in a manner that is consistent with meeting the minimum capital requirements of the bank, as established by the Finance Board. (D) Liquidation of claims The capital structure plan of a Federal home loan bank shall provide for the liquidation in an orderly manner, as determined by the bank, of any claim of that bank against a member, including claims for any applicable prepayment fees or penalties resulting from prepayment of advances prior to stated maturity. (5) Limited transferability of stock The capital structure plan of a Federal home loan bank shall— (A) provide that any stock issued by that bank shall be available only to and held only by members of that bank and tradable only between that bank and its members; and (B) establish standards, criteria, and requirements for the issuance, purchase, transfer, retirement, and redemption of stock issued by that bank. (6) Bank review of plan Before filing a capital structure plan with the Finance Board, each Federal home loan bank shall conduct a review of the plan by— (A) an independent certified public accountant, to ensure, to the extent possible, that implementation of the plan would not result in any write-down of the redeemable bank stock investment of its members; and (B) at least one major credit rating agency, to determine, to the extent possible, whether implementation of the plan would have any material effect on the credit ratings of the bank. (d) Termination of membership (1) Voluntary withdrawal Any member may withdraw from a Federal home loan bank if the member provides written notice to the bank of its intent to do so and if, on the date of withdrawal, there is in effect a certification by the Finance Board that the withdrawal will not cause the Federal Home Loan Bank System to fail to meet its obligation under section 1441b(f)(2)(C) of this title to contribute to the debt service for the obligations issued by the Resolution Funding Corporation. The applicable stock redemption notice periods shall commence upon receipt of the notice by the bank. Upon the expiration of the applicable notice period for each class of redeemable stock, the member may surrender such stock to the bank, and shall be entitled to receive in cash the par value of the stock. During the applicable notice periods, the member shall be entitled to dividends and other membership rights commensurate with continuing stock ownership. (2) Involuntary withdrawal (A) In general The board of directors of a Federal home loan bank may terminate the membership of any institution if, subject to Finance Board regulations, it determines that (i) the member has failed to comply with a provision of this chapter or any regulation prescribed under this chapter; or (ii) the member has been determined to be insolvent, or otherwise subject to the appointment of a conservator, receiver, or other legal custodian, by a Federal or State authority with regulatory and supervisory responsibility for the member. (B) Stock disposition An institution, the membership of which is terminated in accordance with subparagraph (A)— (i) shall surrender redeemable stock to the Federal home loan bank, and shall receive in cash the par value of the stock, upon the expiration of the applicable notice period under subsection (a)(4)(A) of this section; (ii) shall receive any dividends declared on its redeemable stock, during the applicable notice period under subsection (a)(4)(A) of this section; and (iii) shall not be entitled to any other rights or privileges accorded to members after the date of the termination. (C) Commencement of notice period With respect to an institution, the membership of which is terminated in accordance with subparagraph (A), the applicable notice period under subsection (a)(4) of this section for each class of redeemable stock shall commence on the earlier of (1) the date of such termination; or (ii) the date on which the member has provided notice of its intent to redeem such stock. (3) Liquidation of indebtedness Upon the termination of the membership of an institution for any reason, the outstanding indebtedness of the member to the bank shall be liquidated in an orderly manner, as determined by the bank and, upon the extinguishment of all such indebtedness, the bank shall return to the member all collateral pledged to secure the indebtedness. (e) Redemption of excess stock (1) In general A Federal home loan bank, in its sole discretion, may redeem or repurchase, as appropriate, any shares of Class A or Class B stock issued by the bank and held by a member that are in excess of the minimum stock investment required of that member. (2) Excess stock Shares of stock held by a member shall not be deemed to be "excess stock" for purposes of this subsection by virtue of a member's submission of a notice of intent to withdraw from membership or termination of its membership in any other manner. (3) Priority A Federal home loan bank may not redeem any excess Class B stock prior to the end of the 5-year notice period, unless the member has no Class A stock outstanding that could be redeemed as excess. (f) Impairment