Federal financial
institution regulatory agency, to the financial institution as
restitution, with the value of the property so transferred to be
set off against any amount later recovered by the financial
institution as compensatory damages in any State or Federal
proceeding; or
"(5) in the case of property referred to in subsection (aXl)(C),
to any Federal financial institution regulatory agency, to the
extent of the agency's contribution of resources to, or expenses
involved in, the seizure and forfeiture, and the investigation
leading directly to the seizure and forfeiture, of such property.";
and
(3) by adding at the end the following new sentence: "The
United States shall not be liable in any action arising out of a
transfer under paragraph (3), (4), or (5) of this subsection.".
(c) CRIMINAL FORFEITURE.—Section 982 of title 18, United States
Code, is amended—
(1) in subsection (a)—
(A) by inserting "(1)" after "(a)"; and
(B) by adding at the end the following:
"(2) The court, in imposing sentence on a person convicted of a
violation of, or a conspiracy to violate, section 215, 656, 657, 1005,
1006,1007,1014,1341, 1343, or 1344 of this title, affecting a financial

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 505

institution, shall order that the person forfeit to the United States
any property constituting, or derived from, proceeds the person
obtained directly or indirectly, as the result of such violation."; and
(2) in subsection (b), by striking "(b) The provisions" and all
that follows through "However, the" and inserting in lieu
thereof the following:
"(b)(1) Property subject to forfeiture under this section, any seizure and disposition thereof, and any administrative or judicial
proceeding in relation thereto, shall be governed—
"(A) in the c£ise of a forfeiture under subsection (a)(1) of this
section, by subsections (c) and (e) through (p) of section 413 of
the Comprehensive Drug Abuse Prevention and Control Act of
1970 (21 U.S.C. 853); and
"(B) in the case of a forfeiture under subsection (aX2) of this
section, by subsections (b), (c), (e), and (g) through (p) of section
413 of such Act.
"(2) The".
SEC. 964. GRAND JURY SECRECY.

(a) IN GENERAL.—Chapter 215 of title 18, United States Code, is
amended by striking section 3322 and all that follows through
section 3328 and inserting the following:
"§ 3322. Disclosure of certain matters occurring before grand jury
"(a) A person who is privy to grand jury information concerning a
banking law violation—
(1) received in the course of duty as an attorney for the
government; or
"(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal Rules of
Criminal Procedure;
may disclose that information to an attorney for the government for
use in enforcing section 951 of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 or for use in connection with
civil forfeiture under section 981 of title 18, United States Code, of
property described in section 981(a)(1)(C) of such title.
"(b)(1) Upon motion of an attorney for the government, a court
may direct disclosure of matters occurring before a grand jury
during an investigation of a banking law violation to identified
personnel of a financial institution regulatory agency—
"(A) for use in relation to any matter within the jurisdiction
of such regulatory agency; or
"(B) to assist an attorney for the government to whom matters have been disclosed under subsection (a).
"(2) A court may issue an order under paragraph (1) upon a
finding of a substantial need.
"(c) A person to whom matter has been disclosed under this
section shall not use such matter other than for the purpose for
which such disclosure was authorized.
"(d) As used in this section—
"(1) the term 'banking law violation' means a violation of, or a
conspiracy to violate—
"(A) section 215, 656, 657, 1005, 1006, 1007, 1014, or 1344;
or
"(B) section 1341 or 1343 affecting a financial institution;
"(2) the term 'attorney for the government' has the meaning
given such term in the Federal Rules of Criminal Procedure;
and

103 STAT. 506

PUBLIC LAW 101-73—AUG. 9, 1989
"(3) the term 'grand jury information' means matters occurring before a grand jury other than the deliberations of the
grand jury or the vote of any grand juror.".
(b) CLERICAL AMENDMENT.—The table of sections at the beginning
of chapter 215 of title 18, United States Code, is amended by striking
out the item relating to sections 3322 through 3328 and inserting the
following:
"3322. Disclosure of certain matters occurring before grand jury.".
(c) FAIR CREDIT REPORTING ACT AMENDMENT.—Paragraph (1) of

section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is
amended by inserting before the period at the end the following: ",
or a subpoena issued in connection with proceedings before a Federal grand jury".
Texas.

Reports.

SEC. 965. CRIMINAL DIVISION FRAUD SECTION REGIONAL OFFICE.
(a) EsTABUSHMENT.—Not later than 120 days after the date of
enactment of this Act, the Department of Justice shall create a
regional office of the Fraud Section of the Criminal Division in the
Northern District of Texas, and maintain such office, by providing
sufficient legal and other staff and office space, through fiscal year
1992.
(b) STUDY.—Not later than 180 days after the date of the enactment of this Act, the Comptroller General shall study and report to
the Congress on whether additional regional offices of the Fraud
Section of the Criminal Division should be established in other parts
of the country.
SEC. 966. DEPARTMENT OF JUSTICE APPROPRIATION AUTHORIZATION.
(a) I N GENERAL.—There is authorized to be appropriated to the
Attorney General, without fiscal year limitation—
(1) $65,000,000 for each of fiscal years 1990 through 1992, for
purposes of investigations and prosecutions involving financial
institutions to which this Act and amendments made by this
Act apply; and
(2) $10,000,000 for each of fiscal years 1990 through 1992, for
purposes of civil proceedings involving financial institutions to
which this Act and amendments made by this Act apply.
(b) SUPPLANTATION AND REALLOCATION PROHIBITED.—SumS authorized by t h i s section—

(1) are in addition to any other sums authorized to be appropriated for such purposes;
(2) shall not be used to supplant sums otherwise available for
such purposes; and
(3) shall not be reallocated for any other purpose.
SEC. 967. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR THE
JUDICIARY.
There is authorized to be appropriated to the Federal courts
system $10,000,000, to carry out such system's duties under this Act,
for each of fiscal years 1990 through 1992.
SEC. 968. RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS.
Section 1961(1) of title 18, United States Code, is amended by
inserting "section 1344 (relating to financial institution fraud),'
after "(relating to wire fraud),".

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

103 STAT. 507

TITLE X—STUDIES OF FEDERAL DEPOSIT i2usci8ii
note.
INSURANCE, BANKING SERVICES, AND
THE SAFETY AND SOUNDNESS OF GOVERNMENT-SPONSORED ENTERPRISES
SEC. 1001. STUDY OF FEDERAL DEPOSIT INSURANCE SYSTEM.

