12 USC 2277 - Establishment of Farm Credit System Insurance Corporation

Collapse to view only § 2277a-1. Establishment of Farm Credit System Insurance Corporation

§ 2277a. Definitions
§ 2277a-1. Establishment of Farm Credit System Insurance Corporation
§ 2277a-2. Board of Directors
§ 2277a-3. Commencement of insurance
§ 2277a-4. Premiums
§ 2277a-5. Certification of premiums
§ 2277a-6. Overpayment and underpayment of premiums; remedies
§ 2277a-7. General corporate powers
§ 2277a-8. Conduct of corporate affairs; examination of System institutions
§ 2277a-9. Insurance Fund
§ 2277a-10. Powers of Corporation with respect to troubled insured System banks
§ 2277a-10a. Oversight actions by Corporation
§ 2277a-10b. Authority to regulate golden parachute and indemnification payments
§ 2277a-10c. Corporation as conservator or receiver; certain other powers
§ 2277a-11. Investment of funds
§ 2277a-12. Exemption from taxation
§ 2277a-13. Omitted
§ 2277a-14. Prohibitions

§ 2277a. Definitions

As used in this part:

(1) Board of Directors

(2) Corporation

(3) Insured obligation

The term “insured obligation” means any note, bond, debenture, or other obligation issued under subsection (c) or (d) of section 2153 of this title—

(A) on or before January 5, 1989, on behalf of any System bank; and

(B) after such date, which, when issued, is issued on behalf of any insured System bank.

(4) Insured System bank

(5) State

(Pub. L. 92–181, title V, § 5.51, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1611; amended Pub. L. 100–399, title III, § 302(a), (b), Aug. 17, 1988, 102 Stat. 994; Pub. L. 104–105, title II, § 214(a), Feb. 10, 1996, 110 Stat. 175.)

§ 2277a–1. Establishment of Farm Credit System Insurance Corporation

There is hereby established the Farm Credit System Insurance Corporation which shall insure, in accordance with this part, the timely payment of principal and interest on notes, bonds, debentures, and other obligations issued under subsection (c) or (d) of section 2153 of this title on behalf of one or more System banks all of which are entitled to the benefits of insurance under this part.

(Pub. L. 92–181, title V, § 5.52, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1611.)

§ 2277a–2. Board of Directors

(a) Establishment

(b) Chairman

(Pub. L. 92–181, title V, § 5.53, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1611; amended Pub. L. 102–552, title II, § 201(a), Oct. 28, 1992, 106 Stat. 4104; Pub. L. 104–105, title II, § 219(a), Feb. 10, 1996, 110 Stat. 184.)

§ 2277a–3. Commencement of insurance

Effective beginning on January 1, 1989, or 12 months after January 6, 1988, whichever is later, each System bank shall be an insured System bank and shall be subject to this part. Each System bank that is authorized to commence or resume operations under a subchapter of this chapter shall be an insured System bank from the time of such authorization. A bank resulting from the merger or consolidation of insured System banks shall be an insured System bank.

(Pub. L. 92–181, title V, § 5.54, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1611.)

§ 2277a–4. Premiums

(a) Amount in Fund not exceeding secure base amount

(1) In generalIf at the end of any calendar year the aggregate of amounts in the Farm Credit Insurance Fund does not exceed the secure base amount, subject to paragraph (3), the premium due from any insured System bank for the calendar year shall be equal to the sum of—

(A) the average outstanding insured obligations issued by the bank for the calendar year, after deducting from the obligations the percentages of the guaranteed portions of loans and investments described in paragraph (2), multiplied by 0.0020; and

(B) the product obtained by multiplying—

(i) the sum of—(I) the average principal outstanding for the calendar year on loans made by the bank that are in nonaccrual status; and(II) the average amount outstanding for the calendar year of other-than-temporarily impaired investments made by the bank; by

(ii) 0.0010.

(2) Deductions from average outstanding insured obligationsThe average outstanding insured obligations issued by the bank for the calendar year referred to in paragraph (1)(A) shall be reduced by deducting from the obligations the sum of (as determined by the Corporation)—

(A) 90 percent of each of—

(i) the average principal outstanding for the calendar year on the guaranteed portions of Federal government-guaranteed loans made by the bank that are in accrual status; and

(ii) the average amount outstanding for the calendar year of the guaranteed portions of Federal government-guaranteed investments made by the bank that are not permanently impaired; and

(B) 80 percent of each of—

(i) the average principal outstanding for the calendar year on the guaranteed portions of State government-guaranteed loans made by the bank that are in accrual status; and

(ii) the average amount outstanding for the calendar year of the guaranteed portions of State government-guaranteed investments made by the bank that are not permanently impaired.

(3) Reduced premiums

(4) Definition of government-guaranteed loans or investmentsIn this section, the term “government-guaranteed”, when applied to a loan or an investment, means a loan, credit, or investment, or portion of a loan, credit, or investment, that is guaranteed—

(A) by the full faith and credit of the United States Government or any State government;

(B) by an agency or other entity of the United States Government whose obligations are explicitly guaranteed by the United States Government; or

(C) by an agency or other entity of a State government whose obligations are explicitly guaranteed by such State government.

(b) Amount in Fund exceeding secure base amount

(1) In general

(2) AdjustmentThe aggregate outstanding insured obligations of all insured System banks under paragraph (1) shall be adjusted downward to exclude an amount equal to the sum of (as determined by the corporation)—

(A) 90 percent of each of—

(i) the guaranteed portions of principal outstanding on Federal government-guaranteed loans in accrual status made by the banks; and

(ii) the guaranteed portions of the amount of Federal government-guaranteed investments made by the banks that are not permanently impaired; and

(B) 80 percent of each of—

(i) the guaranteed portions of principal outstanding on State government-guaranteed loans in accrual status made by the banks; and

(ii) the guaranteed portions of the amount of State government-guaranteed investments made by the banks that are not permanently impaired.

(d) Determination of loan and investment amountsFor the purpose of subsections (a) and (c), the principal outstanding on all loans made by an insured System bank, and the amount outstanding on all investments made by an insured System bank, shall be determined based on—

(1) all loans or investments made by any production credit association, or any other association making direct loans under authority provided under section 2279b of this title, that is able to make such loans or investments because such association is receiving, or has received, funds provided through the insured System bank;

(2) all loans or investments made by any bank, company, institution, corporation, union, or association described in section 2015(b)(1)(B) of this title, that is able to make such loans or investments because such entity is receiving, or has received, funds provided through the insured System bank; and

(3) all loans or investments made by such insured System bank (other than loans made to any party described in paragraph (1) or (2)).

(e) Allocation to System institutions of excess reserves

(1) Establishment of Allocated Insurance Reserves AccountsThere is hereby established in the Farm Credit Insurance Fund an Allocated Insurance Reserves Account—

(A) for each insured System bank; and

(B) subject to paragraph (6)(C), for all holders, in the aggregate, of Financial Assistance Corporation stock.

(2) Treatment

(3) Annual allocations

(4) Allocation formulaFrom the total amount required to be allocated at the end of a calendar year under paragraph (3)—

(A) 10 percent of the total amount shall be credited to the Allocated Insurance Reserves Account established under paragraph (1)(B), subject to paragraph (6)(C); and

(B) there shall be credited to the allocated insurance reserves account 1

1 So in original. Probably should be “Allocated Insurance Reserves Account”.

of each insured system 2

2 So in original. Probably should be “System”.

bank an amount that bears the same ratio to the total amount (less any amount credited under subparagraph (A)) as—

(i) the average principal outstanding for the calendar year on insured obligations issued by the bank (after deducting from the principal the percentages of the guaranteed portions of loans and investments described in subsection (a)(2)); bears to

(ii) the average principal outstanding for the calendar year on insured obligations issued by all insured System banks (after deducting from the principal the percentages of the guaranteed portions of loans and investments described in subsection (a)(2)).