of capital If the Finance Board or the board of directors of a Federal home loan bank determines that the bank has incurred or is likely to incur losses that result in or are expected to result in charges against the capital of the bank, the bank shall not redeem or repurchase any stock of the bank without the prior approval of the Finance Board while such charges are continuing or are expected to continue. In no case may a bank redeem or repurchase any applicable capital stock if, following the redemption, the bank would fail to satisfy any minimum capital requirement. (g) Rejoining after divestiture of all shares (1) In general Except as provided in paragraph (2), and notwithstanding any other provision of this chapter, an institution that divests all shares of stock in a Federal home loan bank may not, after such divestiture, acquire shares of any Federal home loan bank before the end of the 5-year period beginning on the date of the completion of such divestiture, unless the divestiture is a consequence of a transfer of membership on an uninterrupted basis between banks. (2) Exception for withdrawals from membership before 1998 Any institution that withdrew from membership in any Federal home loan bank before December 31, 1997, may acquire shares of a Federal home loan bank at any time after that date, subject to the approval of the Finance Board and the requirements of this chapter. (h) Treatment of retained earnings (1) In general The holders of the Class B stock of a Federal home loan bank shall own the retained earnings, surplus, undivided profits, and equity reserves, if any, of the bank. (2) Exception Except as specifically provided in this section or through the declaration of a dividend or a capital distribution by a Federal home loan bank, or in the event of liquidation of the bank, a member shall have no right to withdraw or otherwise receive distribution of any portion of the retained earnings of the bank. (3) Limitation A Federal home loan bank may not make any distribution of its retained earnings unless, following such distribution, the bank would continue to meet all applicable capital requirements. (As amended Pub. L. 106-102, title VI, § 608, Nov. 12, 1999, 113 Stat. 1456.) REFERENCES IN TEXT The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, referred to in subsec. (a)(3)(B), is title XIII of Pub. L. 102-550, Oct. 28, 1992, 106 Stat. 3941, which is classified principally to chapter 46 (§ 4501 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note under section 4501 of this title and Tables. AMENDMENTS 1999-Pub. L. 106-102 amended section generally, substituting present provisions for provisions authorizing banks to issue capital stock and providing for mini mum subscriptions, retirement of oversubscriptions, cancellation of oversubscriptions, aggregate unpaid loan principal, reports and information, payments for stock, transfer or hypothecation of stock, withdrawal or removal of members, surrender and cancellation of stock, prepayment penalties, disposal of stock, dividends, and acquisition of membership after expiration of period of withdrawal. § 1427. Directors (a) Number; appointment and election; qualifications; conflicts of interest The management of each Federal home loan bank shall be vested in a board of fourteen directors, eight of whom shall be elected by the members as hereinafter provided in this section and six of whom shall be appointed by the Board referred to in section 1422a of this title, all of whom shall be citizens of the United States, and each of whom shall be either a bona fide resident of the district in which such bank is located or an officer or director of a member of such bank located in that district: Provided, That in any district which includes five or more States the Board may by regulation increase the elective directors to a number not exceeding thirteen and may increase the appointive directors to a number not exceeding three-fourths the number of elective directors: Provided further, That if at any time the number of elective directors in the case of any district is not at least equal to the number of States in such district the Board shall exercise the authority conferred by the next preceding proviso so as to increase such elective directors to a number at least equal to the number of States in such district. 