(a) I N GENERAL.—The Secretary of the Treasury, in consultation
with the Comptroller of the Currency, the Chairman of the Board of
Governors of the Federal Reserve System, the Director of the Office
of Thrift Supervision, the Chairperson of the Federal Deposit Insurance Corporation, the Chairman of the National Credit Union
Administration Board, the Director of the Office of Management
and Budget, and individuals from the private sector, shall conduct a
study of the Federal deposit insurance system.
(b) TOPICS.—As part of the study required under subsection (a), the
Secretary of the Treasury shall investigate, review, and evaluate the
following:
(1) The feasibility of establishing a deposit insurance premium rate structure which would take into account, on an
institution-by-institution basis—
(A) asset quality risk;
(B) interest rate risk;
(C) quality of management; and
(D) profitability and capital.
(2) Incentives for market discipline, including the advantages
of—
(A) limiting each depositor to 1 insured account per
institution;
(B) reducing the amount insured, or providing for a graduated decrease in the percentage of the amounts deposited
which are insured as the amounts deposited increase;
(C) combining Federal with private insurance in order to
bring the market discipline of private insurance to bear on
the management of the depository institution; and
(D) ensuring, by law or regulation, that on the closing of
any insured depository institution, the appropriate Federal
insurance fund will honor only its explicit liabilities, and
will never make good any losses on deposits not explicitly
covered by Federal deposit insurance.
(3) The scope of deposit insurance coverage and its impact on
the liability of the insurance fund.
(4) The feasibility of market value accounting, assessments on
foreign deposits, limitations on brokered deposits, the addition
of collateralized borrowings to the deposit insurance base, and
multiple insured accounts.
(5) The impact on the deposit insurance funds of varjring State
and Federal bankruptcy exemptions and the feasibility of—
(A) uniform exemptions;
(B) limits on exemptions when necessary to repay obligations owed to federally insured depository institutions; and
(C) requiring borrowers from federally insured depository
institutions to post a personal or corporate bond when
obt£dning a mortgage on real property.

103 STAT. 508

PUBLIC LAW 101-73—AUG. 9, 1989

(6) Policies to be followed with respect to the recapitalization
or closure of insured depository institutions whose capital is
* depleted to, or near the point of, insolvency.
(7) The efficiency of housing subsidies through the Federal
home loan bank system.
(8) Alternatives to Federal deposit insurance.
(9) The feasibility of developing and administering, through
the appropriate Federal banking agency, an examination of the
principles and techniques of risk management and the application of such principles and techniques to the management of
insured institutions.
(10) The adequacy of capital of insured credit unions and the
National Credit Union Share Insurance Fund, including
whether the supervision of such fund should be separated from
the other functions of the National Credit Union Administration.
(11) The feasibility of requiring, by statute or other means,
that—
(A) independent auditors and accountants of a depository
institution report the results of any audit of the institution
to the relevant regulatory agency or agencies;
(B) a regulator share reports on a depository institution
with the institution's independent auditors and accountants; and
(C) independent auditors and accountants participate in
conferences between the regulator and the depository
institution.
(12) The feasibility of adopting regulations which are the
same as or similar to the provisions of England's Banking Act,
1987, ch. 22 (4 Halsbury's Statutes of England and Wales 527650 (1987)), enacted on May 15, 1987, relating to the Bank of
England's relationship with auditors and reporting accountants
(including sections 8, 39, 41, 45, 46, 47, 82, 83, 85, and 94 of such
Act).
(c) FINAL REPORT.—Not later than the close of the 18-month period
beginning on the date of the enactment of this Act, the Secretary of
the Treasury shall submit to the Congress a final report containing
a detailed statement of findings made, and conclusions drawn from,
the study conducted under this section, including such recommendations for administrative and legislative action as the Secretary
determines to be appropriate.
SEC. 1002. SURVEY OF BANK FEES AND SERVICES.

(a) ANNUAL SURVEY REQUIRED.—The Board of Governors of the
Federal Reserve System shall obtain a sample, which is representative by geographic location and size of institution, of—
(1) certain retail banking services provided by insured depository institutions; and
(2) the fees, if any, which are imposed by such institutions for
providing such services.
(b) ANNUAL REPORT TO CONGRESS REQUIRED.—

(1) PREPARATION.—The Board of Governors of the Federal
Reserve System shall prepare a report of the results of each
survey conducted pursuant to subsection (a).
(2) CONTENTS OF REPORT.—Each report prepared pursuant to
paragraph (1) shall include—

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 509

(A) a description of any discernable trends in the cost and
availability of retail banking services; and
(B) a description of the correlation, if any, between—
(i) any increase in the amount of any deposit
insurance premium assessed by the Federal Deposit
Insurance Corporation against insured depository
institutions;
(ii) any increase in the amount of the fees imposed by
such institutions for providing reteiil banking services;
and
^
(iii) any decrease in the availability of such services,
(3) SUBMISSION TO CONGRESS.—The Board of Governors of the Reports.
Federal Reserve System shall submit—
(A) the first annual report required under paragraph (1)
not later than June 1,1990; and
(B) each subsequent annual report not later than June 1
of each calendar year beginning after 1990.
(c) SUNSET.—The requirements of subsection (a) shall terminate at
the end of the 2-year period beginning on the later of—
(1) the 5-year period beginning on the date of the enactment
of this Act; or
(2) the date (if any) during the 2-year period beginning at the
end of such 5-year period, on which deposit insurance premiums
are increased under section 7 of the Federal Deposit Insurance
Act.
SEC. 1003. GENERAL ACCOUNTING OFFICE STUDY.

(a) I N GENERAL.—The Comptroller General of the United States
shall conduct a study of deposit insurance issues raised by section
1001 emphasizing in particular—
(1) analysis of the policy considerations affecting the scope of
deposit insurance coverage;
(2) evEduation of the risks associated with bank insurance
contracts both as to the issuing institution and the deposit
insurance funds; and
(3) the effect of proposed changes in the definition of "deposit"
on—
(A) market discipline; and
(B) the ability of other participants in capital markets to
raise funds.
(b) REPORT.—Not later than the close of the 18-month period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit to the Congress the results of the study
required by subsection (a).
SEC. 1004. STUDY REGARDING CAPITAL REQUIREMENTS FOR GOVERNMENT-SPONSORED ENTERPRISES.