(5) Use of funds in Allocated Insurance Reserves AccountsTo the extent that the sum of the operating expenses of the Corporation and the insurance obligations of the Corporation for a calendar year exceeds the sum of operating expenses and insurance obligations determined under paragraph (3) for the calendar year, the Corporation shall cover the expenses and obligations by—

(A) reducing each Allocated Insurance Reserves Account by the same proportion; and

(B) expending the amounts obtained under subparagraph (A) before expending other amounts in the Fund.

(6) Other disposition of Account funds

(A) In generalAs soon as practicable during each calendar year, the Corporation may—

(i) subject to subparagraph (D), pay to each insured System bank, in a manner determined by the Corporation, an amount equal to the balance in the Allocated Insurance Reserves Account of the System bank; and

(ii) subject to subparagraphs (C) and (E), pay to each System bank and association holding Financial Assistance Corporation stock a proportionate share, determined by dividing the number of shares of Financial Assistance Corporation stock held by the institution by the total number of shares of Financial Assistance Corporation stock outstanding at the time of the termination of the Financial Assistance Corporation, of the balance in the Allocated Insurance Reserves Account established under paragraph (1)(B).

(B) Authority to eliminate or reduce payments

(i) Sufficient funding

(ii) Termination of accountOn disbursement of an amount equal to $56,000,000, the Corporation shall—(I) close the account established under paragraph (1)(B); and(II) transfer any remaining funds in the Account to the remaining Allocated Insurance Reserves Accounts in accordance with paragraph (4)(B) for the calendar year in which the transfer occurs.

(D) Distribution of payments received

(E) Exception for previously reimbursed associations

(Pub. L. 92–181, title V, § 5.55, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1612; amended Pub. L. 100–399, title III, § 302(c)–(e), Aug. 17, 1988, 102 Stat. 994; Pub. L. 101–220, § 6(a), Dec. 12, 1989, 103 Stat. 1879; Pub. L. 104–105, title II, § 215(a)(1), (2)(A), (b), (c), Feb. 10, 1996, 110 Stat. 175, 176, 179; Pub. L. 107–171, title V, § 5403(a)(1), May 13, 2002, 116 Stat. 350; Pub. L. 110–234, title V, § 5404, May 22, 2008, 122 Stat. 1154; Pub. L. 110–246, § 4(a), title V, § 5404, June 18, 2008, 122 Stat. 1664, 1916.)

§ 2277a–5. Certification of premiums

(a) Filing certified statement

On a date to be determined in the sole discretion of the Board of Directors of the Corporation, each insured System bank that became insured before the beginning of the period for which premiums are being assessed (referred to in this section as the “period”) shall file with the Corporation a certified statement showing—

(1) the average outstanding insured obligations for the period issued by the bank;

(2)

(A) the average principal outstanding for the period on the guaranteed portion of Federal government-guaranteed loans that are in accrual status; and

(B) the average amount outstanding for the period of Federal government-guaranteed investments that are not permanently impaired (as defined in section 2277a–4(a)(4) of this title);

(3)

(A) the average principal outstanding for the period on State government-guaranteed loans that are in accrual status; and

(B) the average amount outstanding for the period of State government-guaranteed investments that are not permanently impaired (as defined in section 2277a–4(a)(4) of this title);

(4)

(A) the average principal outstanding for the period on loans that are in nonaccrual status; and

(B) the average amount outstanding for the period of other-than-temporarily impaired investments; and

(5) the amount of the premium due the Corporation from the bank for the period.

(b) Contents and form of statement

(1) In general

(2) Premium amount

(d) Regulations

(Pub. L. 92–181, title V, § 5.56, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1612; amended Pub. L. 100–399, title III, § 302(f), Aug. 17, 1988, 102 Stat. 994; Pub. L. 101–624, title XVIII, § 1835, Nov. 28, 1990, 104 Stat. 3833; Pub. L. 104–105, title II, § 215(a)(2)(B), Feb. 10, 1996, 110 Stat. 176; Pub. L. 107–171, title V, § 5403(a)(2)(B), May 13, 2002, 116 Stat. 351; Pub. L. 110–234, title V, § 5405, May 22, 2008, 122 Stat. 1157; Pub. L. 110–246, § 4(a), title V, § 5405, June 18, 2008, 122 Stat. 1664, 1919.)

§ 2277a–6. Overpayment and underpayment of premiums; remedies

(a) Overpayments

(b) Underpayments

(1) Recovery

(2) Limitation

(1) Forfeiture of rights

(2) Enforcement

(3) Liability of directors

(d) Effect on other remedies

(Pub. L. 92–181, title V, § 5.57, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1613; amended Pub. L. 100–399, title III, § 302(g), (h), Aug. 17, 1988, 102 Stat. 994.)

§ 2277a–7. General corporate powers

On January 6, 1988, the Corporation shall become a body corporate and as such shall have the following powers:

(1) Seal

(2) Succession

(3) Contracts

(4) Legal actions

(A) In general

(B) Jurisdiction

(D) Agent for service of process

(5) Officers and employees

(A) In general

(B) Employees of the United States

(6) Bylaws

(7) Incidental powers

(8) Information

(9) Conservator or receiver

(10) Rules and regulations

(Pub. L. 92–181, title V, § 5.58, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1614; amended Pub. L. 100–399, title III, § 302(i), Aug. 17, 1988, 102 Stat. 994; Pub. L. 102–237, title V, § 502(j), Dec. 13, 1991, 105 Stat. 1869; Pub. L. 102–552, title II, § 202(a), Oct. 28, 1992, 106 Stat. 4105; Pub. L. 104–105, title II, § 214(b), Feb. 10, 1996, 110 Stat. 175; Pub. L. 110–234, title V, § 5401(b), May 22, 2008, 122 Stat. 1154; Pub. L. 110–246, § 4(a), title V, § 5401(b), June 18, 2008, 122 Stat. 1664, 1915; Pub. L. 115–334, title V, § 5411(37), Dec. 20, 2018, 132 Stat. 4683.)

§ 2277a–8. Conduct of corporate affairs; examination of System institutions

(a) Conduct of corporate affairs

(1) Fair administration

(2) Obligations and expenses

(3) Use of mails

(4) Use of information

(5) Use of Farm Credit Administration personnel

(b) Examination of System institutions

(1) Examination authority

(A) In general

(B) Request for additional examination or other information

(2) Appointment of examiners

(3) Powers and report

(4) Appointment of claim agents

(d) Cooperation with FCA examiners

(Pub. L. 92–181, title V, § 5.59, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1615; amended Pub. L. 101–220, § 6(b)(3), Dec. 12, 1989, 103 Stat. 1880; Pub. L. 102–552, title II, § 203, title V, § 513(a), Oct. 28, 1992, 106 Stat. 4106, 4133; Pub. L. 104–105, title II, § 216, Feb. 10, 1996, 110 Stat. 179.)

§ 2277a–9. Insurance Fund

(a) Establishment

(b) Amounts in Fund

(1) Mandatory use

(2) Other mandatory uses

(3) Permissive uses

(4) Corporate payment or refunds

(Pub. L. 92–181, title V, § 5.60, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1616; amended Pub. L. 100–399, title III, § 302(j)–(l), Aug. 17, 1988, 102 Stat. 994; Pub. L. 101–624, title XVIII, § 1836(a), Nov. 28, 1990, 104 Stat. 3833; Pub. L. 115–334, title V, § 5411(38), Dec. 20, 2018, 132 Stat. 4683.)