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. [See main edition for text of (b) and (c)] (d) Terms; rules and regulations governing nominations and elections The term of each director, whether elected or appointed, shall be 3 years. The board of directors of each Federal home loan bank and the Finance Board shall adjust the terms of members first elected or appointed after November 12, 1999, to ensure that the terms of the members of the board of directors are staggered with approximately 3 of the terms expiring each year. If any person, before or after, or partly before and partly after, September 8, 1961, has been elected to each of three consecutive full terms as an elective director of a Federal home loan bank in any elective directorship or elective directorships and has served for all or part of each of said terms, such person shall not be eligible for election to an elective directorship of such bank for a term which begins earlier than two years after the expiration of the last expiring of said three terms. The Board is authorized to prescribe such rules and regulations as it may deem necessary or appropriate for the nomination and election of directors of Federal home loan banks, including, without limitation on the generality of the foregoing, rules and regulations with respect to the breaking of ties and with respect to the inclusion of more than one directorship on a single ballot and the methods of voting and of determining the results of voting in such cases. [See main edition for text of (e) and (f)] (g) Chairperson and Vice Chairperson (1) Election The Chairperson and Vice Chairperson of the board of directors of each Federal home loan bank shall be elected by a majority of all the directors of such bank from among the directors of the bank. (2) Terms The term of office of the Chairperson and the Vice Chairperson of the board of directors of a Federal home loan bank shall be 2 years. (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. (4) Procedures The board of directors of each Federal home loan bank shall establish procedures, in the bylaws of such board, for designating an acting chairperson for any period during which the Chairperson and the Vice Chairperson are not available to carry out the requirements of that position for any reason and removing any person from any such position for good cause. [See main edition for text of (h)] (i) Directors' compensation age increase, if any, in the Consumer Price Subparagraph (A) shall not be construed as prohibiting the reimbursement of expenses incurred by members of the board of directors of any Federal home loan bank in connection with service on the board of directors. [See main edition for text of (j) and (k)] (As amended Pub. L. 106-102, title VI, §606(a), (b), Nov. 12, 1999, 113 Stat. 1452, 1453.) AMENDMENTS 1999 Subsec. (a). Pub. L. 106-102, §606(a)(1). substituted", and each of whom shall be either a bona fide resident of the district in which such bank is located or an officer or director of a member of such bank located in that district" for "and bona fide residents of the district in which such bank is located". Subsec. (d). Pub. L. 106-102, §606(a)(2), substituted "The term of each director, whether elected or appointed, shall be 3 years. The board of directors of each Federal home loan bank and the Finance Board shall adjust the terms of members first elected or appointed after November 12, 1999, to ensure that the terms of the members of the board of directors are staggered with approximately % of the terms expiring each year." for "The term of each elective directorship shall be two years and the term of each appointive directorship shall be four years." Subsec. (g). Pub. L. 106-102, §606(a)(3), added subsec. (g) and struck out former subsec. (g) which read as follows: "The Board shall designate one of the directors of each bank to be chairman, and one to be vice chairman, of the board of directors of such bank." Subsec. (i). Pub. L. 106-102, § 606(b), inserted heading. designated existing provisions as par. (1), inserted heading, substituted "Subject to paragraph (2), each bank may pay its directors" for "Each bank may pay its directors", and added par. (2). § 1429. Eligibility to secure advances Any member of a Federal Home Loan Bank shall be entitled to apply in writing for advances. Such application shall be in such form as shall be required by the Federal Home Loan Bank. Such Federal Home Loan Bank may at its discretion deny any such application, or may grant it on such conditions as the Federal Home Loan Bank may prescribe. (As amended Pub. L. 106-102, title VI, § 606(f)(1), Nov. 12, 1999, 113 Stat. 1455.) AMENDMENTS 1999-Pub. L. 106-102 struck out "with the approval of the Board" after "Federal Home Loan Bank" in second sentence and struck out ", subject to the approval of the Board," after "deny any such application, or" in third sentence. § 1430. Advances to members (a) In general (1) All advances Each Federal Home Loan Bank is authorized to make secured advances to its members upon collateral sufficient, in the judgment of the Bank, to fully secure advances obtained from the Bank under this section or section 1431(g) of this title. (2) Purposes of advances A long-term advance may only be made for the purposes of— (A) providing funds to any member for residential housing finance; and (B) providing funds to any community financial institution for small businesses, small farms, and small agri-businesses. (3) Collateral A Bank, at the time of origination or renewal of a loan or advance, shall obtain and maintain a security interest in collateral eligible pursuant to one or more of the following categories: (A) Fully disbursed, whole first mortgages on improved residential property (not more than 90 days delinquent), or securities representing a whole interest