(a) I N GENERAL.—The Comptroller General of the United States
shall conduct a study of the risks undertaken by all governmentsponsored enterprises and the appropriate level of capital for such
enterprises consistent with—
(1) the financial soundness and stability of the governmentsponsored enterprises;
(2) minimizing any potential financial exposure of the Federal
Government; and
(3) minimizing any potential impact on borrowing of the
Federal Government.

103 STAT. 510

PUBLIC L A W 101-73—AUG. 9, 1989
(b) CONSULTATION AND COOPERATION WITH OTHER AGENCIES.—The

Comptroller Greneral shall determine the structure and methodology
of the study under this section in consultation with and with the
cooperation of the Secretary of Agriculture and the Farm Credit
Administration (with respect to the Farm Credit Banks, the Banks
for Cooperatives, and the Federal Agricultural Mortgage Corporation), the Secretary of Education (with respect to the Student Loan
Marketing Association and the College Construction Loan Corporation), the Secretary of Housing and Urban Development (with respect to the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation), and the government-sponsored
enterprises.
(c) ACCESS TO RELEVANT INFORMATION.—Each government-sponsored enterprise shall provide full and prompt access to the
Ck)mptroller General to its books and records and shall promptly
provide any other information requested by the Comptroller General. In conducting the study under this section, the (DomptroUer
General may request information from, or the assistance of, any
department or agency of the Federal Government that is authorized
by law to supervise or approve any of the activities of any government-sponsored enterprise.
(d) SPECIFIC REQUIREMENTS.—The study shall examine and evaluate—
(1) the degrees and types of risks that are undertaken by the
government-sponsored enterprises in the course of their operations, including credit risk, interest rate risk, management and
operational risk, and business risk;
(2) the most appropriate method or methods for quantifying
the types of risks undertaken by the government-sponsored
enterprises;
(3) the actual level of risk that exists with respect to each
government-sponsored enterprise, which shall take into account
factors including the volume and type of securities outstanding
that are issued or guaranteed by each government-sponsored
enterprise and the extent of off-bgJance sheet expense of each
government-sponsored enterprise;
(4) the appropriateness of appl3dng a risk-based capital standard to each government-sponsored enterprise, taking into account the nature of the business each government-sponsored
enterprise conducts;
(5) the costs and benefits to the public from application of a
risk-based capital standard to the government-sponsored enterprises and the impact of such a standard on the capability of
each government-sponsored enterprise to carry out its purpose
under law;
(6) the impact, if any, of the operation of the governmentsponsored enterprises on borrowing of the Federal Government;
(7) the overall level of capital appropriate for each of the
government-sponsored enterprises; and
(8) the quality and timeliness of information currently available to the public and the Federal (Jovemment concerning the
extent and nature of the activities of government-sponsored
enterprises and the financial risk associated with such activities.
(e) REPORTS TO CONGRESS.—The Comptroller General shall submit
to the Congress 2 reports regarding the study under this section. The
first report shall be submitted to the Congress not later than 9

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 511

months after the date of the enactment of this Act and the second
report shall be submitted to the Congress not later than 21 months
after the date of the enactment of this Act. Each report shall set
forth—
(1) the results of the study under this section;
(2) any recommendations of the Comptroller General with
respect to appropriate capital standards for each governmentsponsored enterprise;
(3) any recommendations of the Comptroller General with
respect to information that, in the determination of the
Comptroller General, should be provided to the Congress
concerning—
(A) the extent and nature of the activities of the government-sponsored enterprises; and
(B) the nature of any periodic reports that the Comptroller General believes should be submitted to the Congress
relating to the capital condition and operations of the
government-sponsored enterprises; and
(4) any recommendations and opinions of the Secretary of
Agriculture, the Secretary of Education, the Secretary of Housing and Urban Development, and the Secretary of the Treasury
regarding the report, to the extent that the recommendations
and views of such officers differ from the recommendations and
opinions of the Comptroller General.
(f) DEFINITION.—For purposes of this section, the term "government-sponsored enterprises" means the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the
Federal Home Loan Bank System, the Farm Credit Banks, the
Banks for Cooperatives, the Federal Agricultural Mortgage Corporation, the College Construction Loan Insurance Corporation, the
Student Loan Marketing Association.

TITLE XI—REAL ESTATE APPRAISAL
REFORM AMENDMENTS
SEC. 1101. PURPOSE.

12 USC 3331.

The purpose of this title is to provide that Federal financial and
public policy interests in real estate related transactions will be
protected by requiring that real estate appraisals utilized in connection with federally related transactions are performed in writing, in
accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will
be subject to effective supervision.
SEC. 1102. ESTABLISHMENT OF APPRAISAL SUBCOMMITTEE OF THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL.

The Federal Financial Institutions Examination Council Act of
1978 (12 U.S.C. 3301 et seq.) is amended by adding at the end thereof
the following new section:
"SEC. 1011. ESTABLISHMENT OF APPRAISAL SUBCOMMITTEE.

"There shall be within the Council a subcommittee to be known as
the 'Appraisal Subcommittee', which shall consist of the designees of
the heads of the Federal financial institutions regulatory agencies.

12 USC 3310.

103 STAT. 512

PUBLIC LAW 101-73—AUG. 9, 1989

Each such designee shall be a person who has demonstrated knowledge and competence concerning the appraisal profession.".
12 u s e 3332.

Reports.

SEC. 1103. FUNCTIONS OF APPRAISAL SUBCOMMITTEE.

(a) I N GENERAL.—The Appraisal Subcommittee shall—
(1) monitor the requirements established by States for the
certification and licensing of individuals who are qualified to
perform appraisals in connection with federally related transactions, including a code of professional responsibility;
(2) monitor the requirements established by the Federal
' financial institutions regulatory agencies and the Resolution
Trust Corporation with resj)ect to—
(A) appraisal standards for federally related transactions
under their jurisdiction, and
(B) determinations as to which federally related transactions under their jurisdiction require the services of a
State certified appraiser and which require the services of a
State licensed appraiser;
(3) maintain a national registry of State certified and licensed
appraisers who are eligible to perform appraisals in federally
related transactions; and
(4) transmit an annual report to the Congress not later than
January 31 of each year which describes the manner in which
each function assigned to the Appraisal Subcommittee has been
carried out during the preceding year.
(b) MONITORING AND REVIEWING FOUNDATION.—The Appraisal

Subcommittee shall monitor and review the practices, procedures,
activities, and organizational structure of the Appraisal Foundation.
12 u s e 3333.