§ 2277a–10. Powers of Corporation with respect to troubled insured System banks

(a) Authority to provide assistance

(1) Stand-alone assistance

The Corporation, in its sole discretion and on such terms and conditions as the Board of Directors may prescribe, may make loans to, purchase the assets or securities of, assume the liabilities of, or make contributions to, any insured System bank if such action is taken—

(A) to prevent the placing of the bank in receivership;

(B) to restore the bank to normal operation; or

(C) to reduce the risk to the Corporation posed by the bank when severe financial conditions threaten the stability of a significant number of insured System banks or of insured System banks possessing significant financial resources.

(2) Facilitation of mergers or consolidation

(A) In general

To facilitate a merger or consolidation of a qualifying insured System bank, the sale of assets of such insured System bank to another insured System bank, the assumption of such insured System bank’s liabilities by such other insured System bank, or the acquisition of the stock of such insured System bank by such other insured System bank, the Corporation, in its sole discretion and on such terms and conditions as the Board of Directors may prescribe, may—

(i) purchase any such assets or assume any such liabilities;

(ii) make loans or contributions to, or purchase debt securities of, such other insured System bank;

(iii) guarantee such other insured System bank against loss by reason of such other insured System bank’s merging or consolidating with, or assuming the liabilities and purchasing the assets of, such insured System bank; or

(iv) take any combination of the actions referred to in the preceding clauses.

(B) Qualifying insured System bank

For purposes of subparagraph (A), the term “qualifying insured System bank” means any insured System bank that—

(i) is in receivership;

(ii) is, in the judgment of the Board of Directors, in danger of being placed in receivership; or

(iii) is, in the sole discretion of the Corporation, an insured System bank that, when severe financial conditions exist that threaten the stability of a significant number of insured System banks or of insured System banks possessing significant financial resources, requires assistance under subparagraph (A) to lessen the risk to the Corporation posed by such insured System bank under such threat of instability.

(3) Limitation

(A) Least-cost resolution

(B) Determining least costly approach

In determining the least costly alternative under subparagraph (A), the Corporation shall—

(i) evaluate alternatives on a present-value basis, using a reasonable discount rate;

(ii) document the evaluation and the assumptions on which the evaluation is based; and

(iii) retain the documentation for not less than 5 years.

(i) General rule

(ii) Rule for liquidations

For purposes of this subsection, the determination of the costs of liquidation of any insured System bank shall be made as of the earliest of—

(I) the date on which a conservator is appointed for the insured System bank;(II) the date on which a receiver is appointed for the insured System bank; or(III) the date on which the Corporation makes any determination to provide any assistance under this section with respect to the insured System bank.

(D) Rule for stand-alone assistance

(E) Discretionary determinations

(F) Purchase of stock

(4) Subordination

(5) Reports

(b) Authority to pledge or sell assets

(1) In general

(2) Receipt of dividends

(d) Right to assets

Any agreement that shall diminish or defeat the right, title, or interest of the Corporation in any asset acquired by such Corporation under this section, either as security for a loan or by purchase, shall not be valid against the Corporation unless the agreement—

(1) is in writing;

(2) is executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank;

(3) has been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of the board or committee; and

(4) has been, continuously, from the time of its execution, an official record of the bank.

(e) Insured System bank

(f) Effective date

(Pub. L. 92–181, title V, § 5.61, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1616; amended Pub. L. 101–220, § 6(b)(4), Dec. 12, 1989, 103 Stat. 1880; Pub. L. 101–624, title XVIII, § 1836(b), Nov. 28, 1990, 104 Stat. 3833; Pub. L. 104–105, title II, § 217, Feb. 10, 1996, 110 Stat. 179.)

§ 2277a–10a. Oversight actions by Corporation

(a) “Institution” defined

In this section, the term “institution” means—

(1) an insured System bank; and

(2) a production credit association or other association making loans under section 2279b of this title with a direct loan payable to the funding bank of the association that comprises 20 percent or more of the funding bank’s total loan volume net of nonaccrual loans.

(b) Consultation regarding participation of undercapitalized banks in issuance of insured obligations

(1) Corporation to receive copy of transaction applications

(2) Consultation required

(Pub. L. 92–181, title V, § 5.61A, as added Pub. L. 104–105, title II, § 218, Feb. 10, 1996, 110 Stat. 180.)

§ 2277a–10b. Authority to regulate golden parachute and indemnification payments

(a) DefinitionsIn this section:

(1) Golden parachute paymentThe term “golden parachute payment”—

(A) means a payment (or any agreement to make a payment) in the nature of compensation for the benefit of any institution-related party under an obligation of any Farm Credit System institution that—

(i) is contingent on the termination of the party’s relationship with the institution; and

(ii) is received on or after the date on which—(I) the institution is insolvent;(II) a conservator or receiver is appointed for the institution;(III) the institution has been assigned by the Farm Credit Administration a composite CAMEL rating of 4 or 5 under the Farm Credit Administration Rating System, or an equivalent rating; or(IV) the Corporation otherwise determines that the institution is in a troubled condition (as defined in regulations issued by the Corporation); and

(B) includes a payment that would be a golden parachute payment but for the fact that the payment was made before the date referred to in subparagraph (A)(ii) if the payment was made in contemplation of the occurrence of an event described in any subclause of subparagraph (A); but

(i) a payment made under a retirement plan that is qualified (or is intended to be qualified) under section 401 of title 26 or other nondiscriminatory benefit plan;

(ii) a payment made under a bona fide supplemental executive retirement plan, deferred compensation plan, or other arrangement that the Corporation determines, by regulation or order, to be permissible; or

(iii) a payment made by reason of the death or disability of an institution-related party.

(2) Indemnification paymentThe term “indemnification payment” means a payment (or any agreement to make a payment) by any Farm Credit System institution for the benefit of any person who is or was an institution-related party, to pay or reimburse the person for any liability or legal expense with regard to any administrative proceeding or civil action instituted by the Farm Credit Administration that results in a final order under which the person—

(A) is assessed a civil money penalty; or

(B) is removed or prohibited from participating in the conduct of the affairs of the institution.

(3) Institution-related partyThe term “institution-related party” means—

(A) a director, officer, employee, or agent for a Farm Credit System institution or any conservator or receiver of such an institution;

(B) a stockholder (other than another Farm Credit System institution), consultant, joint venture partner, or any other person determined by the Farm Credit Administration to be a participant in the conduct of the affairs of a Farm Credit System institution; and

(C) an independent contractor (including any attorney, appraiser, or accountant) that knowingly or recklessly participates in any violation of any law or regulation, any breach of fiduciary duty, or any unsafe or unsound practice that caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the Farm Credit System institution.

(4) Liability or legal expenseThe term “liability or legal expense” means—

(A) a legal or other professional expense incurred in connection with any claim, proceeding, or action;

(B) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, or action; and

(C) the amount of, and any cost incurred in connection with, any judgment or penalty imposed with respect to any claim, proceeding, or action.

(5) PaymentThe term “payment” means—

(A) a direct or indirect transfer of any funds or any asset; and

(B) any segregation of any funds or assets for the purpose of making, or under an agreement to make, any payment after the date on which the funds or assets are segregated, without regard to whether the obligation to make the payment is contingent on—

(i) the determination, after that date, of the liability for the payment of the amount; or

(ii) the liquidation, after that date, of the amount of the payment.