in such mortgages. (B) 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 Corporation, the Federal National Mortgage Corporation, and the Government National Mortgage Association). (C) Cash or deposits of a Federal Home Loan Bank. (D) 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. (E) Secured loans for small business, agriculture, or securities representing a whole interest in such secured loans, in the case of any community financial institution. (4) Additional bank authority Subparagraphs (A) through (E) of paragraph (3) 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 collateral security, whether or not such additional security would be eligible to originate an advance. If an advance existing on August 9, 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 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 Federal home loan bank. (5) Review of certain collateral standards The Board may review the collateral standards applicable to each Federal home loan bank for the classes of collateral described in subparagraphs (D) and (E) of paragraph (3), and may, if necessary for safety and soundness purposes, require an increase in the collateral standards for any or all of those classes of collateral. (6) Definitions For purposes of this subsection, the terms "small business", "agriculture", "small farm", and "small agri-business" shall have the meanings given those terms by regulation of the Finance Board. [See main edition for text of (b)] (c) Notes of borrowing members; interest rate; lien on stock Such advances shall be made upon the note or obligation of the member secured as provided in this section, bearing such rate of interest as the Federal home loan bank may approve or determine, and the Federal Home Loan Bank shall have a lien upon and shall hold the stock of such member as further collateral security for all indebtedness of the member to the Federal Home Loan Bank. (d) Obligation to repay; additional security; sale of advances to other banks The institution applying for an advance shall enter into a primary and unconditional obligation to pay off all advances, together with interest and any unpaid costs and expenses in connection therewith according to the terms under which they were made, in such form as shall meet the requirements of the bank. The bank shall reserve the right to require at any time, when deemed necessary for its protection, deposits of additional collateral security or substitutions of security by the borrowing institution, and each borrowing institution shall assign additional or substituted security when and as so required. Any Federal Home Loan Bank shall have power to sell to any other Federal Home Loan Bank, with or without recourse, any advance made under the provisions of this chapter, or to allow to such bank a participation therein, and any other Federal Home Loan Bank shall have power to purchase such advance or to accept a participation therein, together with an appropriate assignment of security therefor. (e) Priority of certain secured interests Notwithstanding any other provision of law, any security interest granted to a Federal Home Loan Bank by any member of any Federal Home Loan Bank or any affiliate of any such member shall be entitled to priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor) other than claims and rights that (1) would be entitled to priority under otherwise applicable law; and (2) are held by actual bona fide purchasers for value or by actual secured parties that are secured by actual perfected security interests. [See main edition for text of (g) to (i)] (As amended Pub. L. 106-102, title VI, §§ 604(a)–(c), 606(f)(2), Nov. 12, 1999, 113 Stat. 1451, 1452, 1455.) AMENDMENTS 1999-Pub. L. 106-102, § 604(b), amended section catchline generally. Subsec. (a). Pub. L. 106-102, §604(a), inserted heading, designated first sentence of introductory provisions as par. (1) and inserted heading, substituted par. (2) for former second sentence of introductory provisions which read as follows: "All long-term advances shall only be made for the purpose of providing funds for residential housing finance.", designated third sentence of introductory provisions as par. (3), inserted heading, redesignated former pars. (1) to (4) as subpars. (A) to (D). respectively, of par. (3) and realigned margins, in subpar. (C), substituted "Cash or deposits" for "Deposits", in subpar. (D), struck out at end "The aggregate amount of outstanding advances secured by such other real estate related collateral shall not exceed 30 percent of such member's capital.", and added subpar. (E), redesignated former par. (5) as (4), inserted heading, substituted "Subparagraphs (A) through (E) of paragraph (3)" for "Paragraphs (1) through (4)", struck out "and the Board" after "such collateral as the Bank" and substituted "determined by the Federal home loan bank" for "determined by the Board", and added pars. (5) and (6). Subsec. (c). Pub. L. 106–102, § 606(f)(2)(A). substituted "Federal home loan bank" for "Board" before "may approve or determine" and struck out at end "At