SEC. 1104. CHAIRPERSON OF APPRAISAL SUBCOMMITTEE; TERM OF
CHAIRPERSON; MEETINGS.

(a) CHAIRPERSON.—The Council shall select the Chairperson of the
subcommittee. The term of the Chairperson shall be 2 years.
(b) MEETINGS; QUORUM; VOTING.—The Appraisal Subcommittee
shall meet at the call of the Chairperson or a majority of its
members when there is business to be conducted. A majority of
members of the Appraisal Subcommittee shall constitute a quorum
but 2 or more members may hold hearings. Decisions of the Appraisal Subcommittee shall be made by the vote of a majority of its
members.
12 u s e 3334.

SEC. 1105. OFFICERS AND STAFF.

The Chairperson of the Appraisal Subcommittee shall appoint
such officers and staff as may be necessary to carry out the functions of this title consistent with the appointment and compensation
practices of the Council.
12 u s e 3335.

SEC. 1106. POWERS OF APPRAISAL SUBCOMMITTEE.

The Appraisal Subcommittee may, for the purpose of carrying out
this title, establish advisory committees, hold hearings, sit and act
at times and places, take testimony, receive evidence, provide
information, and perform research, as the Appraisal Subcommittee
considers appropriate.

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989

103 STAT. 513

SEC. 1107. PROCEDURES FOR ESTABLISHING APPRAISAL STANDARDS AND
REQUIRING THE USE OF CERTIFIED AND LICENSED
APPRAISERS.

12 USC 3336.

Appraisal standards and requirements for using State certified
and licensed appraisers in federally related transactions pursuant to
this title shall be prescribed in accordance with procedures set forth
in section 553 of title 5, United States Code, including the publication of notice and receipt of written comments or the holding of
public hearings with respect to any standards or requirements
proposed to be established.
SEC. 1108. STARTUP FUNDING.

12 USC 3337.

(a) I N GENERAL.—For purposes of this title, the Secretary of the
Treasury shall pay to the Appraisal Subcommittee a one-time payment of $5,000,000 on the date of the enactment of this Act. Thereafter, expenses of the subcommittee shall be funded through the
collection of registry fees from certain certified and licensed appraisers pursuant to section 1109 or, if required, pursuant to section
1122(b) of this title.
0?) ADDITIONAL FUNDS.—Except as provided in section 1122(b) of
this title, funds in addition to the funds provided under subsection
(a) may be made available to the Appraisal Subcommittee only if
authorized and appropriated by law.
SEC. 1109. ROSTER OF STATE CERTIFIED OR LICENSED APPRAISERS; 12 USC 3338.
AUTHORITY TO COLLECT AND TRANSMIT FEES.

(a) I N GENERAL.—Each State with an appraiser certifying and
licensing agency whose certifications and licenses comply with this
title, shall—
(1) transmit to the Appraisal Subcommittee, no less than
annually, a roster listing individuals who have received a State
certification or license in accordance with this title; and
(2) collect from such individuals who perform or seek to
perform appraisals in federally related transactions, an annual
registry fee of not more than $25, such fees to be transmitted by
the State agencies to the Council on an annual basis.
Subject to the approval of the Council, the Appraisal Subcommittee
may adjust the dollar amount of registry fees, up to a maximum of
$50 per annum, as necessary to carry out its functions under this
title.
(b) U S E OF AMOUNTS APPROPRIATED OR COLLECTED.—Amounts

appropriated for or collected by the Appraisal Subcommittee under
this section shall be used—
(1) to maintain a registry of individuals who are qualified and
eligible to perform appraisals in connection with federally related transactions;
(2) to support its activities under this title;
(3) to reimburse the general fund of the Treasury for amounts
appropriated to and expended by the Appraisal Subcommittee
during the 24-month startup period following the date of the
enactment of this title; and
(4) to make grants in such amounts as it deems appropriate to
the Appraisal Foundation, to help defray those costs of the
foundation relating to the activities of its Appraisal Standards
and Appraiser Qualification Boards.

103 STAT. 514
12 u s e 3339.

PUBLIC LAW 101-73—AUG. 9, 1989
SEC. 1110. FUNCTIONS OF THE FEDERAL FINANCIAL INSTITUTIONS REGULATORY AGENCIES RELATING TO APPRAISAL STANDARDS.

Each Federal financial institutions regulatory agency and the
Resolution Trust Corporation shall prescribe appropriate standards
for the performance of real estate appraisals in connection with
federally related transactions under the jurisdiction of each such
agency or instrumentality. These rules shall require, at a minimum—
(1) that real estate appraisals be performed in accordance
with generally accepted appraisal standards as evidenced by the
appraisal standards promulgated by the Appraisal Standards
Board of the Appraisal Foundation; and
(2) that such appraisals shall be written appraisals.
Each such agency or instrumentality may require compliance with
additional standards if it makes a determination in writing that
such additional standards are required in order to properly carry
out its statutory responsibilities.
12 u s e 3340.

SEC. 1111. TIME FOR PROPOSAL AND ADOPTION OF STANDARDS.

Appraisal standards established under this title shall be proposed
not later than 6 months and shall be adopted in final form and
become effective not later than 12 months after the date of the
enactment of this Act.
12 u s e 3341.

SEC. 1112. FUNCTIONS OF THE FEDERAL FINANCIAL INSTITUTIONS REGULATORY AGENCIES RELATING TO APPRAISER QUALIFICATIONS.

Each Federal financial institutions regulatory agency and the
Resolution Trust Corporation shall prescribe, in accordance with
sections 1113 and 1114 of this title, which categories of federally
related transactions should be appraised by a State certified appraiser and which by a State licensed appraiser under this title.
12 u s e 3342.

Housing.

12 u s e 3343.

SEC. 1113. TRANSACTIONS REQUIRING THE SERVICES OF A STATE CERTIFIED APPRAISER.

In determining whether an appraisal in connection with a federally related transaction shall be performed by a State certified
appraiser, an agency or instrumentality under this title shall consider whether transactions, either individually or collectively, are of
sufficient financial or public policy importance to the United States
that an individual who performs an appraisal in connection with
such transactions should be a State certified appraiser, except
that—
(1) a State certified appraiser shall be required for all federally related transactions having a value of $1,000,000 or more;
and
(2) l-to-4 unit, single family residential appraisals may be
performed by State licensed appraisers unless the size and
complexity requires a State certified appraiser.
SEC. 1114. TRANSACTIONS REQUIRING THE SERVICES OF A STATE LICENSED APPRAISER.