(b) Prohibition

(c) Factors to be taken into accountThe Corporation shall prescribe, by regulation, the factors to be considered by the Corporation in taking any action under subsection (b). The factors may include—

(1) whether there is a reasonable basis to believe that an institution-related party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Farm Credit System institution involved that has had a material effect on the financial condition of the institution;

(2) whether there is a reasonable basis to believe that the institution-related party is substantially responsible for the insolvency of the Farm Credit System institution, the appointment of a conservator or receiver for the institution, or the institution’s troubled condition (as defined in regulations prescribed by the Corporation);

(3) whether there is a reasonable basis to believe that the institution-related party has materially violated any applicable law or regulation that has had a material effect on the financial condition of the institution;

(4) whether there is a reasonable basis to believe that the institution-related party has violated or conspired to violate—

(A) section 215, 657, 1006, 1014, or 1344 of title 18; or

(B) section 1341 or 1343 of title 18, affecting a Farm Credit System institution;

(5) whether the institution-related party was in a position of managerial or fiduciary responsibility; and

(6) the length of time that the party was related to the Farm Credit System institution and the degree to which—

(A) the payment reasonably reflects compensation earned over the period of employment; and

(B) the compensation represents a reasonable payment for services rendered.

(d) Certain payments prohibitedNo Farm Credit System institution may prepay the salary or any liability or legal expense of any institution-related party if the payment is made—

(1) in contemplation of the insolvency of the institution or after the commission of an act of insolvency; and

(2) with a view to, or with the result of—

(A) preventing the proper application of the assets of the institution to creditors; or

(B) preferring 1 creditor over another creditor.

(e) Rule of constructionNothing in this section—

(1) prohibits any Farm Credit System institution from purchasing any commercial insurance policy or fidelity bond, so long as the insurance policy or bond does not cover any legal or liability expense of an institution described in subsection (a)(2); or

(2) limits the powers, functions, or responsibilities of the Farm Credit Administration.

(Pub. L. 92–181, title V, § 5.61B, as added Pub. L. 104–105, title II, § 218, Feb. 10, 1996, 110 Stat. 181.)

§ 2277a–10c. Corporation as conservator or receiver; certain other powers

(a) Definition of institution

(b) Certain powers and duties of Corporation as conservator or receiverIn addition to the powers inherent in the express grant of corporate authority under section 2277a–7(9) of this title, and other powers exercised by the Corporation under this part, the Corporation shall have the following express powers to act as a conservator or receiver:

(1) Rulemaking authority of Corporation

(2) General powers

(A) Successor to System institutionThe Corporation shall, as conservator or receiver, and by operation of law, succeed to—

(i) all rights, titles, powers, and privileges of the System institution, and of any stockholder, member, officer, or director of such System institution with respect to the System institution and the assets of the System institution; and

(ii) title to the books, records, and assets of any previous conservator or other legal custodian of such System institution.

(B) Operate the System institutionThe Corporation may, as conservator or receiver—

(i) take over the assets of and operate the System institution with all the powers of the stockholders or members, the directors, and the officers of the System institution and conduct all business of the System institution;

(ii) collect all obligations and money due the System institution;

(iii) perform all functions of the System institution in the name of the System institution which are consistent with the appointment as conservator or receiver;

(iv) preserve and conserve the assets and property of such System institution; and

(v) provide by contract for assistance in fulfilling any function, activity, action, or duty of the Corporation as conservator or receiver.

(D) Powers as conservatorSubject to any Farm Credit Administration approvals required under this chapter, the Corporation may, as conservator, take such action as may be—

(i) necessary to put the System institution in a sound and solvent condition; and

(ii) appropriate to carry on the business of the System institution and preserve and conserve the assets and property of the System institution.

(E) Additional powers as receiver

(F) Organization of new System bank

(G) Merger; transfer of assets and liabilities

(i) In generalSubject to clause (ii), the Corporation may, as conservator or receiver—(I) merge the System institution with another System institution; and(II) transfer or sell any asset or liability of the System institution in default without any approval, assignment, or consent with respect to such transfer.

(ii) Approval

(H) Payment of valid obligations

(I) Incidental powers

(i) In generalThe Corporation may, as conservator or receiver—(I) exercise all powers and authorities specifically granted to conservators or receivers, respectively, under this section and such incidental powers as shall be necessary to carry out such powers; and(II) take any action authorized by this section, which the Corporation determines is in the best interests of—(aa) the System institution in receivership or conservatorship;(bb) System institutions;(cc) System institution stockholders or investors; or(dd) the Corporation.

(ii) Termination of rights and claims(I) In general(II) Exceptions

(iii) Charter

(J) Utilization of private sector

(3) Authority of receiver to determine claims

(A) In general

(B) Notice requirementsThe receiver, in any case involving the liquidation or winding up of the affairs of a closed System institution, shall—

(i) promptly publish a notice to the System 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) Mailing requiredThe receiver shall mail a notice similar to the notice published under subparagraph (B)(i) at the time of such publication to any creditor shown on the System 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 System institution’s books within 30 days after the discovery of such name and address.

(4) Rulemaking authority relating to determination of claims

(5) Procedures for determination of claims

(A) Determination period

(i) In general

(ii) Extension of time

(iii) Mailing of notice sufficientThe requirements 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 System 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 disallowanceIf 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

(i) In general

(ii) Certain exceptionsClause (i) shall not apply with respect to any claim filed by any claimant after the date specified in the notice published under paragraph (3)(B)(i) 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

(i) In general

(ii) Payments to less than fully secured creditorsIn the case of a claim of a creditor against a System institution which is secured by any property or other asset of such System institution, any receiver appointed for any System institution—(I) may treat the portion of such claim which exceeds an amount equal to the fair market value of such property or other asset as an unsecured claim against the System institution; and(II) may not make any payment with respect to such unsecured portion of the claim other than in connection with the disposition of all claims of unsecured creditors of the System institution.

(iii) ExceptionsNo provision of this paragraph shall apply with respect to—(I) any extension of credit from any Federal Reserve bank or the United States Treasury to any System institution; or(II) any security interest in the assets of the System institution securing any such extension of credit.

(E) No judicial review of determination pursuant to subparagraph (D)

(F) Legal effect of filing

(i) Statute of limitation tolled

(ii) No prejudice to other actions

(6) Provision for judicial determination of claims

(A) In generalBefore the end of the 60-day period beginning on the earlier of—

(i) the end of the period described in paragraph (5)(A)(i) with respect to any claim against a System 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 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 System 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 limitations

(7) Review of claims; administrative hearing

(8) Expedited determination of claims

(A) Establishment requiredThe 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 legally valid and enforceable or perfected security interests in assets of any System institution for which the Corporation has been appointed receiver; and

(ii) allege that irreparable injury will occur if the routine claims procedure is followed.

(B) Determination periodBefore 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, provide a statement of each reason for the disallowance and the procedure for obtaining agency review or judicial determination.

(C) Period for filing or renewing suitAny 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 beginning on the date of the filing of a request for expedited relief; or

(ii) the date the Corporation denies the claim.

(D) Statute of limitations

(E) Legal effect of filing

(i) Statute of limitation tolled

(ii) No prejudice to other actions

(9) Agreement as basis of claim

(A) Requirements

(B) Exception to contemporaneous execution requirement

(10) Payment of claims

(A) In general

(B) Liquidation payments

(C)

(11) Priority of expenses and claims

(A) In generalAmounts realized from the liquidation or other resolution of any System institution by any receiver appointed for such System institution shall be distributed to pay claims (other than secured claims to the extent of any such security) in the following order of priority:

(i) Administrative expenses of the receiver.

(ii) If authorized by the Corporation, wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual—(I) in an amount that is not more than $11,725 for each individual (as indexed for inflation, by regulation of the Corporation); and(II) that is earned 180 days or fewer before the date of appointment of the Corporation as receiver.