no time shall the aggregate outstanding advances made by any Federal Home Loan Bank to any member exceed twenty times the amounts paid in by such member for outstanding capital stock held by it exceed twenty times the value of the security required to be deposited under subsection (e) of section 1426 of this title." Subsec. (d). Pub. L. 106–102, §606(f)(2)(B), struck out "and the approval of the Board" after "requirements of the bank" in first sentence and substituted "Any" for "Subject to the approval of the Board, any" in third sentence. Subsec. (e). Pub. L. 106–102, §604(c), struck out subsec. (e) relating to qualified thrift lender status. CHANGE OF NAME Committee on Banking, Finance and Urban Affairs of House of Representatives treated as referring to Committee on Banking and Financial Services of House of Representatives by section 1(a) of Pub. L. 104-14, set out as a note preceding section 21 of Title 2, The Congress. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1430b, 1431, 1441b, 1733, 2705 of this title. § 1431. Powers and duties of banks [See main edition for text of (a) to (g)] (h) Investment of surplus funds Such part of the assets of each Federal Home Loan Bank (except reserves and amounts provided for in subsection (g) of this section) as are not required for advances to members, may be invested, to such extent as the bank may deem desirable and subject to such regulations, restrictions, and limitations as may be prescribed by the Board, in obligations of the United States, in obligations, participations, or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association, in mortgages, obligations, or other securities which are or ever have been sold by the Federal Home Loan Mortgage Corporation pursuant to section 1454 or section 1455 of this title, in the stock of the Federal National Mortgage Association, in stock, obligations, or other securities of any small business investment company formed pursuant to section 681 of title 15, for the purpose of aiding members of the Federal Home Loan Bank System, and in such securities as fiduciary and trust funds may be invested in under the laws of the State in which the Federal Home Loan Bank is located. [See main edition for text of (i) to (k)] (As amended Pub. L. 104-208, div. A, title II, § 2704(d)(11)(A), div. D, title II, § 208(h)(2), Sept. 30, 1996, 110 Stat. 3009-489, 3009-747.) AMENDMENT OF SUBSECTION (k) Pub. L. 104-208, div. A, title II, $2704(c), (d)(11)(A), Sept. 30, 1996, 110 Stat. 3009-487, 3009-489, provided that, effective Jan. 1, 1999, if no insured depository institution is a savings association on that date, subsection (k) of this section is amended as follows: (1) in the subsection heading, by striking "SAIF" and inserting "the Deposit Insurance Fund"; and (2) by striking "Savings Association Insurance Fund" each place such term appears and inserting "Deposit Insurance Fund". AMENDMENTS 1996 Subsec. (h). Pub. L. 104-208, §208(h)(2), substituted "section 681 of title 15" for "section 681(d) of title 15". EFFECTIVE DATE OF 1996 AMENDMENT Amendment by section 2704(d)(11)(A) of Pub. L. 104-208 effective Jan. 1, 1999, if no insured depository institution is a savings association on that date, see section 2704(c) of Pub. L. 104-208, set out as a note under section 1821 of this title. § 1432. Incorporation of banks; corporate powers; housing project loans (a) The directors of each Federal Home Loan Bank shall, in accordance with such rules and regulations as the Board may prescribe, make and file with the Board at the earliest practicable date after the establishment of such bank, an organization certificate which shall contain such information as the Board may require. Upon the making and filing of such organization certificate with the Board, such bank shall become, as of the date of the execution of its organization certificate, a body corporate, and as such and in its name as designated by the Board it shall have power to adopt, alter, and use a corporate seal; to make contracts; to purchase or lease and hold or dispose of such real estate as may be necessary or convenient for the transaction of its business; to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal; to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the transaction of its business,;1 to define their duties, require bonds of them and fix the penalties thereof, and to dismiss at pleasure such officers, employees, attorneys, and agents; and, by the board of directors of the bank, to prescribe, amend, and repeal bylaws governing the manner in which its affairs may be administered, consistent with applicable laws and regulations, as administered by the Finance Board. No officer, employee, attorney, or agent of a Federal home loan bank who receives compensation, may be a member of the board of directors. Each such bank shall have all such incidental powers, not inconsistent with the provisions of this chapter, as are customary and usual in corporations generally. (b) Subject to such regulations as may be prescribed by the Board, one or more Federal home 1 So in original. |