All federally related transactions not requiring the services of a
State certified appraiser shall be performed by either a State certified or licensed appraiser.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 515

SEC. 1115. TIME FOR PROPOSAL AND ADOPTION OF RULES.

12 USC 3344.

As appropriate, rules issued under sections 1113 and 1114 shall be
proposed not later than 6 months and shall be effective upon
adoption in final form not later than 12 months after the date of the
enactment of this Act.
SEC. 1116. CERTIFICATION AND LICENSING REQUIREMENTS.

12 USC 3345.

(a) I N GENERAL.—For purposes of this title, the term "State
certified real estate appraiser" means any individual who has satisfied the requirements for State certification in a State or territory
whose criteria for certification as a real estate appraiser currently
meets the minimum criteria for certification issued by the Appraiser
Qualification Board of the Appraisal Foundation.
(b) RESTRICTION.—No individual shall be a State certified real
estate appraiser under this section unless such individual has
achieved a passing grade upon a suitable examination administered
by a State or territory that is consistent with and equivalent to the
Uniform State Certification Examination issued or endorsed by the
Appraiser Qualification Board of the Appraisal Foundation.
(c) DEFINITION.—As used in this section, the term "State licensed
appraiser" means an individual who has satisfied the requirements
for State licensing in a State or territory.
(d) ADDITIONAL QUAUFICATION CRITERIA.—Nothing in this title
shall be construed to prevent any Federal Eigency or instrumentality
under this title from establishing such additional qualification criteria as may be necessary or appropriate to carry out the statutory
responsibilities of such department, agency, or instrumentality.
SEC.

1117. ESTABLISHMENT OF STATE APPRAISER CERTIFYING AND
LICENSING AGENCIES.

12 USC 3346.

To assure the avEiilability of State certified and licensed appraisers for the performance in a State of appraisals in federally related
transactions and to assure effective supervision of the activities of
certified and licensed appraisers, a State may establish a State
appraiser certifying and licensing agency.
SEC. 1118. MONITORING OF STATE APPRAISER CERTIFYING AND LICENSING AGENCIES.

(a) I N GENERAL.—The Appraisal Subcommittee shall monitor
State appraiser certifying and licensing agencies for the purpose of
determining whether a State agency's policies, practices, and procedures are consistent with this title. The Appraisal Subcommittee
and all agencies, instrumentalities, and federally recognized entities
under this title shall not recognize appraiser certifications and
licenses from States whose appraisal policies, practices, or procedures are found to be inconsistent with this title.
0>) DISAPPROVAL BY APPRAISAL SUBCOMMITTEE.—The Federal
financial institutions, regulatory agencies, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Resolution Trust Corporation shall accept certifications and licenses awarded by a State appraiser certifying the
licensing agency unless the Appraisal Subcommittee issues a written finding that—
(1) the State agency fails to recognize and enforce the standards, requirements, and procedures prescribed pursuant to this
title;

12 USC 3347.

103 STAT. 516

PUBLIC LAW 101-73—AUG. 9, 1989
(2) the State agency is not granted authority by the State
which is adequate to permit the agency to carry out its functions under this title; or
(3) decisions concerning appraisal standards, appraiser qualifications and supervision of appraiser practices are not made in
a manner that carries out the purposes of this title.
(c) REJECTION OF STATE CERTIFICATIONS AND LICENSES.—
(1) OPPORTUNITY TO BE HEARD OR CORRECT CONDITIONS.—Before

refusing to recognize a State's appraiser certifications or licenses, the Appraisal Subcommittee shall provide that State's
certifying and licensing agency a written notice of its intention
not to recognize the State's certified or licensed appraisers and
ample opportunity to provide rebuttal information or to correct
the conditions causing the refusal.
(2) ADOPTION OF PROCEDURES.—The Appraisal Subcommittee
shall adopt written procedures for taking actions described in
this section.
(3) JUDICIAL REVIEW.—A decision of the subcommittee under
this section shall be subject to judicial review.
12 u s e 3348.

SEC. 1119. RECOGNITION OF STATE CERTIFIED AND LICENSED APPRAISERS FOR PURPOSES OF THIS TITLE.
(a) EFFECTIVE DATE FOR USE OF CERTIFIED OR LICENSED APPRAISERS
ONLY.—

(1) I N GENERAL,—Not later than July 1, 1991, all appraisals
performed in connection with federally related transactions
shall be performed only by individuals certified or licensed in
accordance with the requirements of this title.
(2) EXTENSION OF EFFECTIVE DATE.—Subject to the approval of
the council, the Appraisal Subcommittee may extend, until
December 31, 1991, the effective date for the use of certified or
licensed appraisers if it makes a written finding that a State has
made substantial progress in establishing a State certification
and licensing system that appears to conform to the provisions
of this title.
(b) TEMPORARY WAIVER OF APPRAISER CERTIFICATION OR LICENSING
REQUIREMENTS FOR STATE HAVING SCARCITY OF QUALIFIED APPRAIS-

ERS.—Subject to the approval of the Council, the Appraisal Subcommittee may waive any requirement relating to certification or
licensing of a person to perform appraisals under this title if the
Appraisal Subcommittee or a State agency whose certifications and
licenses are in compliance with this title, makes a written determination that there is a scarcity of certified or licensed appraisers to
perform appraisals in connection with federally related transactions
in a State leading to inordinate delays in the performance of such
appraisals. The waiver terminates when the Appraisal Subcommittee determines that such inordinate delays have been eliminated.
(c) REPORTS TO STATE CERTIFYING AND LICENSING AGENCIES.—The

Appraisal Subcommittee, any other Federal agency or instrumentality, or any federally recognized entity shall report any action of a
State certified or licensed appraiser that is contrary to the purposes
of this title, to the appropriate State agency for a disposition of the
subject of the referral. The State agency shall provide the Appraisal
Subcommittee or the other Federal agency or instrumentality with
a report on its disposition of the matter referred. Subsequent to such
disposition, the subcommittee or the agency or instrumentality may

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 517

take such further action, pursuant to written procedures, it deems
necessary to carry out the purposes of this title.
SEC. 1120. VIOLATIONS IN OBTAINING AND PERFORMING APPRAISALS IN
FEDERALLY RELATED TRANSACTIONS.