(iii) In the case of the resolution of a System bank, all claims of holders of consolidated and System-wide bonds and all claims of the other System banks arising from the payments of the System banks pursuant to—(I)section 2155 of this title on consolidated and System-wide bonds issued under subsection (c) or (d) of section 2153 of this title; or(II) an agreement, in writing and approved by the Farm Credit Administration, among the System banks to reallocate the payments.

(iv) In the case of the resolution of a production credit association or other association making direct loans under section 2279b of this title, all claims of a System bank based on the financing agreement between the association and the System bank—(I) including interest accrued before and after the appointment of the receiver; and(II) not including any setoff for stock or other equity of that System bank owned by the association, on that condition that, prior to making that setoff, that System bank shall obtain the approval of the Farm Credit Administration Board for the retirement of that stock or equity.

(v) Any general or senior liability of the System institution (which is not a liability described in clause (vi) or (vii)).

(vi) Any obligation subordinated to general creditors (which is not an obligation described in clause (vii)).

(vii) Any obligation to stockholders or members arising as a result of their status as stockholders or members.

(B) Payment of claims

(i) In general(I) Payment(II) Insufficient funds

(ii) Distribution of remaining assets

(iii) Eligible borrower stock

(i) In general

(ii) Procedure for determination of inconsistency

(iii) Judicial review

(D) Accounting report

(12) Suspension of legal actions

(A) In generalAfter the appointment of a conservator or receiver for a System 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

(ii) 90 days, in the case of any receiver,

in any judicial action or proceeding to which such System institution is or becomes a party.

(B) Grant of stay by all courts required

(13) Additional rights and duties

(A) Prior final adjudication

(B) Rights and remedies of conservator or receiverIn the event of any appealable judgment, the Corporation as conservator or receiver shall—

(i) have all the rights and remedies available to the System institution (before the appointment of such conservator or receiver) and the Corporation in its corporate capacity, including removal to Federal court and all appellate rights; and

(ii) not be required to post any bond in order to pursue such remedies.

(i) assets in the possession of the receiver; or

(ii) the charter of a System institution for which the Corporation has been appointed receiver.

(D) Limitation on judicial reviewExcept as otherwise 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 System institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such System institution or the Corporation as receiver.

(E) Disposition of assetsIn exercising any right, power, privilege, or authority as receiver in connection with any sale or disposition of assets of any System institution for which the Corporation is acting as receiver, the Corporation shall, to the maximum extent practicable, conduct its operations in a manner which—

(i) maximizes the net present value return from the sale or disposition of such assets;

(ii) minimizes the amount of any loss realized in the resolution of cases;

(iii) ensures adequate competition and fair and consistent treatment of offerors;

(iv) prohibits discrimination on the basis of race, sex, or ethnic groups in the solicitation and consideration of offers; and

(v) mitigates the potential for serious adverse effects to the rest of the System.

(14) Statute of limitations for actions brought by conservator or receiver

(A) In generalNotwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation 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) Determination of the date on which a claim accruesFor purposes of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in such subparagraph shall be the later of—

(i) the date of the appointment of the Corporation as conservator or receiver; or

(ii) the date on which the cause of action accrues.

(i) In general

(ii) Claims described

(15) Accounting and recordkeeping requirements

(A) In general

(B) Annual accounting or report

(D) Recordkeeping requirement

(i) In general

(ii) Old records

(16) Fraudulent transfers

(A) In general

(B) Right of recoveryTo the extent a transfer is avoided under subparagraph (A), the Corporation may recover, for the benefit of the System institution, the property transferred, or, if a court so orders, the value of such property (at the time of such transfer) from—

(i) the initial transferee of such transfer or the System institution-affiliated party or person for whose benefit such transfer was made; or

(ii) any immediate or mediate transferee of any such initial transferee.

(i) any transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith; or

(ii) any immediate or mediate good faith transferee of such transferee.

(D) Rights under this paragraph

(17) Attachment of assets and other injunctive relief

(18) Standards

(A) Showing

(B) State proceeding

(19) Treatment of claims arising from breach of contracts executed by the receiver or conservator

(1) Authority to repudiate contractsIn addition to any other rights a conservator or receiver may have, the conservator or receiver for a System institution may disaffirm or repudiate any contract or lease—

(A) to which such System 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 System institution’s affairs.

(2) Timing of repudiation

(3) Claims for damages for repudiation

(A) In generalExcept 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 liability for other damagesFor 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 of damages for repudiation of financial contractsIn the case of any qualified financial contract or agreement to which paragraph (8) applies, compensatory damages 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 (j), except as otherwise specifically provided in this section.

(4) Leases under which the System institution is the lessee

(A) In general

(B) Payments of rentNotwithstanding 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; and

(ii) have no claim for damages under any acceleration clause or other penalty provision in the lease; and

(iii) have a claim for any unpaid rent, subject to all appropriate offsets and defenses, due as of the date of the appointment, which shall be paid in accordance with this subsection and subsection (j).

(5) Leases under which the System institution is the lessor

(A) In generalIf the conservator or receiver repudiates an unexpired written lease of real property of the System institution under which the System 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 term of the lease, unless the lessee defaults under the terms of the lease after the date of such repudiation.

(B) Provisions applicable to lessee remaining in possessionIf 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; and(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 System 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 (i)(II).

(6) Contracts for the sale of real property

(A) In generalIf the conservator or receiver repudiates any contract that meets the requirements of paragraphs (1) through (4) of section 2277a–10(d) of this title for the sale of real property, and the purchaser of such real property under such contract is 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 applicable to purchaser remaining in possessionIf 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 payments 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 System institution under the contract; and

(ii) the conservator or receiver shall—(I) not be liable to the purchaser for any damages arising after that date as a result of the repudiation, other than the amount of any offset allowed under clause (i)(II);(II) deliver title to the purchaser in accordance with the contract; and(III) have no obligation under the contract, other than the performance required under subclause (II).

(i) In general

(ii) No liability after assignment and sale

(7) Provisions applicable to service contracts

(A) Services performed before appointmentIn the case of any contract for services between any person and any System 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 (b) and (d); and

(ii) deemed to have arisen as of the date the conservator or receiver was appointed.

(B) Services performed after appointment and prior to repudiationIf, 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 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 payment shall be treated as an administrative expense of the conservatorship or receivership.

(8) Certain qualified financial contracts

(A) DefinitionsIn this paragraph:

(i) Commodity contractThe term “commodity contract” means—(I) with respect to a futures commission merchant, a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade;(II) with respect to a foreign futures commission merchant, a foreign future;(III) with respect to a leverage transaction merchant, a leverage transaction;(IV) with respect to a clearing organization, a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization, or commodity option traded on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization;(V) with respect to a commodity options dealer, a commodity option;(VI) any other agreement or transaction that is similar to any agreement or transaction referred to in this clause;(VII) any combination of the agreements or transactions referred to in this clause;(VIII) any option to enter into any agreement or transaction referred to in this clause;(IX) a master agreement that provides for an agreement or transaction referred to in any of subclauses (I) through (VIII), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this clause, except that the master agreement shall be considered to be a commodity contract under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (II), (III), (IV), (V), (VI), (VII), or (VIII); or(X) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this clause, including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in this clause.

(ii) Forward contractThe term “forward contract” means—(I) a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with a maturity date more than 2 days after the date the contract is entered into, including a repurchase or reverse repurchase transaction (whether or not such repurchase or reverse repurchase transaction is a repurchase agreement), consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any other similar agreement;(II) any combination of agreements or transactions referred to in subclauses (I) and (III);(III) any option to enter into any agreement or transaction referred to in subclause (I) or (II);(IV) a master agreement that provides for an agreement or transaction referred to in subclauses (I) through (III), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a forward contract under this clause, except that the master agreement shall be considered to be a forward contract under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (II), or (III); or(V) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in subclause (I), (II), (III), or (IV), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause.

