
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 12USC2277a-10]

 
                       TITLE 12--BANKS AND BANKING
 
                     CHAPTER 23--FARM CREDIT SYSTEM
 
          SUBCHAPTER V--FARM CREDIT ADMINISTRATION ORGANIZATION
 
            Part E--Farm Credit System Insurance Corporation
 
Sec. 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

            Assistance may not be provided to an insured System bank 
        under this subsection unless the means of providing the 
        assistance is the least costly means of providing the assistance 
        by the Farm Credit Insurance Fund of all possible alternatives 
        available to the Corporation, including liquidation of the bank 
        (including paying the insured obligations issued on behalf of 
        the bank). Before making a least-cost determination under this 
        subparagraph, the Corporation shall accord such other insured 
        System banks as the Corporation determines to be appropriate the 
        opportunity to submit information relating to the determination.

        (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.

        (C) Time of determination

            (i) General rule

                For purposes of this subsection, the determination of 
            the costs of providing any assistance under any provision of 
            this section with respect to any insured System bank shall 
            be made as of the date on which the Corporation makes the 
            determination to provide the assistance to the institution 
            under this section.
            (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

            Before providing any assistance under paragraph (1), the 
        Corporation shall evaluate the adequacy of managerial resources 
        of the insured System bank. The continued service of any 
        director or senior ranking officer who serves in a policymaking 
        role for the assisted insured System bank, as determined by the 
        Corporation, shall be subject to approval by the Corporation as 
        a condition of assistance.

        (E) Discretionary determinations

            Any determination that the Corporation makes under this 
        paragraph shall be in the sole discretion of the Corporation.

        (F) Purchase of stock

            The Corporation may not use its authority under this 
        subsection to purchase any stock of an insured System bank. The 
        preceding sentence shall not be construed to limit the ability 
        of the Corporation to enter into and enforce covenants and 
        agreements that it determines to be necessary to protect the 
        financial interests of the Corporation.

                          (4) Subordination

        Any assistance provided under this subsection may be in 
    subordination to the rights of owners of obligations and other 
    creditors.

                             (5) Reports

        The Corporation, in its annual report to Congress, shall report 
    the total amount saved, or it estimates to be saved, by the 
    Corporation exercising the authority provided to the Corporation in 
    this subsection.

(b) Authority to pledge or sell assets

    The Corporation, in its discretion, may make loans on the security 
of, or may purchase, and liquidate or sell, any part of the assets of, 
any insured System bank that is placed in receivership because of the 
inability of the bank to pay principal or interest on any of its notes, 
bonds, debentures, or other obligations in a timely manner.

(c) Subrogation

                           (1) In general

        On the payment to an owner of an insured obligation issued on 
    behalf of an insured System bank in receivership, the Corporation 
    shall be subrogated to all rights of the owner against the bank to 
    the extent of the payment.

                      (2) Receipt of dividends

        Subrogation under paragraph (1) shall include the right on the 
    part of the Corporation to receive the same dividends from the 
    proceeds of the assets of the bank as would have been payable to the 
    owner on a claim for the insured obligation.

(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

    As used in this section, the terms ``insured System bank'' and 
``bank'' include each production credit association and other 
association making direct loans under the authority provided under 
section 2279b of this title.

(f) Effective date

    The Corporation shall not exercise any authority under this section 
during the 5-year period prior to January 1, 1993.

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


                               Amendments

    1996--Subsec. (a)(1). Pub. L. 104-105, Sec. 217(b)(1), substituted 
``Stand-alone assistance'' for ``In general'' in par. heading.
    Subsec. (a)(2). Pub. L. 104-105, Sec. 217(b)(2)(A), substituted 
``Facilitation of mergers or consolidation'' for ``Enumerated powers'' 
in par. heading.
    Subsec. (a)(2)(A). Pub. L. 104-105, Sec. 217(b)(2)(B), substituted 
``In general'' for ``Facilitation of mergers or consolidation'' in 
subpar. heading.
    Subsec. (a)(3)(A). Pub. L. 104-105, Sec. 217(a)(2), added subpar. 
(A) and struck out heading and text of former subpar. (A). Text read as 
follows: ``Assistance shall not be provided to an insured System bank 
under this subsection if the amount of such assistance exceeds an amount 
determined by the Corporation to be the cost of liquidating the bank 
(including paying the insured obligations issued on behalf of the bank). 
This subparagraph shall not apply to the provision of assistance to a 
bank if the Corporation determines that the continued operation of the 
bank is essential to provide adequate agricultural credit services in 
the area of operations of the bank.''
    Subsec. (a)(3)(B) to (F). Pub. L. 104-105, Sec. 217(a), added 
subpars. (B) to (E) and redesignated former subpar. (B) as (F).
    1990--Subsec. (f). Pub. L. 101-624 substituted ``prior to January 1, 
1993'' for ``beginning on the date of the enactment of this part''.
    1989--Subsec. (e). Pub. L. 101-220 inserted ``and other association 
making direct loans under the authority provided under section 2279b of 
this title,'' after ``production credit association''.


                    Effective Date of 1989 Amendment

    Amendment by Pub. L. 101-220 effective for insurance premiums due to 
the Farm Credit System Insurance Corporation under this chapter on or 
after Jan. 1, 1990, based on the loan volume of each bank for each 
calendar year beginning with calendar year 1989, and effective for the 
calculation of the initial premium payment required under section 2277a-
5(c) of this title, see section 6(c) of Pub. L. 101-220, set out as a 
note under section 2020 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 2271, 2277a-9 of this title.