12 USC 3349.

(a) VIOLATIONS.—Except as authorized by the Appraisal Subcommittee in exercising its waiver authority pursuant to section
1119(b), it shall be a violation of this section—
(1) for a financial institution to seek, obtain, or give money or
any other thing of value in exchange for the performance of an
appraisal by a person who the institution knows is not a State
certified or licensed appraiser in connection with a federally
related transaction; and
(2) for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Resolution Trust
Corporation to knowingly contract for the performance of any
appraisal by a person who is not a State certified or licensed
appraiser in connection with a real estate related financial
transaction defined in section 1121(5) to which such association
or corporation is a party.
(b) PENALTIES.—A financial institution that violates subsection
(a)(1) shall be subject to civil penalties under section 8(i)(2) of the
Federal Deposit Insurance Act or section 206(kX2) of the Federal
Credit Union Act, as appropriate.
(c) PROCEEDING.—A proceeding with respect to a violation of this
section shall be an administrative proceeding which may be conducted by a Federal financial institutions regulatory agency in
accordance with the procedures set forth in subchapter II of chapter
5 of title 5, United States (Dode.
SEC. 1121. DEFINITIONS.

For purposes of this title:
(1) STATE APPRAISER CERTIFYING AND LICENSING AGENCY.—The

term "State appraiser certifying and licensing agency" means a
State agency established in compliance with this title.
(2) APPRAISAL SUBCOMMITTEE; SUBCOMMITTEE.—The terms
"Appraisal Subcommittee" and "subcommittee" mean the Appraisal Subcommittee of the Federal Financial Institutions
Examination Council.
(3) COUNCIL.—The term "Council" means the Federal Financial Institutions Examinations Clouncil.
(4) FEDERALLY RELATED TRANSACTION.—The term "federally
related transaction" means any real estate-related financial
transaction which—
(A) a federal financial institutions regulatory agency or
the Resolution Trust (Dorporation engEiges in, contracts for,
or regulates; and
(B) requires the services of an appraiser.
(5) REAL ESTATE RELATED FINANCIAL TRANSACTION.—The term
"real estate-related financial transaction" means any transaction involving—
(A) the sale, lease, purchase, investment in or exchange of
real property, including interests in property, or the financing thereof;
(B) the refinancing of real property or interests in real
property; and

12 USC 3350.

103 STAT. 518

PUBLIC LAW 1 0 1 - 7 3 - A U G . 9, 1989
(C) the use of real property or interests in property as
security for a loan or investment, including mortgagebacked securities.
(6) FEDERAL FINANCIAL INSTITUTIONS REGULATORY AGENCIES.—

The term "Federal financial institutions regulatory agencies"
means the Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporations, the Office of the
Comptroller of the Currency, the Office of Thrift Supervision,
and the National Credit Union Administration.
(7) FINANCIAL INSTITUTION.—The term "financial institution"
means an insured depository institution as defined in section 3
of the Federal Deposit Insurance Act or an insured credit union
as defined in section 101 of the Federal Credit Union Act.
(8) CHAIRPERSON.—The term "Chairperson" means the Chairperson of the Appraisal Subcommittee selected by the council.
(9) FOUNDATION.—The terms "Appraisal Foundation" and
"Foundation" means the Appraisal Foundation established on
November 30, 1987, as a not for profit corporation under the
laws of Illinois.
(10) WRITTEN APPRAISAL.—The term "written appraisal"
means a written statement used in connection with a federally
related transaction that is independently and impartially prepared by a licensed or certified appraiser setting forth an
opinion of defined value of an adequately described property as
of a specific date, supported by presentation and analysis of
relevant market information.
12 u s e 3351.

SEC. 1122. MISCELLANEOUS PROVISIONS.

(a) TEMPORARY PRACTICE.—A State appraiser certifying or licensing agency shall recognize on a temporary basis the certification or
license of an appraiser issued by another State if—
(1) the property to be appraised is part of a federally related
transaction,
(2) the appraiser's business is of a temporary nature, and
(3) the appraiser registers with the appraiser certifying or
licensing agency in the State of temporary practice.
(b) SUPPLEMENTAL FUNDING.—Funds available to the Federal

financial institutions regulatory agencies may be made available to
the Federal Financial Institutions Examination Council to support
the council's functions under this title.
(c) PROHIBITION AGAINST DISCRIMINATION.—Criteria established by
the Federal financial institutions regulatory agencies, the Federal
National Mortgage Association, the Federal Home Loan Mortgage
Corporation, and the Resolution Trust Corporation for appraiser
qualifications in addition to State certification or licensing shall not
exclude a certified or licensed appraiser for consideration for an
assignment solely by virtue of membership or lack of membership in
any particular appraisal organization.
(d) OTHER REQUIREMENTS.—A corporation, partnership, or other

business entity may provide appraisal services in connection with
federally related transactions if such appraisal is prepared by
individuals certified or licensed in accordance with the requirements of this title. An individual who is not a State certified or
licensed appraiser may assist in the preparation of an appraisal if—
(1) the assistant is under the direct supervision of a licensed
or certified individual; and

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 519

(2) the final appraisal document is approved and signed by an
individual who is certified or licensed,
(e) STUDIES.—

(1) STUDY.—The Appraisal Subcommittee shall—
(A) conduct a study to determine whether real estate
sales and financing information and data that is available
to real estate appraisers in the States is sufficient to permit
appraisers to properly estimate the values of properties in
connection with federally related transactions; and
(B) study the feasibility and desirability of extending the
provisions of this title to the function of personal property
appraising and to personal property appraisers in connection with Federal fineuicial and public policy interests.
(2) REPORT.—The Appraisal Subcommittee shall—
(A) report its findings to the Congress with respect to the
study described in pargigraph (1)(A) no later than 12 months
after the date of the enactment of this title, and
(B) report its findings with respect to the study described
in paragraph (IXB) to Congress not later than 18 months
after the date of the enactment of this title.

TITLE XII—MISCELLANEOUS PROVISIONS
SEC. 1201. GAO STUDY OF CREDIT UNION SYSTEM.

12 u s e 1752a
note.