(iii) PersonThe term “person”—(I) has the meaning given the term in section 1 of title 1; and(II) includes any governmental entity.

(iv) Qualified financial contract

(v) Repurchase agreement(I) In generalThe term “repurchase agreement” (including with respect to a reverse repurchase agreement)—(aa) means—(AA) an agreement, including related terms, which provides for the transfer of one or more certificates of deposit, mortgage-related securities (as such term is defined in section 78c(a) of title 15), mortgage loans, interests in mortgage-related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities or securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States against the transfer of funds by the transferee of such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests as described above, at a date certain not later than 1 year after such transfers or on demand, against the transfer of funds, or any other similar agreement;(BB) any combination of agreements or transactions referred to in subitems (AA) and (CC);(CC) any option to enter into any agreement or transaction referred to in subitem (AA) or (BB);(DD) a master agreement that provides for an agreement or transaction referred to in subitem (AA), (BB), or (CC), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a repurchase agreement under this item, except that the master agreement shall be considered to be a repurchase agreement under this item only with respect to each agreement or transaction under the master agreement that is referred to in subitem (AA), (BB), or (CC); and(EE) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in any of subitems (AA) through (DD), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subitem; and(bb) does not include any repurchase obligation under a participation in a commercial mortgage,1

1 So in original. The comma probably should not appear.

loan unless the Corporation determines by regulation, resolution, or order to include any such participation within the meaning of such term.(II) Related definition

(vi) Securities contractThe term “securities contract”—(I) means—(aa) a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan, any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including any interest therein or based on the value thereof) or any option on any of the foregoing, including any option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option (whether or not the repurchase or reverse repurchase transaction is a repurchase agreement);(bb) any option entered into on a national securities exchange relating to foreign currencies;(cc) the guarantee (including by novation) by or to any securities clearing agency of any settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, certificates of deposit, or mortgage loans or interests therein (including any interest therein or based on the value thereof) or option on any of the foregoing, including any option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option (whether or not the settlement is in connection with any agreement or transaction referred to in any of items (aa), (bb), and (dd) through (kk));(dd) any margin loan;(ee) any extension of credit for the clearance or settlement of securities transactions;(ff) any loan transaction coupled with a securities collar transaction, any prepaid securities forward transaction, or any total return swap transaction coupled with a securities sale transaction;(gg) any other agreement or transaction that is similar to any agreement or transaction referred to in this subclause;(hh) any combination of the agreements or transactions referred to in this subclause;(ii) any option to enter into any agreement or transaction referred to in this subclause;(jj) a master agreement that provides for an agreement or transaction referred to in any of items (aa) through (ii), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subclause, except that the master agreement shall be considered to be a securities contract under this subclause only with respect to each agreement or transaction under the master agreement that is referred to in item (aa), (bb), (cc), (dd), (ee), (ff), (gg), (hh), or (ii); and(kk) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subclause, including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in this subclause; and(II) does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan unless the Corporation determines by regulation, resolution, or order to include any such agreement within the meaning of such term.

(vii) Swap agreementThe term “swap agreement” means—(I) any agreement, including the terms and conditions incorporated by reference in any such agreement, that is—(aa) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap;(bb) a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange precious metals or other commodity agreement;(cc) a currency swap, option, future, or forward agreement;(dd) an equity index or equity swap, option, future, or forward agreement;(ee) a debt index or debt swap, option, future, or forward agreement;(ff) a total return, credit spread or credit swap, option, future, or forward agreement;(gg) a commodity index or commodity swap, option, future, or forward agreement;(hh) a weather swap, option, future, or forward agreement;(ii) an emissions swap, option, future, or forward agreement; or(jj) an inflation swap, option, future, or forward agreement;(II) any agreement or transaction that is similar to any other agreement or transaction referred to in this clause and that is of a type that has been, is presently, or in the future becomes, the subject of recurrent dealings in the swap or other derivatives markets (including terms and conditions incorporated by reference in such agreement) and that is a forward, swap, future, option or spot transaction on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value;(III) any combination of agreements or transactions referred to in this clause;(IV) any option to enter into any agreement or transaction referred to in this clause;(V) a master agreement that provides for an agreement or transaction referred to in any of subclauses (I) through (IV), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement or transaction that is not a swap agreement under this clause, except that the master agreement shall be considered to be a swap agreement under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (II), (III), or (IV); and(VI) any security agreement or arrangement or other credit enhancement related to any agreements or transactions referred to in any of subclauses (I) through (V), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause.

(viii) Transfer

(ix) Treatment of master agreement as 1 agreementFor purposes of this subparagraph—(I) any master agreement for any contract or agreement described in this subparagraph (or any master agreement for such a master agreement or agreements), together with all supplements to the master agreement, shall be treated as a single agreement and a single qualified financial contact; and(II) if a master agreement contains provisions relating to agreements or transactions that are not qualified financial contracts, the master agreement shall be deemed to be a qualified financial contract only with respect to those transactions that are themselves qualified financial contracts.

(B) Rights of parties to contractsSubject to paragraphs (9) and (10), and notwithstanding any other provision of this chapter (other than subsection (b)(9) and section 2277a–10(d) of this title) or any other Federal or State law, 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 System institution which arises upon the appointment of the Corporation as receiver for such System institution at any time after such appointment;

(ii) any right under any security agreement or arrangement or other credit enhancement related to one or more qualified financial contracts 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.

(D) Certain transfers not avoidable

(i) In general

(ii) Exception for certain transfers

(E) Certain protections in event of appointment of conservatorNotwithstanding any other provision of this chapter (other than subparagraph (G), paragraph (10), subsection (b)(9), and section 2277a–10(d) of this title) or any other Federal or State law, 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 System 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 agreement or arrangement or other credit enhancement related to one or more qualified financial contracts described in clause (i); and

(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.

(F) Clarification

(G) Walkaway clauses not effective

(i) Definition of walkaway clauseIn this subparagraph, the term “walkaway clause” means any provision in a qualified financial contract that suspends, conditions, or extinguishes a payment obligation of a party, in whole or in part, or does not create a payment obligation of a party that would otherwise exist—(I) solely because of—(aa) the status of the party as a nondefaulting party in connection with the insolvency of a System institution that is a party to the contract; or(bb) the appointment of, or the exercise of rights or powers by, the Corporation as a conservator or receiver of the System institution; and(II) not as a result of the exercise by a party of any right to offset, setoff, or net obligations that exist under—(aa) the contract;(bb) any other contract between those parties; or(cc) applicable law.

(ii) Treatment

(iii) Limited suspension of certain obligationsIn the case of a qualified financial contract referred to in clause (ii), any payment or delivery obligations otherwise due from a party pursuant to the qualified financial contract shall be suspended from the time the receiver is appointed until the earlier of—(I) the time such party receives notice that such contract has been transferred pursuant to subparagraph (B); or(II) 5:00 p.m. (eastern time) on the business day following the date of the appointment of the receiver.

(H) Recordkeeping requirements

(9) Transfer of qualified financial contracts

(A) DefinitionsIn this paragraph:

(i) Clearing organization

(ii) Financial institution

(B) RequirementIn making any transfer of assets or liabilities of a System institution in default which includes any qualified financial contract, the conservator or receiver for such System institution shall either—

(i) transfer to one financial institution, other than a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed, or that is otherwise the subject of a bankruptcy or insolvency proceeding—(I) all qualified financial contracts between any person or any affiliate of such person and the System institution in default;(II) all claims of such person or any affiliate of such person against such System 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 System institution);(III) all claims of such System institution against such person or any affiliate of such person under any such contract; and(IV) all property securing or any other credit enhancement for any contract described in subclause (I) or any claim described in subclause (II) or (III) under any such contract; or

(ii) transfer none of the qualified financial contracts, claims, property or other credit enhancement referred to in clause (i) (with respect to such person and any affiliate of such person).