(a) I N GENERAL.—The Comptroller General of the United States
shall conduct a comprehensive study of the Nation's credit union
system. In conducting the study, the Comptroller Greneral shall
examine—
(1) credit unions' present and future role in the financial
marketplace;
(2) the financial condition of credit unions;
(3) credit union capital;
(4) credit union regulation and supervision on both the Federal and State levels;
(5) whether the National Credit Union Administration
examinations of credit unions are comparable in frequency and
quality to supervisory examinations of insured banks and savings associations;
(6) the structure and financial condition of the National
Credit Union Share Insurance Fund, including whether supervision of that Fund should be separated from the other functions of the National Credit Union Administration Board; and
(7) whether the common bond rules regarding credit union
membership continue to serve their originsd purpose.
Comparative information with other t3rpes of depository institutions
should be included.
(b) SUBMISSION.—Before the close of the 18-month period begin- Reports.
ning on the date of the enactment of this Act, the Comptroller
General shall submit to the Committee on Banking, Finance and
Urban Affairs of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate a final report
which shall contain a detailed statement of findings and conclusions, including recommendations for such administrative and legislative action as the Comptroller General deems advisable.

103 STAT. 520

PUBLIC LAW 101-73—AUG. 9, 1989
SEC. 1202. OCC EMPLOYMENT PROVISION.

The 3rd undesignated paragraph of section 5240 of the Revised
Statutes (12 U.S.C. 482) is amended—
(1) by striking out the 1st sentence and inserting in lieu
thereof the following:
"Notwithstanding any of the preceding provisions of this section
to the contrary, the Comptroller of the Currency shall fix the
compensation and number of, and appoint and direct, all employees
of the Office of the Comptroller of the Currency. Rates of basic pay
for all employees of the Office may be set and adjusted by the
Comptroller without regard to the provisions of chapter 51 or subchapter III of chapter 53 of title 5, United States Code. The
Comptroller may provide additional compensation and benefits to
employees of the Office if the same type of compensation or benefits
are then being provided by any other Federal bank regulatory
agency or, if not then being provided, could be provided by such an
agency under applicable provisions of law, rule, or regulation. In
setting and adjusting the total amount of compensation and benefits
for employees of the Office, the Comptroller shall consult with, and
seek to maintain comparability with, other Federal banking
agencies."; and
(2) by redesignating the remaining sentences of such undesignated paragraph as a new undesignated paragraph.
SEC. 1203. NCUA EMPLOYMENT PROVISION.

Section 120 of the Federal Credit Union Act (12 U.S.C. 1766) is
amended by adding at the end thereof the following new subsection:
"0) STAFF.—
"(1) APPOINTMENT AND COMPENSATION.—The Board shall fix

the compensation and number of, and appoint and direct,
employees of the Board. Rates of basic pay for employees of the
Board may be set and adjusted by the Board without regard to
the provisions of chapter 51 or subchapter HI of chapter 53 of
title 5, United States Code.
"(2) ADDITIONAL COMPENSATION AND BENEFITS.—The Board
may provide additional compensation and benefits to employees
of the Board if the same type of compensation or benefits are
then being provided by any other Federal bank regulatory
agency or, if not then being provided, could be provided by such
an agency under applicable provisions of law, rule, or regulation. In setting and adjusting the total amount of compensation
and benefits for employees of the Board, the Board shall seek to
maintain comparability with other Federal bank regulatory
agencies.
"(3) FUNDING.—The salaries and expenses of the Board and
employees of the Board shall be paid from fees and assessments
(including income earned on insurance deposits) levied on insured credit unions under this Act.".
12 u s e 1811
note.

SEC. 1204. EXPANSION OF USE OF UNDERUTILIZED MINORITY BANKS,
WOMEN'S BANKS, AND LOW-INCOME CREDIT UNIONS.
(a) CONSULTATION ON EXPANDED USE.—The Secretary of the Treas-

ury shall consult with the appropriate Federal banking agencies and
the National Credit Union Administration Board on methods for
increasing the use of underutilized minority banks, women's banks,
and limited income credit unions as depositaries or financial agents
of Federal agencies.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 521

(b) REPORT TO CONGRESS.—The Secretary of the Treasury shall
include, in the 1st annual report submitted to the Congress under
section 331(a) of title 31, United States Code, after the completion of
the consultation required by subsection (a), a report of the actions
taken by the Secretary to increase the use of underutilized minority
banks, women's banks, and limited income credit unions as depositaries or financial agents of Federal agencies.
(c) DEFINITIONS.—For purposes of this section:
(1) APPROPRIATE FEDERAL BANKING AGENCY.—The term
"appropriate Federal banking agency" has the meaning given
to such term in section 3(q) of the Federal Deposit Insurance
Act.
(2) MINORITY BANK.—The term "minority bank" means any
depository institution described in clause (i), (ii), or (iii) of
section 19(bXlXA) of the Federal Reserve Act—
(A) more than 50 percent of the ownership or control of
which is held by 1 or more minority individuals; and
(B) more than 50 percent of the net profit or loss of which
accrues to 1 or more minority individuals.
(3) MINORITY.—The term "minority" means any Black American, Native American, Hispanic American, or Asian American.
(4) LOW-INCOME CREDIT UNION.—The term "low-income credit
union" means any depository institution described in section
19(bXlXAXiv) of the Federal Reserve Act which serves predominately low-income members (as defined by the National Credit
Union Administration Board pursuant to section 101(5) of the
Federal Credit Union Act).
(5) WOMEN'S BANK.—The term "women's bank" means any
depository institution described in clause (i), (ii), or (iii) of
section 19(bXlXA) of the Federal Reserve Act—
(A) more than 50 percent of the outstanding shares of
which are held by 1 or more women;
(B) a majority of the directors on the board of directors of
which are women; and
(C) a significant percentage of senior management positions of which are held by women.
SEC. 1205. CREDIT STANDARDS ADVISORY COMMITTEE.

(a) ESTABLISHMENT.—There is hereby established the Credit Standards Advisory Committee (in this section referred to as the
"Committee").
(b) MEMBERSHIP.—

(1) APPOINTMENT.—The Committee shall consist of 11 members, as follows:
(A) The Chairman of the Board of Governors of the
Federal Reserve System, or the Clhairman's designee.
(B) The Director of the Office of Thrift Supervision, or the
Director's designee.
(C) The CJhairperson of the Federal Deposit Insurance
(Dorporation, or the (Chairperson's designee.
(D) The Comptroller of the Currency, or the CJomptroUer's
designee.
(E) The Chairman of the National Credit Union Administration, or the Chairman's designee.
(F) 6 members of the public appointed by the President
who are knowledgeable with the credit standards and lend-

12 USC 1818

103 STAT. 522

PUBLIC LAW 101-73—AUG. 9, 1989

ing practices of insured depository institutions, no more
than 3 of whom shall be from the same political party.
(2) TERMS.—Each member appointed under paragraph (IXF)
shall serve for the life of the Committee.
(3) CHAIRPERSON.—The members shall elect a chairperson of
the Committee who shall serve for a term of 1 year.
(4) VACANCIES.—Any vacancy on the Committee shall be filled
in the manner in which the original appointment was made.
(5) PAY AND EXPENSES.—Members of the Committee shall
serve without pay but each member of the Committee shall be
reimbursed for expenses incurred in connection with attendance of such members a t meetings of the Committee. All expenses of the Committee shall be shared on a pro rata basis,
based upon each agency's total budget for the preceding year by
the Federal financial regulators specified in subparagraphs (A)
through (E) of paragraph (1).
(6) MEETINGS.—TTie Committee shall meet, not less frequently
than quarterly, a t the call of the chairperson or a majority of
the members.
(c) DUTIES OP THE COMMITTEE.—The Committee shall do the
following:
(1) REVIEW CREDIT STANDARDS, LENDING PRACTICES, AND SUPERVISION BY FEDERAL REGULATORS.—Review the credit standards

and lending practices of insured depository institutions and the
supervision of such standards and practices by the Federal
financial regulators.
(2) PREPARE RECOMMENDATIONS.—Prepare written comments

and recommendations for the Federal financial regulators to
ensure that insured depository institutions adhere to prudential
credit standards and lending practices that are consistent for
all insured depository institutions, to the maximum extent
possible.
(3) MONITOR CREDIT STANDARDS, LENDING PRACTICES, AND
SUPERVISION BY FEDERAL REGULATORS.—Monitor the credit

standards and lending practices of insured depository institutions, and the supervision of such standards and practices by
the Federal financial regulators, to ensure that insured depository institutions can meet the demands of a modem and globally competitive financial world.
(d) ANNUAL REPORT.—

(1) REQUIRED.—Not later than January 30 of each year, the
Committee shall submit a report to the Committee on Banking,
Finance and Urban Affairs of the House of Representatives and
the Committee on Banking, Housing, and Urban Affairs of the
Senate.
(2) CONTENTS.—The report required by paragraph (1) shall
describe the activities of the Committee during the preceding
year and the reports and recommendations made by the
Committee to the Federal financial regulators.
(e) CoNPUCT OF INTEREST GUIDELINES.—The Committee shall prescribe such guidelines as the Committee determines to be appropriate to avoid conflicts of interest with respect to the disclosure to
and use by members of the Committee of information relating to
insured depository institutions and the Federal financial regulators.

PUBLIC LAW 101-73—AUG. 9, 1989

103 STAT. 523

SEC. 1206. COMPARABILITY IN COMPENSATION SCHEDULES.

12 USC 1833b.

The Federal Deposit Insurance Coriwration, the Comptroller of
the Currency, the National Credit Union Administration Board, the
Federal Housing Finance Board, the Oversight Board of the Resolution Trust Corporation, the Farm Credit Administration, and the
Office of Thrift Supervision, in establishing and adjusting schedules
of compensation and benefits which are to be determined solely by
each agency under applicable provisions of law, shall inform the
heads of the other agencies and the Congress of such compensation
and benefits and shall seek to maintain comparability regarding
compensation and benefits.
SEC. 1207. STUDY BY SECRETARY OF THE TREASURY.

Reports.
12 u s e 1811

Not later than the close of the 18-month period beginning on the note.
date of the enactment of this Act, the Secretary of the Treasury
shall conduct a study and report to the Congress on—
(1) whether, and to what extent, the issuance of securities by
the United States Government in small denominations benefite
small investors, increases the participation of small investors in
United States Government securities offerings, and promotes
savings and thrift by the average United States taxpayer; and
(2) additional measures the Secretary recommends be taken
to expand the availability of securities issued by the United
States Government to benefit small investors, increase their
participation in United States Grovemment securities offerings,
and to promote savings and thrift by the average United States
taxpayer.

SEC. 1208. EXPENDITURE OF TAXPAYER MONEY ONLY FOR DEPOSIT 12 USC 1811
INSURANCE PURPOSES.
note.

Funds appropriated to the Secretary of the Treasury pursuant to
an authorization contained in this Act, and any amount authorized
to be borrowed from the Secretary of the Treasury by any entity
pursuant to this Act, may only be used as permitted by law, and
may not otherwise be used for making any payment to any shareholder in, or creditor to, any insured depository institution.
SEC. 1209. AMENDMENT TO SECTION 5373 OF TITLE 5, UNITED STATES
CODE.

Paragraph (2) of section 5373 of title 5, United States Code, is
amended to read as follows:
"(2) sections 248, 482,1766, and 1819 of title 12, section 206 of
the Bank Conservation Act, sections 2B(b) and 21A(eX4) of the
Federal Home Loan Bank Act, section 2A(i) of the Home
Owners'Loan Act, and sections 5.11 and 5.58 of the Farm Credit
Act of 1971;".
SEC. 1210. FARM CREDIT ADMINISTRATION AND FARM CREDIT SYSTEM
INSURANCE CORPORATION EMPLOYMENT PROVISION.

Section 5.11(cX2) of the Farm Credit Act of 1971 (12 U.S.C. 2245) is
amended to read as follows:
"(2) OFFICERS AND EMPLOYEES.—
"(A) APPOINTMENT, COMPENSATION, AND BENEFITS.—The

Chairman shall fix the compensation and number of, and
appoint and direct, employees of the Administration. The
Chairman may set and adjust the rates of basic pay for
employees of the Administration without regard to the

103 STAT. 524

PUBLIC LAW 101-73—AUG. 9, 1989
provisions of chapter 51, or subchapter III of chapter 53, of
title 5, United States Code. The Chairman may provide
such additional compensation and benefits to employees of
the Administration as is necessary to maintain comparability with the total amount of compensation and benefits
provided by other Federal bank regulatory agencies. In
setting and adjusting the total amount of compensation and
b