(C) Transfer to foreign bank, foreign financial institution, or branch or agency of a foreign bank or financial institution

(D) Transfer of contracts subject to the rules of a clearing organization

(10) Notification of transfer

(A) Definition of business day

(B) NotificationIf—

(i) the conservator or receiver for a System institution in default makes any transfer of the assets and liabilities of such System institution; and

(ii) the transfer includes any qualified financial contract, the conservator or receiver shall notify any person who is a party to any such contract of such transfer by 5:00 p.m. (eastern time) on the business day following the date of the appointment of the receiver in the case of a receivership, or the business day following such transfer in the case of a conservatorship.

(i) ReceivershipA person who is a party to a qualified financial contract with a System institution may not exercise any right that such person has to terminate, liquidate, or net such contract under paragraph (8)(B) of this subsection, solely by reason of or incidental to the appointment of a receiver for the System institution (or the insolvency or financial condition of the System institution for which the receiver has been appointed)—(I) until 5:00 p.m. (eastern time) on the business day following the date of the appointment of the receiver; or(II) after the person has received notice that the contract has been transferred pursuant to paragraph (9)(B).

(ii) Conservatorship

(iii) Notice

(D) Treatment of bridge System institutionsThe following System institutions shall not be considered to be a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed or which is otherwise the subject of a bankruptcy or insolvency proceeding for purposes of paragraph (9):

(i) A bridge System bank.

(ii) A System institution organized by the Corporation or the Farm Credit Administration, for which a conservator is appointed either—(I) immediately upon the organization of the System institution; or(II) at the time of a purchase and assumption transaction between the System institution and the Corporation as receiver for a System institution in default.

(11) Disaffirmance or repudiation of qualified financial contractsIn exercising the rights of disaffirmance or repudiation of a conservator or receiver with respect to any qualified financial contract to which a System institution is a party, the conservator or receiver for such System institution shall either—

(A) disaffirm or repudiate all qualified financial contracts between—

(i) any person or any affiliate of such person; and

(ii) the System institution in default; or

(B) disaffirm or repudiate none of the qualified financial contracts referred to in subparagraph (A) (with respect to such person or any affiliate of such person).

(12) Certain security interests not avoidable

(13) Authority to enforce contracts

(A) In general

(B) Certain rights not affected

(i) In general

(ii) Certain exceptions

(14) Exception for Federal Reserve and the United States TreasuryNo provision of this subsection shall apply with respect to—

(A) any extension of credit from any Federal Reserve bank or the United States Treasury to any System institution; or

(B) any security interest in the assets of the System institution securing any such extension of credit.

(15) Savings clauseThe meanings of terms used in this subsection—

(A) are applicable for purposes of this subsection only; and

(B) shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any similar terms under any other law, regulation, or rule, including—

(i) the Gramm-Leach-Bliley Act (12 U.S.C. 1811 note; Public Law 106–102);

(ii) the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27 et seq.);

(iii) the securities laws (as that term is defined in section 78c(a) of title 15); and

(iv) the Commodity Exchange Act (7 U.S.C. 1 et seq.).

(d) Valuation of claims in default

(1) In general

(2) Maximum liability

(3) Additional payments authorized

(A) In general

(B) Manner of payment

(e) Limitation on court action

(f) Liability of Directors and Officers

(1) In generalA director or officer of a System institution may be held personally liable for monetary damages in any civil action—

(A) brought by, on behalf of, or at the request or direction of the Corporation;

(B) prosecuted wholly or partially for the benefit of the Corporation—

(i) acting as conservator or receiver of that System institution;

(ii) acting based on a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed by that receiver or conservator; or

(iii) acting based on a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed in whole or in part by a System institution or an affiliate of a System institution in connection with assistance provided under section 2277a–10(a) of this title; and

(i) gross negligence; or

(ii) any similar conduct, including conduct that demonstrates a greater disregard of a duty of care than gross negligence, such as intentional tortious conduct.

(2) Effect

(g) Damages

(h) Bridge Farm Credit System banks

(1) Organization

(A) Purpose

(i) In general

(ii) Intent of CongressIt is the intent of the Congress that, in order to prevent unnecessary hardship or losses to the customers of any System bank in default with respect to which a bridge System bank is chartered, the Corporation should—(I) continue to honor commitments made by the System bank in default to creditworthy customers; and(II) not interrupt or terminate adequately secured loans which are transferred under this subsection and are being repaid by the debtor in accordance with the terms of the loan instrument.

(B) AuthoritiesOnce chartered by the Farm Credit Administration, the bridge System bank may—

(i) assume such liabilities of the System bank or banks in default or in danger of default as the Corporation may, in its discretion, determine to be appropriate;

(ii) purchase such assets of the System bank or banks in default or in danger of default as the Corporation may, in its discretion, determine to be appropriate; and

(iii) perform any other temporary function which the Corporation may, in its discretion, prescribe in accordance with this chapter.

(D) Interim directors

(2) Chartering

(A) ConditionsThe Farm Credit Administration may charter a bridge System bank only if the Board of Directors determines that—

(i) the amount which is reasonably necessary to operate such bridge System bank will not exceed the amount which is reasonably necessary to save the cost of liquidating 1 or more System banks in default or in danger of default with respect to which the bridge System bank is chartered;

(ii) the continued operation of such System bank or banks in default or in danger of default with respect to which the bridge System bank is chartered is essential to provide adequate farm credit services in the 1 or more communities where each such System bank in default or in danger of default is or was providing those farm credit services; or

(iii) the continued operation of such System bank or banks in default or in danger of default with respect to which the bridge System bank is chartered is in the best interest of the Farm Credit System or the public.

(B) Bridge System bank treated as being in default for certain purposes

(D) Bylaws

(3) Transfer of assets and liabilities

(A) Transfer upon grant of charter

(B) Subsequent transfers

(4) Powers of bridge System banksEach bridge System bank chartered under this subsection shall, to the extent described in the charter of the System bank in default with respect to which the bridge System bank is chartered, have all corporate powers of, and be subject to the same provisions of law as, any System bank, except that—

(A) the Corporation may—

(i) remove the interim directors and directors of a bridge System bank;

(ii) fix the compensation of members of the interim board of directors and the board of directors and senior management, as determined by the Corporation in its discretion, of a bridge System bank; and

(iii) waive any requirement established under Federal or State law which would otherwise be applicable with respect to directors of a bridge System bank, on the condition that the waiver of any requirement established by the Farm Credit Administration shall require the concurrence of the Farm Credit Administration;

(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 System bank on such terms as the Corporation determines to be appropriate;

(C) no requirement under any provision of law relating to the capital of a System institution shall apply with respect to a bridge System bank;

(D) the Farm Credit Administration Board may establish a limitation on the extent to which any person may become indebted to a bridge System bank without regard to the amount of the bridge System bank’s capital or surplus;

(E)

(i) the board of directors of a bridge System 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; and

(ii) the board of directors of a bridge System 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) the Farm Credit Administration may waive any requirement for a fidelity bond with respect to a bridge System bank at the request of the Corporation;

(G) any judicial action to which a bridge System bank becomes a party by virtue of its acquisition of any assets or assumption of any liabilities of a System bank in default shall be stayed from further proceedings for a period of up to 45 days at the request of the bridge System bank;

(H) no agreement which tends to diminish or defeat the right, title or interest of a bridge System bank in any asset of a System bank in default acquired by it shall be valid against the bridge System bank unless such agreement—

(i) is in writing;

(ii) was executed by such System 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 System bank in default;

(iii) was approved by the board of directors of such System 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 System bank in default;

(I) notwithstanding subsection 2

2 So in original. Probably should be “section”.

2277a–10(d)(2) of this title, any agreement relating to an extension of credit between a System bank, Federal Reserve bank, or the United States Treasury and any System institution which was executed before the extension of credit by such lender to such System institution shall be treated as having been executed contemporaneously with such extension of credit for purposes of subparagraph (H); and

(J) except with the prior approval of the Corporation and the concurrence of the Farm Credit Administration, a bridge System bank may not, in any transaction or series of transactions, issue capital stock or be a party to any merger, consolidation, disposition of substantially all of the assets or liabilities of the bridge System bank, sale or exchange of capital stock, or similar transaction, or change its charter.

(5) Capital

(A) No capital requiredThe Corporation shall not be required to—

(i) issue any capital stock on behalf of a bridge System bank chartered under this subsection; or

(ii) purchase any capital stock of a bridge System bank, except that notwithstanding any other provision of Federal or State law, the Corporation may purchase and retain capital stock of a bridge System bank in such amounts and on such terms as the Corporation, in its discretion, determines to be appropriate.

(B) Operating funds in lieu of capital

(6) Employee statusRepresentatives for purposes of paragraph (1)(C), interim directors, directors, officers, employees, or agents of a bridge System bank are not, solely by virtue of service in any such capacity, officers or employees of the United States. Any employee of the Corporation, the Farm Credit Administration, or any Federal instrumentality who serves at the request of the Corporation as a representative for purposes of paragraph (1)(C), interim director, director, officer, employee, or agent of a bridge System bank shall not—

(A) 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 any provision of law; or

(B) receive any salary or benefits for service in any such capacity with respect to a bridge System bank in addition to such salary or benefits as are obtained through employment with the Corporation or such Federal instrumentality.

(7) Assistance authorized

(8) Duration of bridge System banks

(9) Termination of bridge System banks statusThe status of any bridge System bank as such shall terminate upon the earliest of—

(A) the merger or consolidation of the bridge System bank with a System institution that is not a bridge System bank, on the condition that the merger or consolidation shall be subject to the approval of the Farm Credit Administration;

(B) at the election of the Corporation and with the approval of the Farm Credit Administration, the sale of a majority or all of the capital stock of the bridge System bank to a System institution or another bridge System bank;

(C) at the election of the Corporation, and with the approval of the Farm Credit Administration, either the assumption of all or substantially all of the liabilities of the bridge System bank, or the acquisition of all or substantially all of the assets of the bridge System bank, by a System institution that is not a bridge System bank or other entity as permitted under applicable law; and

(D) the expiration of the period provided in paragraph (8), or the earlier dissolution of the bridge System bank as provided in paragraph (11).

(10) Effect of termination events

(A) Merger or consolidation

(B) Charter conversion

(D) Amendments to charter

(11) Dissolution of bridge System bank

(A) In generalNotwithstanding any other provision of State or Federal law, if the bridge System bank’s status as such has not previously been terminated by the occurrence of an event specified in subparagraph (A), (B), or (C) of paragraph (9)—

(i) the Corporation, after consultation with the Farm Credit Administration, may, in its discretion, dissolve a bridge System bank in accordance with this paragraph at any time; and

(ii) the Corporation, after consultation with the Farm Credit Administration, shall promptly commence dissolution proceedings in accordance with this paragraph upon the expiration of the 2-year period following the date the bridge System bank was chartered, or any extension thereof, as provided in paragraph (8).

(B) Procedures

(12) Multiple bridge System banks

(i) Certain sales of assets prohibited

(1) Persons who engaged in improper conduct with, or caused losses to, System institutionsThe Corporation shall prescribe regulations which, at a minimum, shall prohibit the sale of assets of a failed System institution by the Corporation to—

(A) any person who—

(i) has defaulted, or was a member of a partnership or an officer or director of a corporation that has defaulted, on 1 or more obligations the aggregate amount of which exceed $1,000,000, to such failed System institution;

(ii) has been found to have engaged in fraudulent activity in connection with any obligation referred to in clause (i); and

(iii) proposes to purchase any such asset in whole or in part through the use of the proceeds of a loan or advance of credit from the Corporation or from any System institution for which the Corporation has been appointed as conservator or receiver;

(B) any person who participated, as an officer or director of such failed System institution or of any affiliate of such System institution, in a material way in transactions that resulted in a substantial loss to such failed System institution;

(C) any person who has been removed from, or prohibited from participating in the affairs of, such failed System institution pursuant to any final enforcement action by the Farm Credit Administration;

(D) any person who has demonstrated a pattern or practice of defalcation regarding obligations to such failed System institution; or

(E) any person who is in default on any loan or other extension of credit from such failed System institution which, if not paid, will cause substantial loss to the System institution or the Corporation.

(2) Defaulted debtors

(3) Settlement of claimsParagraph (1) shall not apply to the sale or transfer by the Corporation of any asset of any System institution to any person if the sale or transfer of the asset resolves or settles, or is part of the resolution or settlement, of—

(A) 1 or more claims that have been, or could have been, asserted by the Corporation against the person; or

(B) obligations owed by the person to any System institution, or the Corporation.

(4) Definition of default

(j) Expedited procedures for certain claims

(1) Time for filing notice of appeal

(2) Scheduling

(3) Judicial discretion

(k) Bond not required; agents; fee

(l) Consultation regarding conservatorships and receivershipsTo the extent practicable—

(1) the Farm Credit Administration shall consult with the Corporation prior to taking a preresolution action concerning a System institution that may result in a conservatorship or receivership; and

(2) the Corporation, acting in the capacity of the Corporation as a conservator or receiver, shall consult with the Farm Credit Administration prior to taking any significant action impacting System institutions or service to System borrowers.

(m) Applicability

(Pub. L. 92–181, title V, § 5.61C, as added Pub. L. 115–334, title V, § 5412, Dec. 20, 2018, 132 Stat. 4686.)

§ 2277a–11. Investment of funds

Money of the Corporation 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.

(Pub. L. 92–181, title V, § 5.62, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1618.)

§ 2277a–12. Exemption from taxation

Notwithstanding any other provision of law, the Corporation, including its franchise, and its capital, reserves, surplus, and income, shall be exempt from all taxation imposed by the United States, or by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, county, municipal, and local taxation to the same extent according to its value as other real property is taxed.

(Pub. L. 92–181, title V, § 5.63, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1618.)

§ 2277a–13. Omitted

§ 2277a–14. Prohibitions

(a) Corporate name

(1) Use of corporate name

(2) False representation

(A) By outside person or entities

(B) System banks

(3) Penalty

(b) Payments or distributions while in default

(1) In general

(2) Liability of directors

(3) Applicability

(1) In general

(2) Applicability

(d) Employment of persons convicted of criminal offenses

(1) In general

(2) Penalty

(e) Prohibition on uses of funds related to Federal Agricultural Mortgage Corporation

(Pub. L. 92–181, title V, § 5.65, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1619; amended Pub. L. 101–624, title XVIII, § 1837, Nov. 28, 1990, 104 Stat. 3834; Pub. L. 102–237, title V, § 502(k), Dec. 13, 1991, 105 Stat. 1869; Pub. L. 115–334, title V, § 5409, Dec. 20, 2018, 132 Stat. 4678.)